Issues forums start each day of MM2000

Mining as an industry in transition appeared to be the overarching theme reflected in five issues forums that kicked off each day of Mining Millennium 2000, a conference jointly sponsored by the Prospectors & Developers Association of Canada (PDAC) and the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

Monday’s forum, “Survival Strategies for the 21st Century,” provided delegates with an overview of the economic, environmental and social challenges facing the minerals industry in the 21st century.

Moderator David Harquail, senior vice-president of Franco-Nevada Mining, set the stage by pointing out that investors have been fleeing Canadian mining stocks by the droves, as evidenced by the recent $11.5-billion withdrawal to international and U.S. equities.

“In March of 1996, the combined weighting of metals and minerals and gold and precious metals on the TSE 300 index was 22.1%,” he said. “It’s now about 6.5%. This industry faces major challenges, including staying relevant in the new investment universe, competing with dot-coms for risk capital, and taking charge of the environmental and political agendas.”

Patrick James, president of Rio Algom, eloquently made the case that mining is no longer a matter of costs and profits and share price, and that, instead, companies are now assessed by a “triple bottom line” of economic, environmental and social criteria. “If my company is unable to develop orebodies because the local residents do not want miners for neighbours, there will be no costs, or profits, or even a share price to worry about.”

This means companies must invest time and energy in sustainable development. “No longer are companies able to march in and tell the residents that we know what is good for them,” James explained. “This has led to a concept we refer to as the need for a social licence, without which projects cannot succeed. It is the key to public consent.”

James went on to provide a basic framework for obtaining such consent, based on establishing partnerships with local citizens, various levels of government, multilateral agencies and social institutions. He also spelled out what communities expect from companies seeking to develop mineral projects. “The list includes up-to-date information on the progress of the project, honest answers to questions, discussion of development alternatives, concern for the environment, sensitivity to local culture, opportunities for citizens to earn a better living, and a better life for their children. Isn’t that what we all want?”

David Goldman, chief operating officer for Noranda, called for the industry to acknowledge that citizens want to be more involved in resource development and, secondly, to develop a more sophisticated approach to communications and public outreach. Taking part in public forums and such things as the Global Mining Initiative (an industry- driven multi-stakeholder process supported by 25 companies) are steps in the right direction, he said.

Defending mining’s place in society is important too, Goldman said. “Our industry has had an apologetic attitude towards success for too long.” He added that it is time to move forward with confidence and make the case that mined products are essential. He believes the industry runs the risk of death by a thousand cuts unless it takes a more proactive approach to a broad range of issues, including debate on tariffs and policies to promote the use of alternatives to metals. “The public’s perception of mining as a dirty, low-tech industry must change if we are to stay in business,” Goldman said.

James Gill, president of Aur Resources, echoed the view that investment capital is fleeing the mining sector, though he took it a step further by stating that access to capital is “the key to survival” and the most pressing problem facing the industry. But getting investor attention won’t be easy, he added, because of mining’s low yields, which are currently below those even those of Canada Savings Bonds, and the negative effects of some high-profile failures.

“We must provide a competitive return on capital, and that means more industry mergers between companies with geographic and operational synergies. My view is that smaller companies must merge to get sufficient critical mass. The goal should be to provide quality, rather than quantity.”

Gill acknowledged that although most companies agree industry consolidation is necessary to stay relevant and attract capital, human nature is such that progress will be slow.

After registering their votes on high-technology devices, delegates agreed that access to capital was their most pressing concern. They also expressed the view that environmental issues were more challenging to deal with than aboriginal issues, particularly for major companies.

While the audience’s views on industry consolidation appeared to be mixed, there was near-unanimous agreement that industry associations need to become more proactive in their efforts to win public acceptance for mining.

Next week: “Land-use battles: will they ever end?”