Transparency in the Mining Sector Taxes and Value Distribution A - - PowerPoint PPT Presentation

Transparency in the Mining Sector – Taxes and Value Distribution

A presentation by Edward Bickham | 17 April 2014 Senior Adviser, Gold for Development, World Gold Council UKSIF and Sustainalytics Seminar Edinburgh

Transparency in the Mining Sector

• EITI and Publish What You Pay
• Dodd-Frank and Home Country Mandatory Disclosure
• Voluntary disclosure initiatives

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Pressure for disclosure has been driven by

• ‘Resource curse’ theory
• Combating corruption and embezzlement
• Resource nationalism
• Suggestions of ‘poor deals’ and tax avoidance/evasion
• Industry desire to explain its economic contribution

Extractive Industries Transparency Initiative

• Concept launched by British Prime Minister in 2002
• Government-led; multi-stakeholder governance
• Initial focus on national-level comparisons between company payment

and government receipts

• Meeting procedural requirements leads to validation/compliance
• Significant enhancement of information availability and trust
• Questions about impact on governance and development outcomes
• Endorsed by UN, World Bank, G8, G20 etc
• 44 implementing countries – 26 compliant
• 40+ supporting mining companies
• Over $1trillion in revenues covered by reports

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Mandatory Home Country Reporting

• Focus on ‘corporate accountability’ and international tax comparisons
• Dodd-Frank s.1504 project-by-project reporting – awaiting

implementing regulations

• EU Transparency Directive
• Canadian legislation in consultation phase
• But EITI offers more
• Country-owned processes and local accountability
• In-country comprehensive coverage
• Focus on what is done with revenues
• Ability to follow-up on discrepancies
• Empowerment of parliamentarians and national institutions

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Challenges for EITI

New Standard has broader coverage of issues:

• SOE-Government transactions
• Gives more scope to adapt to address national priorities
• Stronger focus on sub-national transfers
• Disclosure of license ownership and open cadastres
• Infrastructure for minerals barter deals
• Encouragement of contract transparency and disclosure of

beneficial ownership

• Encouragement of greater scrutiny of budgeting and expenditures
• Flexibility v Inclusion
• More focus on impact and outcomes
• Influx of OECD implementing countries
• Impact on relationships from falling metal prices

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What is the responsible gold mining value distribution report?

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An innovative report that quantifies the economic contribution made by responsible gold mining

• companies. It provides an analysis of how aggregated value is distributed as between stakeholder groups

– including employees, suppliers, governments and investors

World Gold Council | Responsible gold mining and value distribution | 3 February 2014

Why was it developed?

• Mining can make a significant impact to economic growth and
• development. In many countries it is a key driver of GDP, tax

revenues, foreign exchange and employment.

• There is an intense debate about whether the benefits of mining

are fairly distributed.

• For countries to benefit from their mineral reserves, a number of

stakeholders need to be involved, including government, communities, companies and the investors who fund the companies.

• There is often the perception that one set of stakeholders benefit

to the disadvantage of others.

• The report aims to inform discussion of how responsible gold

mining can support socio-economic development.

Methodology

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• Each participating World Gold Council member

company was asked to provide information on payments by country.

• Companies provided data from both producing
• perations and non-gold producing operations
• The World Gold Council consolidated the data on

a country-by-country basis.

• Data was also consolidated to provide global

information on the amount of money that stays in the country where the operation is located and the amount of money that is paid to businesses

• r providers of capital outside the country.

World Gold Council | Responsible gold mining and value distribution | 3 February 2014

What do we mean by “Responsible Gold Mining” ?

• Responsible gold mining is mining which takes

place in compliance with applicable laws which

• bserves high standards of safety and health

protection and of environmental stewardship.

• Responsible gold mining is respectful of local

communities and their cultures and of their human rights; manages its impacts responsibly and which provides acceptable and realistic benefits for all its stakeholders.

Key facts and figures

• 15
• 220,000
• 96
• 804
• 469
• $55bn
• $35bn
• $8.4bn
• $3.4bn
• 80%
• 7%
• 85%

participating companies number of employees and contractors Number of operating gold mines Gold tonnage produced in 2012 Gold tonnage produced in 2012 in non-OECD countries (58% of total) Total disbursements in 2012 Total payments to businesses Total payments to governments Payments to providers of capital % of expenditure incurred in-country Increase in gold tonnage from 2009 to 2012 Increase in total expenditure from 2009 to 2012

World Gold Council | Responsible gold mining and value distribution | 3 February 2014 8

Global value creation and distribution

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Global Highlights

Considerations

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• Responsible gold mining can contribute to

sustainable social and economic development but expectations need to be reasonable.

• The approaches taken must reflect national
• contexts. Collaborative efforts with

governments, communities and development agencies are needed to produce sustained improvements in standards of living, reduce poverty and improve access to services and

• pportunities.
• Collaborative efforts should be guided by

fundamental principles, including treating all individuals with respect, communicating transparently and working to create sustained value for all stakeholders.

• Gold mining contributes to growth and

development through jobs, skills training and capacity building, supply chain opportunities, social investment and infrastructure

• Mining is a long-term business, where mining

companies take on significant risk, through the cycle, on behalf of their investors. Typically from initial exploration to the start of production will involve 10-15 years of upfront investment.

• Of the $44.7bn paid out in country, $39.2bn

(88%) was associated with producing operations and $5.4bn (12%) was associated with non- producing operations, which are incurring costs but no income.

• We hope that by providing further insight of the

economic impact of gold mining and clarifying the realities of the mining life-cycle, we can advance the dialogue around gold mining’s role in development.

World Gold Council | Responsible gold mining and value distribution | 3 February 2014

Conclusions

• Simultaneous alienation of home country governments and investors
• Need to improve understanding of distribution of benefits – based on

transparency

• Corrosive impact of broad-brush allegation of massive illicit flows from

Africa

• Importance of building understanding of all facets of mining’s potential

economic contribution

• Crucial importance of appreciation of impact of commodity cycle and

mine lifecycle

• Extractive sector is leading the way in coming to terms with

transparency

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To view a copy of the report, please visit:

www.gold.org/about_gold/sustainability/socio- economic/responsible_mining_value_distribution/

World Gold Council 10 Old Bailey, London EC4M 7NG United Kingdom T +44 20 7826 4700 F +44 20 7826 4799 W www.gold.org