Day 2- Session 6: Sustainable Mining & Conflict Resources Objective Capital Global Mining Investment Conference 2010 Stationers' Hall, City of London 28-29 September 2010 Speakers: Andy Bone - World Diamond Council Aidan Davy - International Council on Mining & Metals Andre Van Zyl - Oak Ridge Solutions Mike Davis - Global Witness

1. Investment Conferences
GLOBAL MINING
INVESTMENT CONFERENCE 2010
DAY 2 - SESSION 6: SUSTAINABLE MINING & CONFLICT RESOURCES
What next for the Kimberley Process?
Andy Bone – Director, World Diamond Council
Sustainable Mining
Aidan Davy – Senior Programme Director, ICMM
Transforming Artisanal & Small Scale Mining
Andre Van Zyl – Managing Director, Oak Ridge Mining Solutions
Conflict Resources
Mike Davis – Chief Campaigner, Global Witness
● CITY OF LONDON ● TUESDAY-WEDNESDAY, 28-29 SEP 2010
STATIONERS’ HALL
www.ObjectiveCapitalConferences.com

2. GLOBAL MINING
INVESTMENT CONFERENCE 2010
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3. GLOBAL MINING
INVESTMENT CONFERENCE 2010
What next for the Kimberley Process
Andy Bone – Director, World Diamond Council

4. GLOBAL MINING
INVESTMENT CONFERENCE 2010
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5. Sustainable Mining:
Extracting value from ESG
performance
Aidan Davy, Senior Program Director
www.icmm.com

6. Overview of presentation
 Growing pressure on ESG disclosures
 Mining sector risks overall and ESG issues
 Investor interest in ESG risks
 Selected ESG risks and ICMM activities/
members performance
 Conclusion
www.icmm.com

7. Growing pressure on ESG disclosures
 Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)
includes provisions to:
 Report payments by project and by recipient government (1504)
 Provide quarterly reports on a variety of Health & Safety related matters (1504)
 Due diligence measures on “conflict minerals” from the DRC (1502)
 SEC issued guidance on Climate Change Disclosures (02/10):
 Requires listed companies to disclose impacts of climate change
 ‘Physical impacts’ includes changes in water availability or quality
 Investor-led calls to listing authorities and stock exchanges to require
companies to consider the sustainability of their business model
www.icmm.com

8. Mining sector risks
 Life cycle aspects, e.g.  Political instability
recyclability, disposal  War/civil disturbance
 Chemicals management/  Expropriation
inherent HSE risks
 Breach of contract
 Supply/value chain
 Market access
 Resource access –
 Business interruption land, energy, water
 H&S and ESG  Access to capital &
 Failure of systems talent
 Regulatory non-  Climate change
compliance  Reputation
 Commodity price  Currency Risks
 Interest rate risks  Equity risks
www.icmm.com

9. Risk convertibility in the mining sector
 Life cycle aspects, e.g.  Political instability
recyclability, disposal  War/civil disturbance
 Chemicals management/  Expropriation
inherent HSE risks
 Breach of contract
 Supply/value chain
 Market access
 Resource access –
 Business interruption land, energy, water
 H&S and ESG  Access to capital &
 Failure of systems talent
 Regulatory non-  Climate change
compliance  Reputation
 Commodity price  Currency Risks
 Interest rate risks  Equity risks
www.icmm.com

10. ESG operational issues in mining
Ethical Business Practices Labour & Working Conditions
Anti-corruption stance Labour relations
Transparency Diversity and equal opportunities
Political involvement Occupational Health & Safety
Labour issues in supply chain
Environmental Responsibility
Energy and Greenhouse Gases Water resources (use, pollution, management)
Biodiversity Land (use, contamination, management)
Tailings management Solid waste management
Air emissions (excluding GHG) Emergency Preparedness Closure
Social and economic contribution
Artisanal and Small Scale mining Communities (impacts and social investment)
Conflict and security provision Involuntary resettlement of communities
Cultural heritage Local economic development
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11. Top 10 Global Pension Fund Markets ($20.4 trn)
Source: UNCTAD (2010). Investment and Enterprise Responsibility Review
www.icmm.com

12. Scope and influence of Responsible Investment
UNCTAD analysis of world’s 100 largest pension funds:
Average AUM per fund (SUS bn)
51 135
No. of pension funds
27 73
66
22
No. of Responsible No. of Responsible
Investment indicators Investment indicators
As of February 2010, PRI had 700+ signatories (currently 800+) with AUM of over US$20 trn
Source: UNCTAD (2010). Investment and Enterprise Responsibility Review
www.icmm.com

13. Do sell-side analysts give a XXXX?
 Investigated overall impact of CSR
strategies on securities analysts
recommendations (16yr horizon)
 Examined perceptions of analysts on
value creation (or value destruction)
potential of CSR strategies
 Initially, CSR strategies perceived as
value-destructing. Later, CSR
strengths seen as value-creating: shift
from sell to buy recommendations
 Higher ability analysts more likely to
reward CSR strengths
www.icmm.com

14. ESG risks and project finance
 International Finance Corporation
Project finance rise.... and fall
(IFC) has set the standards for
addressing ESG risks
 IFC Performance Standards 35
US$ billions (mining)
US$ billions (total)
embraced by EPFIs – represents 30
over 90% of project finance deals 25
 Mining investments of over $26 bn 20
between 2005 and 2009 15
10
 Despite a dip in 2009, likelihood is
that activity will increase 5
 IFC Performance Standards under
review – bar likely to be raised
Source: Harvard Business Review (2010). An overview of
project finance and infrastructure finance
www.icmm.com

15. Value of global mining sector M&A deals (US$ bn)
(September)
Transaction service providers increasingly address ESG risks as part of M&A due diligence
Source: PwC (Sept, 2010). Mining Industry Briefing: M&A in the Global Mining Sector
www.icmm.com

16. Carbon Disclosure Project – Global 500 (2009)
Includes mining & metals
Performance scores
Disclosure scores
Note1: Materials includes: Metals & Mining (45%), Chemicals (35%) and Construction Materials,
Containers & Packaging, and Paper & Forest Products (20%).
Note 2: As of September 2010, CDP initiative backed by 534 institutional investors with more than $64trn in AUM
Source: PwC (2009). On behalf of The Carbon Disclosure Project
www.icmm.com

17. ICMM activity on Climate Change
 Climate change is of significant interest to
ICMM member companies
 Mining industry estimated to contribute
approx. 1.8% to global GHG emissions
 Many metals produced are essential to
pollution prevention ‘green technologies’
 ICMM members working to establish
themselves as part of the solution to the
climate change challenge
 Current efforts involve sharing information to
improve understanding of issues and drive
implementation of best practice technology
www.icmm.com

18. Water availability & quality
Water disclosure scores by sector (out of 100):
Source: CERES (2010). Murky Waters? Corporate Reporting on Water Risks
www.icmm.com

19. Increasing importance of Indigenous Peoples
 Indigenous Peoples are increasingly
important in terms of resource access
 EIRIS, CAER and The Ethical Funds
Company all promoting FPIC (ideally
large ‘C’)
 Not just NGO’s advocating: Co-
Operative Bank’s support for Beaver
Lake Cree Nations vs. Tar Sands in
Alberta
 EIRIS analysed 250 companies from
FTSE All World Developed Index: Oil
& Gas (47%), Mining (36%); Forestry
(10%) and Agribusiness (7%)
www.icmm.com

20. Indigenous Peoples – selected indicators
Agribusiness
Forestry & Paper
% %
Oil & Gas
Mining
Indigenous Policy FPIC (consent/consultation)
% %
Indigenous employment Resettlement
Source: EIRIS (2009). Indigenous rights: risks and opportunities for investors
www.icmm.com

21. ICMM member ‘policy’ commitments
10 Principles for Sustainable Development
1. Implement ethical business practices and apply good corporate governance
2. Integrate SD in corporate decision-making 3. Uphold fundamental human rights
4. Manage risks based on sound science 5/6. Improve EHS performance
7. Conserve biodiversity & participate in integrated land use planning
8. Encourage life cycle approach to materials management
9. Contribute to community development
10. Publicly report, independently assure and engage openly and transparently
6 Position Statements
Mining and Protected Areas Mining: Partnerships for Development
Climate Change Mining and Indigenous Peoples
Mercury Risk Management Transparency of Mineral Revenues
www.icmm.com

22. Reporting & Assurance by ICMM members
 Adopting systematic approaches to
reporting material risks, which reflects
enhanced ESG performance
 Undertaking robust assurance of
sustainability reports to enhance
credibility and trust
 Understanding how/which ESG
efforts contribute to value
creation/protection
 Enabling investors & analysts to
better differentiate between
companies
www.icmm.com

23. Do mining investors respond to ESG factors?
Vedanta resources share price (2010)
www.icmm.com

24. Concluding remarks
 ESG factors are increasingly a
mainstream concern for investors
 Not just buy-side analysts, but
increasingly sell-side analysts who have
an interest and influence
 ESG factors will continue to grow in
importance in terms of project finance
and M&A activity
 ICMM members demonstrate leadership
in terms of ESG commitments and
performance
“ESG analysis will benefit from improved reporting and corporate governance
structures. But attention should also be paid to the need for improvements in the
coherence and consistency of ESG analysis itself.”
UNCTAD (2010). Investment and Enterprise Responsibility Review
www.icmm.com

25. For further information
please contact:
Aidan Davy, Senior Program Director
aidan.davy@icmm.com
www.icmm.com

26. GLOBAL MINING
INVESTMENT CONFERENCE 2010
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27. Transforming artisanal and small
scale mining

28.  Intro video
 Background to Oakridge involvement
 Overview of conflict situation in East Congo
 Current situation
 The fairmining solution
 Project Kivu – first fairmining implementation
 The future of fair mining

31.  By invitation - we got involved based on request from local
stakeholders groups
 Background in corporate business transformation,
troubleshooting and root cause analysis
 Our approach was region development focused, not mining
specific
 We spend 12 months detailed on the ground analysis and
investigation before putting a proposal together.
 We are developing the solution in conjunction with all local
stakeholders
 We are developing solutions with repeatability in mind

32.  It is not as complex as it seems
 It is there by design
 Blood minerals – not all minerals are fueling war (Blood Gold)
 Resolving the conflict situation will result in many people losing a
lot of money
 Our initial root cause analysis showed many anomalies when
compared with what gets reported in main stream media
 Aid is a big cause of corruption
 NGO’s creating a false economy
 Economic development and job creation is the only solution

33.  Strong and cohesive voice for artisanal mining starting to
emerging out of North Kivu
 Joint meetings between Local Communities, SAEESCAM,
COMIMPA, ANR, Comptoirs, Mining Police, Government and
UN Expert Group
 This voice does not effectively reach international advocacy
and media.
 We are launching platforms to address this
 www.walikali.com and www.habarizakweto.net
 Mineral ban in North Kivu, South Kivu and Maniema (Coltan,
Wolframite and Cassiterite)
 Developing the artisanal mining sector in these regions now
high on DRC government agenda.

34.  It is a holistic, generic, business approach to
community based mining that is contextual in
it’s implementation
 Product Scope – All metals and minerals
 Key elements
 Social and economical development
 Environmental development
 Transparent and traceable (compliance)
 Ethical trading

35.  Proprietary communication platform
 www.fairmining.com
 Best in class information and process
management systems and infrastructure
 Fully integrated management information systems
 Real time KPI monitoring and management facilities
 Balanced scorecard methodology implemented
 HF Radio based email facilities in rural areas
 RFID tracking
 Detailed financial and revenue distribution model

36.  Secure chain of custody module (mining certificates of origin)
 Trading platform
 Ethical metals and stones trading platform
 Baseline traceable and transparent
 Level 1 – fully independent certified FT/FM products
 Gold and associated metals
 South America – premium 10-15%
 Level 2 – internally verified sourced minerals from fairmining
partners/products
 No premium
 All metals
 Incl 2nd party ethical products
 Level 3 – recycled metals
 Communities and projects (social networking)

37.  Kalminco, the first majority locally owned Congo
minerals company in North Kivu
 80% of profits stays in the Congo
 Very attractive ROI to investors (eg. Phase 2
gives 100% ROI in 12 months)
 Will become operational as part of the DRC
government’s initiatives to clean up the mineral
trade in North Kivu

38.  Project Kivu
 Three more Fairmining implementations are under
negotiation and will become available soon
 600 km2 concessions to be developed in DRC –
business plan available in November 2010
 Ghana – early 2011
 Sierra Leone – early 2011
 Investors that are seriously looking for both high
social and financial dividends are welcome to talk to
us

40. GLOBAL MINING
INVESTMENT CONFERENCE 2010
Lead sponsors:
Media partners:
Other sponsors & participating organisations:

41. 29 September
Global Mining Investment Conference
Mike Davis
Team Leader, Conflict Resources
Global Witness
mdavis@globalwitness.org

49. What’s being done to tackle the trade in conflict
minerals?
• US legislation – provisions on conflict minerals in
financial reform act
• UN Security Council due diligence guidelines for
companies sourcing from Eastern DRC
• OECD standards on due diligence for companies
sourcing minerals from conflict-affected areas
• Certification schemes: German government and ICGLR
• Industry initiatives
• UN Sanctions

50. Key elements of supply chain due diligence
1. Conflict minerals policy
2. Supply chain risk assessments
3. Remedial action
4. Audit
5. Public reporting

53. Companies involved in / investing in the minerals
sector should:
• Ensure due diligence on supply chains
• Back legislation on conflict minerals in Europe to
match what’s just been introduced in US
Companies involved in / investing in the diamonds
sector should:
• Ensure due diligence on supply chains
• Ensure a stronger commitment to human rights by
the Kimberley Process

54. 29 September
Global Mining Investment Conference
Mike Davis
Team Leader, Conflict Resources
Global Witness
mdavis@globalwitness.org

55. GLOBAL MINING
INVESTMENT CONFERENCE 2010
Lead sponsors:
Media partners:
Other sponsors & participating organisations: