Creating Shared

Value in the

Mining Industry

Andrew Keith

Glen Corder

Mark Jones

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Not this kind of SHARING

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Economics - simplified

Current premise

The planet

provides infinite

natural capital –

economist and

financiers

determine where

financial capital is

invested to delivery

financial growth

and prosperity.

Future premise

How can we use

the financial capital

available in the

economic system

to create prosperity

for people and

planet?

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Strategic Investment Decision Evaluation Models (Joubert,

2014)

Causes of project delays from a survey of 190 delayed

projects (Goldman Sachs, Xtrata, 2012)

Investment - measures

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Causes of conflict (Rachel Davis & Daniel Franks © 2014 by the CSR Initiative at the Harvard Kennedy School)

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Creating Shared VALUE (Porter and Kramer, HBR 2011)

CSR CSV

Value: Doing good Value: Economic and societal benefits relative to cost

Citizenship, philanthropy, sustainability Joint company and community value creation

Discretionary or in response to external pressure

Integral to competing

Separate from profit maximisation Integral to profit maximisation

Agenda is determined by external reporting and personal preferences

Agenda is company specific and internally generated

Impact limited by corporate footprint and CSR budget

Realigns the entire company budget

Example: Fair trade purchasing Example: Transforming procurement to increase quality and yield

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The Capitals – beyond the single and triple bottom

lines

Industry example

Sasol Video:

https://www.youtube.com

/watch?v=-zELkQ6BO4E

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Mining and Metals – EY Risk Radar

RISK

10. Access to water and energy

9. Balancing talent requirements

8. Sharing the benefits

7. Infrastructure access

6. Price and currency volatility

5. Capital projects

4. Resource nationalism

3. Social license to operate

2. Capital dilemmas

1. Productivity improvement

CAPITAL

10. Natural

9. Human/ Social

8. Social

7. Manufactured

6. Financial

5. Manufactured

4. Social

3. Social

2. Financial

1. Financial

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Platinum Mine in South Africa – Pre-Feasibility Stage –

Green Line Mining

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Financial Capital Improvements:

Improved NPV, IRR, payback period

Many scenarios reviewed & tweaked

Theory of Constraints applied

Social and Human Capital improvements:

• Identified further initiatives to strengthen workforce performance,

• Assisting in developing local enterprises,

• Improving health facilities and road safety.

Natural Capital improvements:

Identified initiatives with potential to reduce electricity and water usage

Case Study – Platinum mine – Creating shared value

Base Case

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Cost of Sustainability Initiatives

• Estimated to be approx. 3-4%

of total NPV – worst case

• The NPV would be reduced by

up to 20% with 1 year delay and

more than 40% with 3 years

delay

Risk Reduction

Reducing the risk that licence to

operate issues will lead to conflict

Reducing the premium added by

project financiers to account for

project risk

Case Study – Platinum mine – Creating shared value

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Miners in Queensland operate in an

unpredictable environment affected

by global demand for commodities.

While in the short-term it’s easy to

make productivity gains through

supply chain cost reduction

sustainable long-term growth

requires a different approach.

The sector needs to collaborate to

create sustainable and bankable

gains through investing in

intellectual capital, innovative

policy and shared value throughout

the entire supply chain linked to

consumers needs.

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Designing the future together mining in Queensland (Workshop held 2 August 2016)

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• The future is uncertain – there is a need to be agile

• Collaboration amongst all stakeholders in the value chain is

critical to create a prosperous future

• Social licence is imperative to combating risks to the sector

• Communication and education must promote shared value

and tangible economic benefits

• We need to harness and direct intellectual capital and

productivity to the right problems

• Collaboration – between all participants including miners,

mineral processors, manufacturers, shareholders, investors

(e.g. pension funds), communities and the customer

• Shared value – there needs to be tangible benefits

demonstrated to all stakeholders

• Communication – there is a need to educate but also to listen

• Community – communities need to be at the heart, not

disenfranchised spectators

• Customer – we have to understand our customers

Themes

Common threads

Themes, common threads and starting points on

explorations

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Conclusions

To achieve success, mining companies must look beyond traditional tools of engagement, dialogue and discourse to build integrated teams and identify innovative ways in which their business can benefit society. (Fraser and Scoble, 2015)

CSV provides a business based concept for this transformational change

Case Study - enterprise wide optimisation with a SUSOP Five Capitals approach to community and environmental sustainability issues at the Pre-feasibility stage with benefits across the Five Capitals.

Opportunities:

Enhanced community collaboration – incorporation of community representatives into the Capitals balancing discussion Better understanding of Financial Capital Enhanced ownership of outcomes

Intellectual Capital - upgrading in the mine supply chain for creation of additional value through enhanced expertise, technology and innovation

Capital Optimisation – can the Capitals be objectively optimised in parallel?

REGISTRATION NOW OPEN

For further information, please contact: Rachel Magill, Senior Coordinator, Events|rmagill@ausimm.com.au