Responsible mineral development: a multidimensional view on value creation in mining

Responsible Mineral Development Initiative (RMDI)

Maximizing the Value of Extractives

José M García

Stockholm, 26 November 2013

The World Economic Forum is an independent international

organization committed to improving the state of the world by

engaging business, political, academic and other leaders of society to

shape global, regional and industry agendas.

Incorporated as a not-for-profit foundation in 1971, and

headquartered in Geneva, Switzerland, the Forum is tied to no

political, partisan or national interests.

Vision

To catalyze and integrate global, regional and industry transformation

processes as the trusted partner of our members and constituents

Mission

2

Responsible Mineral Development overview

3

Increasing recognition of mining's potential role in development

"I’m not sure that we want companies that are just going to dig

holes. We want companies that are going to make those

linkages and build our economy for the future, post-mining"

-Paul Jourdan, South African government advisor

"This year, the obligations of the industry as a development partner

were front and centre... the debate was as much about people and

politics as it was about mining. The agenda has clearly changed"

-Ed O'Keefe, Director, Synergy Global Consulting, on

INDABA 2013

"We can change the lives of communities forever. We can go

from being an extractive industry to a development industry."

- Mark Cutifani, Anglo American CEO

4

What is RMDI?

- Neutral platform for multi stakeholder engagement

- Identifies number of possible actions, initiatives and case studies that

address the predominant challenges. Practical examples that have

helped to advance responsible mineral development in specific

circumstances

- RMDI is actively working to establish collaborative multi-stakeholder

dialogue platforms in a number of countries e.g. Peru, Chile, Mongolia,

Guinea, Mozambique

- At either national or local level, a dialogue platform can explore the

perceptions and attitudes of participants regarding the “value” to be

derived from mineral development activities

5

RMDI was established to provide guidance around key challenges

Stakeholder perceptions and suggestions

on challenges

Views, priorities and concerns about mineral

development

What works and what does not

Common challenges:

Limited capacity

Insufficient stakeholder inclusion

Opaque negotiation and decision process

Incomplete compliance & monitoring

Phase I (2010)

Identified key challenges

Phase II (2011)

6 building blocks for practical action

Towards

responsible

mineral

development

Progressive

capacity build-

ing and know-

ledge sharing

A shared

understanding

of the costs

and benefits

Collaborative

processes for

stakeholder

engagement

Thorough compliance

monitoring and enforcement of commitments

Early and

comprehensive

dispute

management

1

6 2

5 3

Transparent

processes and

arrangements

4

250 interviews in 13 countries and 4

continents

10 workshops on 6 continents with

more than 300 participants

6

RMDI country roundtables: A Global Initiative

Phase I 2010

Phase II 2011

Phase III 2012-13

7

Context: Responsible Mineral Development Initiative phase III:

Development of Mineral Value Management concept and tool

Phase III (2012):Creating a better understanding of

value between stakeholders

• Development of Mineral Value Management (MVM)

tool based on RMDI building blocks 2 and 3 and four

main barriers to understanding:

1. Focus on specific & easily quantifiable value

dimensions

2. Mismatch between expectations and reality

3. Failure to involve the right stakeholders and /or

misunderstood objectives

4. Assumption that value is a zero sum game

• Mineral Value Management survey tool tests

perceptions and expectations of stakeholders across 7

key dimensions of value for the mining sector (fiscal,

employment & skills, environment & biodiversity, social

cohesion/cultural & socio-economic, procurement &

supply chain, beneficiation & downstream,

infrastructure)

Global survey of over 300

stakeholders, testing

perceptions and expectations

2012

8

'Mineral Value Management' tool tests expectations across 7

dimensions of value

Fiscal (tax, royalties etc.)

& legal / regulatory

environment

Employment

& skills

Beneficiation &

downstream

industry

Infrastructure

Procurement &

supply chain

1

2

4

6

5

3 Environment &

bio-diversity

7

Direct

Mining

Diversification &

Multiplier Impacts

Social cohesion,

cultural and socio-

economic

Used to conduct global survey of ~300 stakeholders,

generating 4 key insights

9

Differences in the levels of expectations between stakeholders Survey results: Insight

Governments Commodity producers

Others

(NGO's, academics...)

Fiscal, leg. & reg

Employment & skills

Environ. & bio-diversity

Socio-econ. & culture

Procurement & supply

Downstream

Infrastructure

0

+4

+2

Fiscal, leg. & reg

Employment & skills




Downstream

Infrastructure

0

+4

+2

Fiscal, leg. & reg

Employment & skills




Downstream

Infrastructure

0

+4

+2

Key :

0 – country rates lowest in the world for value creation in this dimension

2 – average value creation in this dimension

4 – country rates amongst the highest in the world for value creation in this dimension

Perceived value today Expected future value (10 years)

Example: Global survey results – African region

i

10

Stakeholders are starting with different perceptions and aspirations Insight

Governments (n=5) Commodity producers (n=27)

Civil society (n=26)

(NGO's, communities,...)

Key :





Peru survey results

0

1

2

3

4

I) Fiscal, legal & regulatoryenvironment

II) Employment & skills

III) Environmental and bio-diversity

IV) Socio-economic, culturaland social cohesion

V) Procurement and supplyindustries

VI) Beneficiation anddownstream industry

VII) Infrastructure

Nations (Governments)

Current Future

NGO's & Communities

0

1

2

3

4







VII) Infrastructure

Commodity producers

Current Future

0

1

2

3

4







VII) Infrastructure

NGO's & Communities

Current Future

i

11

Value driven by 2 types of factors

Structural

Enabling

Inherent nature of a country & its resource base

and the extractives industry

Country's current stage of economic

development and maturity of minerals industry

Structure & capacity of government and

institutional environment

Capacity & willingness of private sector

Levels of trust & collaboration and influence of

stakeholders

12

Fiscal, employment and social dimensions are priorities ... Survey results: Insight

Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):

1. Fiscal: 53%

2. Social: 43%

3. Employment: 32%

7. Procurement: 8%

1. Fiscal: 54%

2. Employment: 37%

3. Social: 34%

7. Procurement: 6%

1. Fiscal: 62%

2. Social: 32%

3. Infrastructure: 29%

7. Downstream: 8%

1. Fiscal: 55%

2. Employment: 40%


7. Environment: 9%

ii

13

... but drivers per dimensions may differ by stakeholder Survey results: Insight ii

Fiscal, legal & regulatory Employment & skills

Social cohesion, cultural &

socio-economic

Example survey results: "Enabling factors" which drive value:

% times factor ranked in top 3

40

20

0

Others

(NGO’s,

others..)

30

Mining

co.s

15

Gov’t

53 60

Effectiveness of

compliance & monitoring


60

40

20

0

Others

(NGO’s,

others..)

35

Mining

co.s

55

Gov’t

20

Flexibility of labour market

60


22

40

20

0

Others

(NGO’s,

others..)

51

Mining

co.s

Gov’t

11

Ability to implement &

monitor legislation

14

African stakeholders aligned on the priorities, but what about the

solutions?

Nations (Governments) Commodity producers

Others (NGO's,

academics...)

23

Environ.

6

Em

plo

ym

ent

31

Fis

cal

51

% of times ranked 1 or 2

60

40

20

0

Infr

astr

uctu

re

31

Dow

nstr

eam

27

Pro

cure

ment

26

Socia

l

Em

plo

ym

ent

48

Fis

cal

61

4


60

40

20

0

Infr

astr

uctu

re

30

Dow

nstr

eam

4 P

rocure

ment

13 S

ocia

l

39

Environ.

Fis

cal

56


60

40

20

0

Infr

astr

uctu

re

33

Dow

nstr

eam

15

Pro

cure

ment

4

Socia

l

26

Environ.

19

Em

plo

ym

ent

44

Dimensions ranked most as top 2 priority Ranked least time in top 2

15

In other dimensions, we see differences by stakeholders ... Survey results: Insight

30

20

10

0

63%

85%

Other (NGO,

others..)

3

Commodity

producer

7

Government

19

Other (NGO,

others..)

15

Commodity

producer

4

Government

27

Africa Latin America

% of times downstream rated in top 2 (by stakeholder)

iii

16

Why does this matter?

—Differences in levels of expectations

between stakeholder groups and

regions

—Areas of focus may be the same but

what creates value for stakeholders

within these may differ

— In other areas there is differing levels

of alignment

—Stakeholders need to understand the

perceptions and expectations of others

—Stakeholders need to understand how

value is created for them and each

other and under what time frame

—Explore ways to mutually maximise

value and find acceptable tradeoffs

Insights Implications

i

ii

iii

Having a process which creates transparency around

expectations is a critical first step for constructive dialogue

17

What is RMDI?

A solid initiative

1. A series of reports describing an underlying governance framework to support

responsible mineral development as well as best practise examples,

18

What is RMDI?

A solid initiative



2. The web-based MVM tool, and

19

What is RMDI?

A solid initiative



2. The web-based MVM tool, and

3. In-country multi-interest mining dialogues that use the results of the country-

wide application of the MVM tool, as well as data collected from other

initiatives (I.e. ICMM). Peru, Chile, Mongolia, Mozambique

20

World Economic Forum – Mining & Metals

José M García

Associate Director, Mining and Metals

Global Leadership Fellow

[email protected]

mailto:[email protected]

21

Responsible Mineral Development – Stockholm, 26 November 2013

22

Background Slides

Our Value Creation Process

Committed to Improving the State of the World

The Forum serves as a

neutral, impartial and

trusted Partner of the

global governance system

informal

INTERACTION

physical, virtual & sustained

catalyzing and integrating

Transformation

Processes

Global Industry Regional

UNDERSTANDING

Community of INTEREST

SHAPING

Community of PURPOSE

ACTING

Community of ACTION

WHO … strategic dialogues

to enhance greater

understanding of the

relevant issues

… shaping agendas

through taskforces and

collaborative processes,

finding solutions to key

issues

… catalyzing action to

advance global, regional

and industry agendas

through specific

initiatives

World Economic Forum

Community of Leaders:

Multistakeholder Core • Government

• Business

• Civil Society

New Champions • Global Growth Companies

• Technology Pioneers

• Young Global Leaders

• Global Shapers

• Social Entrepreneurs

Strategic Insights

• Global Agenda Councils

• Global University Leaders

• Global Risk Response Network

• Global Benchmarking Network

• Strategic Foresight

HOW

WHAT

24

But stakeholders not necessarily in agreement on best way to do this

South Africa

Ongoing civil unrest

in relation to mining

labor and resource

nationalization

debate

Indonesia

Introduction of

mineral ore

export

restrictions

from May 6

2012

Australia

High profile

public debate in

relation to

Mineral

Resource Rent

Tax

Argentina

Provincial

governors demand

larger share of

mines

Guinea

Ongoing review of

mining contracts and

recent strikes at

mining operations

Namibia

transferring new

mining and

exploration to a

state-owned

company

Zimbabwe

"indigenization"

policy will force

foreign firms to

"cede" a 51%

stake to locals.

Mongolia

Ongoing

discussions in

relation to

issues with

Oyu Tolgoi

project

Chile

Increasing

discontent from

local communities

including legal

action

Peru

Local stakeholder

protests in relation to

planned Conga mine

Selected recent examples:

25

Phase III (2012): Creating a better understanding of value between

stakeholders

Collaborative

processes for

stakeholder

engagement

A shared

understanding

of costs and

benefits

.....in a multistakeholder

process designed to

increased transparency

Creating a better

understanding of

expectations and how

value is created for all

stakeholders.....

2

3

— Focus on specific & easily quantifiable value

dimensions

— Mismatch between expectations and reality

— Failure to involve the right stakeholders and

/or misunderstood objectives

— Assumption that value is a zero sum game

4 main barriers to understanding

Used building blocks

2 & 3 to create 'Mineral Value Management'

26

Differences in the levels of expectations between stakeholders Survey results: Insight

Governments Commodity producers

Others

(NGO's, academics...)

Fiscal, leg. & reg

Employment & skills




Downstream

Infrastructure

0

+4

+2

Fiscal, leg. & reg

Employment & skills




Downstream

Infrastructure

0

+4

+2

Fiscal, leg. & reg

Employment & skills




Downstream

Infrastructure

0

+4

+2

Key :





Example: Global survey results – African region

i

27

Fiscal, employment and social dimensions are priorities ... Survey results: Insight

Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):

1. Fiscal: 53%

2. Social: 43%

3. Employment: 32%

7. Procurement: 8%

1. Fiscal: 54%

2. Employment: 37%

3. Social: 34%

7. Procurement: 6%

1. Fiscal: 62%

2. Social: 32%


7. Downstream: 8%

1. Fiscal: 55%

2. Employment: 40%


7. Environment: 9%

ii

28

... but drivers per dimensions may differ by stakeholder Survey results: Insight ii

Fiscal, legal & regulatory Employment & skills

Social cohesion, cultural &

socio-economic

Example survey results: "Enabling factors" which drive value:


40

20

0

Others

(NGO’s,

others..)

30

Mining

co.s

15

Gov’t

53 60

Effectiveness of

compliance & monitoring


60

40

20

0

Others

(NGO’s,

others..)

35

Mining

co.s

55

Gov’t

20

Flexibility of labour market

60


22

40

20

0

Others

(NGO’s,

others..)

51

Mining

co.s

Gov’t

11

Ability to implement &

monitor legislation

29

African stakeholders aligned on the priorities, but what about the

solutions?

Nations (Governments) Commodity producers

Others (NGO's,

academics...)

23

Environ.

6

Em

plo

ym

ent

31

Fis

cal

51


60

40

20

0

Infr

astr

uctu

re

31

Dow

nstr

eam

27

Pro

cure

ment

26

Socia

l

Em

plo

ym

ent

48

Fis

cal

61

4


60

40

20

0

Infr

astr

uctu

re

30

Dow

nstr

eam

4 P

rocure

ment

13 S

ocia

l

39

Environ.

Fis

cal

56


60

40

20

0

Infr

astr

uctu

re

33

Dow

nstr

eam

15

Pro

cure

ment

4

Socia

l

26

Environ.

19

Em

plo

ym

ent

44

Dimensions ranked most as top 2 priority Ranked least time in top 2

30

In other dimensions, we see differences by stakeholders ... Survey results: Insight

30

20

10

0

63%

85%

Other (NGO,

others..)

3

Commodity

producer

7

Government

19

Other (NGO,

others..)

15

Commodity

producer

4

Government

27

Africa Latin America

% of times downstream rated in top 2 (by stakeholder)

iii

31

.....but potential alignment on other opportunities

Survey results: Insight iii

Direct: Improving the direct mining infrastructure in the country to attract more investments and improve the profitability of the industry (e.g., leading to more taxes, etc...) Multiplier: Leveraging the infrastructure for broader use (e.g., other non-mining industries, public services, etc...)

100

0

Direct

Multiplier

Others (NGO’s, others...)

41

59

Comm. Prod.

43

57

G’ments

40

60

20

40

60

80

Question: Is the largest area for improvement in the 'direct' or 'multiplier' effects?

Infrastructure

32

Why does this matter?

—Differences in levels of expectations

between stakeholder groups and

regions

—Areas of focus may be the same but

what creates value for stakeholders

within these may differ

— In other areas there is differing levels

of alignment

—Stakeholders need to understand the

perceptions and expectations of others

—Stakeholders need to understand how

value is created for them and each

other and under what time frame

—Explore ways to mutually maximise

value and find acceptable tradeoffs

Insights Implications

i

ii

iii

Having a process which creates transparency around

expectations is a critical first step for constructive dialogue

33

Suggested action

Agree on actions for priority areas

—Needs to address both data based findings and perceptions

Continue to invest in capacity building to ensure dialogue is constructive

—Use of globally accepted frameworks and case studies can create common

understanding

Increased focus on ways to collaborate within and between stakeholder groups

— Requires ongoing country level interactions with a commitment to action

Global community (international organizations, donors, industry platforms, etc)

and the role they can play in providing a neutral platform

—Creating trust is vital for establishing and maintaining partnerships

Responsible mineral development: a multidimensional view on value creation in mining

Economy & Finance

Transcript of Responsible mineral development: a multidimensional view on value creation in mining