The Business Case for Socially Responsible Mining

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Blaise Bond
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1 The Business Case for Socially Responsible Mining Some Lessons from Australia Alumni and Business Breakfast Ian Satchwell 20 September 2013

2 Australia has a very open economy free trade; liberal investment because it s good for us! Hon Tony Abbot MP, Prime Minister of Australia Hon Andrew Robb MP, Minister for Trade and Investment 2

Overview 150 years of mining experience Australia has done well from mining We ve made mistakes but we have learned much Grow the pie strategies Economic reform and infrastructure partnerships

3 Overview 150 years of mining experience Australia has done well from mining We ve made mistakes but we have learned much Grow the pie strategies Economic reform and infrastructure partnerships Investment attraction, efficient approvals, certain fiscal regime Win-win-win approaches: partnerships, delivery of returns for all Using mining to facilitate broad-based economic growth Importance of technology, knowledge and skills Generating strong social licence to operate Source: Qantas 3

4 What is socially responsible mining? Corporate social responsibility plus + Good governance (government, industry & community) + Sustainable, broad-based returns 4

5 Australia is well located to supply Asia with mineral and energy products Iron ore, LNG Bowen Basin region coal, LNG Hunter region coal 5

Australia s engineering and construction challenge the largest investment wave since the 1800s gold rushes* WA & NT projects to 2016: USD220 billion+ Offshore petroleum basins Pilbara Region LNG,

LNG, mining DARWIN Northern Territory South Australia Copper, uranium, mineral sands, petroleum Goldfields Region ADELAIDE Gold, nickel, iron ore Queensland New South Wales Victoria MELBOURNE South

6 Australia s engineering and construction challenge the largest investment wave since the 1800s gold rushes* WA & NT projects to 2016: USD220 billion+ Offshore petroleum basins Pilbara Region LNG, iron ore, infrastructure Mid West Region Iron ore, gold, uranium, nickel, PERTH South West Region Alumina, mineral sands, gold *Reserve Bank, Australia BROOME PORT HEDLAND KARRATHA Western Australia LNG, mining DARWIN Northern Territory South Australia Copper, uranium, mineral sands, petroleum Goldfields Region ADELAIDE Gold, nickel, iron ore Queensland New South Wales Victoria MELBOURNE South Australia projects to 2016 USD10 billion+ Gladstone and North West Economic Triangle Base metals, bauxite-alumina HOBART SYDNEY CANBERRA BRISBANE Queensland projects to 2016: USD100 billion+ Bowen, Surat and Galilee Basins Coal, CSG, LNG NSW Coal, gold, base metals 6

7 Western Australia case: investment will result in decades of increased production with lower volatility $m Historic and forecast production value* for WA s key resources Double 2011 value Increased sustaining capital and services 80,000 70,000 60,000 Gold 50,000 Iron Ore 40,000 30,000 Nickel 20,000 10, Oil/Gas Alumina and Bauxite Source: ACIL Tasman analysis * At ten year average prices 7

8 Resource economy in Australia: bigger than traditionally measured Gross Value Added resource economy Share of nominal GVA, financial year (has more than doubled in past 10 years) Resource employment by industry Share of total employment, financial year Resource economy accounts for 18% of GVA 11.5% directly from extraction and processing 6.5% from other sectors providing inputs Resource economy accounts for 10% of employment 3.25% directly from extraction and processing 6.75% from other sectors providing inputs Source: Rayner and Bishop, Reserve Bank of Australia February

9 Taking a broad view: indirect and induced benefits from mining Economic output Indirect Induced Direct from mining Purchasing expenditure for local goods and services Local manufacturer or service provider Subsequent backward expenditure for local goods and services along the supply chain Income of supply chain employees Taxes paid by suppliers to the Government Household consumption as direct and indirect employees spend their income within the local economy Payments to employees Local dealer Income of dealer s employees Taxes paid by dealer to the Government Household consumption as direct and indirect employees spend their income within the local economy In Australia, for every $1 of mining revenue, 40 is spent on goods and services: Reserve Bank Adapted from Saipem

10 It s not only about mining: other growth drivers 1 Global & regional HQ 2 Service and technology hub 3 Trade & foreign investment 4 Agriculture and food sector growth 10

11 Growing mining is important, but so is growing other sectors Australian exports Investment in Australia Growth in real value-added by sector, (%) Source: Grattan Institute 11

12 Western Australia case: Employment growth more than just mining jobs Employment growth by industry sector Mining and Construction Non Mining and Construction Construction Healthcare and Social Services Retail Mining Professional Services Education Manufacturing Transport Hospitality Administration and Support Other Current workforce (2010) Additional workers until ,000 1,000,000 1,500,000 Australian mining employment multiplier is 3 4 Major focus is on education and training 0 50, , , , , ,000 Source: CCIWA: Building Western Australia s Workforce for Tomorrow, June

13 Strong pre-competitive geoscience underpinnings

14 Australian exploration projects strong base of grassroots, but few make it to feasibility implications for investment attraction Au Cu Coal U REE Ni Number of exploration projects by stage of development Source: Geoscience Australia, Feasibility Advanced Exploration Grassroots

Growth of Mining Equipment, Technology and Services (METS) additional way of thinking about value-adding METS output is growing at 15 to 20% a year 4% of national output in 2002-03 8.

15 Growth of Mining Equipment, Technology and Services (METS) additional way of thinking about value-adding METS output is growing at 15 to 20% a year 4% of national output in % in METS contribution to GDP 6.7% in Est. 9.4% in Many METS are knowledgeand technology-intensive Source: Australian Treasury and Ed Shan / Minerals Council of Australia 15

16 METS is now a very important industry sector Source: Austmine 16

17 with deep links into the economy Source: Austmine 17

18 METS firms are exporting, equipment, technology and knowledge developed from 150 years of mining knowledge Source: Austmine 18

19 Challenge 1: Market volatility and uncertainty, as always! Annual zinc prices and stocks Annual nickel prices and stocks Annual copper prices and stocks Annual aluminium prices and stocks China growth rates and patterns of growth? Demand from rest of Asia? Source: BREE and LME 19

Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest.

20 Challenge 2: Margins and returns are not as strong as previously Note: Cost per tonne is the weighted average of 8 major gold producers by total ore mined; average grade is the weighted average of 8 major gold producers by total ore mined; Major Gold producers: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest. Source: Gold Fields company data; annual reports, Condemned to Excellence report(iamgold Corporation, Dec 2012) Source: Resource Nationalism: How to grow, not shrink the pie, Nick Holland, Gold Fields, September 2013

21 so mining not as attractive to investors as it was: increased competition for mining investment Source: Resource Nationalism: How to grow, not shrink the pie, Nick Holland, Gold Fields, September 2013

22 Challenge 3: competitiveness of Australian mines cash operating costs: percent of production by cost curve quartile Source: AME; Brook Hunt 22

Challenge 3: Infrastructure provision: Infrastructure Australia approach Priorities Identifying, prioritising and investing in infrastructure that delivers real economic,

23 Challenge 3: Infrastructure provision: Infrastructure Australia approach Priorities Identifying, prioritising and investing in infrastructure that delivers real economic, social and environmental benefits Creating new opportunities to fund and finance infrastructure though PPPs But arguably insufficient emphasis on knowledge infrastructure

People are Australia s most important asset Focus on attracting, developing and retaining high-quality talent, not just a focus on hard infrastructure Education and training institutions: key

24 People are Australia s most important asset Focus on attracting, developing and retaining high-quality talent, not just a focus on hard infrastructure Education and training institutions: key infrastructure assets Crucial to dealing with challenges and opportunities of the 21st Century Advanced education integrated with research Complementary to traditional infrastructure Knowledge-intensive and knowledge creating Adaptable and capable to deal with uncertainty and to engage with the emerging new global economy Public sector and industry collaboration e.g. Technical colleges; SKM Learning Centre, GE Energy Learning Centre; University research and teaching centres (Rio Tinto, BHP, Chevron, Shell) Knowledge spillovers: trained workers move between projects and firms, taking skill set and culture with them Integrated policy on industry, education and training

25 It s for the people: building strong community benefits, understanding and support

International Mining for Development Centre Mining

MINING FOR DEVELOPMENT IM4DC Country/region

Initiative (EITI) Government to government

26 International Mining for Development Centre Mining for Development Initiative IM4DC A KEY ELEMENT MINING FOR DEVELOPMENT IM4DC Country/region programs Extractive Industries Transparency Initiative (EITI) Government to government partnerships Community and social development Advanced degree scholarships 26

27 IM4DC OBJECTIVES Build skills and capability within government, universities, research institutions and civil society organisations to bring about: Improved policies, practices and legislation Improved knowledge of resources base An ability to continue to build local capacity in mining governance How? Short courses, workshops, conferences, study tours, research, fellowships, institutional partnerships 27

Leveraging Australia s Mining Expertise IM4DC COURSES AND ACTIVITIES Activities cover the mining life cycle and all elements of mining for development Geodata Minerals and energy policy Resource

28 Leveraging Australia s Mining Expertise IM4DC COURSES AND ACTIVITIES Activities cover the mining life cycle and all elements of mining for development Geodata Minerals and energy policy Resource governance Licensing and agreements Indigenous agreement-making Community engagement Local content Regional development Infrastructure planning and delivery Revenue design Mine waste management Mine closure and post mining land use Environmental and water management Occupational health and safety 28

International Mining for Development Centre Africa program 2013-14 FOUR PRIORITY COUNTRY HUBS; ~16 OTHER COUNTRIES 17 courses in Africa Access to

29 International Mining for Development Centre Africa program FOUR PRIORITY COUNTRY HUBS; ~16 OTHER COUNTRIES 17 courses in Africa Access to 18 courses in Australia Fellowships Action Research Institutional partnerships Advice to governments M4D Conference Alumni community of practice 29

Where IM4DC is working International Mining for Development Centre United Kingdom Canada Mongolia Colombia Ecuador Peru Chile USA Afghanistan West Africa Liberia Ghana East Africa Bolivia Zambia

30 Where IM4DC is working International Mining for Development Centre United Kingdom Canada Mongolia Colombia Ecuador Peru Chile USA Afghanistan West Africa Liberia Ghana East Africa Bolivia Zambia Uruguay South Africa Mozambique Southern Africa Myanmar Laos Indonesia The Philippines Pacific Australia Multi year engagement with governments and institutions Participation in courses, research Possible future priority engagement Locations of peer partner institutions African countries serviced by IM4DC include: Congo, Mali, Morocco, Niger, Nigeria, Burkina Faso, Ethiopia, Guinea, Cote d Ivoire, Gabon, Uganda, South Africa, Kenya, Malawi, Cameroon, Tanzania, Sierra Leone, Senegal, Namibia, Madagascar 30

31 IM4DC Achievements SUCCESSFUL CAPACITY-BUILDING

Thank you Contact International Mining for Development Centre WA Trustees Building Level 2, 133 St Georges Terrace Perth WA 6000 Australia Tel: +61 8 9263 9811 Email: admin@im4dc.

32 Thank you Contact International Mining for Development Centre WA Trustees Building Level 2, 133 St Georges Terrace Perth WA 6000 Australia Tel: admin@im4dc.org The Energy and Minerals Institute The University of Western Australia M475, 35 Stirling Highway Crawley WA 6009 Australia Tel: emi@uwa.edu.au Web: The Sustainable Minerals Institute The University of Queensland St Lucia Brisbane QLD 4072 Australia Tel: reception@smi.uq.edu.au Web:

Sustainable mining in Latin America: Australia s competitive advantage. Australia-Latin American Business Council 3 February 2015

Sustainable mining in Latin America: Australia s competitive advantage Australia-Latin American Business Council 3 February 2015 Summary Australia has world-leading track record and global brand in sustainable