CHALLENGES AND OPPORTUNITIES FOR THE EUROPEAN AND ESTONIAN MINERAL SECTOR
Exploration of Mineral Resources and Prospects for Mining ConferenceMay 16, 2019
Prof. Michael Hitch, P.Eng., P.Geo.
INTRODUCTION
Natural resources have long made – and continues to make – a significant contribution to Estonia's economic growth and development
Uses sophisticated production techniques and highly skilled labour to make the most of Estonia’s mineral endowments
Is the engine for economic growth and technological development
It is a sector that needs to be sustained and nurtured
Eesti mineraalsete loodusvarade potentsiaal
www.energia.ee
ROLE OF NATURAL RESOURCES IN OUR SOCIETY
Natural resource development has always been one of the first building blocks of society
‘mother’ of society’s infrastructure
‘Bread’ of communities
‘Sculptor’ of landscapes
Prosperity
Initial creation of value
ROLE OF NATURAL RESOURCES IN OUR SOCIETY
A metaphor for the relationship between resource developers, governance bodies and non-industrial stakeholders
The realignment of power relations where community stakeholders are equal partners
Very much an evolving occurrence here in Estonia
Social License
Benefit Sharing
Engagement
Legal & Procedural Fairness
Dispute Resolution
ROLE OF NATURAL RESOURCES IN OUR SOCIETY
Consume Now or Consume Later (UN SDG#12)
Sustainable consumption and production:
• Promoting resource and energy efficiency,
• Sustainable infrastructure and providing access to basic services,
• Green and decent jobs and a better quality of life for all
Sustainable consumption and production aims at doing more and better with less
Focus on economic gains that increase by reducing resource use, land degradation and pollution throughout the supply chain
www.eitrawmaterials.eu
ROLE OF NATURAL RESOURCES IN OUR SOCIETY
Ensuring External Sustainability
External pressures on domestic resource production
Preservation and development of external markets for natural resource products
THE NOTION OF SUSTAINABILITY
Sustainability as we know it today
Sustainability includes topics that reflect impacts and opportunities
• Community
• People
• Water
• Biodiversity
• Energy
• Materials Stewardship
• Governance
SUSTAINABILITY PRIORITIES
Collaboration with communities so they benefit in a self-defined way
If not well managed negative impacts may occur:
• Environmental degradation,
• Stresses on social infrastructure and health services; and
• Interruption of subsistence lifestyles or creation economic dependence
Community
SUSTAINABILITY PRIORITIES
Develop and engage a diverse workforce so they can lead to a sustainable future in a safe and healthy way
Embed a culture of safety, learning from high-potential incidents and sharing best practices and operating with excellence
People
SUSTAINABILITY PRIORITIES
Responsibly manage water resources to benefit of present and future generations and enjoy a balance between the social, economic, recreational and cultural benefits
Water
www.estonia.ee
SUSTAINABILITY PRIORITIES
Achieve a net positive impact on biodiversity by maintaining or re-establishing self sustaining landscapes and ecosystems that lead to viable long-term and diverse land uses
Biodiversity
www.cwf-fcf.org/
SUSTAINABILITY PRIORITIES
Manage and make a positive impact on energy usage and make a positive contribution to society’s efficient use of energy
Energy
www.mining.ubc.ca
SUSTAINABILITY PRIORITIES
Maximize the benefit of our products and services to society while minimizing impact on people and the environment
Managing the impacts and benefits of materials across their life cycles from production through to recycling, reuse and end of life
Materials Stewardship
Estonian Recycling Competence Centre
SUSTAINABILITY PRIORITIES
Development of natural resources to the benefit of all stakeholders through transparency, and diligent anti-corruption awareness
Governance
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Prioritisation and a resource development plan that reflects domestic need and available export market opportunities
Role of state-owned enterprises and developing opportunities for private investors/developers
Foreign investment provides:• Capital inflow to increase stock of real capital
• Acceleration in employment
• Reduces economic disparities between leading and lagging sectors, and
• Increases the pool of investable funds.
i
Resource Planning
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Access to High Quality Geologic Data
• Broad mineral occurrence data is available on a number of online platforms e.g. European Geological Data Infrastructure
• Due to cutbacks in funding, many member state Geological Surveys stopped producing primary data that exploration companies require… data on historic an current operations, regional geology etc.
• Eastern, post-Soviet Europe has heaps of data, but haven’t quite developed a way to get it into the public domain
• GTK in Finland and SGU in Sweden have been very successful
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Mining Rights Management
• In jurisdictions like Canada and Australia, mining cadastres exist that captures mineral licenses, and forms the basis of granting authority and ultimately access
• Application of this model is somewhat uneven amongst EU member states and generally speaking those that are encouraging mineral exploration and development have developed such systems
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Right to Mine and Security of Tenure
STRADE: Promoting Investor Interest in the EU Mining Sector
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project. It is also the area where governments and the EU can do the most to reduce risks and
thereby promote the attractiveness of the region as a destination for mining investment.
3.2. Mining investment risks in EU jurisdictions
Regional considerations taken into account by investors in the metals and mining sector include
geological potential and the operating environment. STRADE’s Policy Brief 05/2017 noted that the
combination of geological potential and the operating environment determine the mineral
investment competitiveness of a jurisdiction. How the jurisdiction compares with other countries will
influence a nation's ability to attract
international mining investment.
Mark Cutifani, Chief Executive of Anglo
American, one of the largest global
mining companies, comments on
mining investment risks as follows4
Risk management has always
been one of the fundamental
considerations for mining
companies to ensure safe,
responsible and sustainable
operations. As physical risks
evolve with scaling up of
operations or with increasing
technical and social complexity,
so do a wider range of risks
become more prominent. This
evolving risk dynamic demands
specific management strategies
to minimise the potential for
uncertain outcomes. It doesn’t
matter if you are a major mining
house or a junior developing
your first operation, risk
identification and management
must be core to your
management processes
Risk to mining investments can come for a number of sectors and various risk indices have been
constructed to reflect these risks. The World Risk Report (Figure 7) uses legal, governance, social,
fiscal and infrastructure risks to assign a ‘rating’ to mining jurisdictions. As expected, Canada and
Australia feature in the regions with the least risk. Western and North Europe (Finland, Ireland,
Portugal, Spain, Sweden, UK) also receive some positive scores. Central and East Europe,
however are rated as more riskier jurisdictions. These include Bulgaria, Germany, Greece,
Greenland, Italy, Poland, Russia and Serbia.
4 http://www.mining-journal.com/digital_assets/cef6461e-2984-41b3-8ce1-c11729429499/World-Risk-Report-2017-
Executive-Summary.pdf
Figure 7 Investment Risk Index, sub-regional averages (2017)
Source: World Risk Report (2017), Mining Journal
0 20 40 60 80 100
Southern Asia
Central Asia
SSA
West Africa
East/North L. America
Central/East Europe
Eastern Asia
West/South L. America
Eastern Australia
Eastern USA
Far-west/North Europe
West/Central Australia
Western USA
Northern Canada
Southern Canada
Source: World Risk Report, Mining Journal (2017) in STRADE Report – Promoting Investor Interest in the EU Mining Sector (2018)
• In jurisdictions like Canada and Australia, assured that if we are the first on the ground and it is free, exploration can happen
• ‘First-come-first-served’ approach is unevenly applied
• Some jurisdictions, regulators choose the most suitable companies
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Converting Exploration to Mining Licenses and Mining Rights Transfer• In most European jurisdictions it is a follow on process and the
explorer has first right to develop
• Transfer is relatively clear providing the new party fulfils technical, financial and regulatory/environmental conditions
• In some jurisdictions, the transfer may be subject to review in terms of whether it satisfies the ‘public interest’
• Other examples, nations can force a sale if deemed to be in the nation’s interest
DEVELOPING AND NURTURING A NATURAL RESOURCE SECTOR
Public Perception of Mining
• Mineral development in Europe faces similar social and environmental risks as in many other jurisdictions.
• Founded in historic poor environmental performance e.g. Talvivaara
• Opposition in some fashion at the ‘community’ level or expressed through the regulatory and permitting process, e.g. Northland, Nordic, and Beowulf’s Kallak Iron project.
• NGO opposition is well developed in Europe and only in certain jurisdictions has there been effort to facilitate a dialogue amongst affected stakeholders
TRANSFORMING ESTONIA’S MINERAL ECONOMY
Rail Baltica
Talsinki Tunnel
Revitalising aging infrastructure
New Economy infrastructure
Estonia’s Infrastructure Promise
TRANSFORMING ESTONIA’S MINERAL ECONOMY
• Eventual shift from oil shale as a primary source of energy
• Other resources have to become part of the big picture strategy
• Support innovation and out-of-the-box thinking (something Estonia is pretty good at!)
www.mccullough.com
TRANSFORMING ESTONIA’S MINERAL ECONOMY
• Phosphate resources have tremendous promise as the next major element of Estonian Resource strength
• Has export potential, its high quality
• We have knowledge gaps
• Unify what is know from historic and more recent work
• Assess what mining might look like (underground/open pit, other mining methods); mineral processing options to maximise the resource (e.g. REEs)
Phosphorite
TRANSFORMING ESTONIA’S MINERAL ECONOMY
The Innovation Triangle
• Powerful image illustrating how relationships build strength and opportunity
• Partnerships smooths the unevenness of some conditions needed for a healthy exploration environment
• Academic and Research Institutions tend to be very entrepreneurial and supportive
Exploration Company
Research Institutions
Academia
Innovation
• Many have been surprised in the different exploration landscape in Europe and Estonia
• Opportunities exist to assist and enhance the Estonian experience through partnerships with research institutes and academia
• Partnerships bring together raw materials’ stakeholders to create a vibrant minerals sector in Estonia and close the gap between domestic production and consumption of strategic commodities
The Collective Power of Partnerships
TRANSFORMING ESTONIA’S MINERAL ECONOMY
CONCLUSION
The Future of Estonian Resource Prosperity is NOW
• Estonia is endowed with a unique bounty of mineral resources that have been developed to some degree
• Opportunity to capitalize on Estonian skills and expertise to make current production more efficient (lower cost, higher productivity, greater resource utilization)
• Develop new capacity, capability and understanding of waste management, new resource development opportunities and social acceptance and social license
• Optimise environmental performance
Aitäh