CHAPTER 6: GOVERNANCE OF MINERAL RESOURCES

Natural resource endowments, such as oil, gas, and minerals, can serve as powerful drivers of national development. The global shift toward renewable energy is increasing demand for minerals used in low-carbon technologies, such as solar panels, wind turbines, and electric vehicles.

Government officials in many mineral-rich countries worldwide are excited about the opportunities provided by the mining sector as a result of the increased demand. This optimism is rooted in the expectation of increased investments that will generate government revenue, employment, and opportunities for local businesses. However, experience shows that natural resource wealth does not automatically translate into sustainable development. Natural resource wealth, and the establishment of an extractive industry to harness it, can become sources of conflict, inequality, and environmental degradation.

To avoid negative outcomes and fully realize the benefits of natural resources, countries need not only adequate knowledge of the associated challenges and opportunities, but also strong governance systems. The prospects of converting resource wealth into sustainable development within a country depends on good governance. Good natural resource governance involves putting in place the laws, institutions, and practices necessary to manage these resources in a sustainable, equitable, and transparent manner, for the benefit of all citizens, both now and in the future.

This training module provides an overview of key principles for governing the extractive sector, with a focus on mining. The guidance presented draws on the recommendations of leading international institutions working to strengthen government oversight of non-renewable resources. Among the most prominent are the Natural Resource Governance Institute (NRGI), the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF), and the World Bank. For further reading on these governance frameworks, see the recommended reading at the end of this module.

The Unique Characteristics of the Mining Industry

Many experts have observed that mineral resource extraction often fails to deliver the development benefits that are often promised. In fact, resource-rich countries with large oil, gas and/or mining sectors can perform worse economically than countries without such resources. The issues connected to resource wealth include poor human development outcomes, environmental damage, and social or political unrest. This has led to terms like the “resource curse” or the “paradox of plenty.”

Although these patterns of poor outcomes are often associated with oil, mining sector can show similar risks, especially where governance is weak. Challenges include corruption, mismanagement of public revenues, and lack of economic diversification. However, these outcomes are not inevitable. Increasingly, attention is being given to the specific policy and institutional choices that can help mitigate risks and turn mining into a driver of sustainable development.

To avoid the pitfalls of the resource curse and better appreciate the importance of good mineral resource governance, the fundamentals of the extractive industry and how it differs from other industrial sectors, should be clarified. Below are a few economic and political factors that should be taken into consideration by a government that seeks to convert its mineral resources into capital and sustainable development:

Natural resources are extracted, not grown or produced: By their nature, mineral resources (incl. oil and gas) are non-renewables. They will eventually be exhausted. From an economic aspect, mineral resources should be viewed less like a source of income and more like an asset. This critical feature distinguishes this industry sector from others and presents governments and policymakers with a number of important issues, ranging from legal framework adjustments to macroeconomic planning in space and time. Countries should carefully plan and distribute revenues generated by the mining industry wisely for citizens, now and in the future, to benefit from it.
Mineral resources belong to the people: Unlike manufactured goods that are produced and traded in markets, mineral resources are considered public assets. In most countries, the ownership of subsoil resources is vested in the state on behalf of the people—either through the constitution or in specific sectoral legislation such as a Minerals Act. As such, both the government and the extractive industry share a responsibility to ensure that the population derives tangible benefits from resource extraction.
Minerals are point-source resources and geographically bound: Mineral deposits form through long-term geological processes and occur only in locations where the necessary conditions for mineral formation and concentration have been met. In practice, mining can therefore only take place where the bedrock contains metals at concentrations that are economically viable to extract, i.e., where the deposit qualifies as an ore (see Chapter 1, An Introduction to Minerals, Ore and Exploration). Unfortunately, the location of an ore body is often unfavorable in other respects, such as remoteness, environmental sensitivity, or competing land uses. These factors can complicate permitting processes, increase costs, and heighten the potential for environmental and social conflict.
Price volatility and the Dept Trap: Commodity price volatility is one of the biggest challenges facing countries dependent on commodity trade. Because mining revenues are tied directly to global market prices, profits and government income can rise and fall sharply in so-called boom-and-bust cycles. During boom periods, when commodity prices are high, governments often increase public spending and borrowing to finance infrastructure projects, social programs or other development initiatives. However, when prices drop, revenues collapse, which is often followed by cuts in essential services like health, education and government agency budgets. Bust periods may also cause debt distress in highly indebted commodity-dependent states, including many of the least developed countries in the world.
The private sector is not immune. Mining companies tend to over-invest during booms and then face bankruptcies or project cancellations during busts. More broadly, price swings undermine macroeconomic stability in a country.

Understanding Dutch Disease and Its Impacts on Economic Diversity: The Dutch Disease is also grouped into the common challenges for resource-rich countries. It occurs when a surge in revenues from natural resources such as minerals leads to a sharp inflow of foreign currency, causing the local currency to appreciate in value. While this may seem positive at first, it has serious side effects. A stronger currency makes other sectors, like manufacturing, agriculture, and tourism, less competitive in global markets, because their exports become more expensive. At the same time, labor and investment shift away from these sectors into mining, that is often less labor-intensive (this is only applicable for large-scale mining). As a result, economic diversity declines and many jobs are lost in industries that previously supported large parts of the population.
The mining industry is capital-intensive and high-risk: Developing a mine requires significant upfront investment and long lead times, often spanning more than a decade from exploration to production. These high capital requirements, combined with substantial risks such as fluctuating commodity prices, regulatory uncertainty, and geological variability, explain why most mining projects are owned and operated by large international corporations, with long experience of mining operations and access to large amounts of capital. Balancing the need to attract foreign direct investment (FDI) in mining with the imperative to regulate the sector for long-term national benefit and environmental protection is a challenge for many governments in resource-rich countries.
The Large Artisanal and Small-Scale Sector (ASM): Artisanal mining is a prominent aspect of the mining sector in many developing countries. These operations typically involve minimal or no mechanization and are often carried out without formal legal rights. For many miners and their families, artisanal mining represents a vital means of survival and is closely linked to poverty. Despite its economic importance, artisanal mining is widely associated with serious environmental degradation, poor safety conditions, and adverse social effects. While the traditional policy response was to criminalize such activities, there is now a growing recognition of their potential contribution to national mining development.
Mining unproportionally affects women: Women in the mining sector, particularly in ASM, face systemic challenges. They are often limited to low-paying, informal tasks such as ore crushing and panning, which lack legal protection and expose them to health risks like mercury poisoning. In both ASM and large-scale mining, women are more vulnerable to gender-based violence due to the male-dominated and transient nature of many mining sites. Countries affected by the Dutch disease also offer fewer opportunities for women as it often weakens sectors like agriculture and manufacturing, which have traditionally employed a larger share of women. This can pressure women into precarious, informal, and low-paid work like ASM, with few protections or career prospects.

Environmental and Social Aspects of the Mining Industry

The sector specific challenges that a government needs to consider when embarking on a path to become a resource economy, was briefly presented in the previous section,. These challenges result in several effects and difficulties equally important to address: environmental degradation, social inequality, and human and indigenous rights abuses.

In short, the environmental impacts include a range of serious and widespread effects, particularly in developing economies. Environmental effects associated with mining are land degradation and deforestation, water pollution and overuse, air pollution, biodiversity loss, waste generation and tailings mismanagement. In fact, mine wastes and their storage constitute the largest waste problem on the planet largest waste problem on the planet due to its enormous volume, long-term accumulation, and serious environmental risks. Waste management and the environmental impacts can be further investigated in Chapter 2-5 of the Introductory Module and Chapter 7, 8, 11 and 12 of the Advanced Module at the Knowledge Platform.

Environmental and social challenges can arise as a consequence of the point-source nature of mineral resources when trying to balance the needs of the people and environments that surround the mining area. Sharing and compensating for resources such as land, water and access to mineral assets can create conflict between the mining companies and the communities. In addition, mining operations can necessitate the relocation of communities due to various factors, including ground subsidence, hazardous environmental conditions, or the need to access the mineral resource. While relocation can be an opportunity for community development, it also carries significant risks of social, economic, and cultural harm if not managed properly. Resettlement may also affect the communities that receive people, both those resettled and others. New mining projects can lead to an influx of people from neighboring areas looking for jobs on the project or setting up businesses. This can cause stress on economic, social and cultural relations and generate political unrest locally.

The social effects associated with mining can also be viewed on a larger scale. As previously mentioned, endowment of mineral wealth usually signals good times with new opportunities for employment, business and social developments. But the reality is that citizens often do not benefit from the income generated by mineral extraction. A mining project often ends up as an enclave, largely disconnected from the local, and sometimes national, economy. The revenues from mineral taxation and royalties are not always distributed fairly within a country and the benefits do not reach the individuals that need it most.

Avoiding the Pitfalls of Mining: How Governments Can Mitigate Risks

The extractive sector faces many well-known challenges, but these are not inevitable. With the right policies and practices, countries can sidestep negative outcomes and harness mining for inclusive development. With the right strategies and governance mechanisms in place, many risks can be mitigated. The international organisations NRGI and IGF promote effective policy, robust regulatory frameworks, and inclusive stakeholder engagement to help ensure that the extraction of mineral wealth leads to long-term and equitable national development. The next section presents a brief overview of IGF’s Mining Policy Framework for mining and sustainable development. The MPF presents six pillars of good international practice with respect to environmental, social, and economic governance, and promote the generation and equitable sharing of benefits in a manner that will contribute to sustainable development.

Building Laws, Policies, and Institutions

A key starting point in mitigating the challenges associated with the mining sector is to assess and evaluate the legal framework, policy landscapes and responsible institutions. The first pillar of the MPF emphasizes the creation of a clear and coherent legislative and institutional structure. It requires governments to define clear ownership, regulatory authority, and responsibilities across ministries and agencies. A modern framework underpins good governance and enables effective oversight and coordination throughout the mining life cycle.

Institutions must be well-resourced, transparent, and protected from political or corporate interference. Often, governance failures stem not from poor laws, but from weak institutional capacity or lack of enforcement.

Coordination between government bodies is also key. Ministries responsible for mining, environment, finance, planning, taxation, and community affairs must work together to avoid overlaps, confusion, and enforcement gaps.

Legal and institutional frameworks should also evolve over time to address new environmental, technological, and social challenges, such as climate change and stronger closure standards. Finally, anti-corruption measures, like transparency, public reporting, and grievance systems, help build trust and ensure responsible mining that supports long-term development.

Pillar 1 “Laws, Policies, and Institutions” helps:

Establish state ownership of subsoil resources and define the state's role as steward on behalf of current and future generations.
Clarify land tenure and surface rights, helping to prevent or resolve disputes related to land use and indigenous or community rights.
Provide the legal clarity to ensure the investor confidence needed to manage long lead times and risks, while ensuring companies operate under defined obligations.
Encourages policy coherence across institutions to manage land, investment, and permitting in an inclusive and transparent manner.

Capturing and Managing Mineral Wealth for Development

One of the most powerful promises of mining is its potential to generate substantial financial benefits for a country. When governed well, mineral revenues can fund schools, hospitals, infrastructure, and long-term development. The second pillar of the MPF focuses on optimizing mining revenues. This includes government design of fiscal regimes, including taxes, royalties, and fees, to capture a fair share of wealth for public investment. It also advocates for transparent mechanisms and systems for revenue-allocation decisions, and for mitigating the effects of commodity price volatility.

Pillar 2 “Financial Benefits” helps:

Promote revenue management tools (e.g. sovereign wealth funds, stabilization funds) to smooth income over time and across commodity price cycles.
Encourage fiscal policies that capture a fair share of resource rents without discouraging investment.
Supports diversification of the economy and transparent budgeting to avoid overdependence on the sector and the Dutch Disease.
Recommend disclosure of contracts and payments (e.g. EITI), reducing the likelihood of rent-seeking and corruption.

Balancing the Economic Gains with Social Well-Being

The cornerstone of responsible mining is ensuring that communities can thrive alongside mining activities and are presented with opportunities for growth and prosperity. The socio-economic pillar of the MPF addresses how mineral extraction can support inclusive development. It promotes creation of mining-linked policies “local content”, such as local hiring, procurement, gender equity, and infrastructure access, to generate jobs, build skills, and improve livelihoods beyond mining revenues, and that last after the mine is closed. It also emphasizes the importance of public consultation to ensure benefits reach affected communities fairly and in the best way possible.

Pillar 3 “Socio-Economic Benefits” help:

Promote local employment, skills development, and infrastructure to ensure benefits extend beyond mining revenues and the mine life.
Encourage inclusive consultation processes to prevent marginalization of local communities and indigenous people, and women.
Help counteract Dutch Disease by using resource revenues to strengthen other sectors and businesses including sectors that employ women.
Reduces dependence on mining by enhancing human capital and socio-economic resilience.
Promote gender equity in hiring, procurement, and community development by encouraging gender-sensitive policies and inclusive local content strategies.

Effective Environmental Management to Support Development

Mining and the associated value chain are significant contributors to negative environmental impacts. The MPF pillar addressing environmental management highlights responsible stewardship of land, water, air, biodiversity, and ecosystem services. Governments must require Environmental and Social Impact Assessments (ESIAs), enforce environmental standards, monitor pollution, and ensure rehabilitation and biodiversity protection over the long term. It emphasizes the importance of standards and codes to ensure mine waste is managed correctly and that waste structures are appropriately and safely designed, operated, maintained, and closed.

Pillar 4 “Environmental Management” helps:

Require comprehensive Environmental Impact Assessments (EIA) and public participation before permitting.
Ensure ongoing environmental monitoring and enforcement to mitigate ecological damage.
Promote the polluter pays principle (PPP) and environmental liability mechanisms.
Emphasize the need for progressive rehabilitation and land restoration planning throughout the mine life.

Sustainable Development beyond Mine Closure

If development is only associated with the operating phase of a mine, it is not sustainable. Hence, mine closure and community transition to a non-mining economy is a critical phase in the mining lifecycle, with far-reaching environmental, social, and economic implications. Despite this, it is often underfunded, poorly planned, or addressed too late in the process. Focusing on post-mining transition, pillar five of MPF states that a mining operation that is consistent with sustainable development requires the planning of its closure before commissioning and throughout the entire life cycle of mine. This includes the conversion of former mine sites to other productive uses and support for the economic and social stability of communities during the post-mining transition and decommission.

Pillar 5 “Post-Mining Transition” helps:

Require early mine closure planning, including social and economic transition support.
Demand financial assurance (e.g., closure bonds) to avoid public liabilities.
Promote community participation in closure plans to align with local development needs.
Encourage post-mining land use planning and economic alternatives to avoid collapse of local economies.

Artisanal and Small-Scale Mining (ASM) as a Development Contributor

Artisanal and small-scale mining (ASM) plays a vital role in the rural economies in which it operates and provides livelihoods to over 350 million people worldwide. It contributes significantly to the production of minerals such as gold, cobalt, diamonds, and gemstones, especially in low- and middle-income countries.

Recognizing the prevalence of ASM, this pillar promotes its formalization and integration through simplified licensing, technical assistance, environmental safeguards, health and safety measures, and gender inclusion. It supports ASM as a legitimate livelihood while reducing its environmental and social risks and attributing it as a contributor of sustainable development.

Pillar 6 “Artisanal and Small-Scale Mining” helps:

Encourages formalization of ASM through simplified licensing and support services.
Provides technical and environmental training to reduce harmful practices.
Advocates for social protection and gender inclusion in ASM policies.
Supports coexistence of ASM and large-scale mining, reducing land conflicts.

Ensure women in ASM benefit from training, safety standards, and access to markets.

The Role of Public Servants in Mineral Resource Governance

The effectiveness of mineral resource governance depends not only on laws and policies but also on the professionalism, competence, and integrity of public servants. Government officials play a crucial role as stewards of non-renewable resources, managing them in the interest of both current and future generations. This responsibility requires technical expertise, strategic foresight, and unwavering commitment to the public good.

Public servants involved in different aspects of mining are responsible for ensuring that mining activities align with the legal framework, national development goals, environmental standards, and community interests. Our duties often include evaluating license applications, monitoring environmental compliance, managing fiscal regimes, and coordinating with other government bodies. Effective governance demands transparency, institutional cooperation, and the ability to resist undue political and corporate influence.

To succeed in this role, public officials must recognize the inherent challenges embedded in the conversion of mineral resources into economic and social prosperity. Strong institutional frameworks, continued professional development, and international collaboration are essential to address these encounters and build public trust in the mining sector.

Ultimately, the civil service must act not as passive regulators but as proactive agents of sustainable development, helping to transform mineral wealth into long-term societal benefits.

Figure 1. In its six pillars, the IGF’s Mining Policy Framework presents good practices required for good environmental, social, and economic governance of the mining sector, and the generation and equitable sharing of benefits in a manner that will contribute to sustainable development.