Responsible Mineral Development Initiative (RMDI) Maximising the Value of Extractives for Development December 2013 Alex Wong World Economic Forum alex.wong@weforum.org
Mission 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
Responsible Mineral Development overview 2
Increasing recognition of mining's potential role in development "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 "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 "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 3
But stakeholders not necessarily in agreement on best way to do this Selected recent examples: Peru Local stakeholder protests in relation to planned Conga mine Guinea Ongoing review of mining contracts and recent strikes at mining operations Namibia transferring new mining and exploration to a state-owned company Mongolia Ongoing discussions in relation to issues with Oyu Tolgoi project Chile Increasing discontent from local communities including legal action Argentina Provincial governors demand larger share of mines Zimbabwe "indigenization" policy will force foreign firms to "cede" a 51% stake to locals. 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 4
RMDI was established to provide guidance around key challenges Phase I (2010) Identified 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 II (2011) 6 building blocks for practical action 1 Progressive capacity building and knowledge sharing 6 2 Early and comprehensive dispute management Towards responsible mineral development 5 Thorough compliance 3 monitoring and enforcement of commitments 4 Transparent processes and arrangements A shared understanding of the costs and benefits Collaborative processes for stakeholder engagement 250 interviews in 13 countries and 4 continents 10 workshops on 6 continents with more than 300 participants 5
Phase III (2012): Creating a better understanding of value between stakeholders 4 main barriers to understanding Used building blocks 2 & 3 to create 'Mineral Value Management' Focus on specific & easily quantifiable value dimensions Mismatch between expectations and reality 2 A shared understanding of costs and benefits Creating a better understanding of expectations and how value is created for all stakeholders... Failure to involve the right stakeholders and /or misunderstood objectives Assumption that value is a zero sum game 3 Collaborative processes for stakeholder engagement...in a multistakeholder process designed to increased transparency 6
RMDI Phase III - Mineral Value Management 7
'Mineral Value Management' tool tests expectations across 7 dimensions of value 1 Fiscal (tax, royalties etc.) & legal / regulatory environment 7 Infrastructure Diversification & Multiplier Impacts 2 Employment & skills 6 Beneficiation & downstream industry Direct Mining 3 Environment & bio-diversity 5 Procurement & supply chain 4 Social cohesion, cultural and socioeconomic Used to conduct global survey of ~300 stakeholders from 37 countries 8
Value driven by 2 types of factors Structural 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 Enabling Capacity & willingness of private sector Levels of trust & collaboration and influence of stakeholders 9
Stakeholders are starting with different perceptions and aspirations Example: Global survey results African region Governments Commodity producers Others (NGO's, academics...) Fiscal, leg. & reg Fiscal, leg. & reg Fiscal, leg. & reg Infrastructure Employment & skills Infrastructure Employment & skills Infrastructure Employment & skills Downstream 0 +2 Environ. & biodiversity Downstream 0 +2 Environ. & biodiversity Downstream 0 +2 Environ. & biodiversity Procurement & supply +4 Socio-econ. & culture Procurement & supply +4 Socio-econ. & culture Procurement & supply +4 Socio-econ. & culture Perceived value today Expected future value (10 years) 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 10
Country stage of economic development also impacts aspirations Example: Global survey results Stage of Development 1 Factor Driven (Developing) Efficiency Driven (Middle income) Innovation Driven (Advanced) Fiscal, leg. & reg Fiscal, leg. & reg Fiscal, leg. & reg Infrastructure Employment & skills Infrastructure Employment & skills Infrastructure Employment & skills Downstream 0 +2 Environ. & biodiversity Downstream 0 +2 Environ. & biodiversity Downstream 0 +2 Environ. & biodiversity Procurement & supply +4 Socio-econ. & culture Procurement & supply +4 Socio-econ. & culture Procurement & supply +4 Socio-econ. & culture Perceived value today Expected future value (10 years) 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 1. Country classifications based on World Economic Forum's Global Competitiveness Report: 11
Example: Peru Key minerals: Copper, gold, lead, zinc, tin, molybdenum, silver Exports to EU: Total volume $7.7B usd representing 17% total Peruvian exports, of which 76% is raw materials Germany (24%), Spain (24%), Italy (13%) are main destinations Copper and zinc are main minerals imported Opportunity: Opportunity to create a common understanding and build trust around mining activities and the value it can provide to Peru Key Government Priority: Poverty reduction and sustained dialogue on the contribution of mining to development High Level Roundtable co-hosted by Ministry of Mining & Energy in April 2013 12
Example: Peru Pre-Roundtable Survey Results Ranking of priority dimensions (based on % of times ranked 1 st or 2 nd ): Government 1. Environment: 100% 2. Social: 60% 3. Fiscal: 20% 7. Downstream: 0% Environment ranked as the top priority for government Commodity producers 1. Social: 73% 2. Fiscal: 38% 3. Infrastructure: 35% 7. Downstream: 0% Civil Society 1. Social: 64% 2. Environment: 48% 3. Fiscal: 36% 7. Downstream: 4% Social improvement was within the top 3 priorities for all stakeholders Downstream was consistently ranked as the lowest priority 13
Example: Peru Roundtable Focus Areas Roundtable Chair: Jorge Merino, Minister of Energy and Mining Building Local and National Capacity Special Remarks: René Cornejo Díaz, Ministry of Housing, Construction and Sanitation ** Discussion leader: Anthony Hodge, President, International Council of Mining and Metals Moderated by: Antoine Chevrier, Canadian International Development Agency Social Cohesion, Early Conflict Prevention Special Remarks: Vladimiro Huaroc Portocarrero, Head, Office for Social Conflict Resolution, Office of the Council of Ministers of Peru Discussion leader: Beatriz Boza, Chair, Ciudadanos al Día Moderated by: Fidel Jaramillo, Inter-American Development Bank Small Scale/Artisanal mining Special Remarks: Manuel Pulgar, Minister of Environent of Peru Special Remarks: Guillermo Shinno, Vice Minister of Mines of Peru Discussion leader: Miguel Santillana, Principal Researcher, Instituto del Peru Moderated by: José M García, Senior Manager, World Economic Forum 14
Example: Peru Post Roundtable Next Steps Key Themes Going Forward Enhanced public awareness on mining: Improving awareness and understanding Capacity building Mining and agriculture: Managing the nexus Mining contribution to development 15
Conclusions Dialogue in the early stage of mineral development between all stakeholders Needs to address both data based findings and starting 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) can play a key role in providing a neutral platform Creating trust is vital for establishing and maintaining partnerships 16
Additional Information Responsible Mineral Development Initiative Links to Reports Phase 1 Stakeholder Perceptions and Suggestions http://www3.weforum.org/docs/ip/2013/mm/wef_mm_responsiblemineraldevelopmentinitiative2010.pdf Phase 2 A Framework for Advancing Responsible Mineral Development http://www3.weforum.org/docs/ip/2013/mm/wef_mm_responsiblemineraldevelopmentinitiative2011.pdf Phase 3 Mineral Value Management A Multidimensional View of Value Creation from Mining http://www3.weforum.org/docs/ip/2013/mm/wef_responsiblemineraldevelopmentinitiative2013englishversion.pdf 17