May 2009

Canadian mining's worldwide reach

An overview of the challenges involved and strategies deployed in keeping the industry’s global lead

By D. Zlotnikov

Photo reprinted with permission of Beyond Borders; courtesy of Barrick Gold

Anyone even peripherally involved with Canadian mining knows that the industry is a vital part of this country’s economy and that Canada is a major world player. However, even if one is looking at the big picture from the perspective of a multinational operator, the full scale of the industry may be difficult to comprehend. According to Gavin Graham, director of investment, BMO Asset Management, of the CDN$27 billion that the company’s Canadian arm has under management, approximately $2 billion is attributed to mining equity. “It’s not necessarily because we’re enthusiastic fans of mining,” explained Graham, “but rather, because the mining industry is a very big percentage of Canadian stock market capitalization.” Between mining and energy, Graham estimated that about half of the total Canadian stock market is exposed to resources.

With so much current and historical activity in the mining sector, Canada has a well-established reputation as a great source of mining expertise. Over the years, Canadian mining engineers, geologists and various other mining-related professionals have travelled the globe, working on projects everywhere from the Australian plains to the Chilean mountains. Many Canadian mining firms have done the same. In 2007, Canadian companies held interests in 360 mining projects outside of its borders, and you’d be hard-pressed to find a country that did not have a Canadian mining company working in it.

But recent years have brought many changes to the industry, both inside and outside of Canada. What does the future hold then for Canadian mining on the global stage?

Big impressions

Barrick will work with Un Techo para Chile to provide 700 families (representing an estimated 3,000 people) with new homes in safe neighborhoods as part of its Atacama Commitment |  Photo reprinted with permission of Beyond Borders

Given the relative scale of the parties involved, it is important to first consider what changes Canadian miners bring to the global mining industry. Take for example IAMGOLD’s Sadiola project in Mali, West Africa. Joe Conway, IAMGOLD president and CEO, said that when the company began operating there, the country was very poor. “In terms of GDP the impact of the project was tremendous,” observed Conway. “It resulted in about a 20 to 30 per cent increase in that country’s GDP. ”

Sadiola had more than financial implications for the region — literally thousands of people moved closer to the mine in hope of benefiting from the activity. “You definitely see a large impetus for people coming into these communities,” said Conway. “I think when we were initially building the project there might have been 1,000 people, and now there are probably 20,000.”

The challenge, Conway pointed out, goes beyond that of dealing with underdeveloped infrastructure, to that of creating some sustainability at the local level. “In many of our operations, we have found it necessary to set up foundations specifically for local development,” he said. This means looking beyond the mine site and reaching out to support — and in some instances even create and operate — community- focused initiatives addressing the needs of the local residents. “Unfortunately we operate in certain parts of Africa that have a very significant AIDS problem,” said Conway. “Again, we work through the local governments to make sure that there is a high level of education around the issue and help people who do have the virus to deal with it.” In Botswana, IAMGOLD is also one of the major supporters of a local orphanage, where all the children have lost their parents to AIDS. “There’s no question,” said Conway, “you d have to be socially responsible.”

This view is shared by Barrick Gold, the world’s largest gold producer, a company that is also on the front lines in the battle against HIV/AIDS in Tanzania, Papua New Guinea and South Africa. It operates 27 producing mines around the world, which means its community relations projects are many and varied.

According to Nancy White, the company’s director of communications for responsible mining, such projects are a major area of focus for Barrick. Aside from the economic benefits resulting from job creation, taxes and the purchase of local goods and services, in 2007 the company reports to have contributed over US$40 million to communities through community programs (e.g. health and education), scholarships, infrastructure projects to build roads and supply power to developing regions, as well as charitable donations. That same year, the company spent almost half a billion dollars on goods and services from businesses in developing countries in keeping with its “buy local first” policy.

Of particular note is Barrick’s partnership with local nongovernmental organizations to help alleviate the pockets of poverty that exist in the Atacama Region of northern Chile where thousands of residents live below the poverty line. Called the Atacama Commitment, this effort of targeted programs and initiatives focuses on housing, education, health and socio-economic development and is part of Barrick’s commitment to improve economic and social conditions in the regions where it operates.

Many of the issues that Canadian operators face abroad are not that different from ones faced domestically; the more promising deposits are frequently in remote areas with little existing infrastructure. Environmental assessments must be completed and licenses must be received. Local laws must be obeyed. Simple, really…except when it is anything but.

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