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 mining: discovery, development, operations, METS, community, environment Latin America is a fast growing destination for Australian-based mining investment and METS Latin America and Australian economic diplomacy, aid for trade Scope for stronger collaboration between ALL Australian and Latin American stakeholders to achieve sustainability and shared value 2

Sustainable mining: oxymoron or imperative? APPROACH OF SUSTAINABLE MINERALS INSTITUTE, THE UNIVERSITY OF QUEENSLAND Stage 1: Only revenue maximising Stage 2: Efficient Enhancing performance through individual activities Stage 3: Effective Improve benefits and performance through connectivity with environments, communities and industry Stage 4: Sustainable Embedding sustainability in all decision making and business practices to consider the economic, social and environmental needs of current generations without compromising the needs of future generations 3

Emerging approach: Shared value COMPANIES ADDRESS SOCIAL NEEDS AND IMPROVE THEIR COMPETITIVENESS Business Opportunities & Challenges Shared Value is: Policies and practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates Societal Needs Corporate Assets and Expertise Shared Value is NOT: Sharing the value already created (philanthropy) CSR by another name Personal values Balancing stakeholder interests Compliance Tying business success to the prosperity of host communities and countries Source: Adapted from Shared Value Initiative, Extracting with Purpose, October 2014 4

Building sustainable mining and creating shared value requires shared effort EVERY STAKEHOLDER HAS A ROLE TO PLAY Companies Integrate shared value creation into business model Reconceive products and markets eg build local markets for intermediate products Redefine productivity in value chains eg local workforce and local suppliers Create enabling local environment eg local clusters, shared infrastructure Governments Implement policies and regulation that encourage and facilitate shared value Shift relationship with energy and minerals companies from a contractor model to a development partner model Co-invest with companies and communities NGOs & education providers Become centres of excellence for shared value and disseminate best practices to their members & clients Balance holding sectors accountable with engaging them constructively to advance their mission International development community Support developing country partners to maximise the development potential of mining eg though cooperation in capacity-building in in governance, education, R&D, OHS 5

Mining lifecycle and key interactions FIELDS IN WHICH GOVERNANCE CAPACITY IS NEEDED Community engagement Indigenous agreement-making Resource governance Negotiations and agreements Occupational health & safety Precompetitive geodata Regional development Post mining economy Acquisition and exploration Construction and development Mining and concentration Transport Trading, marketing and sales Closure, rehabilitation and monitoring Environmental & water management Mineral economics & policy Mine closure and post mining land use Local content & enterprise Education, training and skills Revenue design & administration Infrastructure planning & delivery Mine waste management 6

Australian energy and minerals project construction 2010 2016: the largest investment wave since the 1800s gold rushes* RESULTING IN DECADES OF WORLD-LEADING PRODUCTION 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 of Australia PORT HEDLAND KARRATHA BROOME Western Australia LNG, mining DARWIN Northern Territory South Australia Queensland Copper, uranium, mineral sands, petroleum Goldfields Region ADELAIDE Gold, nickel, iron ore South Australia projects to 2016 USD10 billion+ New South Wales Victoria MELBOURNE Gladstone and North West Economic Triangle Base metals, bauxite-alumina HOBART Bowen, Surat and Galilee Basins Coal, CSG, LNG SYDNEY CANBERRA BRISBANE Queensland projects to 2016: USD100 billion+ New South Wales Coal, gold, base metals Victoria/Tasmania Coal, gold, base metals, oil & gas 7

Australian companies also have been busy globally! DISCOVERED MINERAL AND COAL RESOURCES 2008 2013 Value of discoveries by Australian (ASX) companies $2,100bn Value of discoveries by other companies?$4,000bn?$5,000bn How to turn potential to actual shared value? Maiden resources discovered and delineated by ASX companies 2008 2013 8

$410bn Europe 23% 53 Generating value globally: Australia s mining-related investment and trade interests 66 $296bn 38% $218bn 75 34% North & Central Asia North America SE Asia & Pacific 5b $25bn 105 Africa 27% 206 $687bn Australia 62% Latin America $461bn 662 $556bn 94 27% Number of ASX-listed mining companies operating in region (Source: SNL Mining and Metals) Percentage of Australian-based METS companies identifying region as a key market (Source: Austmine) Value as at August 2014 of maiden resources announced by ASX-listed companies 2008-2013 by region (Source: SNL Mining and Metals) 9

Latin America is rising fast in exploration and mining AUSTRALIA HAS GROWING PRESENCE Mining operations Exploration Source: SNL Metals and Mining 10

Latin America is the top destination for exploration NON-FERROUS EXPLORATION 2013 4% Europe 5% Russia Canada 13% 2% FSU 4% China United States 7% 6% West Africa 3% East Africa 2% 3% DRC Southern Africa Africa 14% 13% 6% Pacific Islands Australia Mexico 6% 6% Latin America 26% Peru Other Latin America 3% Brazil 5% 6% Chile Other locations account for 6% Source: SNL Metals and Mining World Exploration Trends 2014 11

Latin America opportunity TSX-V TSX ASX AIM LSE HKEx JSE Number of exploration & mining companies in Latin America 5 15 10 19 95 116 347 96 ASX-listed mining companies have 539 projects across 16 countries Total capital raised for LatAm projects by ASX listed companies over last 5 years was $2.56 billion Chile: 115 Australian companies total, incl. 28 juniors plus 59 METS Brazil: 110 companies, incl. 20 juniors plus 30 METS Peru: 88 companies total, incl. 20 investors/ juniors plus 60 METS Operations of ASX and non-asx listed mining companies in Latin America Sources: SNL Metals and Mining, ASX, Austrade 12

Africa comparison Latin America has high potential! Number of listed mining companies in Africa ASX TSX & TSX-V 196 220 $6.83 billion has been raised through follow-on raisings by ASX listed companies for projects in Africa over the last 5 years LSE & AIM 101 JSE 60 HKEx 11 Operations of ASX and non-asx listed mining companies in Africa Sources: SNL Metals and Mining, ASX 13

Mining and sustainability shortfalls snapshots POTENTIAL COOPERATION OPPORTUNITIES FOR AUSTRALIA Chile: energy, water, productivity, OHS, skills, gender, environment, mine closure, geoscience and titles, social licence Peru: community, social licence, OHS, environment, approvals, water, infrastructure, skills for mining and governance, ASM Brazil: geoscience, OHS, community and social licence, R&D and education Argentina: whole mining regime! 14

Resource-driven countries need a new growth model TO TRANSFORM THEIR POTENTIAL RESOURCE WINDFALL INTO LONG-TERM PROSPERITY Building institutions and governance of the resources sector Developing infrastructure Ensuring robust fiscal policy and competitiveness Supporting local content Spending resources windfall wisely Transforming resource wealth into broad, inclusive socioeconomic development Gaining community support for responsible resource development Skills and institutional capacity are key to sound governance. OECD: "Skills have become the global currency of the 21st century. Without proper investment in skills, people languish on the margins of society" Source: Adapted from McKinsey Global Institute, Reverse the curse: Maximizing the potential of resource-driven economies, December 2013 and IM4DC 15

Resource-driven countries need a new growth model TO TRANSFORM THEIR POTENTIAL RESOURCE WINDFALL INTO LONG-TERM PROSPERITY Building institutions and governance of the resources sector Developing infrastructure Ensuring robust fiscal policy and competitiveness Supporting local content Spending resources windfall wisely Transforming resource wealth into broad, inclusive socioeconomic development Gaining community support for responsible resource development Skills and institutional capacity are key to sound governance. OECD: "Skills have become the global currency of the 21st century. Without proper investment in skills, people languish on the margins of society" Source: Adapted from McKinsey Global Institute, Reverse the curse: Maximizing the potential of resource-driven economies, December 2013 and IM4DC 16

Resources companies need a new approach to the changing landscape PARTNERSHIPS WITH GOVERNMENTS & COMMUNITIES IN ECONOMIC & SOCIAL DEVELOPMENT TO BUILD SHARED VALUE Source: McKinsey Global Institute, Reverse the curse: Maximizing the potential of resource-driven economies, December 2013 17

Shared interests and goals between stakeholders BASIS FOR COLLABORATION IN BUILDING MINING AND METS SECTORS Mining and METS* companies Developing supplier countries Communities & NGOs Developed supplier, METS & investor countries Customer & investor countries Education, training & capacity-building organisations *METS = Mining Equipment, Technology and Services 18

International Mining for Development Centre Building on Australia s mining reputation WHY DEVELOPING COUNTRIES WANT TO DEAL WITH & LEARN FROM AUSTRALIA Australia is a well-respected mining nation and partner: leading brand globally 100 years of experience and world leader in mining and processing technologies, in mining services and education, and in doing well from mining Major offshore investor in Africa, Asia, Latin America Leader in mining governance and administration The X-factors: little geopolitical baggage; cultural competence; ability to work in diverse cultures and frontier environments 19

Minerals Energy & Development Economic diplomacy underpins Australia s relationships BY MUTUALLY LIBERALISING TRADE, BOOSTING ECONOMIC GROWTH, ENCOURAGING INVESTMENT AND ASSISTING BUSINESS MINERALS ENERGY & DEVELOPMENT WORKS ACROSS ALL PILLARS Australian Government s Economic Diplomacy Strategy 20

Australian aid: promoting prosperity, increasing stability, reducing poverty NEW STRATEGIC FRAMEWORK FOCUSSSED ON ECONOMIC CAPACITY-BUILDING Australian Government s Aid Framework 21

Latin America high potential for economic diplomacy INCLUDING AID FOR TRADE WITH LOWER INCOME COUNTRIES AND CO-FUNDED CAPACITY-BUILDING COLLABORATIONS Education markets Education & research partners Water services markets Governance partners 94 ASX mining companies $461bn ASX discoveries 27% METS priority market Team Australia is highly effective Source: SNL Metals and Mining 22

International Mining for Development Centre Role of IM4DC UNIVERSITY PARTNERSHIP SUPPORTED BY AUSTRALIAN GOVERNMENT Mission Support developing countries to transform their extractive resource endowment into inclusive and sustainable economic growth and social development Goal IM4DC alumni and partner institutions effect change through transformational leadership in mining, development and related activities Themes Governance and Regulation Community and Environmental Sustainability Operational Effectiveness Agent for sustainable mining underpinned by good governance 23

2 4 International Mining for Development Centre IM4DC mining governance capacity-building INTEGRATED, UNIVERSITY-BASED PROGRAM Education and training Action research Fellowships Institutional linkages Publications Alumni network and conferences Advice to governments

Mining lifecycle and key interactions FIELDS IN WHICH IM4DC HELP BUILD GOVERNANCE CAPACITY Community engagement Indigenous agreement-making Resource governance Negotiations and agreements Occupational health & safety Precompetitive geodata Regional development Post mining economy Acquisition and exploration Construction and development Mining and concentration Transport Trading, marketing and sales Closure, rehabilitation and monitoring Environmental & water management Mineral economics & policy Mine closure and post mining land use Local content & enterprise Education, training and skills Revenue design & administration Infrastructure planning & delivery Mine waste management 25

IM4DC delivery IM4DC Achievements GLOBAL CAPACITY-BUILDING SUCCESSFUL OUTPUTS 2012-2014 TRAINING OUTCOMES Resulting in significant changes 2314 participants from 65 developing countries (incl. 366 from LATAM) 13538 88 participant training days short courses October 2011 to February 2014 30% 1400+ 50 female in mining & development action participation alumni network research (50% LATAM) projects

Where IM4DC is working 226 Mongolia West Africa Myanmar Cambodia 651 SE Asia & Pacific 5b Ghana Africa 1071 Zambia East Africa Tanzania Mozambique Southern Africa Indonesia The Philippines Papua New Guinea Solomon Islands Fiji Colombia Peru Bolivia Ecuador Latin America 366 Uruguay 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, Cameroon, Ghana, South Sudan, Zimbabwe Multi year engagement with governments and institutions Participation in courses, study tours, research Number of IM4DC education and training participants

Partnerships with other institutions UNDERPIN IM4DC CAPACITY-BUILDING Institutional partnerships in developed and developing countries Universities Government agencies NGOs Multilateral organisations Donors Industry associations Companies 28

Conclusion OPPORTUNITIES TO COOPERATE TO ACHIEVE SHARED VALUE AND SUSTAINABLE BENEFITS FROM MINING Latin American resource-rich developing countries are seeking new growth models Australian-based mining and services companies are embracing shared value and sustainability approaches Universities, research institutions and training centres support knowledge transfer and institutional partnerships Australia has major interests in supporting sound mining governance and sustainable growth Latin American countries and Australia are well-matched partners 29

Contact International Mining for Development Centre The University of Western Australia WA Trustees Building Level 2, 133 St Georges Terrace Perth WA Australia 6000 Tel: +61 8 9263 9811 Email: admin@im4dc.org www.im4dc.org The Energy and Minerals Institute The University of Western Australia M475, 35 Stirling Highway Crawley WA Australia 6009 Tel: +61 8 6488 4608 Email: emi@uwa.edu.au www.emi.uwa.edu.au The Sustainable Minerals Institute The University of Queensland St Lucia Brisbane QLD Australia 4072 Tel: +61 7 3346 4003 Email: reception@smi.uq.edu.au www.smi.uq.edu.au