Responsible Gold Mining and Value Distribution | The World Gold Council

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In an industry first, member companies of the World Gold Council have collaborated to combine data which provides a comprehensive, country by country view on how value generated by the formal gold mining sector is distributed and how much of that value remains with host nations. This data covers expenditure in 2012 and includes payments to suppliers, employees and governments.

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  • In 2011, IAMGOLD announced a five-year partnership with Plan Canada to support youth and economic development in Burkina FasoIAMGOLD has committed $1.0 million to the project along with in-kind contributions in country and has provided support on various practical and technical elements of the programmeThe goal of the project is to improve the quality and relevance of pre-vocational education for approximately 6,400 girls and boys, aged 13–18 years, who are identified as ‘kids at risk’Among the key 2012 accomplishments, 13 schools were renovated or newly constructed and equipped as training sitesGold sales from companies surveyed were equivalent to 26% of national exports in 2012Payments to government represented 3.5% of total government revenue
  • Despite gold output falling 11% from 2009 to 2012 among companies surveyed (from 14.5 to 12.9 tonnes), in country expenditure more than trebledPayments to suppliers and wages/salaries represented over 90% of total in country expenditure in both 2009 and 2012The Maricunga and La Coipa mines are located approximately 4,000 metres above sea level in the Atacama Desert, one of the driest places on Earth. In this water-stressed area, Kinross has undertaken extensive studies to better understand the hydrological cycle in the area and implemented measures to improve waterAnnual precipitation is approximately 150 millimetres and comes as snow. In 2011, Kinross installed two 100-metre lines of wooden snow fencing, aiming to improve snowmelt infiltration into groundwaterKinross is optimistic that carefully installed snow fences can result in meaningful contributions to the local water supply. Preliminary results showed that accumulated snow contributed to an increase in groundwater recharge during the spring melt
  • Golden Star Resources provides National Health Insurance Scheme coverage for all its Ghanaian employees and their immediate families, as well as providing mine site clinic access for some 5,600 people (employees and their registered family) for 2012As part of their CSR programme, Golden Star built a health centre at Nsadweso, an Outpatients Department at the Prestea Government Hospital, nurses quarters at Bogoso, a mini-clinic at Brakwaline, and a community health post at BondayeOf companies surveyed, total gold output increased by 60% between 2009 and 2012 (from 47.0 to 75.2 tonnes) yet expenditure within Ghana more than trebledGold sales from companies surveyed was equivalent to over 30% of national exports in 2012
  • Responsible Gold Mining and Value Distribution | The World Gold Council

    1. 1. Responsible gold mining and value distribution A presentation by Terry Heymann Managing Director, Gold for Development, World Gold Council 7 November 2013
    2. 2. What is the value distribution report? A new report that quantifies the overall economic contribution made by leading responsible gold mining companies by providing, for the first time, a collective analysis of the value distributed to different stakeholder groups – including employees, suppliers, governments, communities and investors Why has it been developed? • Mining can make a significant impact to economic growth and development. In many countries around the world, it is a key driver of GDP, tax revenues, foreign exchange and employment. • Yet for a number of years there has been a debate about whether the benefits of mining are fairly distributed. • For countries to benefit from their mineral reserves, a number of stakeholders need to be involved, including government, communities, companies and the investors who fund these companies. • Unfortunately, there is often the perception that one set of stakeholders benefit to the disadvantage of others. • This report has been developed to show, for the first time, how gold mining is supporting socio-economic development. World Gold Council | Responsible gold mining and value distribution report | December 2013 2
    3. 3. What is responsible gold? • Responsible gold mining is mining which takes place in compliance with applicable laws which observes high standards of safety and health protection and of environmental stewardship. • Responsible mining is respectful of local communities and their cultures and of their human rights; manages its impacts responsibly and which provides acceptable and realistic benefits for all its stakeholders. 3 World Gold Council | Responsible gold mining and value distribution report | December 2013
    4. 4. Global value creation and distribution: World Gold Council | Responsible gold mining and value distribution report | December 2013 4
    5. 5. The report tells us: Impact Gold mining makes a very significant contribution to the economies of those countries where gold is mined • Globally, the companies included in this report spent over US$55.6bn in 2012 • Of this $55.6bn in total expenditure, $35.2bn (62%) went to other businesses (e.g. suppliers), $8.3bn (15%) in wages and salaries, $8.5bn (15%) in taxes to government and $3.4bn (6%) in payments to providers of capital (including dividends and interest) • The research shows that significant expenditure is incurred in the country of operation. Of the $55.6bn in total expenditure, at least $44.7bn (80%) was paid out in the country where the operation was situated. • The report also profiles numerous examples of community development, education, healthcare or infrastructure projects that gold mining companies develop in the areas where their mines are situated. World Gold Council | Responsible gold mining and value distribution report | December 2013 5
    6. 6. The report tells us: Transparency Greater transparency should lead to better development outcomes. This report provides a comprehensive view of economic contribution made by gold mining companies • Transparency and good governance are widely recognised as being amongst the key elements in enabling countries with resource-based economies to translate their mineral endowment in to socioeconomic development. • This report complements the work of the G8, G20 and the OECD and existing reporting undertaken by leading gold mining companies who already observe high levels of transparency. • This report goes beyond the disclosure provided by the Extractive Industries Transparency Initiative (EITI), which documents payments to governments; this report extends analysis to include a deeper exploration of the industry‟s contribution to national economies including payments to suppliers and employees. • The World Gold Council has already taken a lead, with its member companies, in promoting transparency; a specific example is the development of the Conflict-Free Gold Standard which supports the responsible sourcing of gold from conflict-affected and high-risk areas. World Gold Council | Responsible gold mining and value distribution report | December 2013 6
    7. 7. The report tells us: Collaboration Responsible mining contributes to the development of host countries in a number of ways, but collaboration is important • Gold mining contributes to economic growth and development in the form of jobs, investment in skills and local capacity building, supply chain opportunities, social investment and infrastructure. • However, gold mining companies are not able to provide unlimited job creation, wholesale improvements in the standard of living, and eradication of poverty by their efforts alone. Collaborative efforts are required - with governments, civil society, communities and the donor community. • Mining is a long-term business, where mining companies take on significant risk on behalf of their investors. • Typically from initial exploration to the start of mine production will involve between ten and fifteen years of investment. Mine development which includes geological, technical, financial and socio-environmental appraisals, is undertaken in the context of fluctuating commodity prices and foreign exchange movements. • Of the $44.7bn paid out in country, $39.2bn (88%) was associated with producing operations and $5.4bn (12%) was associated with non-producing operations, which are incurring costs but no income. World Gold Council | Responsible gold mining and value distribution report | December 2013 7
    8. 8. Research on gold and socio-economic development There is a growing body of research demonstrating that gold and gold mining contribute to socioeconomic development, particularly for developing nations • This research builds on a recent report – The Direct Economic Impact of Gold - commissioned by the World Gold Council and undertaken by PwC. • The Direct Economic Impact of Gold analysed the entire gold value chain from large scale mining supply to consumer demand in order to quantify how gold contributes to global GDP. The prime metric for evaluation was gross value added (GVA), which measures the contribution to gross domestic product (GDP) - not expenditures incurred by gold mining companies. • The 15 largest gold producing countries, which accounted for around three quarters of global output, directly generated at least US$78.4 billion of gross value added (GVA) in 2012 – approximately equal to the GDP of Ecuador, a country of over 15 million people. • Gold mining supports national wealth creation contributing a significant part of the economy in countries as diverse as Mexico, Ghana and Uzbekistan. • Additional reports assess the “multiplier” impact; workers in gold mining have up to 28 dependents in Ghana World Gold Council | Responsible gold mining and value distribution report | December 2013 8
    9. 9. Global Highlights World Gold Council | Responsible gold mining and value distribution report | December 2013 9
    10. 10. Case study: Argentina • Barrick is the main private employer in San Juan province, San Juan used to be one of the poorest provinces in the country, but as the economy grows, poverty rates are declining and other key socioeconomic indicators are showing signs of improvement • Infant mortality fell from 19.6 per 1,000 births in 2003 to 11.0 in 2010 – a 44 percent decrease, and nearly double the 28 percent drop in the national infant mortality rate • Industrias Metalurgicas Jaime, a San Juan-based company began assembling off-road truck hoppers for the Veladero operation in 2004. Since then, the company‟s workforce has grown significantly and its work with Veladero has led to opportunities beyond mining • Of companies surveyed, total gold output increased 17% from 2009 to 2012 (from 30 to 35 tonnes) yet payments to suppliers almost trebled from $535m to $1,460m and wages increased almost five times from $72m to $338m • Gold sales from companies surveyed contributed to over 2% of national exports in 2012 World Gold Council | Responsible gold mining and value distribution report | December 2013 10
    11. 11. Case study: Argentina World Gold Council | Responsible gold mining and value distribution report | December 2013 11
    12. 12. Case study: Burkina Faso • In 2011, IAMGOLD announced a five-year partnership with Plan Canada to support youth and economic development in Burkina Faso. • The goal of the project is to improve the quality and relevance of pre-vocational education for approximately 6,400 girls and boys, aged 13–18 years, who are identified as „kids at risk‟. • IAMGOLD has committed $1.0 million to the project along with in-kind contributions in country and has provided support on various practicaland technical elements of the programme. • Among the key 2012 accomplishments, focus areas for vocational training were identified through a market survey and 13 schools were renovated or newly constructed and equipped as training sites. • Gold sales from companies surveyed were equivalent to 26% of national exports in 2012 • Payments to government from companies surveyed represented 3.5% of total government revenue World Gold Council | Responsible gold mining and value distribution report | December 2013 12
    13. 13. Case study: Burkina Faso World Gold Council | Responsible gold mining and value distribution report | December 2013 13
    14. 14. Case study: Chile • Despite gold output falling 11% from 2009 to 2012 among companies surveyed (from 14.5 to 12.9 tonnes), in country expenditure more than trebled • Payments to suppliers and wages/salaries represented over 90% of total in country expenditure in both 2009 and 2012 • The Maricunga and La Coipa mines are located approximately 4,000 metres above sea level in the Atacama Desert, one of the driest places on Earth. In this water-stressed area, Kinross has undertaken extensive studies to better understand the hydrological cycle in the area and implemented measures to improve water • Annual precipitation is approximately 150 millimetres and comes as snow. In 2011, Kinross installed two 100-metre lines of wooden snow fencing, aiming to improve snowmelt infiltration into groundwater • Kinross is optimistic that carefully installed snow fences can result in meaningful contributions to the local water supply. Preliminary results showed that accumulated snow contributed to an increase in groundwater recharge during the spring melt World Gold Council | Responsible gold mining and value distribution report | December 2013 14
    15. 15. Case study: Chile World Gold Council | Responsible gold mining and value distribution report | December 2013 15
    16. 16. Case study: Ghana • Golden Star Resources provides National Health Insurance Scheme coverage for all its Ghanaian employees and their immediate families, as well as providing mine site clinic access for some 5,600 people (employees and their registered family) for 2012 • As part of their CSR programme, Golden Star built a health centre at Nsadweso, an Outpatients Department at the Prestea Government Hospital, nurses quarters at Bogoso, a mini-clinic at Brakwaline, and a community health post at Bondaye • Of companies surveyed, total gold output increased by 60% between 2009 and 2012 (from 47.0 to 75.2 tonnes) yet expenditure within Ghana more than trebled • Gold sales from companies surveyed was equivalent to over 30% of national exports in 2012 World Gold Council | Responsible gold mining and value distribution report | December 2013 16
    17. 17. Case study: Ghana World Gold Council | Responsible gold mining and value distribution report | December 2013 17
    18. 18. Case study: Kyrgyz Republic • Payments to government from companies surveyed contributed to over 5% of total government revenue in 2012 • Gold sales from companies surveyed was equivalent to 28% of national exports in 2012 • Centerra and Kumtor Gold Company play a major role in the economic and social development of Kyrgyzstan. One percent of the mines revenue is paid into the Issyk-Kul Development Fund (IKDF) which is designed to fund infrastructure development in the Issyk-Kul region where the mine operates. • Since the inception of the Kumtor-funded IKDF, schools, hospitals, clinics, water and road infrastructure and kindergartens have been built or repaired • In 2012 US$6 million was spent on the development of small to medium-sized enterprises (SMEs), agricultural sector strengthening, youth and education programmes and environmental projects • Centerra and Kumtor have also made significant contributions over the years to national projects in Kyrgyzstan. In 2011, US$10million was provided as a grant through the Ministry of Education to repair schools across the country World Gold Council | Responsible gold mining and value distribution report | December 2013 18
    19. 19. Case study: Kyrgyz Republic World Gold Council | Responsible gold mining and value distribution report | December 2013 19
    20. 20. Case study: Papua New Guinea • Gold sales from companies surveyed was equivalent to over 10% of national exports in 2012 • Over 90% of total expenditure was incurred in country in both 2009 and 2012 • For many people around the world, easy access to banking services is taken for granted, with branches or automated teller machines (ATM) on virtually every street corner. For the residents of Porgera, however, this is not the case • For the first time in 10 years, they now have a bank branch and two ATMs. The long-term relationship between Barrick and the Bank of South Pacific (BSP) contributed to the bank‟s decision to open its 37th branch • Previously, the closest banks were in the provincial capital Wabag (about 75 kilometres away) and Mount Hagen (about 177 kilometres away), both over difficult terrain • Having a bank branch where residents can make deposits will mean fewer cash transactions thereby helping crime prevention, increasing personal savings and reducing cash in homes. • The bank also caters to small businesses, offering access to credit, which will help owners to build their businesses locally World Gold Council | Responsible gold mining and value distribution report | December 2013 20
    21. 21. Case study: Papua New Guinea World Gold Council | Responsible gold mining and value distribution report | December 2013 21
    22. 22. To view a copy of the report, please visit: www.gold.org/about_gold/sustainability/socioeconomic/responsible_mining_value_distribution/ World Gold Council 10 Old Bailey, London EC4M 7NG T +44 20 7826 4700 F +44 20 7826 4799 www.gold.org
    23. 23. Appendix
    24. 24. Methodology • The World Gold Council undertook a quantitative assessment of the value distribution associated with the world‟s leading gold mining companies. • Each participating company was asked to provide information on payments by country and which of those payments went to individuals or commercial entities in the same country. • Companies were asked to include payments related to both producing operations (where gold is being poured and they have a source of revenue) and non producing operations (where no gold is being poured, there is no source of revenue, yet costs are still incurred). • The World Gold Council consolidated the data on a country-by-country basis. The data was also consolidated to provide global information on the amount of money that stays in the country where the operation is located and the amount of money that is paid to businesses or providers of capital outside the country. • The report includes data from 15 member companies with operations in over 25 countries with over 220,000 employees and contractors. • The 2012 figures include data from 96 producing gold mines and numerous „non-producing operations‟ including exploration activities, pre-mine development and closed mine sites. World Gold Council | Responsible gold mining and value distribution report | December 2013 24
    25. 25. Considerations • Responsible gold mining can contribute substantially to social and economic development but we need to take a realistic view of the role it can play and contribution it can make. • The approaches taken must reflect the unique context and circumstances of each country. Collaborative efforts with governments, communities and the international development community are required to ensure sustained improvements in the standard of living, reduce poverty and improve access to better services and opportunities. • These collaborative efforts will differ by country and community, but they should be guided by fundamental principles, including treating all individuals with respect, communicating in an open and transparent manner and working to create sustained value for all stakeholders. • Maximising the development potential of mining requires continued attention and discussion. The gold mining industry is keen to play its role, alongside governments, development agencies and local communities. • It is hoped that by providing further insight of the economic impact of gold mining in countries around the world and clarifying the realities of the mining life-cycle, we can advance the dialogue. World Gold Council | Responsible gold mining and value distribution report | December 2013 25

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