EAST ASIA SCIENCE AND SECURITY EXPERTS WORKING GROUP MEETING September 22, 2010 Beijing, PRC

1. EAST ASIA SCIENCE AND SECURITY EXPERTS WORKING GROUP MEETING September 22, 2010 Beijing, PRC Minerals, Development and Local Communities: Approaches and Case Studies from Asia By Allen L. Clark East-West Center

2. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Asia mineral development Focused on the “New Frontier Nations” High impact on remote areas/communities Evolving/incomplete mineral policy and legislation Twelve nations with new legislation in last 8 years Most use some form of a negotiated mineral agreement No linkages across sectors Lack of environment and social/cultural policy, legislation and administrative guidelines. Community based mineral development is largely ad hoc, guided by industry and impacted by multiple external stakeholders (NGO’s/IDB’s/UN/NGO’s/AID) Increasingly important role of the private sector Role and “modus operandi” of mineral industry is poorly understood High levels of mistrust, confusion, uncertainity.

3. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Asia Mineral Development (Cont) Inadequate institutional capacity to effectively administrate and/or manage mineral development Virtually no social scientists on staff Competition between national to local levels of government and associated government agencies Lack of inter-ministerial cooperation “Alternative” permissions Abdication or responsibility

4. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING • Legal Components and Community Agreements • International Treaties and Accords • Universal Declaration of Human Rights; International Dispute • Resolution Conventions; Other relevant Treaties/Conventions • National law: • Constitution; National mining regime (Laws; Implementing • Rules and Regulations; Decrees; Orders; Guidelines) • Other National Laws/Regulations • Revenue sharing; Foreign Investment; Dispute • Resolution; Cultural Protection; Environment: (land, water, forest) • Contingent liability. • Corporate Headquarters Country Legal Requirements • Vicarious Liability/Respondeat Superior (Employer/employee • responsibility);Alien Tort Claims Act;Unfair Practices Acts; • Anti-corruption/ Foreign Corrupt Practices laws.

5. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING • Legal Components and Community Agreements (Cont) • Governing legal instruments • Community Impact and Benefit Agreements; Industrial • and Employment Agreements; Joint venture, financing, contract and • leasing agreements; Investment guarantee policies; Internal corporate • policies of all other companies and contractors. • Non-binding Advisory Panel Bylaws • Community development association or other advisory association or • board; Environmental advisory committees; any other relevant advisory • committee rules especially those created by contract. • Extra-jurisdictional requirement • Equator Principles (now subscribed to by over 60 major companies); • Voluntary Principles on Security and Human Rights; United Nations Global • Compact; and corporations individual internal standards and guidelines. • A comprehensive legal structure and an agreed upon set of practices and standards for socially responsible mineral development,meeting national, investor and community needs, is the primary challenge facing mineral development in Asia today.

6. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Mining and Communities – Asia’s Challenge

7. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Case Histories • Bougainville, Papua New Guinea – An old mine in a newly independent developing nation. • Kumtor, Kyrgyrz Republic – A large deposit being mined in a newly emerging CAR nation. • Sepong, Lao PDR – A new mine in a small transitional nation of ASEAN • Voisey Bay, Canada – From exploration to mining in a developed mining country • Tampakan, Philippines A prospective mine in a developed ASEAN nation.

8. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Bougainville – Papua New Guinea (Before)

9. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Bougainville – Papua New Guinea Time frame 1963 CRA granted prospecting Authority 1969 Bougainville Copper granted Special Mining Lease 1972 Mine starts production 1974 Renegotiation of Bougainville Copper Agreement 1979 -1981Landowners riot/villager unrest 1988 - New compensation demands – Autonomy 1989 Mine closes 1990-1996 Civil War between PNG and BgnVl Res Army 1997 Executive Outcomes 2000 Peace Accord – formation of BAR 2005 First elections held for Gov. of BAR 2010 – New elected Government – reopen Bougainville Mine (?)

10. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Kumtor Mine Kumtor – Kyrgyz Republic

11. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Kumtor – Kyrgyz Republic Time frame 1978 – Deposit discovered by Russian Geophysical expedition 1988 - Soviet specialists view mine as non-commercial 1992 Negotiations begin with Cameco 1993-1994 Feasibility study 1994 Agreement signed (4% of profits to the local Government) 1998 Cyanide spill – local unrest 2002 Kyrgyz worker killed in mine wall collapse – local unrest 2004 IFC sells holdings in Kumtor 2007 Government considers nationalization of Kumtor – protests by Kumtor mining community 2007 Villagers blockade road over environment/work issues 2008 Kyrgyz Financial police raid Kumtor offices 2009 New Terms Agreement signed for future mining 2009 Cameco transfers all rights to Kyrgyzaltyn JSC

12. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Sepong - Lao PDR

13. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Sepong - Lao PDR Time frame September 2001 Gold Feasibility Study October 2001Gold Environmental and Social Impact Assessment (ESIA) October 2002 Copper Feasibility Study November 2002 Copper ESIA Addendum December 2002 First gold poured December 2003Gold expansion Feasibility Study and ESIA Addendum December 2004 Gold production expansion - March 2005 Copper Project to be in production April 2010 –Mine sold to MinMetals of China

14. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Sepong - The role of the IFC Original ESIA (2001) prepared by Oxiana, with IFC guidelines and reviewed independently by State Technology and Environment Agency (STEA) resulting in following changes: Early preparation of a Resettlement Action Plan Formalization of the Public Consultation and Disclosure Plan (PCDP) Establishment of a Trust Fund for Community Development Development of a Community/Indigenous Peoples Development Plan (C/IPDP). Establishment of a trust fund – A means to keep social services within the purview of local government, rather than the mine, while implementing the programs within the C/IPDP.

15. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Case History Lessons Learned Existing national policy and legislation is inadequate to guide social and community development. In the absence of national policy and legislation commit to the development of environmental and social codes consistent with the best and most appropriate standards Its never to early to start the process to acquire a “social license to Mine” Government agencies, at all levels, are inadequately staffed to administrate social and community projects There is no “one size fits all” for social and community development programs. Social and community programs must be directed to sustainability and not dependency. Community perception of a mine and its role in community development changes over time and generations. Environmental degradation is the most common “trigger” of social and community dissatisfaction. Successful social and community development programs are dependent on: maintaining an absolute commitment to public consultation and involvement of the local community in the development and implementation of social and community programs. an ability to listen, to be flexible, to have an absolute commitment at the highest levels in the organization and hard work.

16. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Generic History of Community Development Years 1-3: Pre-development phase: ESIA preformed to assess the impact of the mine on the environment and local communities and propose means of mitigation and/or remediation. – little or no concept of the “reality of the mine”. Years 4-8: Development to production – Community programs initiated creating “haves and have not’s” and new demands arise. A partial concept of the “reality of the mine” emerges” Years -9-13: Operational Mine – Community programs modified and expanded with greater participation of the community and external stakeholders; environmental impacts increase and resource rent distribution issues become critical. The “reality of the mine” becomes clear. Years 13-15 Mine Expansion – Community expectations change, increase and divisions within the community, with government and with industry emerge. Adequacy of community programs become and issue. The “reality of the mine” becomes a negative.

17. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Generic History of Community Development (Cont.) Years 15-25 : Pre-closing phase: The “inter-generational” phase of community programs characterized discontent past and present programs, increased demand for increased funding and concerns re mine closure and sustainability. Invariably the “reality of the mine” is negative. Years 26-30: Mine closure – With mine closure adverse social impacts arise (unemployment, social unrest); environmental issue become critical (and many unmet) and issues of sustainability become paramount. Contingent liabilities are left unmet. The “reality of the impact” becomes a legacy.

18. ENERGY AND MINERALS EXPERTS WORKING GROUP MEETING Sepon – Basic Principles Communicate, spend time listening not talking. Use appropriate communication media, including the best translators available. Use local knowledge and resources if possible Break complex issues into simple steps. Be prepared to explain time after time. Be prepared to say no – with a reason. Understand community structures and cultural expectations. Understand social contexts (Gender, ethnicity) Understand and respect all stakeholders. Address every issue. Deliver on promises. Be absolutely committed.