George posted the following on the ABZ thread. I read it
regularly because I'm heavily invested there. For those
who don't read the ABZ thread, I thought you should
read someone better qualified than I am Canada and the Challenge of Attracting Investment in Mining
by
Gordon R. Peeling, President
The Mining Association of Canada
Ottawa, Canada
Introduction
Thank you for inviting me to discuss Canada's challenges in attracting mining investment. A country's mineral potential can only be realized if it can attract the necessary mining capital. Unless a country's government can maintain a stable and constructive business climate, mineral investment will suffer.
Today, mining countries face special challenges in attracting investment. For one thing, we live in a time of rapid political change. Globalization has revealed new opportunities for investment and has increased competition for mining capital. The rapidity of modern communications ensures that investment problems in any one country are instantly known across the globe. Thus, maintaining a stable and welcoming policy climate is both more important, and more difficult, than it has ever been.
I would like to begin by outlining some of the business and policy problems we faced. I will then briefly describe three major initiatives taken by The Mining Association of Canada to improve the investment climate in Canada and the early results of these initiatives. Finally, I would like to say a few words about new international challenges which face the global mining industry.
Canada built its modern economy on natural resources. Today, most Canadians live in large cities. They know very little about the natural resource industries, the sources of our material wealth.
Public attitudes reflect this ignorance. Surveys the MAC carried out from 1987 showed that many Canadians had negative attitudes toward mining. In particular, most said they did not trust the industry or its leaders. Mining was described as a dirty, dangerous industry which does not care for the environment. We also polled decision leaders in government and the news media and found even stronger negative stereotypes.
Government policies began to move in an adverse direction. The result was predictable. Mining investment in Canada fell dramatically. A two-year study of Canada's business climate for mining, completed in 1992, revealed serious problems. Exploration spending, which had reached a peak of more than a billion Canadian dollars in 1987, fell dramatically to less than half of that figure by 1990. Capital investment in mining, as a share of all investment, had also fallen by 50 percent from earlier years.
At the same time, Canadian companies were increasing their exploration and investment activity outside Canada, notably in Latin America and Asia. These countries pulled investment in through their political and economic reforms. But at the same time, our domestic policy problems pushed investment away from Canada.
These problems were of several kinds. First, there was rapid increase in the creation of parks and other protected areas, substantially reducing the land available for exploitation. Second, in allocating these lands, governments made arbitrary decisions, the most notorious example being the Windy Craggy deposit. Third, after more than 20 years of negotiation, Aboriginal claims are still not settled, leading to uncertainty in mineral tenure. Fourth, there has been a rapid increase in environmental regulation, increasing companies' costs and leading to project delays. Finally, these regulations were in some cases duplicated at the national and provincial levels of government.
In summary, by 1992 the Canadian business climate was marked by an atmosphere of public distrust, policy uncertainty and unpredictability. Canada's former reputation as a stable and welcoming jurisdiction was slipping.
The industry responded, via MAC, by initiating three major programs. Each had a different objective. The first objective was to build trust with Canadians, and the chosen field of action was environmental. The second was to build alliances, and the method was to seek accommodation with other interest groups. The third was to build momentum for policy change. The method was political mobilization at the grass roots. I would now like to discuss each of these in turn.
Building Trust through Environmental Management Initiatives
Concern for the environment is widespread in western civilization. It has become a dominant value, particularly in Europe, but Canada is not much different. When we undertook to improve the investment situation in Canada, we understood that the environment would be the focus. Environment is the issue for mining.
Mining is a frequent target of criticism on environmental grounds, and it is vulnerable to policies based on environmental ideology. The economic viability of mining is very sensitive to land access restrictions and to unnecessary environmental costs imposed by governments, including the cost of delay. Yet in the largest mining province of Ontario, the mining industry occupies about 0.02% of the land as compared to 7.1% for parks.
Still worse, it is almost impossible for the mining industry to reverse its unsatisfactory environmental image, because it has little credibility. The fact is, the public does not trust mining people.
To repair the investment climate in Canada, our first task was to build trust and restore the credibility of the mining industry with respect to the environment. We could not attack other elements of the investment climate until our environmental reputation was dealt with. We needed to show concrete action and concrete results in order to establish environmental credibility. The industry took a wide range of environmental initiatives.
First, it initiated and funded (with government) a comprehensive research program on acid rock drainage, the most serious environmental problem associated with metal mining. By the end of 1997, about C$20 million was spent. Practical solutions for many of the problems have been found.
Secondly, the MAC developed an Environmental Policy ( the first such policy issued by any national mining body). Endorsement of the Policy was made a condition of membership. The Association also published a "Guide for Environmental Practice", a booklet containing the Environmental Policy and interpretive guidelines. The Policy and Environmental Management Framework were updated in 1996.
Third, the MAC promoted the establishment of an international mining association dedicated to the environment. The result is the highly successful International Council on Metals and the Environment.
Fourth, the MAC promoted the Whitehorse Mining Initiative, which had a heavy environmental component. I will describe this initiative in a few minutes.
Fifth, member companies undertook voluntary emission reductions under the ARET Program (Accelerated Reduction and Elimination of Toxic Substances). They committed to reduce their total emissions of designated substances by 71 percent between 1988 and 2000. By 1993, emissions had been reduced by 41 percent. By 1996, emissions were reduced by 66 percent. The commitment has been expanded to
reach an 80% reduction by 2008 and a 90% reduction beyond 2008.
In addition, the industry is launching a multi-year research program with five government departments on Metals in the Environment (MITE). The objective is to develop an agreed set of science outcomes for the development of policy and regulatory approaches to metals.
Lastly, mention must be made of the development of a guide to tailings management that will be released by MAC this year. This is in response to concerns, both national and international, with regard to the safe management of tailings facilities.
This series of initiatives has established the members of The Mining Association of Canada as serious players in the environmental arena. Credibility has been established with governments and the media, and to some extent with environmental groups. The most effective measures by far were the two ARET reports which documented specific, measurable emission reductions.
Building Alliances through the Whitehorse Mining Initiative
Rationale for the WMI
The industry goal in launching the Whitehorse Mining Initiative (WMI) was to build alliances and partnerships with other influential interest groups. The method was a two-year national consultation (between 1992 and 1994) in which other groups were invited to contribute to a new strategic vision for the Canadian mining industry.
It is unusual for an industry to seek advice from stakeholders, including labour unions and environmental activists. Why did we ask our critics to help design our strategic plan? Because we expected to obtain several benefits.
First, we wanted other groups to become more familiar with the industry and understand it better. Secondly, we knew that the industry needed a better understanding of other groups' attitudes, values and expectations. Industry could then use this knowledge to guide its future behaviour and tactics. We learned that industry needed to modify operating practices and build closer ties to local communities. Third, we hoped to create partnerships or joint projects with some interest groups who have traditionally been opposed to mining. Lastly, we wanted other groups to support our efforts to get the changes in policy which would be necessary to improve the investment climate.
WMI was proposed by the mining industry and supported by the federal, provincial and territorial ministers of mines. The cost of the initiative was shared more or less equally among the MAC, the federal government and the provincial governments as a group. The total direct cost of the program was approximately C$1.3 million.
WMI Process
Direct participants in the consultation numbered around 150 persons, drawn from six major groups. These were: mining industry executives; federal government officials and officials from several provinces and territories; labour unions representing mining workers; environmental groups; and Aboriginal peoples. These six groups were identified as the prime "stakeholder" groups, as each had a stake in the outcome, namely the future of the mining industry in Canada. Though the initiative was proposed by the industry, it was managed cooperatively by all stakeholders. While this was sometimes a difficult process to manage, it maintained the good will and commitment of all those involved.
Discussion of substantive issues took place at five discussion tables. These were called the Leadership Council and the four Issue Groups.
The Leadership Council consisted of more than 40 members, drawn from the decision-making level in each major stakeholder group (ie, Chief Executives of mining companies, ministers of mines, national labour leaders, and so on). These were serious and influential people. Their visible support was very important to the success of the undertaking. They were expected to agree on a set of high-level principles, to make an effective commitment to the WMI outcomes, to implement the agreed changes, and through example, to lead others to implement the findings.
Four Issue Groups were created, each having between 20 and thirty members drawn from all the stakeholder groups. Specific subjects were assigned to the issue groups.
The Environment Issue Group dealt with environmental assessment, environmental management during operations, mine closure, streamlining regulation, and community liaison. The Finance and Taxation Issue Group studied securities regulation, taxation and other charges, user fees, and financial aspects of mine closure. The Land Access & Land Use Issue Group discussed protected areas, mineral tenure, land use planning processes. Finally, the Workforce/ Workplace/ Community Issue Group dealt with stability of communities, health and safety regulation, mobility of workers, training and skills development.
WMI Outputs
At the end of the consultation or negotiation phase, several consensus documents were produced. These reports contained a "vision" of the future of the mining industry, as well as the principles, goals, objectives and recommendations which had been agreed by the participants. There were two sets of hard reports. These were the WMI Issue Group Reports, and the WMI Leadership Council Accord. Every word in all the reports was negotiated, the final wording representing the consensus of all the participants in each group.
Each Issue Group report contains a detailed analysis of the issues, as well as a set of principles, objectives and recommendations for each issue. All the Issue Group reports together contain a total of 170 recommendations addressed to all stakeholders. During the long and intensive Issue Group discussions, a high degree of trust and understanding was reached among the individuals involved. As a result, some of the agreements are radical, representing a departure from the public positions of one group or another. For that reason, though the Issue Group reports represented a consensus of stakeholder representatives, they could not be endorsed by the Leadership Council as a whole. However, they are a rich source of ideas for future change.
The Leadership Accord is the most visible and important product of the WMI. It is a product of extensive negotiation and represents a consensus of the individuals who sat on the Leadership Council. As these were all influential leaders in their own fields, the Accord carries a great deal of moral weight. The printed version of the Accord is a substantial document of 34 pages. It contains 16 principles and 70 goals supporting the principles. These principles and goals fall into several themes, ranging from Addressing Business Needs to Maintaining a Healthy Environment.
The Accord also contains a shared "Vision":
Our Vision is of a socially, economically, and environmentally sustainable and prosperous mining industry, underpinned by political and community consensus
In signing the Accord, Council members made an impressive commitment to support the vision, principles and goals publicly, and to promote their implementation. This commitment was signed by almost all the members of the Leadership Council with very few abstentions.
WMI Implementation
Agreement on principles means little unless action follows. If the WMI Vision, Principles, and Goals are to become a reality, there is a need for all stakeholder groups to take appropriate action in support of the agreement. Industry and government have already taken several concrete steps to implement the Accord. We realize that major changes in industry practices and government policy are not achieved overnight. However, we have already obtained major benefits from the exercise.
The WMI has led to continuing contacts among those who participated in the consultations and a much higher degree of dialogue, understanding, and communication among them. This illustrates that in the long run, the process of trying to reach agreement is as important as any tangible product.
Through dialogue, the WMI has allowed us to gain knowledgeable partners in Canadian society, if not outright "allies". The MAC now has a comfortable working relationship with labour and environmental groups. While we disagree in some matters, the relationship is free of mutual suspicion.
The WMI has attracted international attention. It seems that in many parts of the world people are looking for ways to reduce controversy and make mining projects more acceptable to the community. We have been asked to describe the WMI process in the United States, Australia, Indonesia and, of course, Brazil. In South Africa, a major consultation among mining stakeholders similar to the WMI has been launched with support from the Canadian International Development Agency.
The Whitehorse Mining Initiative was a difficult but rewarding experiment in building partnerships. One of the most significant outcomes is that the mining industry enjoys improved political and community support, placing it in a good position to exert greater influence in government circles. Simply because the industry was willing to talk to its critics, and listen to them, the WMI increased our credibility and perceived trustworthiness among decision makers.
I will now describe our third major initiative, the political action campaign which we call "Keep Mining in Canada" (now called "Mining Works For Canada").
Building Political Momentum: "Keep Mining in Canada"
Having established its credentials and created partnerships, the Canadian mining industry urgently needed to press for favourable government policy, leading to a better investment climate. We wanted action, but we knew that governments do not take policy or legislative action unless political forces are in place. Where would we find political support for our policy objective?
We decided to look for support primarily among those who know the industry best and are dependent on it, namely those Canadians who live in mining communities. The fundamental principle of a "grass-roots" campaign is that a simple mining message is delivered to government by a large number of individual citizens rather than by industry executives or association staff. The Prime Minister pays more attention to a thousand postcards or letters demanding action than he does to a delegation of respectful business executives.
The Keep Mining in Canada campaign (KMIC) was formally launched in September 1993 and it still continues today, but under the name of "Mining Works For Canada", at an annual cost of less than C$1.0 million.
A political campaign has four requirements: it needs a strategy; it needs messages; it needs a delivery system; and it needs tactical action to deliver the messages to the target.
Developing a strategy involves determining the general approach and the objectives of the campaign. It involves selecting those issues where victory is possible. These must be issues that help the mining industry and that will be acceptable to the public and fit with existing government priorities.
The messages consist of the campaign's intellectual content. Industry must think out its position, as well as a set of rational arguments for the position. These should present the industry's desires in a way which is consistent with the broad public interest. We then must prepare simple but powerful messages which citizens can deliver with conviction and emotion. We felt the phrase "keep mining in Canada!" was the most powerful message of all. Finally, this ammunition is packaged in eye-catching materials such as brochures, videos, lapel buttons, etc. We also used a certain number of print, radio and TV advertisements.
The delivery system is the large group of individuals who are willing to participate in campaign activities. We identified several thousand individuals including management personnel at all the mines, mining suppliers, municipal authorities, and citizens in all the mining towns. Maintaining this formidable group in fighting trim means energizing the participants through a series of public relations events. We also maintained the interest and commitment of individual participants through regular communications with them. Every few weeks, we send every individual a bulletin that contains campaign news and success stories.
Finally, delivery involves providing participants with a compelling but simple message and also giving them the means to deliver the message. Several of the ways in which the message was delivered included:
Individual Canadians sent some 30,000 postcards to the Prime Minister.
Hundreds of petitions were signed by thousands of residents of mining communities and delivered to members of Parliament.
Municipal governments in more than 120 mining towns formally adopted resolutions of support for the campaign.
Dozens of speeches were delivered by volunteer "ambassadors", professionals employed in the mining industry.
The campaign got media coverage through advertisements, articles and media interviews.
The campaign staged two major annual "lobby days" in which up to 100 mining campaign representatives travelled to the capital to meet with individual legislators.
This campaign has been highly successful by any measure. One intangible but highly significant outcome has been the effect of the campaign on mining people themselves. The campaign has provided an outlet for the frustration felt by individuals living in mining communities. They are enthusiastic about participating in the campaign. More and more, individuals and community groups are undertaking independent projects, without being prompted. MAC, based on the success of KMIC, has now committed to a new three-year program under the banner of "Mining Works For Canada".
Impact on Canada's Investment Climate
We feel that each of the three components of our multi-year strategy has had benefits for the mining industry, independent of the others. Each was a worthwhile venture. However, the combined effect has been nothing short of spectacular. Once an invisible industry, mining is now in the limelight. More Canadians now view mining as a responsible and exciting industry, an industry of the future.
More importantly, government policies have begun to change. In 1994, the federal government announced a comprehensive approach to the streamlining of regulations, and mining was chosen as a priority sector. In 1995, the federal budget provided a small measure of tax relief for mine reclamation expenses, the only sectoral initiative contained in the budget. In 1996, the government adopted a new mineral and metals policy which is highly favourable to the industry. Among other things, it commits the government to follow a scientific risk-based approach to environmental regulation, to promote the continuing safe use of metals, and to improve decision making processes for land access.
Parallel policy changes have begun to emerge also at the provincial level of government, particularly in the simplification of regulation. For example, in 1996, federal and provincial ministers of environment agreed to a comprehensive approach to the rationalization of environmental regulation in Canada. In 1998, Ministers of the Environment signed the "Harmonization Agreement".
These trends are very favourable to the operation of the mining industry in Canada. We are proud that our strategic approach has helped to bring them about. While these lessons are not necessarily transferrable to other countries, it is interesting to note that many representatives of other governments have visited MAC to discuss our experience.
I would like to use the remainder of my time to alert you to challenges facing the global metals industry. However favourable the policies may be in Canada, it is a disturbing fact that the use of metals is being questioned at the international level.
The Challenges
Our ability to produce and sell metals in future decades is threatened. A growing array of international environmental agreements, conventions and protocols, based on the so-called toxicity of metals, will create serious restrictions. In United Nations agencies, as well as in the OECD and other arenas, country delegations are seriously discussing international standards and regulations which could affect metals. The global metals industry and the national governments of metal-producing countries must wake up and respond to these threats.
Restrictions on metals are being advocated by environmental groups and their developed country allies, mainly in Europe. This position takes an oversimplified view of toxicity, and it ignores the concepts of risk assessment and risk management. It does not reflect the actual chemical and biological behaviour of metals and metal compounds in the environment.
Powerful forces are lined up against metals in this struggle. Countries such as Sweden, Norway, Denmark, Germany and the Netherlands have heavily influenced the European Union to adopt positions written by Greenpeace and other environmental organizations.
What can be done? National mining associations are working closely with ICME to address these issues in a credible way with international organizations such as the WHO, IFCS, OECD, UNEP, etc.
Metal companies themselves must do more. They must be aware of any environmental and health risks associated with metal production and use. They must expand their support for environmental and health research. As well, metal producers should voluntarily discourage or abandon any production practices or applications of metals that present an unreasonable or unmanageable risk. Perhaps some dissipative uses of metals cannot be defended and must be discarded.
National governments also have an important role. These governments determine the regulatory climate within their own borders. In addition, national governments are, in the last analysis, the masters of multilateral organizations such as the OECD, the UN and its agencies, etc. Each country's metals industry and its national mining association must work closely with its own national government to promote rational treatment of metals. They must ensure that both national and international decisions are taken on the basis of risk assessment and risk management, using sound scientific principles.
Conclusion
Thank you again for this opportunity to speak to you. I have tried to show that it is possible for the mining industry to influence national policy in order to attract investment. If we wish to prosper by attracting mineral investment, we must ensure that our products enjoy continued access to growing markets. I hope that I have been able to demonstrate that MAC is a progressive, credible association, working on behalf of its Canadian mining industry members to foster a policy and regulatory climate conducive to maximizing the industry's potential.
Thank you.
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