Thanks to all the GRI 2010 Global Conference organizers, and special thanks to Maaike for the invitation and opportunity to come today to talk about the mineral exploration industry, our CSR challenges, and the steps we are taking to improve our sustainable development goals. I would like to start my presentation by letting you know who we are…. Mission: advocacy, information, networking, and leading practice Members:
MINING SEQUENCE The pyramid is a very useful visual aid to appreciate the unique aspects of the exploration and mining sequence: Mining cycle proceeds from the base to the apex Land requirements: very large at base (exploration stage) and narrow down towards apex (mining, closure) Environmental impact: (inverse rel.): gradual increase on environmental impact of these activities moving from the base to the top – but the impact is also reduced down into a relatively small area So our industry is very capital intensive Investment: escalates from bottom to top (read slide) Exploration very challenging: only 1 in 1000 deposits will ever become a mine = 98% failure rate Takes 8 – 12 yrs from discovery to production Decades to get to discovery – property typically passes through hands many individuals & companies before discovery is actually made (nature of this is quite episodic) Nature of the exploration process = Implications: Culture and priorities very different from that of communities Potential effect on company: put social license to operate at risk .
4 main players in the exploration business: Mining producing companies, junior exploration companies, prospectors. In some countries – government agencies conduct exploration but not in Canada. In Canada they play a crucial role in provision of geological data of the land mass thru geological surveys Mining producing companies: come in variety of sizes (mega producers to small single mine companies: many of them have exploration people on staff / active exploration programs - but their primary purpose is mineral extraction Junior exploration sector = small businesses focused entirely on exploration Prospectors historically performed important function of identifying mineral occurrences – still do – declining in numbers. Juniors are modern equivalent of the prospector
The Canadian industry is by far the largest in the world just by the shear number of companies based here, compared to other regions. Fully 52% of all companies that exist are based in Canada
There are about 1800 Canadian companies working on close to 10,000 projects in over 100 countries. About half these projects are located in Canada and the rest are located around the world as illustrated here
Have you heard the expression “ there is only one opportunity to give a first impression ”? Well, that is exactly what exploration teams face with the mining industry. We call them the ambassadors of the industry because they are in the front line when they go to the field, the area they cover while exploring is very wide , and in their way they meet and have a first contact with local stakeholders , so whatever they do good or wrong is then followed then by the rest of the mining cycle. While attending to some talks from the finance sector in mining at the PDAC convention this year I was amazed by the fact that there was one underlying message from all the speakers from the finance sector that was: “ we will not invest in companies that do not have social, and environmental responsible practices”. The complexity of CSR is now involving the finance sector as well, and that is in the long term – from my point of view, really good. But there are some challenges to face within the industry, which I will show in the next slide.
But before we go into the challenges, let’s have a quick look at the context and realities involving the industry 1) Over the past fifteen years there has been a shift in public priorities from a focus on environmental issues to social issues and most recently an emphasis on human rights and ethical practices. The mining industry has made very significant progress with environmental issues, as they will, in time, with social issues. But social issues are much more complex given that they are centered on human relations and human behaviour, involving differing cultures, values, beliefs, perceptions and needs – often competing needs. 2) A fundamental driver of CSR arises from concerns over globalization : The main concern is the view that globalization has empowered corporations but there has not been an equal empowerment of international institutions and society in general 3)This in turn has caused the mobilization of civil society (NGOs) to try and bridge the gap by finding other ways to hold corporations accountable. Most of us have experienced this in one form or another. 4)CSR is a relatively new phenomenon; It is still not well-defined and understood It involves rapidly evolving expectations and uncertainties on how to deliver on those expectations 5) Up until recently there were no international guidelines which attempt to define what CSR is for the exploration business and how to deliver on its expectations Thus most companies are trying to apply CSR; believe they are applying CSR, using common sense and home grown approaches. But they have nothing against which to benchmark their practices and therefore there is a wide variability in the manner and approach of their application. 6) There is one reality I would like to add: The industry does not communicate the “good things” in an effective way.
We have to keep in mind that exploration companies: Have capacity limitations: most junior companies or exploration teams are teams of 3 – 8 people. Another aspect of juniors is that majority of them have no revenue from production They are entirely dependent on the capital markets for obtaining funds for exploration projects This means: very knowledgeable about markets and raising funds But also means subject to the market forces and whims of investors they must maintain interest/loyalty of investor – highly competitive and notoriously fickle they must be constantly producing results, in short time frames Significant implications re: CSR - which we will get to later at any given time: 300 - 2000 companies: numbers rise and fall with the markets sector is stratified: well-established / new comers at the bottom they are all small companies: mostly under 8 employees (some with 1 or 2) (limited capacity – very focused on exploration objectives) employees usually highly educated and experienced (often geologists), sometimes from producing mining companies
Let’s see why I say this. The following slides developed by Globescan demonstrate the results of surveys carried out in 23 countries. Each slide reflects the need to create awareness about the need to put reporting systems in place to address stakeholder concerns, and develop processes to improve the industry’s practices.
This slide from GlobeScan shows that mining does not rank highly in peoples perception of their CSR performance - in fact, mining is towards the bottom of the list. Well, if mining companies are perceived as not doing such a good job on CSR, perhaps we can take some comfort if at least the public’s perception is getting better over time. Unfortunately this is not the case!
Today, the industry realizes more than ever that they need to improve their practices, not only to gain the social license to operate, but to contribute to sustainable development and increase their projects’ value. Just like I mentioned before, the finance sector is demanding companies to improve their practices to invest in projects that wouldn’t represent more costs to improve the negative legacies that a junior company may have left. Now that the awareness to apply CSR and report it is increasing, companies say: Ok we are ready to take the challenge, but how do we do it ? The mining industry has to improve it’s CSR performance to the point where not only those of us who are engaged in it can be proud of it but that the whole of society can be equally proud. We must improve our performance in all aspects of corporate social responsibility. That is clearly a challenge but it is one we can address and overcome. Let’s start to look at the ways we are tackling the challenge.
Given the realities and needs of the exploration sector we designed e3 Plus to be: comprehensive enough in order to satisfy the public expectations of corporate behavior and properly inform exploration companies scaleable to the size of the company , the nature of the project and the stage of exploration and flexible reflecting the fact that projects occur in a wide variety of geographic, cultural and environmental circumstances, e3 Plus is the first CSR framework for exploration e3 Plus gives practical guidance Aligns businesses values and behavior with the expectations and needs of stakeholders It was created with the input of more than 450 professionals and stakeholders, through workshops and focus groups including: Aboriginal people Government Consultants Geologists Environmentalists E3 Plus has a predecessor called e3 which was an environmental e-manual to help exploration teams address all the environmental challenges as well. However, with emerging issues and complaints about the industry’s performance in the social area we realized that we had to move beyond the environmental aspects to social and health and safety aspects.
The Framework components are being developed in 2 phases. The Phase 1 components (in green) form a hierarchy of information going from very high level, to very detailed as one moves from the Principles , through a Guidance document and then three, very comprehensive Good Practice Toolkits (the knowledge piece) The area in yellow indicates phase 2 of the Framework under development (the accountability piece) and I will come back to this in a moment I will concentrate now my talk to the accountability section of e3 Plus.
Just to give you a short background in the development of the accountability section, I would like to mention the antecedents of why and how did we reach the GRI office. The GRI launched its Mining and Metals supplement at the 2010 PDAC convention. We thought it was a good opportunity to further analyze the supplement and find out how applicable it was to the exploration sector. So we contacted the GRI office in February 2010 with the aim of expressing our interest to work together to further develop the GRI mining supplement with a sub-section specifically applicable to the exploration sector, and to look at the possibility of using this sub-section for the e3 Plus accountability section. The initiative led both parties to schedule a face-to-face meeting to talk further about a potential partnership.
GRI Conference - 27 May - Elizalda - Mining and Metal Sector Supplement
CSR, Mineral Exploration and the Challenge of Accountability Bernarda Elizalde, Program Director Sustainable Development Prospectors and Developers Association of Canada ● May 27, 2010 ● GRI Global Conference ● Amsterdam, The Netherlands
Number of Companies Size and HQ location Source: Metals Economics Group Junior Interm. Senior Gov’t. Other TOTAL Canada 1087 21 7 1116 Australia 498 21 4 1 3 527 U.S.A 102 5 3 110 Europe 102 6 8 1 117 Africa 29 5 5 39 Latin America 13 13 4 1 31 Rest of World 10 17 8 5 40
Projects financed in Canada 5093 1228 583 150 1056 310 688 81 314 125 359 <ul><ul><ul><ul><ul><li>Of the 9987 mineral projects held by TSX and TSX-V </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>companies, 49% are outside of Canada </li></ul></ul></ul></ul></ul>Source: InfoMine, Compiled by TSX, January 2008
<ul><li>1) Evolving Expectations </li></ul><ul><li>Mobilization of civil society </li></ul><ul><li>Evolving expectations and uncertainties </li></ul><ul><li>Nothing against to benchmark, and no reporting system applicable to the exploration sector </li></ul>CSR context and realities Environmental Social Human Rights and ethical practice
CHALLENGES <ul><li>Capacity limitations </li></ul><ul><li>Dependency on </li></ul><ul><li>capital markets </li></ul><ul><li>Majority have no revenue </li></ul><ul><li>from production </li></ul><ul><li>Show results in a short </li></ul><ul><li>timeframe. </li></ul><ul><li>Lack of CSR guidelines </li></ul>
The need to improve practices and reporting in the exploration industry
The aim of the partnership <ul><li>Create a practical reporting system that would be applicable, convergent, and complementary to other reporting systems such as the capital market, or other governmental regulation systems. </li></ul>
Vision <ul><li>The PDAC and GRI agreed that we would need to: </li></ul><ul><ul><li>Create a model report for each exploration stage (early, intermediate, and advanced exploration) </li></ul></ul><ul><ul><li>Ask exploration companies to apply some sections of the already developed GRI system, such as the materiality test and some applicable indicators. </li></ul></ul><ul><li>The GRI- e3 Plus reporting system would also: </li></ul><ul><ul><li>Be applicable if a certification system is set in place. </li></ul></ul><ul><ul><li>Create software that would put together a more practical, user-friendly reporting system. </li></ul></ul><ul><ul><li>Be applicable to finance institutions </li></ul></ul><ul><ul><li>Create different platforms for explorers to indicate their level of compliance within the reporting system. Thus, they would not limit themselves to filling out a form, but they would have the motivation to report more things if they want to. </li></ul></ul>
Next steps <ul><li>Formalize the partnership with the GRI </li></ul><ul><li>Discuss further details about timetables. </li></ul><ul><li>The PDAC will: </li></ul><ul><ul><li>Conduct further research </li></ul></ul><ul><ul><li>Develop a first draft to create a two page reporting template for each exploration stage. </li></ul></ul><ul><ul><li>Develop a review process with the PDAC CSR committee. </li></ul></ul><ul><ul><li>Organize a consultation process with multi stakeholder groups. </li></ul></ul>Main needs – reporting systems Applicable indicators and procedures from the GRI system