RESOURCE NATIONALISM AND MINING

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9 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

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RESOURCE NATIONALISM AND MINING


ISSUES AND POTENTIAL RESPONSES

Jon Samuel, Head of Social Performance, 19 February 2013

2

ANGLO AMERICAN’S FOOTPRINT

2


Platinum

Diamonds

Copper

Nickel

Iron
Ore
and Manganese


Metallurgical Coal


Thermal Coal


Corporate
and rep offices

Key

E

Exploration
Offices

E

3

RESOURCE NATIONALISM


SOME DEFINITIONS


“Resource nationalism…encompasses efforts by resource
-
rich nations to shift
political and economic control of their energy and mining sectors from foreign
and private interests to domestic and state
-
controlled companies”



“The threat of tax increases, renegotiation of terms, larger participation of state
-
owned companies and ultimately nationalisation.”



“Resource nationalism, the terms used to describe situations where
governments assert increased control over the natural resources located in their
territories”



“Resource nationalism is a term used to describe a tendency of people and
governments to assert control over natural resources located on their territory.”



“Situation where producer countries want to maximise their (future) revenues
from present production by altering terms of investment”

4


Economic drivers:

-
High
perceived profits
in
the mining industry

-
Lack
of perceived benefits to host countries /
communities
:

“fair share


-
Changing balance of power between resource owners and developers: general
industry shift from capital to opportunity constraints as demand has grown


Socio
-
cultural / technological drivers:

-
Communications
revolution

-
Growing intolerance of poverty, and greater expectations on business to play a
constructive role in its alleviation other than through “business
-
as
-
usual” measures

-
Mining generally perceived to be a part of the problem on many global issues
(climate change, water availability, biodiversity, food security, human rights etc
)

-
Negative legacies


Political drivers:

-
Emerging economies striving to have their voice heard, and to assert their national
interests as their economies and foreign interactions grow

-
Rise of democracy and local empowerment


As an industry we communicate poorly:

-
We don’t articulate the benefits we bring in a credible manner

-
The risk / reward trade
-
off is not understood, so profits are deemed
excessive

RESOURCE NATIONALISM


DRIVERS

5

HOW THE WORLD SEES THE MINING INDUSTRY

6

RESOURCE NATIONALISM


IN PRACTICE

Taxes and royalties

Local content / value
-
add requirements
(labour, procurement, beneficiation)

State participation in mining
projects

Expropriation

Indigenisation (private)

From our perspective…

Changing the

rules of the game

while playing

7

RESOURCE NATIONALISM


MANIFESTATIONS IN
SELECTED COUNTRIES

7

Country

Tax / royalty
changes

Local content
required

State
participation

Indigenisation

Australia

MRRT

(2010)

Royalty increase
(carbon tax)

Botswana

Desires for greater
beneficiations

Debswana

50/50

Brazil

Currently

under review
(
incl

internal debate
between federal and
state level)

Pressure for local
supply contracts
(especially in oil and
gas)

Vale government
shareholding, state
ownership of
Petrobras

Chile

Voluntary

royalty
increase in 2010

Codelco

Colombia

Under
discussion/review

Mozambique

Talk of increase

Will be an important
part of license to
operate

Degree of free carry
(5
-
20%)

8

RESOURCE NATIONALISM


MANIFESTATIONS IN
SELECTED COUNTRIES

8

Country

Tax/royalty

Local content
required

State
ownership

Indigenisation

Peru

Negotiated
voluntary windfall

taxes

Several local
benefit schemes

in
place (often
negotiated locally)

South Africa

SIMS report
suggests
increasing both

Range of
requirements
under mining
charter (likely to
increase)

Nationalisation

debate and state
mining company

Broad
-
based

Black

Economic
Empowerment

(26%)

Venezuela

Strong focus on
community

and
union benefits

Nationalisations
and expropriations.
Mixed

companies
required in oil and
gas

Zimbabwe

Yes

51%

requirement
(threat of
expropriation)

9

RESOURCE NATIONALISM AND OIL AND GAS

Private
share of
global oil
resources

National Oil Companies account for ~55% of production and ~88% of reserves
globally (in the 1970s it was the other way around)

10

DID HIGH OIL PRICES LEAD TO NATIONALISATION?

OPEC led oil market

?

Source: OPM analysis for Anglo American

11

Non
-
OPEC

35%

Saudi Arabia

25%

Kuwait

10%

Iran

9%

UAE

5%

Iraq

4%

Other OPEC

12%

OPEC

65%

OWNERSHIP PATTERNS IN OIL AND GAS

Non
-
OPEC

32%

Kuwait

22%

Saudi
Arabia

18%

Iran

12%

Iraq

9%

Venezuela

7%

OPEC

68%

In 1960
:


World oil reserves
were 291
bn

bbls
;


of which: 85% were
privately held; and


two
-
thirds were in
OPEC countries,
and also privately
held



In 1980
:


Reserves were 668
bn

bbls
;


of which: two
-
thirds
were in OPEC, and
state
-
owned.

1960

1980

Source: OPM analysis for Anglo American

12

COULD THE SAME THING HAPPEN TO MINING?

Nationalisation

Privatization

Pressure on rents and
state
-
owned equity

?

Source: OPM analysis for Anglo American

13


Our view is that large
-
scale nationalisation in the mining sector is unlikely:


Prices rises do not appear to have been the trigger for nationalisation in oil
and gas (in fact the converse appears to be true)


There was a spate of nationalisations in mining, but these tended not to be
successful and led to subsequent privatisations or closures


The economic rents from mining are generally much lower than in oil and gas,


Mining operations are technically challenging to run, and require very high
levels of ongoing capital expenditure to sustain them


Very limited ability to control markets, given wide distribution of most minerals
across the world


The increasing inter
-
connectedness of the global economy makes the cost
to
implementing countries
of unilateral nationalisations much higher


Governments have realised that they don’t need to nationalise: the tax
system and other policy tools provide other means


We have a better understanding of what we need to do to respond to the
threats posed by resource nationalism

COULD THE SAME THING HAPPEN IN MINING?

14


Be clearer about the existing economic impacts of the mining sector, at both
local level and at more macro levels, including addressing the resource curse
debate


Ensure that mining is seen as a responsible industry:


Sound business ethics


High standards of safety, health and environmental management


Fair treatment of workers


Good neighbours


Perhaps most importantly, deliver more effective responses to the demand for a
greater share of benefits by enhancing the industry’s contributions to local and
national socio
-
economic development

HOW SHOULD MINING RESPOND?

15

RESOURCE CURSE: POTENTIAL CAUSES

Resource
Curse

Terms of
Trade

Dutch
Disease

Rent
Seeking

Impacts
of Mining

Volatile
Markets

16

Volatility can and has
been managed by
instruments such as
hedging and
stabilisation funds

RESOURCE CURSE: RESPONSES

Terms of
Trade

Dutch
Disease

Impacts
of Mining

Volatile
Markets

The price of
manufactured
goods is also
falling

Productivity
improvements can
increase benefits to
local economies

Reallocating factors of production
to resource sector may be efficient

Only a problem if adjustment after
resource
extraction is not planned
for and / or not possible

Responsible
management of
impacts and

proactive development
initiatives can create
positive economic
contributions

Revenue transparency
and governance
reform
can
help
to reduce rent seeking

Rent
Seeking

Resource
Curse

17

WHAT ROUTES ARE THERE FOR DELIVERING
DEVELOPMENTAL BENEFITS FROM MINING?

OPERATION

INFRASTRUCTURE

BENEFICIATION

JOBS / WAGES

CAPACITY

BUILDING/

TRAINING

PROCUREMENT

TAXATION

SOCIAL

INVESTMENT

SME

DEVELOPMENT

18

ANGLO AMERICAN’S APPROACH TO SUPPORTING LOCAL
SOCIO
-
ECONOMIC DEVELOPMENT

Our approach to community development is based on
understanding local contexts and leveraging our core
business to create sustainable upliftment


Leveraging our $13.8 billion

supply chain
(approximately 100 x social investment
budget each year)


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Procurement

Local Training
and
Recruitment

Governmental
Capacity
Development

Enterprise
Development

Social
Investment

*

* 2011 data

19

ENSURING WE UNDERSTAND THE LOCAL CONTEXT


Our
Socio
-
Economic Assessment Toolbox
(SEAT) is at the heart of our management of
social performance and developmental
issues


SEAT is an award
-
winning manual that
provides extensive guidance on:


Profiling and engaging with host
communities


Assessing positive and negative impacts


Managing relationships with host
communities


Contributing to community development


SEAT provides extensive guidance on
understanding our local context, and how we
should respond to that


Freely available at
www.angloamerican.com/seat



20

LOCAL PROCUREMENT

Demand
-
side Measures

Policy: Local Procurement Strategy

Resources:

Appropriate people and budget

SC Local Procurement Initiatives (eg
Ring Fencing)

Set framework, show
leadership support

Demonstrate
commitment

Operationalise
commitments

Communication and Reporting:

Targets and KPIs

Build Anglo
American capacity
and incentivise

Support for Small and Medium
-
size Business Start
-
ups (e.g. Emerge / Zimele)

Supplier Development Programmes
(building capacity of existing suppliers)

Alternative Livelihoods and Micro
-
credit Programmes

Supporting the
grass
-
roots

Creating formal
businesses

Build capability, capacity
and size of suppliers

Objective

Supply
-
side Measures

Localising Suppliers


(e.g. near
-
mine supplier parks)

Encouraging more suppliers to
locate in mining areas

21

CAPACITY DEVELOPMENT


As a business we pay very significant sums
in taxes


Clear that these revenues are not always
well spent, typically due to a lack of
capacity


Meanwhile, we often suffer because of poor
pubic service provision


We are now engaging on a structured basis
in South Africa and Brazil in initiatives to
build the capacity of host municipalities and
regions


Working with partners, we have undertaken
structured assessments and designed
tailored implementation packages


Focus is on revenue management,
accountability mechanisms and basic
service delivery

22

ENTERPISE DEVELOPMENT


Through our Zimele and Emerge schemes in South Africa and Chile we are
now supporting over 47,000 jobs in small businesses


We provide a mixture of equity, loans and technical assistance to businesses,
and help them understand how our supply chain works


Our ongoing procurement needs create a very strong platform from which to support
local entrepreneurs


Currently expanding our ED initiatives to Botswana, Brazil and Peru


Current focus areas include:


Reducing
costs:
substituting
social investments (i.e. grants) with enterprise
development activities (i.e. loans, equity participation and business training)


Increasing
efficiencies: in existing schemes by outsourcing some of the activities to
specialist delivery partners (e.g. Technoserve, CARE)


Partnering with development finance institutions to increase the capital available


Creating
revenue: for example by generating captive, low
-
cost sources of carbon
credits


Creating more stable host communities and a more robust and competitive supply
chain

23

SOCIAL INVESTMENT


$128 million spent on social investment in 2011, about $0.5 billion in the last 5 years


Monitored using a Group
-
wide database and set of indicators to help ensure value
for money

24

CONCLUDING REMARKS


Resource nationalism has emerged in recent years as one of the
major risks facing the mining industry


However, this isn’t a new phenomenon, and in some ways current
manifestations are less threatening than in previous decades


Some of the drivers of resource nationalism are due to poor
understanding of the economic realities of mining


The mining industry needs to do a better job of understanding and
communicating its economic contributions


It also needs to work with partners, in particular governments and
host communities, to enhance current economic contributions, with a
strong focus on leveraging the core business


THANK YOU

ANNEXES

27

TIMELINE OF A TYPICAL MINE

Exploration



Closure

Year from acquiring exploration permits (assumes continuous intention to develop)


1
4



7



10+ 30+



Only
approx

1% of exploration targets are ever developed into mines


Capital Expenditure for
“Tier 1”
mine typically between
$1 and $10 billion


Some of World’s biggest deposits have been mined for over 100 years

Development


Studies


Operation


28

MANAGING SOCIAL RISK

Respect
human rights

Deliver lasting, positive net benefit

Identify and manage social impacts

Efficiently utilise resources

Obey all laws and regulations

Ensure contractors follow our standards

Set targets, review performance

Develop staff competencies

Engage employees and stakeholders

Report and investigate incidents

29

SOCIAL PERFORMANCE WORK PROGRAMME

Anglo American Values
and Good Citizenship
Business Principles

Group
Social Strategy:
Partner
of Choice for Host
Governments and Communities

Policies and Standards: the
Anglo American
Social
Way

1.
Education

and Training
:



SEAT
training


Post
-
grad
diplomas


Advanced Social
Management
Programme


ABET

2. Guidance

Documents:




SEAT


Mine
Closure
Planning
Toolbox

3. Social

Initiatives:




Enterprise
Development


Social
Investment


Capacity
development


HIV/AIDS


Housing

6. External

Engagement:




Communities


Governments
and multi
-
laterals


Industry
associations


Multi
-
lateral
initiatives

5. Internal

Alignment:



Business Units


Functional
liaison


4.
Leverage

Core Business
:



Local
procurement


Local workforce
development


Synergies from
infrastructure
provision


30

SEAT: STRUCTURE

Engagement throughout

Step 1


Profile your
operation, including
existing community
development
initiatives

Step 2


Profile and
engage with
stakeholders

Step 3


Assess and
prioritise impacts
and issues

Step 4


Improve
social performance
management

Step 5


Deliver
enhanced socio
-
economic benefits

Step 6


Develop a
social management
plan

Step 7


Prepare a
SEAT report and
feed back to
stakeholders

31


Access to jobs and training


Access to land and alternative livelihoods


Access to supply chain opportunities


Balance / distribution of social investments


Rivalries between stakeholder groups


Perceptions of environmental impacts


Health and public services


Transport issues


Communication and transparency


RECURRING ISSUES THAT SEAT ADDRESSES

Generally very pragmatic issues

A strong
emphasis on the
level and
distribution of
benefits