The Business Case for Socially

Responsible Mining
Some Lessons from Australia

Alumni and Business Breakfast

Ian Satchwell

20 September 2013
Australia has a very open economy – free trade;
liberal investment – because it’s good for us!

Hon Tony Abbot MP, Prime Minister of Australia

Hon Andrew Robb MP, Minister for Trade and Investment 2

Overview

• 150 years of mining experience

• Australia has done well from mining
• We’ve made mistakes…
• …but we have learned much
• “Grow the pie” strategies
Source: Qantas
• Economic reform and infrastructure partnerships
• Investment attraction, efficient approvals, certain fiscal regime
• Win-win-win approaches: partnerships, delivery of returns for all
• Using mining to facilitate broad-based economic growth
• Importance of technology, knowledge and skills
• Generating strong social licence to operate

3
What is socially responsible mining?

Corporate social responsibility ‘plus’

+
Good governance
(government, industry & community)
+
Sustainable, broad-based returns

4
 Australia is well
located to supply
Asia with mineral
and energy
products

Iron ore, LNG Bowen Basin region

coal, LNG

Hunter region
coal

5
Australia’s engineering and construction challenge – the largest
investment wave since the 1800s gold rushes*

WA & NT projects Gladstone and

LNG, mining
to 2016: USD220 billion+ North West
DARWIN Economic Triangle
Offshore petroleum Base metals, Queensland
basins bauxite-alumina projects to 2016:
Pilbara Region BROOME
USD100 billion+
LNG, iron ore, PORT HEDLAND Northern Territory Bowen, Surat and
infrastructure KARRATHA
Galilee Basins
Queensland Coal, CSG, LNG
Western Australia

Mid West Region South Australia

BRISBANE
Iron ore, gold, Copper, uranium,
uranium, nickel, NSW
mineral sands, New South Wales
Coal, gold, base
PERTH petroleum SYDNEY
South West Region Goldfields Region ADELAIDE CANBERRA
metals
Alumina, mineral sands, Gold, nickel, iron ore Victoria

gold MELBOURNE
South Australia
projects to 2016
*Reserve Bank, Australia
USD10 billion+ HOBART
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 Western Australia case: investment will result in decades of
increased production with lower volatility

Increased
sustaining
Historic and forecast production value* for WA’s key capital and
resources Double 2011 services
$m value

80,000
70,000
Gold
60,000
50,000 Iron Ore
40,000
Nickel
30,000
20,000 Oil/Gas
10,000
Alumina and Bauxite
0
2005 2009 2013 2017

Source: ACIL Tasman analysis * At ten year average prices 7

 Resource economy in Australia: bigger than traditionally measured

Gross Value Added – resource economy 2011-12 Resource employment by industry 2011-12
Share of nominal GVA, financial year Share of total employment, financial year
(has more than doubled in past 10 years)

Resource economy accounts for 18% of GVA Resource economy accounts for 10% of employment
• 11.5% directly from extraction and processing • 3.25% directly from extraction and processing
• 6.5% from other sectors providing inputs • 6.75% from other sectors providing inputs

Source: Rayner and Bishop, Reserve Bank of Australia February 2013 8

 Taking a broad view: indirect and induced benefits from mining
Economic output Indirect Induced
 Subsequent backward  Household consumption as
expenditure for local goods direct and indirect employees
Local and services along the supply spend their income within the
Direct from mining manufacturer chain local economy
 Income of supply chain
 Purchasing expenditure or service employees
for local goods and provider  Taxes paid by suppliers to the
services Government

 Income of dealer’s employees  Household consumption as

 Taxes paid by dealer to the direct and indirect employees
 Payments to employees Government spend their income within the
Local dealer local economy

In Australia, for every $1 of mining revenue, 40¢ is spent on goods and

services: Reserve Bank
Adapted from Saipem 2011 9
It’s not only about mining: other growth drivers

1 2
Global & regional HQ Service and
technology hub

3 4
Trade & foreign Agriculture and food
investment sector growth

10
Growing mining is important, but so is growing other sectors

Australian exports 1998 – 2012 Investment in Australia 1960 – 2010

Growth in real value-added

by sector, 2000-2012 (%)

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Source: Grattan Institute
 Western Australia case: Employment growth –
more than just mining jobs
Current workforce (2010) Additional workers until 2020

Mining and Australian

Construction mining
employment
Non Mining and multiplier is
Employment Construction
3–4
growth by 0 500,000 1,000,000 1,500,000

industry
sector Construction
Healthcare and Social Services
2010-2020 Retail
Mining
Major focus is
Professional Services
on education
Education
Manufacturing
and training
Transport
Hospitality
Administration and Support
Other

0 50,000 100,000 150,000 200,000 250,000 300,000

Source: CCIWA: Building Western Australia’s Workforce for Tomorrow, June 2010 12
Strong pre-competitive geoscience underpinnings
 Australian exploration projects – strong base of grassroots, but few
make it to feasibility – implications for investment attraction

• 011-12
3500 203
Feasibility
3000 626
Advanced
2500 Exploration
1126 Grassroots
2000
103
172 27
1500 82

649 379
1000 59
100
66 7
1352 680 834 296
116 24
500 40
62 341
122 49
0
Au Cu Coal U REE Ni

Number of exploration projects by stage of development

Source: Geoscience Australia, 2011-12
 Growth of Mining Equipment, Technology and Services (METS) –
additional way of thinking about value-adding

METS output is growing at 15

to 20% a year
• 4% of national output in
2002-03
• 8.4% in 2011-12
METS contribution to GDP
• 6.7% in 2010-11
• Est. 9.4% in 2012-13

Many METS are knowledge-

and technology-intensive

Source: Australian Treasury and Ed Shan / Minerals Council of Australia 15

 METS is now a very important industry sector

16
Source: Austmine
 …with deep links into the economy

17
Source: Austmine
METS firms are exporting, equipment, technology and
knowledge – developed from 150 years of mining knowledge

Source: Austmine 18
Challenge 1: Market volatility and uncertainty, as always!

Annual zinc prices and stocks Annual nickel prices and stocks

Annual copper prices and stocks Annual aluminium prices and stocks

China growth rates and patterns of growth? Demand from rest of Asia?
Source: BREE and LME 19
 Challenge 2: Margins and returns are not as strong as previously

Note: Cost per tonne is the weighted average of 8 major gold producers by total ore mined; average grade is the weighted average of 8 major gold producers by total ore mined;
Major Gold producers: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest.
Source: Gold Fields company data; annual reports, Condemned to Excellence report(IAMGOLD Corporation, Dec 2012)
Source: Resource Nationalism: How to grow, not shrink the pie, Nick Holland, Gold Fields, September 2013
 …so mining not as attractive to investors as it was:
increased competition for mining investment

Source: Resource Nationalism: How to grow, not shrink the pie, Nick Holland, Gold Fields, September 2013
Challenge 3: competitiveness of Australian mines – cash operating costs:
percent of production by cost curve quartile

Source: AME; Brook Hunt 22

 Challenge 3: Infrastructure provision: Infrastructure Australia
approach

Priorities

• Identifying, prioritising and

investing in infrastructure that
delivers real economic, social
and environmental benefits

• Creating new opportunities to

fund and finance infrastructure
though PPPs

But arguably insufficient emphasis

on knowledge infrastructure
 People are Australia’s most important asset
Focus on attracting, developing and retaining high-quality talent, not just a
focus on hard infrastructure

Education and training • Crucial to dealing with challenges and opportunities of the 21st Century
institutions: key • Advanced education integrated with research
infrastructure assets

Complementary to • Knowledge-intensive and knowledge creating

traditional • Adaptable and capable to deal with uncertainty and to engage with the
infrastructure emerging new global economy

• e.g. Technical colleges; SKM Learning Centre, GE Energy Learning Centre;

Public sector and University research and teaching centres (Rio Tinto, BHP, Chevron, Shell)
industry collaboration • Knowledge spillovers: trained workers move between projects and firms, taking
skill set and culture with them

Integrated policy on industry, education and training

It’s for the people: building strong community benefits,
understanding and support
–
International Mining for Development Centre

Mining for Development Initiative

IM4DC A KEY ELEMENT

MINING FOR DEVELOPMENT

Extractive
Government to Community Advanced
Country/region Industries
IM4DC government and social degree
programs Transparency
partnerships development scholarships
Initiative (EITI)
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IM4DC
Build skills and capability within government, universities, research
OBJECTIVES institutions and civil society organisations to bring about:

Improved policies, practices Improved knowledge of An ability to continue to

and legislation resources base build local capacity in mining
governance

How? Short courses, workshops, conferences, study tours,

research, fellowships, institutional partnerships

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Leveraging Australia’s
Mining Expertise
IM4DC COURSES AND ACTIVITIES
● Geodata
● Minerals and energy policy
● Resource governance
● Licensing and agreements
● Indigenous agreement-making
● Community engagement
● Local content
● Regional development
● Infrastructure planning and delivery
Activities cover the ● Revenue design
● Mine waste management
mining life cycle and
● Mine closure and post mining land use
all elements of mining ● Environmental and water management
for development ● Occupational health and safety

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 International Mining for Development Centre

Africa program 2013-14

FOUR PRIORITY COUNTRY HUBS; ~16 OTHER COUNTRIES

• 17 courses in Africa
• Access to 18 courses in
Australia
• Fellowships
• Action Research
• Institutional partnerships
• Advice to governments
• M4D Conference
• Alumni community of practice

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 International Mining for Development Centre

Where IM4DC is working

United Kingdom

Canada Mongolia
USA
Afghanistan Myanmar
West Africa Laos
Liberia The Philippines
Colombia Ghana Pacific
East Africa Indonesia
Ecuador Bolivia
Zambia
Peru
South Africa Mozambique
Chile Uruguay
Australia
Southern Africa

Multi year engagement with governments and institutions

African countries serviced by IM4DC include:
Participation in courses, research Congo, Mali, Morocco, Niger, Nigeria, Burkina Faso,
Ethiopia, Guinea, Cote d’Ivoire, Gabon, Uganda,
Possible future priority engagement South Africa, Kenya, Malawi, Cameroon, Tanzania,
Sierra Leone, Senegal, Namibia, Madagascar
Locations of peer partner institutions 30
IM4DC Achievements
SUCCESSFUL CAPACITY-BUILDING
 Thank you

Contact International Mining for Development Centre The Energy and Minerals Institute The Sustainable Minerals Institute
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Australia Australia Australia
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