Sustainable mining in Latin America: Australia’s competitive advantage Australia-Latin American Business Council 3 February 2015
Summary • Australia has world-leading track record and global brand in sustainable mining: discovery, development, operations, METS, community, environment • Latin America is a fast growing destination for Australian-based mining investment and METS • Latin America and Australian economic diplomacy, aid for trade • Scope for stronger collaboration between ALL Australian and Latin American stakeholders to achieve sustainability and shared value 2
Sustainable mining: oxymoron or imperative? APPROACH OF SUSTAINABLE MINERALS INSTITUTE, THE UNIVERSITY OF QUEENSLAND Stage 1: Only revenue maximising Stage 2: Efficient – Enhancing performance through individual activities Stage 3: Effective – Improve benefits and performance through connectivity with environments, communities and industry Stage 4: Sustainable – Embedding sustainability in all decision making and business practices to consider the economic, social and environmental needs of current generations without compromising the needs of future generations 3
Emerging approach: Shared value COMPANIES ADDRESS SOCIAL NEEDS AND IMPROVE THEIR COMPETITIVENESS Shared Value is: Policies and practices that Business enhance the competitiveness of a Opportunities company while simultaneously advancing the economic and & Challenges social conditions in the communities in which it operates Shared Value is NOT: Corporate • Sharing the value already Societal Assets and created (philanthropy) Needs • CSR by another name Expertise • Personal values • Balancing stakeholder interests • Compliance Tying business success to the prosperity of host communities and countries 4 Source: Adapted from Shared Value Initiative, Extracting with Purpose, October 2014
Building sustainable mining and creating shared value requires shared effort EVERY STAKEHOLDER HAS A ROLE TO PLAY • Integrate shared value creation into business model Companies • Reconceive products and markets – eg build local markets for intermediate products • Redefine productivity in value chains – eg local workforce and local suppliers • Create enabling local environment – eg local clusters, shared infrastructure • Implement policies and regulation that encourage and facilitate shared value • Shift relationship with energy and minerals companies from a contractor model to a Governments development partner model • Co-invest with companies and communities • Become centres of excellence for shared value and disseminate best practices to their NGOs & education members & clients providers • Balance holding sectors accountable with engaging them constructively to advance their mission International • Support developing country partners to maximise the development potential of mining – eg though cooperation in capacity-building in in governance , education, development community R&D, OHS 5
Mining lifecycle and key interactions FIELDS IN WHICH GOVERNANCE CAPACITY IS NEEDED Community engagement Indigenous agreement-making Resource governance Negotiations and agreements Occupational health & safety Precompetitive geodata Regional development Post mining economy Closure, Acquisition Construction Trading, rehabilitation Mining and and and Transport marketing and concentration and exploration development sales monitoring Environmental & water management Mineral economics & policy Mine closure and post mining land use Local content & enterprise Education, training and skills Revenue design & administration Infrastructure planning & delivery Mine waste management 6
Australian energy and minerals project construction 2010 – 2016: the largest investment wave since the 1800s gold rushes* RESULTING IN DECADES OF WORLD-LEADING PRODUCTION Gladstone and WA & NT projects LNG, mining North West to 2016: USD220 billion+ Economic Triangle DARWIN Queensland Offshore petroleum Base metals, basins projects to 2016: bauxite-alumina USD100 billion+ Pilbara Region BROOME LNG, iron ore, Bowen, Surat and PORT HEDLAND Northern Territory infrastructure KARRATHA Galilee Basins Coal, CSG, LNG Queensland Western Australia Mid West Region South Australia BRISBANE Iron ore, gold, Copper, uranium, New South Wales uranium, nickel, mineral sands, New South Wales Coal, gold, base petroleum PERTH SYDNEY metals South West Region Goldfields Region ADELAIDE CANBERRA Alumina, mineral sands, Gold, nickel, iron ore Victoria gold Victoria/Tasmania MELBOURNE South Australia Coal, gold, base projects to 2016 metals, oil & gas USD10 billion+ HOBART * Reserve Bank of Australia 7
Australian companies also have been busy globally! DISCOVERED MINERAL AND COAL RESOURCES 2008 – 2013 Value of discoveries by Australian (ASX) companies $2,100bn Value of discoveries by other companies ?$4,000bn – ?$5,000bn How to turn potential to actual shared value? 8 ‘Maiden resources’ discovered and delineated by ASX companies 2008 – 2013
Generating value globally: Australia’s mining-related $410bn investment and trade interests 53 Europe 23% 34% $218bn 66 38% $296bn 75 North & Central North America Asia SE Asia & Pacific 5b $25bn 105 62% Latin America $687bn Africa Australia 27% 206 $461bn 94 662 $556bn 27% Number of ASX-listed mining companies operating in region (Source: SNL Mining and Metals) Percentage of Australian-based METS companies identifying region as a key market (Source: Austmine) Value as at August 2014 of ‘maiden resources’ announced by ASX -listed companies 2008-2013 by region 9 (Source: SNL Mining and Metals)
Latin America is rising fast in exploration and mining AUSTRALIA HAS GROWING PRESENCE Mining operations Exploration 10 Source: SNL Metals and Mining
Latin America is the top destination for exploration NON-FERROUS EXPLORATION 2013 5% Russia 13% Canada 4% Europe 7% United States FSU 2% 4% China 6% 6% West Africa Mexico Other Latin America 6% 3% East Africa 6% Pacific Islands 2% DRC 3% Brazil 5% Peru Latin America 26% 3% Southern Africa 13% Australia 6% Chile Africa 14% Other locations account for 6% 11 Source: SNL Metals and Mining World Exploration Trends 2014
Latin America opportunity • 96 ASX-listed mining companies have Number of exploration & mining companies 539 projects across 16 countries in Latin America • Total capital raised for LatAm TSX-V 347 projects by ASX listed companies TSX 116 over last 5 years was $2.56 billion ASX 95 • Chile: 115 Australian companies AIM 19 total, incl. 28 juniors plus 59 METS LSE 15 • Brazil: 110 companies, incl. 20 HKEx 10 juniors plus 30 METS JSE 5 • Peru: 88 companies total, incl. 20 investors/ juniors plus 60 METS Operations of ASX and non-ASX listed mining companies in Latin America Sources: SNL Metals and Mining, ASX, 12 Austrade
Africa comparison – Latin America has high potential! Number of listed mining companies in Africa • $6.83 billion has been raised through ASX 220 follow-on raisings by ASX listed companies TSX & TSX-V 196 for projects in Africa over the last 5 years LSE & AIM 101 JSE 60 HKEx 11 Operations of ASX and non-ASX listed mining companies in Africa 13 Sources: SNL Metals and Mining, ASX
Mining and sustainability shortfalls snapshots POTENTIAL COOPERATION OPPORTUNITIES FOR AUSTRALIA • Chile: energy, water, productivity, OHS, skills, gender, environment, mine closure, geoscience and titles, social licence • Peru: community, social licence, OHS, environment, approvals, water, infrastructure, skills for mining and governance, ASM • Brazil: geoscience, OHS, community and social licence, R&D and education • Argentina: whole mining regime! 14
Resource-driven countries need a new growth model TO TRANSFORM THEIR POTENTIAL RESOURCE WINDFALL INTO LONG-TERM PROSPERITY • Building institutions and governance of the resources sector • Developing infrastructure • Ensuring robust fiscal policy and competitiveness • Supporting local content • Spending resources windfall wisely • Transforming resource wealth into broad, inclusive socioeconomic development • Gaining community support for responsible resource development Skills and institutional capacity are key to sound governance. OECD: "Skills have become the global currency of the 21st century. Without proper investment in skills, people languish on the margins of society" Source: Adapted from McKinsey Global Institute, Reverse the curse: Maximizing the potential of 15 resource-driven economies , December 2013 and IM4DC
Resource-driven countries need a new growth model TO TRANSFORM THEIR POTENTIAL RESOURCE WINDFALL INTO LONG-TERM PROSPERITY Building institutions and governance of the resources sector Developing infrastructure Ensuring robust fiscal policy and competitiveness Supporting local content Spending resources windfall wisely Transforming resource wealth into broad, inclusive socioeconomic development Gaining community support for responsible resource development Skills and institutional capacity are key to sound governance. OECD: "Skills have become the global currency of the 21st century. Without proper investment in skills, people languish on the margins of society" Source: Adapted from McKinsey Global Institute, Reverse the curse: Maximizing the potential of 16 resource-driven economies , December 2013 and IM4DC
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