Natural Resources & National Development Views from the ICMM

Dr John Groom Head of Safety, Health & Environment, Anglo American & Chair of ICMMs Resource Endowment Initiative
September 11th, XXVIII Convencin Minera, Arequipa

The Challenge of Mineral Wealth: using resource endowments to foster sustainable development

Scope of presentation

Background on ICMM

The Resource Endowment Initiative

The Peru Country Case study

Way Forward

ICMM Corporate Members

Goal: Raise Standards of Performance

The Resource Endowment Initiative

Identifying and promoting ways to assist mineralrich countries across the developing world to use their mineral resources to achieve broad-based economic growth and sustainable development

Resource Endowment Work Program

May December 2004

January December 2005

January 2006 onwards

Analytical Framework

Two Overall Research Questions

What are the critical success factors that have enabled some countries to benefit from substantial resource endowments and avoid the so-called resource curse? What practical steps might be taken by the industry, governments, local communities and aid agencies to build these success factors?

Outputs from Phases 1 and 2

Toolkit which provides a systematic and consistent approach to documenting impacts of individual mining projects on a local, regional and national level Practical policy recommendations for mining companies, governments, development institutions and NGOs aimed at enhancing the socio-economic contribution of mining Country case studies for Peru, Chile, Ghana and Tanzania:
reviewed in depth the economic and social impact of one large mine examined the national (macro) economic impact of the mining industry as well as poverty and social indicators

Synthesis Report which contrasts and compares similarities and differences

7

Overall findings in synthesis report

The contribution of mining investments to socio-economic development and poverty reduction can be significant The performance of different mineral dependent countries varies greatly, but apparent success factors include:
A stable macroeconomic climate Mineral legislation supportive of inward investment (e.g. in Peru,

$9.8 billion between 1992-2004 (domestic & international)

Good governance and institutional capacity are important especially at local and regional levels Effective partnerships between companies and governments in fostering local supply chains, for example, or improving local social provision

Minings resurgence in Peru has coincided with period of greater economic stability.
Mining in Peru makes a crucial economic contribution: approximately 55% of merchandise exports and 5% of GDP in 2006 Between 1990-2006, Perus overall GDP increased by 93% whereas mining GDP increased by 135% Mining contributed to around 21% of Perus government tax revenues in 2006 (a massive increase from around 5% in 2004) While direct employment small .65% of procurement from the industry in Peru is sourced locally Overall, sector employs 95,000 directly, but 380,000 indirectly (with mining salaries averaging 7.5 times agricultural salaries)
9

National level governance reforms in Peru are not matched at regional/local levels.
Important recent developments:
Canon Minero: 50% of corporate income tax to mining areas; this is significant contribution Mining Royalty: 1-3% value of production, 100% to mining areas Voluntary Support Fund (VSF): $790 million over five years to reduce poverty and social exclusion in mining areas

But proactive arrangements are needed where capacity of local and regional governments need strengthening Companies can support capacity building, e.g. integrating social investment into local/regional government development plans

10

Antamina: substantial contribution at local and national levels in Peru

Company has sustainable development objectives. Through the Antamina Mining Fund (AMF), it is working to reduce child malnutrition, improve education, promote income generation and enhance institutional capabilities of local governments. Significant direct/indirect employment: 9,000-12,000 jobs created -- but share of directly employed personnel from the region is 16% Social investment of $7.9 million in 2006, with local population involved in project design and implementation Antamina contributed $1,2 billion to the Peruvian economy in 2006 through taxes, transfers and national procurement of goods and services. This year Antamina has transferred $64 million for social investments to be carried out in the Ancash Region, through the AMF.

11

Way Forward: Lessons from four countries

Collaborative action is needed to capture the full potential benefits of mineral wealth and achieve enhanced and lasting outcomes This requires partnership approaches between companies, governments, social representatives (including NGOs) and donor agencies Individual partners have specific responsibilities, comparative advantages, and contributions to make but collaboration is fundamental Phase 3 of the Resource Endowment Initiative is seeking to encourage uptake of the Phase 2 recommendations and enhance the contribution of mining to social and economic development
12

Potential areas for collaborative action in Peru could focus on:

Mining and Poverty Reduction Mining and Economic Development
Revenue management Regional development planning Increasing local content

Social Investment and Compensation Dispute Resolution and Communication

The clusters in the Synthesis Report identify actions and responsibilities for (i) companies, (ii) host governments, and (iii) development organizations and the voluntary sector.
13

Peru Phase 3 Work Program

1. Desk-based review of mining sector initiatives July 2007

2. In-country mapping and gap analysis

3. Discussion of options for pilots

4. Workshop to discuss priority areas for partnership Q4 2007

August 2007

Stages 1 4: Catalytic and leadership role by ICMM Stages 5 8: Leadership of partners in-country
5. Development of M&E framework 7. Periodic external evaluation 8. Reporting & dissemination of lessons learned

6. Action plan implementation

14

Results of in-country mapping

Mining and Poverty Reduction: challenge is how mining industry could work with others to directly address poverty alleviation at national level? Mining and Economic Development:
Revenue management: multi-stakeholder initiatives are underway Regional development planning: Limited activity and generally not supportive of management of public funds (e.g. Canon Minero) Increasing local content: Individual corporate effort but more collaborative action could have positive benefits

Social Investment and Compensation: individual companies active but effectiveness of approaches vary widely Dispute Resolution: multi-stakeholder initiatives are underway

15

Way Forward: Peru multi-stakeholder workshop A workshop is planned for later this year with two objectives:
Providing feedback to stakeholders in-country on the Resource Endowment work so far Workshop participants to be engaged on identifying priority projects for partnerships as basis for action-plan in country

16

Thank you

www.icmm.com
17