Environmental and Social Issues - what investors should know about the risks b y Fergus Anckorn

1. Environmental and Social Issues - what investors should know about the risksby Fergus Anckorn

2. The menu • (A VERY brief!) History of Environmental and Social Issues Management • Environmental and social Issues • Standards, guidance and benchmarks • What investors should look for

3. History of Environmental/Social Management & Mining • Don’t kill the slaves – they are expensive! • Mining Acts that were aimed to protect property rights • Extension of those Acts to accommodate the new health and safety Acts introduced in the 19th and 20th centuries (water and air) • Increasing environmental awareness commencing in the 1980s with the Brundtland Commission Report on sustainable development • Demands by governments, communities, shareholders, NGOs and funding agencies for improved environmental management • And into the 21st Century - Greater awareness of the need to address social issues, climate change, sustainability……..

4. Regulations & Guidance • Mining Acts • Mining permit conditions • Integrated Pollution Prevention & Control • Registration, Evaluation, Authorisation and Restriction of Chemicals • Environmental protection legislation • World Bank/IFC guidance and standards • Emergency Preparedness Regulations • Equator Principles • International Council on Mining & Metals • Country-based guidance (eg EU’s Mining Wastes BREF) • Mining association guidance/initiatives (eg CN Code) • Company codes, etc, etc, etc

5. The menu • (A VERY brief!) History of Environmental and Social Issues Management • Environmental and social Issues • Standards, guidance and benchmarks • What investors should look for

6. Mining issues - environmental • Exploration impacts – drilling, trenching, access roads • Discharge of wastes – fluids, tailings, toxic residues • Use and discharge of water • Noise, dust, vibration, traffic • Land take for construction and visual influence • Closure – attaining physical, chemical, & biological stability …………impacting on…… Air, water, soils, wildlife, people and cultural heritage

7. Mining issues - social • Employment and immigration • Inward investment • Pressure on existing social infrastructure • Change to land use and livelihoods – community relocation • Quality of life impacts • Community sustainability – boom and bust • Health and Safety • Uncertainty • National and local politics

8. Environmental management tools • The Environmental/Social Impact Assessment Process • Environmental Permit conditions • Environmental and social (community) management planning • Closure planning

9. Impact Mitigation Measures • Adopt environmental codes (e.g. CN Code), BAT, etc; • Environmental optimisation via the ESIA – e.g. minimise footprint • Consultation with affected stakeholders • Appropriate containment of reagents, etc; • Spill contingency measures - routine; • Seveso II major accident avoidance/planning • Site clean-up and restoration/after-care

10. The menu • (A VERY brief!) History of Environmental and Social Issues Management • Environmental and social Issues • Standards, guidance and benchmarks • What investors should look for

11. Equator Principles - what are they? • “a financial industry benchmark for determining, assessing and managing social & environmental risk in project financing”; • Applied by Equator Principles Financial Institutions • Loans will not be provided by EPFIs where the borrower cannot or will not comply • Applies across all industry sectors, globally, to projects with total capital costs exceeding US$10M • 10 Principles that extensively use IFC/World Bank guidance………………

12. Equator Principles • Requirement to categorise projects in terms of potential impacts and risks, i.e. project screening; • Appropriate social and environmental assessment to be undertaken • Appropriate social and environmental standards to be adopted (Specifically referencing IFC Performance Standards) • Action Plan and Management System to be prepared • Appropriate levels of consultation and information disclosure to stakeholders to have been conducted • Grievance mechanisms to be put in place

13. Equator Principles • Independent review of proposals to be carried out • Covenants linked to promised deliverables to be put in place • Independent monitoring of projects to be carried out through their life • Each EPFI to prepare an annual public report on its Equator Principles implementation • …..and most significantly applies IFC Performance Standards to projects in non-OECD countries

14. IFC Performance Standards • PS1: Social and Environmental Assessment and Management System • PS2: Labour and Working Conditions • PS3: Pollution Prevention and Abatement • PS4: Community Health, Safety and Security • PS5: Land Acquisition and Involuntary Resettlement • PS6: Biodiversity Conservation and Sustainable Natural Resources Management • PS7: Indigenous Peoples • PS8: Cultural Heritage

15. Equator Principles and Performance Standards together impose………. • consideration of third parties and implications • consideration of supply chain and implications • disclosure requirements • a focus on vulnerable populations

16. Other standards • International Cyanide Management Code • Mine closure standards and guidance provided by Northern Ontario and UK Minerals Industry Research Organisation (MIRO); • Mining Wastes Best Reference (BREF) document, March 2005, • APELL for Mining – guidance for the mining industry in raising awareness and preparedness for emergencies at local level • PDAC Environmental Excellence in Exploration Programme (e3) • Etc, etc!.

17. The menu • (A VERY brief!) History of Environmental and Social Issues Management • Environmental and social Issues • Standards, guidance and benchmarks • What investors should look for

18. The Company • Track record on environmental/social management? • do they have a track record in CSR? • Are there Company Environmental and Social Responsibility Principles or Codes of Conduct? • What environmental standards do they routinely employ for exploration and project development? • Do they have people on staff with environmental training? • Do they employ appropriate international and local consultants with proven track record?

19. The Project • What standards are being employed in the design and development of the Project? • If an exploration property, what environmental management code is being employed? • Is there a programme of public consultation and information disclosure in place? • Does the company keep records on public and community consultation? • What are the local environmental management requirements and how do these compare to international standards? • What consultancy assistance is called upon?

20. The Modern Mining Industry’s Driving Axiom Mining has as much to do with achieving public and potential shareholder’s confidence as it does with exploration and exploitation of mineral resources

21. The Implications of adopting questionable standards • The Project may not be eligible for a loan from a reputable lender • The Project may have less value due to inherent liabilities and lower bankability • NGOs may target the Project • There may be problems in retaining existing mine property leases or obtaining new ones • Reputation risks for institutional investors

22. But get it right and……….. • The Project can be • bankable • higher value • defendable against NGO criticism • easier to retain licences and obtain environmental permits • good reputation that attracts investors