Achieving Long-Term Value Through ESG PracticesBy Lorenzo Núñez | Fri, 08/06/2021 - 11:10
Q: In regard to judicial certainty, what should be done to provide investors with peace of mind?
A: While there are a number of factors that contribute to investors’ piece of mind, the most important factor today is certainty. For the past three years, ESG goals have been incorporated into the plans of many companies and they are using these to create long-term value, which I believe is the new trend in regard to the mining business. What stakeholders are looking for is a long-term mining operation that applies ESG practices, with the certainty that the legal framework they operate under today will be the same tomorrow. This can allow companies to take more chances with their investment, thereby creating long-term value for investors.
Q: What are mining industry’s main judicial challenges and how is PwC supporting its clients in this regard?
A: One of the main challenges that companies face today relates to SAT’s fiscal policies. The government agency recently released its list of official tax industry percentages, which includes mining. This tool allows companies to look at their effective rate and compare it against the list to determine if they are clear.
We help clients by creating a preventive strategy. In addition, we advise companies on their data management. The entire tax landscape has become more complex because companies are managing an increasing amount of information. In addition, new outsourcing restrictions are a major setback for the industry, which employs many foreign contractors. Our consulting focuses on creating solid data management technologies for our clients that enables them to develop preventive strategies, with the goal of creating a sense of stronger business certainty.
We also help our clients with the operating costs of metal prices. We always look at different ways to help reduce costs while simultaneously improving a mine’s performance. The volatility of metal prices is exclusive to the mining industry, so we place much of our focus on our client’s performance.
We also help mining companies improve their ESG goals, as well as advising them on the ideal way to communicate their practices. Mining has always considered safety an essential element in its practices, especially for staff but also for the community. Therefore, we are helping mining companies include ESG goals in all of their safety planning by helping them improve their practices. We want companies to understand that having a good ESG performance can translate into increased investment and better returns for their investors.
Q: How does PwC help mining companies with their ESG reporting and compliance?
A: One of the advantages that we have at PwC is that we are a global company. In regard to ESG, we look at other countries and analyze how their mining sectors are operating. We take that information and present it to our clients as a reference for improving their ESG performances. Sometimes companies need to see another company’s practices to understand their true value and to properly incorporate them.
Q: How does Mexico compare to Chile and Peru? What can the country learn from those jurisdictions?
A: Mexico’s GDP is a lot more diversified than that of Chile and Peru. For the South American countries, mining is a fundamental part of their economy, while it is not in Mexico. However, what we can learn from those countries is how their governments and industries collaborate with each other. These countries have encouraged mining operations to grow with incentives that Mexico has forgotten or ignored. Mining companies need to invest a hefty amount, which will not yield any returns until much later in the mine’s life cycle. Chile and Peru have allowed mining companies to deduct their taxes during the exploration phase, since they know that mining companies will take time to break even. We no longer do that in Mexico; therefore, we need to understand mining as a whole, as well as mining companies, and as a result we can attract more investment. At the end of the day, what the government needs is more money for its projects. But to get more money, the government needs to attract more money. I believe that the current administration has set its priorities on a very short list of items, while many other industries struggle with the same amount of uncertainty.
Q: What does the future of mining look like in PwC’s eyes?
A: The future of mining is about creating long-term value that revolves around ESG goals. ESG has been part of the discussion long before the pandemic but the pandemic itself served as a catalyst for ESG practices. Companies need to understand that this is the future of mining and a key component in creating value will be through a good ESG performance.
PwC works with many of the largest operators in the mining market to help them overcome regulatory challenges and guide them through legislative hurdles.