responsible mineral development: a multidimensional view on value creation in mining
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Responsible Mineral Development Initiative (RMDI)
Maximizing the Value of Extractives
José M García
Stockholm, 26 November 2013
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
Mission
2
Responsible Mineral Development overview
3
Increasing recognition of mining's potential role in development
"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
"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
"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
4
What is RMDI?
- Neutral platform for multi stakeholder engagement
- Identifies number of possible actions, initiatives and case studies that
address the predominant challenges. Practical examples that have
helped to advance responsible mineral development in specific
circumstances
- RMDI is actively working to establish collaborative multi-stakeholder
dialogue platforms in a number of countries e.g. Peru, Chile, Mongolia,
Guinea, Mozambique
- At either national or local level, a dialogue platform can explore the
perceptions and attitudes of participants regarding the “value” to be
derived from mineral development activities
5
RMDI was established to provide guidance around 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 I (2010)
Identified key challenges
Phase II (2011)
6 building blocks for practical action
Towards
responsible
mineral
development
Progressive
capacity build-
ing and know-
ledge sharing
A shared
understanding
of the costs
and benefits
Collaborative
processes for
stakeholder
engagement
Thorough compliance
monitoring and enforcement of commitments
Early and
comprehensive
dispute
management
1
6 2
5 3
Transparent
processes and
arrangements
4
250 interviews in 13 countries and 4
continents
10 workshops on 6 continents with
more than 300 participants
6
RMDI country roundtables: A Global Initiative
Phase I 2010
Phase II 2011
Phase III 2012-13
7
Context: Responsible Mineral Development Initiative phase III:
Development of Mineral Value Management concept and tool
Phase III (2012):Creating a better understanding of
value between stakeholders
• Development of Mineral Value Management (MVM)
tool based on RMDI building blocks 2 and 3 and four
main barriers to understanding:
1. Focus on specific & easily quantifiable value
dimensions
2. Mismatch between expectations and reality
3. Failure to involve the right stakeholders and /or
misunderstood objectives
4. Assumption that value is a zero sum game
• Mineral Value Management survey tool tests
perceptions and expectations of stakeholders across 7
key dimensions of value for the mining sector (fiscal,
employment & skills, environment & biodiversity, social
cohesion/cultural & socio-economic, procurement &
supply chain, beneficiation & downstream,
infrastructure)
Global survey of over 300
stakeholders, testing
perceptions and expectations
2012
8
'Mineral Value Management' tool tests expectations across 7
dimensions of value
Fiscal (tax, royalties etc.)
& legal / regulatory
environment
Employment
& skills
Beneficiation &
downstream
industry
Infrastructure
Procurement &
supply chain
1
2
4
6
5
3 Environment &
bio-diversity
7
Direct
Mining
Diversification &
Multiplier Impacts
Social cohesion,
cultural and socio-
economic
Used to conduct global survey of ~300 stakeholders,
generating 4 key insights
9
Differences in the levels of expectations between stakeholders Survey results: Insight
Governments Commodity producers
Others
(NGO's, academics...)
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
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
Perceived value today Expected future value (10 years)
Example: Global survey results – African region
i
10
Stakeholders are starting with different perceptions and aspirations Insight
Governments (n=5) Commodity producers (n=27)
Civil society (n=26)
(NGO's, communities,...)
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
Perceived value today Expected future value (10 years)
Peru survey results
0
1
2
3
4
I) Fiscal, legal & regulatoryenvironment
II) Employment & skills
III) Environmental and bio-diversity
IV) Socio-economic, culturaland social cohesion
V) Procurement and supplyindustries
VI) Beneficiation anddownstream industry
VII) Infrastructure
Nations (Governments)
Current Future
NGO's & Communities
0
1
2
3
4
I) Fiscal, legal & regulatoryenvironment
II) Employment & skills
III) Environmental and bio-diversity
IV) Socio-economic, culturaland social cohesion
V) Procurement and supplyindustries
VI) Beneficiation anddownstream industry
VII) Infrastructure
Commodity producers
Current Future
0
1
2
3
4
I) Fiscal, legal & regulatoryenvironment
II) Employment & skills
III) Environmental and bio-diversity
IV) Socio-economic, culturaland social cohesion
V) Procurement and supplyindustries
VI) Beneficiation anddownstream industry
VII) Infrastructure
NGO's & Communities
Current Future
i
11
Value driven by 2 types of factors
Structural
Enabling
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
Capacity & willingness of private sector
Levels of trust & collaboration and influence of
stakeholders
12
Fiscal, employment and social dimensions are priorities ... Survey results: Insight
Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):
1. Fiscal: 53%
2. Social: 43%
3. Employment: 32%
7. Procurement: 8%
1. Fiscal: 54%
2. Employment: 37%
3. Social: 34%
7. Procurement: 6%
1. Fiscal: 62%
2. Social: 32%
3. Infrastructure: 29%
7. Downstream: 8%
1. Fiscal: 55%
2. Employment: 40%
3. Infrastructure: 32%
7. Environment: 9%
ii
13
... but drivers per dimensions may differ by stakeholder Survey results: Insight ii
Fiscal, legal & regulatory Employment & skills
Social cohesion, cultural &
socio-economic
Example survey results: "Enabling factors" which drive value:
% times factor ranked in top 3
40
20
0
Others
(NGO’s,
others..)
30
Mining
co.s
15
Gov’t
53 60
Effectiveness of
compliance & monitoring
% times factor ranked in top 3
60
40
20
0
Others
(NGO’s,
others..)
35
Mining
co.s
55
Gov’t
20
Flexibility of labour market
60
% times factor ranked in top 3
22
40
20
0
Others
(NGO’s,
others..)
51
Mining
co.s
Gov’t
11
Ability to implement &
monitor legislation
14
African stakeholders aligned on the priorities, but what about the
solutions?
Nations (Governments) Commodity producers
Others (NGO's,
academics...)
23
Environ.
6
Em
plo
ym
ent
31
Fis
cal
51
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
31
Dow
nstr
eam
27
Pro
cure
ment
26
Socia
l
Em
plo
ym
ent
48
Fis
cal
61
4
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
30
Dow
nstr
eam
4 P
rocure
ment
13 S
ocia
l
39
Environ.
Fis
cal
56
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
33
Dow
nstr
eam
15
Pro
cure
ment
4
Socia
l
26
Environ.
19
Em
plo
ym
ent
44
Dimensions ranked most as top 2 priority Ranked least time in top 2
15
In other dimensions, we see differences by stakeholders ... Survey results: Insight
30
20
10
0
63%
85%
Other (NGO,
others..)
3
Commodity
producer
7
Government
19
Other (NGO,
others..)
15
Commodity
producer
4
Government
27
Africa Latin America
% of times downstream rated in top 2 (by stakeholder)
iii
16
Why does this matter?
—Differences in levels of expectations
between stakeholder groups and
regions
—Areas of focus may be the same but
what creates value for stakeholders
within these may differ
— In other areas there is differing levels
of alignment
—Stakeholders need to understand the
perceptions and expectations of others
—Stakeholders need to understand how
value is created for them and each
other and under what time frame
—Explore ways to mutually maximise
value and find acceptable tradeoffs
Insights Implications
i
ii
iii
Having a process which creates transparency around
expectations is a critical first step for constructive dialogue
17
What is RMDI?
A solid initiative
1. A series of reports describing an underlying governance framework to support
responsible mineral development as well as best practise examples,
18
What is RMDI?
A solid initiative
1. A series of reports describing an underlying governance framework to support
responsible mineral development as well as best practise examples,
2. The web-based MVM tool, and
19
What is RMDI?
A solid initiative
1. A series of reports describing an underlying governance framework to support
responsible mineral development as well as best practise examples,
2. The web-based MVM tool, and
3. In-country multi-interest mining dialogues that use the results of the country-
wide application of the MVM tool, as well as data collected from other
initiatives (I.e. ICMM). Peru, Chile, Mongolia, Mozambique
20
World Economic Forum – Mining & Metals
José M García
Associate Director, Mining and Metals
Global Leadership Fellow
jose.garcia@weforum.org
21
Responsible Mineral Development – Stockholm, 26 November 2013
22
Background Slides
Our Value Creation Process
Committed to Improving the State of the World
The Forum serves as a
neutral, impartial and
trusted Partner of the
global governance system
informal
INTERACTION
physical, virtual & sustained
catalyzing and integrating
Transformation
Processes
Global Industry Regional
UNDERSTANDING
Community of INTEREST
SHAPING
Community of PURPOSE
ACTING
Community of ACTION
WHO … strategic dialogues
to enhance greater
understanding of the
relevant issues
… shaping agendas
through taskforces and
collaborative processes,
finding solutions to key
issues
… catalyzing action to
advance global, regional
and industry agendas
through specific
initiatives
World Economic Forum
Community of Leaders:
Multistakeholder Core • Government
• Business
• Civil Society
New Champions • Global Growth Companies
• Technology Pioneers
• Young Global Leaders
• Global Shapers
• Social Entrepreneurs
Strategic Insights
• Global Agenda Councils
• Global University Leaders
• Global Risk Response Network
• Global Benchmarking Network
• Strategic Foresight
HOW
WHAT
24
But stakeholders not necessarily in agreement on best way to do this
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
Argentina
Provincial
governors demand
larger share of
mines
Guinea
Ongoing review of
mining contracts and
recent strikes at
mining operations
Namibia
transferring new
mining and
exploration to a
state-owned
company
Zimbabwe
"indigenization"
policy will force
foreign firms to
"cede" a 51%
stake to locals.
Mongolia
Ongoing
discussions in
relation to
issues with
Oyu Tolgoi
project
Chile
Increasing
discontent from
local communities
including legal
action
Peru
Local stakeholder
protests in relation to
planned Conga mine
Selected recent examples:
25
Phase III (2012): Creating a better understanding of value between
stakeholders
Collaborative
processes for
stakeholder
engagement
A shared
understanding
of costs and
benefits
.....in a multistakeholder
process designed to
increased transparency
Creating a better
understanding of
expectations and how
value is created for all
stakeholders.....
2
3
— Focus on specific & easily quantifiable value
dimensions
— Mismatch between expectations and reality
— Failure to involve the right stakeholders and
/or misunderstood objectives
— Assumption that value is a zero sum game
4 main barriers to understanding
Used building blocks
2 & 3 to create 'Mineral Value Management'
26
Differences in the levels of expectations between stakeholders Survey results: Insight
Governments Commodity producers
Others
(NGO's, academics...)
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
Fiscal, leg. & reg
Employment & skills
Environ. & bio-diversity
Socio-econ. & culture
Procurement & supply
Downstream
Infrastructure
0
+4
+2
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
Perceived value today Expected future value (10 years)
Example: Global survey results – African region
i
27
Fiscal, employment and social dimensions are priorities ... Survey results: Insight
Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):
1. Fiscal: 53%
2. Social: 43%
3. Employment: 32%
7. Procurement: 8%
1. Fiscal: 54%
2. Employment: 37%
3. Social: 34%
7. Procurement: 6%
1. Fiscal: 62%
2. Social: 32%
3. Infrastructure: 29%
7. Downstream: 8%
1. Fiscal: 55%
2. Employment: 40%
3. Infrastructure: 32%
7. Environment: 9%
ii
28
... but drivers per dimensions may differ by stakeholder Survey results: Insight ii
Fiscal, legal & regulatory Employment & skills
Social cohesion, cultural &
socio-economic
Example survey results: "Enabling factors" which drive value:
% times factor ranked in top 3
40
20
0
Others
(NGO’s,
others..)
30
Mining
co.s
15
Gov’t
53 60
Effectiveness of
compliance & monitoring
% times factor ranked in top 3
60
40
20
0
Others
(NGO’s,
others..)
35
Mining
co.s
55
Gov’t
20
Flexibility of labour market
60
% times factor ranked in top 3
22
40
20
0
Others
(NGO’s,
others..)
51
Mining
co.s
Gov’t
11
Ability to implement &
monitor legislation
29
African stakeholders aligned on the priorities, but what about the
solutions?
Nations (Governments) Commodity producers
Others (NGO's,
academics...)
23
Environ.
6
Em
plo
ym
ent
31
Fis
cal
51
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
31
Dow
nstr
eam
27
Pro
cure
ment
26
Socia
l
Em
plo
ym
ent
48
Fis
cal
61
4
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
30
Dow
nstr
eam
4 P
rocure
ment
13 S
ocia
l
39
Environ.
Fis
cal
56
% of times ranked 1 or 2
60
40
20
0
Infr
astr
uctu
re
33
Dow
nstr
eam
15
Pro
cure
ment
4
Socia
l
26
Environ.
19
Em
plo
ym
ent
44
Dimensions ranked most as top 2 priority Ranked least time in top 2
30
In other dimensions, we see differences by stakeholders ... Survey results: Insight
30
20
10
0
63%
85%
Other (NGO,
others..)
3
Commodity
producer
7
Government
19
Other (NGO,
others..)
15
Commodity
producer
4
Government
27
Africa Latin America
% of times downstream rated in top 2 (by stakeholder)
iii
31
.....but potential alignment on other opportunities
Survey results: Insight iii
Direct: Improving the direct mining infrastructure in the country to attract more investments and improve the profitability of the industry (e.g., leading to more taxes, etc...) Multiplier: Leveraging the infrastructure for broader use (e.g., other non-mining industries, public services, etc...)
100
0
Direct
Multiplier
Others (NGO’s, others...)
41
59
Comm. Prod.
43
57
G’ments
40
60
20
40
60
80
Question: Is the largest area for improvement in the 'direct' or 'multiplier' effects?
Infrastructure
32
Why does this matter?
—Differences in levels of expectations
between stakeholder groups and
regions
—Areas of focus may be the same but
what creates value for stakeholders
within these may differ
— In other areas there is differing levels
of alignment
—Stakeholders need to understand the
perceptions and expectations of others
—Stakeholders need to understand how
value is created for them and each
other and under what time frame
—Explore ways to mutually maximise
value and find acceptable tradeoffs
Insights Implications
i
ii
iii
Having a process which creates transparency around
expectations is a critical first step for constructive dialogue
33
Suggested action
Agree on actions for priority areas
—Needs to address both data based findings and 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)
and the role they can play in providing a neutral platform
—Creating trust is vital for establishing and maintaining partnerships
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