Mining after COVID-19...2020/05/07 · workforce & connecting technical leads, project development teams & donors • Developing & implementing projects with existing partners to

Mining after COVID-19:

Rebuilding sustainable

operations

May 2020www.americasmi.com

AMI & leading experts

WEBINAR

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Introductions

Mining post COVID-19

©2020 Americas Market Intelligence. All rights reserved. ǀ Private and Confidential www.americasmi.com 4©2020 Americas Market Intelligence. All rights reserved. ǀ Private and Confidential

AMI is the leading above

ground risk &

advisory firm in Latin

American mining

Authors of Managing

Mining Risk in Latin

America

27 years experience in

the region

Full coverage

of Latin America and the

Caribbean

Our teams have

executed 3000+

client engagements

in Latin American &

Caribbean markets

since 1993

www.americasmi.com 5


©2020 Americas Market Intelligence. All rights reserved. ǀ Private and Confidential

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Today’s Panelists

Moderator

Remi PietMining Practice Director

Panelists

John PriceManaging Director

Curator

Abel DelgadoDigital Marketing Director

Ana Candida de Mello

CarvalhoPartner

Arthur DeakinAnalyst

Stephanie ShumskyTechnical Manager

Sarah GordonCEO

7 areas of mining

risk





Poll Question 1

Which of the following risks to you consider to be the most impactful on a mine?

13%

10%

13%

6%

10%

42%

6%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Macroeconomic pressure

Reputation

Security

Regulatory and legal

Political interference

Local community opposition

Infrastructure and labour




Macro-economic pressure

Rising resource prices

Definition: High resource prices

can trigger public protests and

higher royalty policies.

COVID trend: Quarantines -> fiscal crisis

and governments will look to raise taxes

on export industries like mining

Lack of local funding

options

Definition: Absence or

underdevelopment of local capital

markets and private investors

COVID trend: Local fundraising in

emerging markets will be even more

costly and difficult.

Capital controls Definition: Capital controls can

destroy project viability.

COVID trend: Collapsing fiscal

discipline in many countries will lead

to capital flight and imposing capital

controls.

Currency

manipulation

Definition: Currency intervention

usually leads to an overvalued

currency.

COVID trend: A strong dollar world will

harm the competitiveness of dollarized

or dollar pegged jurisdictions.

Influence of external

debt and creditor

Definition: High external debt

obligations with a creditor

country expose a country to

external influence.

COVID trend: Fiscal crisis in many

jurisdictions will provide added

leverage to future bi-lateral lenders.




Introducing Pact

Mines to Markets (M2M) Signature Initiative

• Work with government, industry and miners themselves to make

artisanal and small-scale mining (ASM) formal, safer and more

productive

• Specializing health and safety in mining, human rights, traceability

and transparency, economic empowerment among miners, mercury

abatement, child labor reduction, mineral certification,

governance and ethical sourcing.

• Using Delve to organize a Covid-19 Task force to share information, ideas and resources, and

support action initiatives that will directly help ASM communities

• Launching a global innovation incubator, collecting over 150 ideas across our global

workforce & connecting technical leads, project development teams & donors

• Developing & implementing projects with existing partners to educate communities, supply

PPE and build public health response capacity

Covid-19 Response

http://www.pactworld.org/our-approach/health

http://www.pactworld.org/projects/scaling-itsci

http://www.pactworld.org/our-approach/livelihoods

https://www.pactworld.org/country/child-labor

https://delvedatabase.org/about/news-and-events/impacts-of-covid-19-on-artisanal-and-small-scale-mining-insights-from-the-ground




Legacy of bad mining practices

Local community opposition

Definition: Previous unscrupulous mining practices can turn a

local community into permanent sceptics

Covid Trend: Covid has led gov’t and communities to

request unprecedented assistance, respond appropriately

and a new legacy could be launched.

Overlapping resource use

Definition: Neighboring actors vying for resources (water,

energy, land), including well-connected users

Covid Trend: Covid may present opportunities to

renegotiate, but, economic changes (i.e. unemployment)

drive land scarcity as communities turn to charcoal

production & other resource-intensive coping strategies.

Local content / local procurement

Definition: The community and government pressure to

source products and service locally.

Covid Trend: Covid is impacting international supply

chains, highlighting the benefits of local sourcing and

national hires. Opportunity to find new local suppliers &

invest in building their capacity.

Environmental ConcernsDefinition: Communities may be concerned about the

environmental impact of a mine, including water availability,

dust, waste management and toxic pollution.

Covid Trend: Communities may worry that environmental

impacts could increase Covid risks (i.e. dust exposure).

Mines must take this time to educate & act responsibly.

Indigenous Claims

Definition: Local indigenous communities aim to protect

territory, resources or ancestral rites and rituals.

Covid Trend: Covid is a threat to these communities but

supporting public health projects can demonstrate

benevolence of companies and can help build

relationships.

Grievance Management & Communication

Definition: Communities are frustrated by systems that

delay/avoid fair compensation. Communication is key to manage

rumors & relationships.

Covid Trend: Covid is worsening economic conditions &

misinformation spread. Invest to expedite payment

processing & control the narrative.

Informal mining operationsDefinition: Informal miners may feel their livelihoods and

rights to exploit resources are threatened and protest.

Covid Trend: ASM formalization is an attractive solution to

lost state revenues & widespread unemployment. Context-

adapted cooperation adapted could bring win-win solutions

for marginal deposits & lower prices.




Political interference

Political ambitionDefinition: Political actor

putting his own ambition ahead

of mining investments.

COVID trend: Mining is a convenient scapegoat for

governments looking for a rise in popularity, but it

has fallen off the radar with Covid19

Political

campaigns and

party alliances

Definition: Align with anti-

mining interests to be chosen.

COVID trend: Candidates seek political stances

with high ROI. With ambitious Covid19 strategy,

miners can be part of the solution, rather than

part of the problems

Local political

power

Definition: The federal

government approves the

project but is then challenged

by the local political agenda.

COVID trend: With overflowing local authorities

(Covid19), miners can support, not weigh

administrative resources (administrative

institutionalism)

International

interference

Definition: Global border

dispute or international regime

(such as ILO 169)

COVID trend: Greater focus on the formalization

of ASM and implementation of the SDGs, regime

and international support (debt relief) but greater

scrutiny on process quality (Covid-19)

Nationalization /

Expropriation

Definition: Expropriation of

ownership or cancellation of

operating license.

COVID trend: Mining exports (USD), resource

nationalism rarely leads today to expropriation,

government's focus on public health (opportunity)




Introducing Barbosa Mussnich Aragao

We are a Brazilian full-service law firm

Founded in 1995 by lawyers with well-established reputations. Took part in a significant number of large transactions in Brazil. Built a solid reputation

as an innovative, cutting-edge law firm and experienced consistent growth.

▪ Business Crime

▪ Competition

▪ Compliance, Investigations and Law Enforcement

▪ Corporate and M&A

▪ Digital and New Technologies

▪ Employment

▪ Energy

▪ Environmental

▪ Finance and Capital Markets

▪ Government Relations

▪ Infrastructure and Regulatory & Government Affairs

▪ Insurance

▪ Intellectual Property

▪ Litigation and Arbitration

▪ Oil & Gas

▪ Real Estate

▪ Restructuring and Insolvency

▪ Superior Courts

▪ Tax

▪ Wealth Management and Succession Planning

What We Do

This is not just one of the very best firms in the Brazilian

market, it is the home of rainmakers who have famously

handled some of the most memorable transactions in the

country’s recent history.

“

”Latin Lawyer

Recent Awards & Recognitions




Tax And Income Distribution Regime

Regulatory & legal

Definition: How miners are taxed and royalty redistribution to

state and municipal levels.

COVID trend: Reduced production and royalties, in

addition to sanitary restrictions on transport and/or

boarder closures may affect local budgets. Reinforced

need to focus actions at the local and regional level to

build lasting partnerships.

Weak regulatory framework

Definition: Under defined regulations they can lead to careless

mining practices and reputational damage.

COVID trend: While regulatory oversight on public health

will be strengthened, some countries have been less

stringent or even determined continuity of economic

activities deemed essential (including mining and its supply

chain, such as Brazil’s case).Environmental assessment required

Definition: Onerous environmental assessments and

regulations (i.e. dam control) can delay or jeopardize

projects.

COVID trend: Environmental sustainability will remain a

strong imperative. The goal is to create an integral value

around a mining site. Covid only reinforces the public

health dimension, giving it enhanced importance.

Administrative obstacles

Definition: Bureaucratic proceedings to obtain permits can

delay projects by months, even years.

COVID trend: Delays will increase, public hearings are

suspended... Now is a time to focus on structural alliances

(local/regional)

Land and mineral rights

Definition: Competition from land and mineral claims may risk

the legal viability of a mine.

COVID trend: Few changes. Covid19 may offer arguments

for the legitimacy of operation and the presence in the

territory.

Corrupt rule of law

Definition: Powerful opponents (e.g. political leaders,

agribusiness, litigants) bribe judges to interpret the laws in their

favor.

COVID trend: Occurrence likely to decrease, in view of

increase collaboration between public and private

stakeholders. Legitimacy and local support can be built

against this risk in Covid's time. Attention to more flexible

regulations and law enforcement in post-Covid scenario,

which may stimulate a less obvious expression of this risk

Social Licensing

Definition: Highly complex stakeholder management process

COVID trend: Increased demand for project legacies on

foreign companies, specially related to social and health

improvement.




Poll Question 2

Which mining region will be most negatively impacted by COVID-19?

1%

7%

19%

31%

36%

6%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Australia

Canada/US

Mexico and Central America

Africa

South America

Eurasia




Security

Organized

Crime

Definition: Organized criminal

groups target mining operations to

extort money or drive them away.

COVID trend: In some jurisdictions, organized

criminal groups have proven more effective than

government in lending support to communities

facing an economic crisis.

Illegal mining Definition: Illegal miners invade

mining concessions, steal

equipment and can resort to

violence.

COVID trend: lockdowns impact several mining

operations. While they are dormant, the

temptation for illegal miners to invade

concessions rises.

Guerillas, Civil

War

Definition: Civil war can reduce

access to mines. Guerillas can

target miners for extortion or

resort to illegal mining.

COVID trend: Some civil warring parties agreed to

COVID ceasefires. Fighting may stop but armies

must be fed so extortion will continue.

KidnappingsDefinition: Criminal groups can

target foreign mining executives

who have kidnapping insurance.

COVID trend: Lockdowns temporarily lower

kidnapping risk but once mines resume, their

success versus other industries will attract

opportunists again.

Acts of GodDefinition: Earthquakes,

mudslides, hurricanes and

pandemics can disrupt mines,

threaten workers.

COVID trend: Business interruption insurance

policies almost never cover pandemics so the

lockdowns are very costly.




Introducing Satarla

www.satarla.com

SATARLA has associates, teams and

clients based in Europe, Africa,

Americas, Middle East, Australasia.

SATARLA is a risk management

consultancy. Our diverse team has

hands-on experience in

implementing integrated and

sustainable risk management from

site to board level across multiple

geographies and industries. We

work across all sectors, however,

have specialist expertise in the

mining and extractives sector.

SATARLA RISK MANAGEMENT:

TRAINING | CONSULTANCY | RESEARCH

RESEARCH

Challenging risk management so that it is truly

practical, accessible and useful.

Organising conferences through to cutting edge

research (e.g. AI, IoT, big data etc…)

TRAINING

Preferred training deliverer for The Institute of Risk

Management together with many other institutions.

Face-to-face and online training, both bespoke in-

house and standard public courses.

CONSULTANCY

Board facilitation to full development of risk

management framework.

Broad range of organisations including: Mining;

Finance; Healthcare; Charities; Government; …




Access to water and energy supplies

Infrastructure & labour

Road and rail connectivity

Definition: Infrastructure to move cargo and people in and out

of the mine.

COVID trend: Large government investments in infrastructure

will be postponed due to focus on health and social

infrastructure. Miners to move to other forms of private

transportation.

Availability of critical parts

Definition: Breakdown in supply chains result in an inability to

source critical components for equipment.

COVID trend: Critical spares not available for equipment

resulting in production stoppage and/or unsafe working

environments.

Availability of labour

Definition: Key skills not available where and when they are

needed.

COVID trend: Potential change in how mines are operated

with more online work, fewer expatriates. Could boost local

economy.

Ecosystem of limited service companies

Definition: Dependency on local suppliers boosts local economy

but can also cause stress in the system.

COVID trend: Relationships with suppliers must be redefined

with increased focus on quality standards, health protocols.

Focus by operators on supporting social enterprise to kick-

start local trade post covid-19.

Delay to projects

Definition: Capital projects delayed due to unavailability of key

labour and components

COVID trend: All projects have been delayed or paused. This

will result in lower production over the long term and impact on

supply of commodities to the market.

COVID trend: Operating costs have fallen with falling oil prices,

but the availability of water and power remains crucial. A

focus on renewable energy must be maintained for reputation

and long-term strategy (security, community). Definition: Confirmed ongoing access to reliable sources at

competitive prices.




Environmental concerns

Reputation

Definition: Environmental mining degradation that damages

corporate reputation.

COVID trend: Covid offers a new blank page to change the

narrative and improve the reputation of the mining

company.

Indigenous rights

Definition: Access to indigenous land or impact to rituals can

lead to media-collected protests.

COVID trend: Indigenous claims are unaffected, but Covid

can offer ways to build new bridges, talk openly

(science/shamanism).

Worker safety

Definition: Lack of protocols and/or training can lead to miners'

deaths and reputational damage.

COVID trend: The focus will be on public health and the

highest standards are needed. Formal mining can make a

difference and have positive externalities in suppliers.

Unscrupulous press

Definition: Journalists trying to extort miners or paid for

opponents to attack a miner.

COVID trend: Journalists focus on Covid and are confined.

There are opportunities to play in the center of the stage

explaining the positive contribution of mining.

International Scrutiny

Definition: Pressure from the international community to adopt

sustainable extractive practices.

COVID trend: Global focus on the prevention of second

waves of the pandemic. Public health practices will be

central issues for the international community for several

months/years.

Illegal mining practices and surveillance

Definition: Illegal mining impact on the environment and

criminalization. Violent repression by the authorities.

COVID trend: Illegal mining practices are increasing more

in times of economic crisis. A balanced combination of

surveillance and socialization (formalization) is needed.




Antioquia’s approach to sustainable mining in a tropical climate




Poll Question 3

How do you feel about the mining investment climate today (May 7th) versus January 1st, 2020?

25%

39%

14%

17%

4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

The mining investment climate is much worse

The mining investment climate is somewhat worse

The mining investment climate is unchanged

The mining investment climate is somewhat better

The mining investment climate is much better

Panel Q&A





Your follow-up questions are welcome

Moderator Panelists

John [email protected]

Curator

Ana Candida de Mello

[email protected]

Arthur [email protected]

Stephanie [email protected]

Sarah [email protected]

Remi Piet

[email protected]

Abel Delgado

[email protected]

Documents

Mining after COVID-19...2020/05/07 · workforce & connecting technical leads, project development teams & donors • Developing & implementing projects with existing partners to