Part 1 out of 3

The Case of the Mining Industry Dilemma

A Canadian mining firm has been operating in Peru for over a decade. The mine has been an economic engine for the area, providing jobs for the local indigenous inhabitants and services such as health care for their families. The local town has grown up with the mine, becoming a thriving small community complete with educational and health care facilities for the local population.

The mine was recently discovered to have been the source of a number of toxic contaminants leaking into the water table and having detrimental effects on the local flora and fauna as well as on the health of the surrounding indigenous population. While these effects were real and fell well out-side of Canadian legislated minimum standards, the level of contamination did not violate any local laws or standards.

The cost of clean-up and the upgrading of the operational systems needed to mitigate the adverse effects of the mining activities were found to be economically prohibitive. Continuing operations in light of the new knowledge with respect to the environmental degradation was felt to be an unacceptable risk to the local population, not to mention a significant public relations risk. Closing the mine would mean the loss of livelihood and subsequent economic hardship for a significant portion of the local populace. Selling the mine would remove the Canadian company from the equation but would still leave the local population at risk from continued environmental contamination, albeit under new mine ownership.

The executives in the Canadian head office are struggling with the decision of what to do with the Peruvian mining operation. What do you recommend?