Mining On Top: Stockholm 2013 26-27 Nov 2013 Responsible mineral development: a multidimensional view on value creation in mining – José García, World Economic Forum; Associate Director, Mining & Metals

1. Responsible Mineral Development Initiative (RMDI)
Maximizing the Value of Extractives
José M García
Stockholm, 26 November 2013

2. 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

3. Responsible Mineral Development overview
2

4. 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

5. 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
4

6. RMDI was established to provide guidance around key challenges
Phase I (2010)
Identified key challenges
Phase II (2011)
6 building blocks for practical action
1
Progressive
capacity building and knowledge sharing
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
250 interviews in 13 countries and 4
continents
6
2
Early and
comprehensive
dispute
management
Towards
responsible
mineral
development
5
Thorough
compliance
monitoring and
enforcement of
commitments
A shared
understanding
of the costs
and benefits
3
Collaborative
processes for
stakeholder
engagement
4
Transparent
processes and
arrangements
10 workshops on 6 continents with
more than 300 participants
5

7. RMDI country roundtables: A Global Initiative
Phase I 2010
Phase II 2011
Phase III 2012-13
6

8. 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.
2.
3.
4.
•
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
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)
2012
Global survey of over 300
stakeholders, testing
perceptions and expectations
7

9. 'Mineral Value Management' tool tests expectations across 7
dimensions of value
1 Fiscal (tax, royalties etc.)
& legal / regulatory
environment
7 Infrastructure
Diversification &
Multiplier Impacts
6 Beneficiation &
downstream
industry
5 Procurement &
supply chain
2 Employment
& skills
Direct
Mining
3 Environment &
bio-diversity
4 Social cohesion,
cultural and socioeconomic
Used to conduct global survey of ~300 stakeholders,
generating 4 key insights
8

10. Differences in the levels of expectations between stakeholders
Survey results: Insight
i
Example: Global survey results – African region
Governments
Commodity producers
Fiscal, leg. & reg
Fiscal, leg. & reg
Employment &
skills
Infrastructure
0
Downstream
Environ. & biodiversity
+4
Fiscal, leg. & reg
Employment &
skills
Infrastructure
0
Downstream
+2
Procurement &
supply
Others
(NGO's, academics...)
Environ. & biodiversity
0
Downstream
+2
Socio-econ. &
culture
Perceived value today
Procurement &
supply
+4
Employment &
skills
Infrastructure
Environ. & biodiversity
+2
Socio-econ. &
culture
Procurement &
supply
+4
Socio-econ. &
culture
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
9

11. Stakeholders are starting with different perceptions and aspirations
Insight
i
Peru survey results
Governments (n=5)
Commodity producers (n=27)
Civil society (n=26)
(NGO's, communities,...)
Nations (Governments)
Commodity producers
NGO's & Communities
I) Fiscal, legal & regulatory
environment
4
I) Fiscal, legal & regulatory
environment
4
I) Fiscal, legal & regulatory
environment
4
VII) Infrastructure
3
II) Employment & skills
VII) Infrastructure
3
II) Employment & skills
VII) Infrastructure
3
2
2
1
1
1
0
0
II) Employment & skills
2
III) Environmental and bio- VI) Beneficiation and
downstream industry
diversity
VI) Beneficiation and
downstream industry
V) Procurement and supply
industries
IV) Socio-economic, cultural
and social cohesion
Current
Future
Perceived value today
V) Procurement and supply
industries
0
III) Environmental and bio- VI) Beneficiation and
downstream industry
diversity
IV) Socio-economic, cultural
and social cohesion
III) Environmental and biodiversity
V) Procurement and supply
industries
Current
Future
Expected future value (10 years)
IV) Socio-economic, cultural
and social cohesion
Current
Future
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
10

12. Value driven by 2 types of factors
Inherent nature of a country & its resource base
and the extractives industry
Structural
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
11

13. Fiscal, employment and social dimensions are priorities ...
Survey results: Insight
ii
Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):
1.
2.
3.
7.
1.
2.
3.
7.
Fiscal: 54%
Employment: 37%
Social: 34%
Procurement: 6%
Fiscal: 53%
Social: 43%
Employment: 32%
Procurement: 8%
1.
2.
3.
7.
1.
2.
3.
7.
Fiscal: 62%
Social: 32%
Infrastructure: 29%
Downstream: 8%
Fiscal: 55%
Employment: 40%
Infrastructure: 32%
Environment: 9%
12

14. ... but drivers per dimensions may differ by stakeholder
Survey results: Insight
ii
Example survey results: "Enabling factors" which drive value:
Employment & skills
Fiscal, legal & regulatory
Social cohesion, cultural &
socio-economic
% times factor ranked in top 3
% times factor ranked in top 3
% times factor ranked in top 3
60
60
60
55
53
51
40
40
35
40
30
20
20
15
22
20
20
11
0
0
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Effectiveness of
compliance & monitoring
0
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Flexibility of labour market
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Ability to implement &
monitor legislation
13

15. African stakeholders aligned on the priorities, but what about the
solutions?
Nations (Governments)
Others (NGO's,
academics...)
Commodity producers
% of times ranked 1 or 2
% of times ranked 1 or 2
60
% of times ranked 1 or 2
60
61
60
56
51
48
44
40
39
40
31
26
26 27
20
20
19
20
15
13
6
4
4
Dimensions ranked most as top 2 priority
Procurement
Social
Environ.
Employment
Fiscal
Infrastructure
Downstream
Procurement
Social
Environ.
Employment
0
Fiscal
Infrastructure
Downstream
Procurement
Social
Environ.
Employment
0
Fiscal
0
4
Infrastructure
23
33
30
Downstream
31
40
Ranked least time in top 2
14

16. In other dimensions, we see differences by stakeholders ...
Survey results: Insight
iii
% of times downstream rated in top 2 (by stakeholder)
85%
30
27
63%
19
20
15
10
7
4
3
0
Government
Commodity
producer
Africa
Other (NGO,
others..)
Government
Commodity
producer
Other (NGO,
others..)
Latin America
15

17. Why does this matter?
Insights
Implications
i
— Differences in levels of expectations
between stakeholder groups and
regions
— Stakeholders need to understand the
perceptions and expectations of others
ii
— Areas of focus may be the same but
what creates value for stakeholders
within these may differ
— Stakeholders need to understand how
value is created for them and each
other and under what time frame
iii In other areas there is differing levels
—
— Explore ways to mutually maximise
value and find acceptable tradeoffs
of alignment
Having a process which creates transparency around
expectations is a critical first step for constructive dialogue
16

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,
17

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
18

20. 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 countrywide application of the MVM tool, as well as data collected from other
initiatives (I.e. ICMM). Peru, Chile, Mongolia, Mozambique
19

21. World Economic Forum – Mining & Metals
José M García
Associate Director, Mining and Metals
Global Leadership Fellow
jose.garcia@weforum.org
20

22. Responsible Mineral Development – Stockholm, 26 November 2013
21

23. Background Slides
22

24. Our Value Creation Process
Committed to Improving the State of the World
HOW
WHO
World Economic Forum
Community of Leaders:
The Forum serves as a
neutral, impartial and
trusted Partner of the
global governance system
WHAT
UNDERSTANDING
Community of INTEREST
Multistakeholder Core
… strategic dialogues
to enhance greater
understanding of the
relevant issues
• Government
• Business
• Civil Society
New Champions
• Global Growth Companies
• Technology Pioneers
• Young Global Leaders
• Global Shapers
• Social Entrepreneurs
informal
INTERACTION
Community of PURPOSE
physical, virtual & sustained
Strategic Insights
• Global Agenda Councils
• Global University Leaders
• Global Risk Response Network
• Global Benchmarking Network
• Strategic Foresight
SHAPING
ACTING
catalyzing and integrating
Transformation
Processes
Global  Industry  Regional
Community of ACTION
… shaping agendas
through taskforces and
collaborative processes,
finding solutions to key
issues
… catalyzing action to
advance global, regional
and industry agendas
through specific
initiatives

25. 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
Indonesia
Introduction of
mineral ore
export
restrictions
from May 6
2012
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
Australia
High profile
public debate in
relation to
Mineral
Resource Rent
Tax
24

26. Phase III (2012): Creating a better understanding of value between
stakeholders
4 main barriers to understanding
— Focus on specific & easily quantifiable value
dimensions
Used building blocks
2 & 3 to create 'Mineral Value Management'
2
A shared
understanding
of costs and
benefits
— Mismatch between expectations and reality
— Failure to involve the right stakeholders and
/or misunderstood objectives
— Assumption that value is a zero sum game
Creating a better
understanding of
expectations and how
value is created for all
stakeholders.....
3
Collaborative
processes for
stakeholder
engagement
.....in a multistakeholder
process designed to
increased transparency
25

27. Differences in the levels of expectations between stakeholders
Survey results: Insight
i
Example: Global survey results – African region
Governments
Commodity producers
Fiscal, leg. & reg
Fiscal, leg. & reg
Employment &
skills
Infrastructure
0
Downstream
Environ. & biodiversity
+4
Fiscal, leg. & reg
Employment &
skills
Infrastructure
0
Downstream
+2
Procurement &
supply
Others
(NGO's, academics...)
Environ. & biodiversity
0
Downstream
+2
Socio-econ. &
culture
Perceived value today
Procurement &
supply
+4
Employment &
skills
Infrastructure
Environ. & biodiversity
+2
Socio-econ. &
culture
Procurement &
supply
+4
Socio-econ. &
culture
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
26

28. Fiscal, employment and social dimensions are priorities ...
Survey results: Insight
ii
Ranking of priority dimensions (based on % of times ranked 1st or 2nd ):
1.
2.
3.
7.
1.
2.
3.
7.
Fiscal: 54%
Employment: 37%
Social: 34%
Procurement: 6%
Fiscal: 53%
Social: 43%
Employment: 32%
Procurement: 8%
1.
2.
3.
7.
1.
2.
3.
7.
Fiscal: 62%
Social: 32%
Infrastructure: 29%
Downstream: 8%
Fiscal: 55%
Employment: 40%
Infrastructure: 32%
Environment: 9%
27

29. ... but drivers per dimensions may differ by stakeholder
Survey results: Insight
ii
Example survey results: "Enabling factors" which drive value:
Employment & skills
Fiscal, legal & regulatory
Social cohesion, cultural &
socio-economic
% times factor ranked in top 3
% times factor ranked in top 3
% times factor ranked in top 3
60
60
60
55
53
51
40
40
35
40
30
20
20
15
22
20
20
11
0
0
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Effectiveness of
compliance & monitoring
0
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Flexibility of labour market
Gov’t
Mining
co.s
Others
(NGO’s,
others..)
Ability to implement &
monitor legislation
28

30. African stakeholders aligned on the priorities, but what about the
solutions?
Nations (Governments)
Others (NGO's,
academics...)
Commodity producers
% of times ranked 1 or 2
% of times ranked 1 or 2
60
% of times ranked 1 or 2
60
61
60
56
51
48
44
40
39
40
31
26
26 27
20
20
19
20
15
13
6
4
4
Dimensions ranked most as top 2 priority
Procurement
Social
Environ.
Employment
Fiscal
Infrastructure
Downstream
Procurement
Social
Environ.
Employment
0
Fiscal
Infrastructure
Downstream
Procurement
Social
Environ.
Employment
0
Fiscal
0
4
Infrastructure
23
33
30
Downstream
31
40
Ranked least time in top 2
29

31. In other dimensions, we see differences by stakeholders ...
Survey results: Insight
iii
% of times downstream rated in top 2 (by stakeholder)
85%
30
27
63%
19
20
15
10
7
4
3
0
Government
Commodity
producer
Africa
Other (NGO,
others..)
Government
Commodity
producer
Other (NGO,
others..)
Latin America
30

32. .....but potential alignment on other opportunities
Survey results: Insight
iii
Question: Is the largest area for improvement in the 'direct' or 'multiplier' effects?
Infrastructure
100
80
60
57
59
Multiplier
40
43
41
Direct
G’ments
Comm. Prod.
Others (NGO’s, others...)
60
40
20
0
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...)
31

33. Why does this matter?
Insights
Implications
i
— Differences in levels of expectations
between stakeholder groups and
regions
— Stakeholders need to understand the
perceptions and expectations of others
ii
— Areas of focus may be the same but
what creates value for stakeholders
within these may differ
— Stakeholders need to understand how
value is created for them and each
other and under what time frame
iii In other areas there is differing levels
—
— Explore ways to mutually maximise
value and find acceptable tradeoffs
of alignment
Having a process which creates transparency around
expectations is a critical first step for constructive dialogue
32

34. 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
33