IGF the Ideal Partner for Governments Seeking Sustainable MiningBy Alejandro Ehrenberg | Mon, 06/21/2021 - 17:36
Q: How does the IGF’s Mining Policy Framework help governments foster a more responsible mining sector?
A: Sustainable development is at the core of what IGF does. We achieve this through resource governance and by providing tools for states to assess the governance of their metals and minerals extractive industries. IGF facilitates and provides best practices for governments and, in turn, they can assess whether to implement them or not. The Mining Policy Framework is considered the main compass we provide governments to evaluate the quality of resource governance in their countries. It is a twofold approach. It’s first objective is to provide direction and make explicit the main questions that need to be covered to make sure there is an appropriate governance of the mining sector.
There are six areas to be considered: artisanal and small-scale mining, legal and policy framework, financial benefit optimization (taxation), environmental management, social and economic benefit optimization, closure and postmining transition. The second objective of the approach provides assessment around these six areas in a country-by-country basis to see if the governance of resources is optimal and to identify the gaps. After that, IGF comes in with tailor-made technical assistance and policy advice to governments to address those challenges. The goal is that the governance of the whole mining cycle furthers sustainable development objectives.
Q: What are the best practices that ensure a fair taxing system in mining countries?
A: It is important to highlight that where multinational companies are involved, there are certain issues to address. By design, these companies operate in many jurisdictions and have tax agreements with different countries. Shifting profits from high tax jurisdictions to low tax jurisdictions has always been an issue for host-countries although the practice is not illegal. We estimate that about US$200 billion a year has been shifted around in the past two years. IGF works to support governments to get a fair share of benefits from mining companies. We help countries evaluate how much their minerals are worth and plan taxation systems according to their value. We have designed a financial modelling tool for governments to try out different scenarios with different fiscal incentives setups so they can see how companies would behave under each scenario. In the end, what is important is the balance: ensure that revenues received are appropriate and fair, while ensuring that investment is incentivized. Public controversies between companies and governments end up being more costly in terms of prestige and reputation for both parties. Before that happens, it is important to optimize taxation systems fairly.
We encourage and assist governments to implement a policy that maintains sufficient flexibility to ensure a balance is achieved between optimizing revenue from mining activities, while permitting the mine developers and operators an adequate rate of return on their investment. This policy should also include national corporate income taxes based on net profits as the common element of commercial mining. Lastly, it should apply such taxes in the same manner as it does to non-mining entities within a jurisdiction but with the potential for allowances specific to mining to obtain specific public policy aims. Throughout this process, transparency is of the essence. To publicize information on the flow of taxes and duties, IGF recommends that governments participate in initiatives such as EITI.
Q: What is the issue that your New Tech, New Deal seeks to address?
A: The Old Deal, or the deal between governments and companies that is current today, means that a mining company extracts mineral resources in exchange for paying taxes, providing employment, doing CSR in local communities and procuring locally. Nevertheless, in an age of rapid technological advancement, such as automation technology, there is a risk that this arrangement is disrupted. Automation has benefits regarding safety, environmental impact and efficiency of mining processes but it also translates into leaner mining operations, with fewer workers. Also, some technologies will be coming from big OEMs
The result is that miners’ social license to operate suddenly becomes completely off-balance. The local economy will not necessarily be galvanized by the mine in the way it used to be. IGF’s New Tech, New Deal seeks to manage the transition between the current deal and the situation new technologies are ushering in. We believe that the automated mine of the future can still provide communities with opportunities. Jobs may be less abundant but they will be better paid. For those who may be laid off, also need to provide sustainable solutions, in the form of re-training and re-skilling, facilitate transition to jobs in other sectors, or help them develop new economic sectors. We also need to support local communities in developing their skills to take up the new and better opportunities in more sophisticated mine environments. More opportunities for women could occur and we need to equip them to benefit from those.
We did a mapping of the types of technologies that are coming in: some are examples include green technologies, like dry stack tailings, that will result in more water for local communities. This can be beneficial to agriculture. If you have more water available due to good water practices at the mine, you can transition from subsistence agriculture into commercial agriculture. Additionally, if the mine shares its transportation and communication infrastructure around the community, they could access markets beyond the mine gate, previously not available. Another example is 5G connectivity, which is coming to remote places that did not even have a telephone line. This infrastructure can lead to fundamental changes and open up more opportunities for local communities that would not have existed without the mine. The New Deal sees mines as engines of development that build community resilience and a productive ecosystem. In turn, the mine consolidates its license to operate. At the same time, it examines the challenges that need to be addressed to manage the transition smoothly and hence avoid conflicts with communities, as a result of lost opportunities.
The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) supports more than 75 nations committed to leveraging mining for sustainable development to ensure negative impacts are limited and financial benefits are shared.