Overview of global investment in mining delivered at China Mining Congress in October 2014. Focus on Chinese investment overseas and lessons learned from international experience. Presented by Michael Stanley.

1. Dr. Michael Stanley & Dr. Yongmei Zhou
World Bank Group
China Mining Congress 2014
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2. •Global extractive investment trends
•China’s overseas mining investment
•What can we learn from the international experience?
•What can the World Bank Group offer?
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4. The global population is consuming the stock of inventoried resources – there are diminishing rates of discovery across many metallic commodities
Even if the world were able to achieve a step change in resource productivity—the efficiency with which resources are extracted and used—new sources would still be required to replace those that are running out.
By 2030  an estimated $11-17 trillion of new investment needed in mineral and oil and gas projects in lower-income countries
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Source: McKinsey on Sustainability & Resource Productivity

5. Number of discoveries by Region Major deposits found in the World: 1950-2009
Source: McKinsey on Sustainability & Resource Productivity

6. Historically:
About 90% of resource investment has been in generally stable high- and upper- middle-income countries.
Future:
More resource investment flowing into poorer and often more volatile environments.
(Source: Macroeconomic Policy Frameworks for Resource-Rich Developing Countries, IMF 2012

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Afghanistan, Angola Bosnia and Herzgovina, Burkina Faso Cameroon, Central African Republic, Chad, Congo, Democratic Republic, Cote d'Ivoire Egypt, Eritrea Guinea Iraq Korea, Democratic Republic Libya Madagascar, Mali, Mauritania, Myanmar Niger, Nigeria Sierra Leone, Sudan, South Sudan, Syrian Arab Republic Togo Uganda Yemen Zimbabwe

8. Investment Decision Criteria
What Government Needs to Do
Geological Potential / Resource Certainty
Geological Survey providing basic geo-data and undertaking mineral resource assessment
Profitability of Potential operations – competitive fiscal regime, realistic foreign exchange controls
Investment Laws
Security of Tenure – clear, non-discretionary mining rights and title for permitting
Mining Cadastre
Consistency of Mineral Policy – clarity of roles & responsibility, stability of exploration / exploitation terms and conditions, mineral ownership (resource nationalism)
Mineral Policy
Tax Legislation
Stability of Legislation –predictable environmental / social obligations, non-discretionary transparent regulatory environment
Clear, consistent mining, environmental, social, and tax regulations
Availability of Infrastructure
Public Private Partnerships

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Source: “Mining Exploration, Corporate Social Responsibility and
Human Rights: Untangling the Facts, Seeking Solutions”. Odell &
Silva. PDAC Paper.

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$27
$31
$33
$20
Aluminum
Copper
Steel
Other metals
$26
$85
FCS
Non-FCS

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$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Philippines
Ghana
Saudi Arabia
USA
Zambia
India
Malaysia
Russian Federation
Myanmar
Chile
South Africa
Ecuador
Afghanistan
Canada
Brazil
Sierra Leone
DRC
Guinea
Indonesia
Peru
Australia
Chinese Overseas Investment in Mining
Jan 2005- Jun 2014 (in $million)
(Only including deals larger than $100m each)
Data source: http://www.heritage.org/research/projects/china-global-investment-tracker- interactive-map

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Community grievances related to environment issues, lack of jobs in the mine, lack of business contracts as suppliers, resettlement issues
Labor protest and strike related to conditions of service
Demand by civil society and media for disclosure of tax payment, contract terms (incl. tax exemption of imports, pricing of exports)

15. Guidelines for Overseas Investment
Environment Protection Guidelines for Overseas Investment
SASAC Guidelines on Corporate Social Responsibility
Green Credit Policy and training of commercial banks and big companies
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17. Source: OECD
Many fragile states are extremely dependent on proper management of natural resources
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18. Decisions taken about mining investment, land acquisition and allocation of development budget without transparency and involvement of local communities and stakeholders
Fiscal revenue from extractive industries not shared equitably across levels of government and among stakeholders in the local area.
Local people bear disproportionately the cost of mining: local inflation, environmental degradation, health problems, loss of traditional livelihood, displacement
Local people’s expectation for jobs and business opportunities often dashed due to poor skills and business capacity
Conflicts due to competing claims to land ownership or inadequate surface rent
Poor management of revenues from extractive industries leads to grand corruption, rapidly increase in inequality, and sometimes funding for violent conflict within country or with neighboring countries
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19. International standards
◦Global Reporting Initiative
◦Global Compact
◦OECD Guidelines on Multinational Enterprises
◦OECD Convention on Combating Bribery
◦Voluntary Principles on Security and Human Rights
Industry standards:
◦ICMM: 10 sustainable development principles
◦The Mining Association of Canada, the Towards Sustainable Mining (TSM) initiative
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20. Extractive Industries
Local / Regional Economic Development
Regional Development Planning & Coordination
Infrastructure and Transport Corridors
Community Development Agreements & Outcomes
Social & Human Development
Collection of Taxes & Revenues Management
Environmental Management
Licensing & Contracts
Policy & Regulatory
Sustainable Development
Mining firms are only part of the puzzle

21. •National government: leadership for overall governance, policy, fiscal and broad legal regime.
•Sub-national government: legal basis, licensing, technical requirements, facilitation of good investments, information.
•Mining company: commitment to transparent, safe and productive operations.
•Mining community: maintain communication with mining firm for mutual benefit; identify needs.
•Civil society: monitoring social, environmental and other impacts for local and national well-being.
Everybody needs to play a role

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23. World Bank Group work aims to support country’s along the entire extractive industries value chain to enable the transformation of revenue from resources into sustainable development that benefits the poor.
Award of Contracts and Licenses
Regulation and Monitoring of Operations
Collection of Taxes and Royalties
Revenue Management and Allocation
Implementation of Sustainable Development Policies and Projects
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24. Capacity building for government
◦Licensing: provision of data on natural resource, contract negotiation support
◦Sector promotion: provision of geo data, building professional capacity, increasing capital and innovation
◦Regulations: strengthen institutional capacity, address illegal mining
◦Tax/royalty: value-chain assessment, pricing, improved compliance and collection
◦Transparency: of payments to inform forecast and monitoring
◦Public expenditure management and public investment management
◦Building capacity of local government for managing local development around mining areas
◦Building multi-stakeholder platform for dialogue
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25. Integrated spatial planning around “resource corridor”
Co-financing multi-use infrastructure projects, e.g., roads, railway, port
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26. IFC Equity investment in mining companies
Developing capacity of local companies as suppliers for mining companies
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27. Promote sustainable mining through partnership with mining associations
Support international initiatives for improved transparency and accountability
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•14 IDA credits for a total of $428 million: 11 in Africa, 2 in East Asia-Pacific, 1 in South Asia
•33 recipient-executed trust fund projects worth a total of $77 million
•52 technical assistance activities in 38 countries

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31. MIGA insures FDI against losses due to
◦Currency inconvertibility and transfer restrictions
◦Expropriation
◦War, civil disturbance, terrorism, and sabbotage
◦Breach of contract
◦Non-honoring of sovereign financial obligations
Since inception in 1988, MIGA has issued guarantee contracts of $1.6bn for mining projects. Mining portfolio currently is $240m, 2% of MIGA’s outstanding gross portfolio.
MIGA provides dispute resolution services for guaranteed investments to prevent disruptions to developmentally beneficial projects
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The World Bank in Mozambique is supporting: Capacity Building for responsible & transparent management of Mozambique’s massive extractives industry, including:
•Negotiating deals
•Raising financing for projects
•Improving tax administration
•Improving environmental & social practices
•Facilitating development of domestic market value addition.

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The World Bank is supporting the Government to establish the policy, fiscal, legal, regulatory and institutional framework for the extractive sector
Provided the state owned mining company with extensive training & technical support, including for its
olegal statutes & charter
opreparation of agreements with its project companies.
oThe company received technical advice on corporate strategy and assessment of some of its mineral assets, advancing it towards international standards
oone of its green field projects started operation in 2011.
IFC is discussing equity financing to support a $12 billion investment to develop a copper &gold deposit at Oyu Tolgoi in the South Gobi desert. OT is the world’s largest undeveloped copper-gold deposit.

34. The World Bank is working with the government of Afghanistan to strengthen the country´s mining institutional framework and regulation.
Results:
Review of major mining contracts providing transparency and accountability to the negotiations process.
Ministry of Mines has completed its first ever competitive tender rounds for hydrocarbons & production of hydrocarbons has begun.
Revenue Transparency: strong progress has been made regarding implementation of the Extractive Industries Transparency Initiative (EITI).
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35. The World Bank is supporting the Government of Guinea to
strengthen the capacity & governance systems of key institutions for managing the minerals sector in Guinea
assist in creating an enabling environment for the realization of PPPs in mining ancillary infrastructure development.
IFC: Partnering with Rio Tinto, which is developing the Simandou iron ore project in Guinea, Africa’s largest private sector investment.
IFC is a 5% shareholder in the project.
IFC is implementing a local supplier development program, helping smaller businesses improve their technical and management skills, and better understand Rio Tinto’s requirements for health, safety & environmental responsibility.
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36. Extractive Industries
Local / Regional Economic Development
Regional Development Planning & Coordination
Infrastructure and Transport Corridors
Community Development Agreements & Outcomes
Social & Human Development
Collection of Taxes & Revenues Management
Environmental Management
Licensing & Contracts
Policy & Regulatory
Sustainable Development
Entry points for partnership