How much are benefit-sharing agreements worth to communities affected by mining?

Abstract

Benefit-sharing agreements (BSAs) determine how resource extraction companies and stakeholder communities share the economic value created by extractive activities. Besides direct financial compensation, BSAs can include preferential access to contracting opportunities for local firms and promises of direct employment for local individuals. Quantifying potential BSA benefits can have practical value for communities entering into BSA negotiations and or monitoring the implementation of agreements. This paper seeks to demonstrate that BSAs can be quantitatively modeled by estimating the expected size of net benefits from two BSAs: the Ahafo gold mine in Ghana, and the Mary River iron ore mine in Nunavut, Canada. We calculate net benefits at the time of the BSA's negotiation by estimating the gains in financial transfers, jobs, and contracting opportunities that accrue to members of the affected communities, relative to a counterfactual of the mining project occurring in the absence of the BSA, and report the relative contribution from each category of benefits. Adding up the net benefits across the three categories, we find that in the Ahafo case the impacted community's discounted benefits from the BSA amount to 1.08% of the estimated life-of-mine revenue and 2.10% in the Mary River case, with the primary contributions coming from jobs and financial transfers respectively.