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14th Americas School of MinesInvesting in LatinAmerica

Corporate Social Responsibility (CSR) and communityengagement: what has changed for mining companies?

Bill Mercer, Prospectors and Developers Association

14th Americas School of Mines

"Corporate Social Responsibility (CSR) and communityengagement: what has changed for mining companies?".

Bill Mercer15:30; 22 September 2010

PWC Mining SchoolRio de Janeiro


Pricew aterhouseCoopers

• Health and Safety

− Employees and public

• Environment

− Exploration to closure and beyond

• Financial

− Economic sustainability, investors

• Social/Community

− Village, city and country

WHAT DOES CORPORATE SOCIAL RESPONSIBILITY INVOLVE?(see also “Sustainable Development”

September 2010Slide 3

Section heading goes here

Investing in LatinAmerica


EXTERNAL DRIVERS - INTERNATIONAL EVOLUTION OF CSR1990s - 2007

• Rio Declaration on Environment and Development (1992)

• ILO Declaration on Fundamental Principles and Rights at Work(1998)

• OECD Guidelines for Multinational Enterprises (2000)

• Voluntary Principles on Security and Human Rights (2000)

• Equator Principles (2003)

• Extractive Industries Transparency Initiative (2005)

• Global Reporting Initiative (2006)

• Promoting Responsible Competitiveness (Cnd Govt) (2006)

• Canadian Bill C300 (not passed) 2009-?: An Act respectingCorporate Accountability for the Activities of Mining, Oil or Gas inDeveloping Countries


CSR DRIVERS FOR MINING COMPANIES – WHY TAKE ACTION?

• “Social licence to operate”

• Regulators and risk

• Cost of accidents (safety and environmental)

• Brand recognition

• Cost of remediation and closure

• Footprint - environmental

• Historic perceptions (public, media, politicians)

• NGOs

• The internet

• Changing attitudes within industry – family/friends, young people

• Investors – financial scandals (Bre-X)13/10/2010

5


SOME NGOs FOCUSED ON MINING

Partizans (people against Rio Tinto) (focus: Rio Tinto) - 1978

Pembina Institute (focus: environment) - 1985

Halifax Initiative (focus: Less developed countries, human rights) -1994

Earthworks (Focus: American mining companies in USA orinternational) - 1999

Mining Watch Canada (focus: Environment/social: Canadiancompanies in Canada or international) - 1999

Mines and Communities (focus: Social/global mining companies) -?2002

Blue: Canadian examples


WHY IS MINING DIFFERENT TO OTHER INDUSTRIES?

• “Mines are where you find them”

• Difficult locations – physically,climate

• Rural (indigenous) people - notexposed to industry

• Competition for land (tailingsespecially)

• Competition for water

• Competition for labour (effect onwages)

• Large number of junior companies

13/10/20107


HEALTH AND SAFETY

13/10/20108



History of health and safety is like manyindustries

• Manual labour• Legacy of coal and asbestos mining• Silicosis

THE HISTORICAL RECORDHEALTH AND SAFETY





Despite problems in the news, there isa focus on health and safety in mostcompanies

CANADA

• PDAC H&S Committee (2005)• MAC H&S Committee (2008)

• Professional responsibility

• “Westray Bill”: criminalresponsibility

HEALTH AND SAFETY – the modern and Canadian perspective



Picture of modern miner

PPE etc


ENVIRONMENT

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SURFACE IMPACT OF MINING IN ORDER OF MAGNITUDE

− Tailings and water

• Local and regional

− Moving communities

• Local

− Open pits

• Site specific

− Plant

• Site specific

− Underground

13/10/201012

Agnico Eagle’s Goldexmine

Codelco’s Chuquicamata



Size

Topography

Seismic risk

Dam construction

Tailings material

Acid rock drainage(metal leaching)

TAILINGS DAMS – THE RISK ISSUES

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• SNAP LAKE DIAMOND MINE, NWT,CANADA

− Research caribou migration, native plantsfor reclamation

− Research aquifers (incl Hg mobilization) -$2 million

• DIAVIK DIAMOND MINE, NWT, CANADA

− $6 million pre production – baselineenvironmental studies

− $3.5 million per year current operationalenvironmental monitoring

MINING AND BIODIVERSITY





“Typical” project in Canadian north:

• Environmental baseline studies ~CND$5-15M

• Environmental assessment process ~CND$1M

Life of mine environmental cost ~CND$80 million

Expenditures from 1980 to 2010 total perhaps $2 billion on environmentalstudies (oil and gas, mining) in Canadian North

National Budget for Environment Canada 2009/10 year ~$1,000M

• Portion for Wildlife and Ecosystems ~$130M

INVESTMENT IN ENVIRONMENTAL RESEARCH BY MININGNorthwest Territories, Canada




SOCIAL – COMMUNITY ENGAGEMENT – HUMAN RIGHTS

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Mining Companies and Social ResponsibilityA Canadian Perspective

THE PAST

The company as thebenevolent force

• Company town – reasonablehousing, recreation facilities

Communities

• No obligations

• No political power

• Disadvantaged

THE PRESENT

Legacy of past practices

Political change in parts of theworld opening up new areas– politics, social structure

Indigenous people, and humanrights


BACKGROUND - INDIGENOUS PEOPLE AND THE MININGINDUSTRY IN CANADA

Land claims cover up to 30% of land area, especially innorth

Long tradition of working with industry:

Prospectors, claim stakers, guides

Mining is single largest employer of Indigenous people

Mining companies: ~$1B into Aboriginal ownedbusinesses

Also history of conflict:

Historic lack of benefits from mining

Land conflict

Pollution especially tailings

Occupational illness


TSX:AVLOTCQX:AVARF www.avalonraremetals.com 20

AVALON RARE METALS INC

Nechalacho Deposit, Community Engagement

Renaming ceremonyCommunity meetingsSite visitsFirst Nations TrainingEmployment at site40% of individuals

employed at site ofAboriginal origin

Business developmentMajor contractors with Aboriginal

ownership

Contracts for ice road haulage, airstrip

Wind power evaluation with YKDFN

Core boxes


COMMUNITY ENGAGEMENT – KEY LEARNINGS

• Engagement is not a stage in exploration – itis an on-going process, before, during andafter production

• Learn about the people, listen to the people,show respect

• Strive to create win-win situations –education, business, social development

• Seek and create common goals


CANADIAN INDUSTRY RESPONSE TO CSR – THE PDAC

• 2000: recognition of need to assist industry for improved environmentalpractice

• 2001: start of the E3 Environmental manual

• 2002: addition of section on working with Aboriginal people in Canada

• 2005: formation of health and safety committee

• 2006: CSR identified during PDAC Strategic planning as critical step

• 2009: Launch of E3 Plus

13/10/201022


KNOWLEDGE

ACCOUNTABILITY

Thank [email protected]

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