Hands-on Sustainability in Madagascar: Ambatovy s experience

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1 Hands-on Sustainability in Madagascar: Ambatovy s experience 8 th Risk Mitigation and CSR Seminar October 16, 2012 Mark Sitter Sherritt International Corporation 1

2 FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements. Forward-looking statements generally can be identified by the use of statements that include words such as believe, expect, anticipate, intend, plan, forecast, likely, may, will, could, should, suspect, outlook, projected, continue or other similar words or phrases. Specifically, forward-looking statements in this document include statements respecting certain future expectations about the Corporation s capital and project development spending; capital project commissioning and completion dates; production volumes; royalty revenues; oil and gas drilling activities; export thermal coal sales; and other corporate objectives, plans or goals for These forward-looking statements are not based on historic facts, but rather on current expectations, assumptions and projections about future events. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that those assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. Sherritt cautions readers of this press release not to place undue reliance on any forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. By their nature, forward-looking statements require Sherritt to make assumptions and are subject to inherent risks and uncertainties. Key factors that may result in material differences between actual results and developments and those contemplated by this press release include global economic conditions, business, economic and political conditions in Canada, Cuba, Indonesia, Madagascar, and the principal markets for Sherritt s products. Other such factors include, but are not limited to, uncertainties in the development and construction of large mining projects; risks related to the availability of capital to undertake capital initiatives; changes in capital cost estimates in respect of the Corporation s capital initiatives; risks associated with Sherritt s joint venture partners; future non-compliance with financial covenants; potential interruptions in transportation; political, economic and other risks of foreign operations; Sherritt s reliance on key personnel and skilled workers; the possibility of equipment and other unexpected failures; the potential for shortages of equipment and supplies; risks associated with mining, processing and refining activities; uncertainties in oil and gas exploration; risks related to foreign exchange controls on Cuban government enterprises to transact in foreign currency; risks associated with the United States embargo on Cuba and the Helms-Burton legislation; risks related to the Cuban government s ability to make certain payments to the Corporation; development programs; uncertainties in reserve estimates; uncertainties in asset-retirement and reclamation cost estimates; Sherritt s reliance on significant customers; foreign exchange and pricing risks; uncertainties in commodity pricing; credit risks; competition in product markets; Sherritt s ability to access markets; risks in obtaining insurance; uncertainties in labour relations; uncertainties in pension liabilities; the ability of Sherritt to enforce legal rights in foreign jurisdictions; the ability of Sherritt to obtain government permits; risks associated with government regulations and environmental health and safety matters; differences between Canadian GAAP and IFRS; and other factors listed from time to time in Sherritt s continuous disclosure documents. Further, any forward-looking statement speaks only as of the date on which such statement is made, and except as required by law, Sherritt undertakes no obligation to update any forward-looking statements. 2

3 AMBATOVY OVERVIEW Nickel and cobalt mining operation in Madagascar Largest-ever foreign investment in Madagascar: US$5.5 billion Partners: - Sherritt International Corp. 40% - Sumitomo Corp. 27.5% - Korean Resources Corp. 27.5% - SNC-Lavalin Inc. 5% Annual production capacity - Nickel 60,000 tonnes - Cobalt 5,600 tonnes - Ammonium sulfate fertilizer 210,000 tonnes 3

4 AMBATOVY SITES 4

5 KEY AMBATOVY VALUES Health and safety: Part of corporate culture; absolute priority Zero harm to the community and personnel Social and environmental responsibility: Respect for cultural and social values Protect natural environment around sites Honesty and integrity: High ethical standard Transparency Good corporate governance: Strict compliance with principles of good governance to protect the public, employees and investors 5

6 COMPLIANCE Large Mining Investment Law Decree to Make Investments Compatible with the Environment Equator Principles International Finance Corporation Performance Standards Extractive Industries Transparency Initiative Business and Biodiversity Offsets Program International Council on Mining and Metals Principles Other companies standards 6

7 ENVIRONMENT PROGRAM Guiding Principle: No net loss to biodiversity, preferably a net gain Avoid, minimize, mitigate, compensate Compliance with stringent environmental norms and regulations and commitment to leadership Conservation programs for flora and fauna, including orchids, lemurs and critically endangered frogs and fish Stakeholder/third-party involvement NGO collaboration: CI, WCS, Missouri Botanical Gardens Community collaboration: forest management Scientific Consultative Committee monitors Env Program Audited by regulators and third-party experts (representing lenders) 7

8 CONSERVATION Biodiversity offsets program: pilot project within the framework of the Business and Biodiversity Offsets Program (BBOP) Mine conservation: Mine conservation forests of 4,900 ha surrounding the footprint Forest overlying part of ore body for conservation of unknown species, 300 ha Off-site conservation: Ankarena 6,800 ha of threatened low and medium altitude forest linked to the remaining eastern rainforest corridor Land to be impacted: 2,500 ha Land to be reclaimed: 2,400 ha* Land to be conserved: 12,000 ha Net gain in biodiversity:11,900 ha *100 ha of permanent infrastructure not to be reclaimed 8

9 SOCIAL COMMITMENTS Social Engagement 3 Pillars Mitigation Demobilization Reduction of Impacts Benefits Relationships Resettlement Villages Grievance Mechanism Community Relations Community Development Economic Development Approach: avoid, reduce, remedy, compensate (similar to ENV) 9

10 DEMOBILIZATION Support program for demobilized workers at the end of Construction contracts to transition to other income-generating opportunities Monthly allowance for a fixed period / conditions apply 20,000+ workers including subcontractors Other support mechanisms: Regional and District Labour Offices Manpower Redeployment Centres Agricultural Training Centres 10

11 ARCHEOLOGY Treated in accordance with local customs, scientific procedures, and IFC PS8 on Cultural Heritage Contribution to regional history and cultural heritage: 4,500+ artifacts and 250+ sites Collaboration with the Universities of Antananarivo and Toamasina, Museum of Art and Archeology and others 11

12 RESETTLEMENT & COMPENSATION Resettlement Villages IFC compliant 1,196 people resettled 296 new houses built 47 hectares allocated for farming Health, education and livelihood programs Rice field rehabilitation: Pipeline: 440 ha. Local methods / farmer participation Compensation: Cash and rice donation until production is restored Community facilities constructed for loss of recreational or social services 12

13 HEALTH & WELL-BEING HIV/AIDS: raise awareness in the community and workplace Policy of Zero tolerance for Child Prostitution: targeting workers who breach child protection laws; and community awareness program with UNICEF Water wells in resettlement villages and along the Pipeline 13

14 COMMUNITY DEVELOPMENT WHAT Reduce barriers to development through improving health and education Livelihood improvement through agricultural productivity increases and income generation Institutional strengthening focused on governance and planning HOW Increase Resilience Grow Capacity Repair (and build) Infrastructure 14

15 ECONOMIC BENEFITS Direct contributions to Government: Royalties, duties and taxes Nickel to become one of Madagascar s top exports stabilize currency Procure Policy: buy locally through ALBI Maximize spinoffs due to in-country plant and refinery Contracts for Malagasy companies: more than $1 billion Support and development of SMME: mentoring, advice and support Jobs: Hire locally policy target: 85% Malagasy Construction: 20,000 Operations 6,000 (employees + contractors) + 20,000 indirect Training: technical, managerial, leadership 50 courses; 3,000 trained 15

16 Hands-on Sustainability in Madagascar: Ambatovy s experience 8th Risk Mitigation and CSR Seminar October 16, 2012 Mark Sitter Sherritt International Corporation 16