The International Resource Journal: LatAm Mining Congress 2009 LatAm Mining Congress 2009 ================================================================================ admin on 03 September, 2009 11:01:00 Although metal prices tanked this past year, mid-August saw prices go up, and the growing sentiment that worldwide financial storms are finally letting up was reflected in several markets. Still, the global crisis has taken its toll, especially on countries whose livelihoods are supported by mining, oil and gas development. Financial markets in Latin America weakened as fallen commodity prices hurt prospects for exporting. Investors have certainly seen reasons to sell, as Latin America’s largest bank (based on assets) reported a 14 per cent fall in its second quarter. Overall, things have not been rosy for South America—for companies operating in the region and those native to major developing countries such as Chile, Venezuela and Brazil. Many companies have been suffering from a severe shortage of working capital and have pursued options for long-term financing to fund growth. However, the global financial crisis has brought into perspective areas for improvement in the mining industry— especially sustainability. Having told the stories of companies operating in South America ourselves, The International Resource Journal was pleased to get an invite to the Latin American Mining Congress in Coral Gables, Florida, to hear what big thinkers in the industry have to say about Latin America’s future in mining. The Congress took place from June 29 to July 1, and brought heads together to look at the industry from the outside. Taking a closer look at sustainability Attendees at the Congress addressed a wide range of cultural, socio-economic and environmental issues facing mining industry in Latin America. First on the list was Corporate Social Responsibility (CSR). As developing countries emerge as economic competitors for the rest of the world, basic social responsibilities need to be considered by the host countries and companies operating within. Fortunately, delegates at the Congress were able to hear from Eva T. Thorne, who helped attendees learn how to determine risk tolerance for CSR issues in Latin America. Thorne is a director of Pact, a Washington, DC-based international development NGO that works to develop innovative partnerships between corporations and NGOs, with the intent to advance sustainable development. Thorne’s CSR research is extensive and informed by experience working in developing countries. Thorne described determining risk tolerance as a “continuous and ongoing process—not a onetime thing”. In an ever-changing industry, companies and public organizations that partner with them need to collaborate to make CSR initiatives work. “To successfully operate, mining companies who are operating in Latin America need to master the art of political risk, management, and litigation by incorporating assessments, analysis and plans as soon as they identify an area for investment” she explained. Essentially, risk assessment in Latin America is a thorough, from the bottom-to-the-top, process. The list of risks in mining in Latin America is extensive, but the reward for operating in the region can outweigh those risks—if companies are prepared to sufficiently research and keep their eyes open. Not only are companies and governments alike dealing with economic risks, the political landscape can be unstable, and legislation is not always black and white. Latin America has experienced revolving and continuously changing tax and royalty regimes. In addition, security is a risk factor when deciding to do business in Latin America due to ethnic conflict, civil unrest, labour unrest and sometimes terrorism. Starting small Julian Rooney, Vice President, Public Policies and Government Relations South America for Xstrata Copper was also in attendance, at the Congress and offered some inside insight into how companies can promote sustainability while operating in Latin America. Of course, Xstrata often sets the benchmark for sustainability, but Rooney gave specific regional examples of sustainable projects in Argentina, Chile and Peru. In Argentina, Xstrata completed a walnut re-engineering project in Puertade San José, As part of the project, Xstrata planted high density Chandler walnut trees in old plots that originally housed regular walnut trees. This will enable farmers to enter more competitive markets and increase their incomes. A seed processing plant was also built where 40 local women work peeling, washing and packing the final product. The results: In 2010 the plots planted originally in 2006 will start producing walnuts, and the return of investment for the local community will start showing. Rooney explained the motivation for smaller, but highly important, projects like this one: “in the mining industry, not everybody is going to be able to be employed by that industry or supporting industries that mining generates”. Therefore, companies must identify “what are the activities in the area that do have some kind of economic advantage and do have some sustainability in the long term”. Looking at the long-term After recognizing those activities, Xstrata—like other major players—can begin co-designing with local people activities that are sustainable. “We need to not only think about things that are going to be in operation during the mining project but also how they will be sustainable in the long term—so that there are mutual benefits for the stakeholders working on a partnership including authorities, communities, and NGOs operating in the area”. Obviously, the protection of natural resources is an important topic, and according to Rooney “private and public alliances will help to ensure long term regional development that outlives the lifespan of any mining operation”. Mr. Hernán Martínez, Minister of Mining for Colombia was present at the Congress to discuss the coal industry in Colombia, quickening changes to the mining code, reorganizing the institutional structure of mining, and speeding up the process of assigning areas of availability across Colombia. Although we have not yet had the chance to interview Mr. Martínez, we learned quite a bit from the Ministry website. The Ministry has committed to defining conducive lines of policy to modernize the state management of the mining sector in Colombia, with the following objectives in mind (on a general scale): improve the efficiency in the management of the sector, increase the knowledge base in the sector, promotion of mining, provide better information about the sector, improve competitiveness with technological modernization, and promote sustainable development in conjunction with other ministries. For more information on new policies, visit the Ministry’s website at http://www.minminas.gov.co/minminas. Though mining executives are familiar with the cyclical nature of the commodities business, 2008 into this year has presented new challenges. Industry consolidation in many markets, including developing nations, has become easier in some circumstances than weathering the storm. The LatAm Congress really exemplified a strategic opportunity to bring together mining experts and execs to present their outlooks on the sector, and come up with ideas to explore new areas for growth. About Terrapin We’re brainstorming your next big idea Our purpose is to give our customers the relationships and big ideas to do different and better business. We’ve been doing it for more than 20 years. We want you to come away from one of our events with eight big ideas and eight new key contacts. That’s how we contribute to the business communities we serve. Around the world. Living the brand Our experience, skill, creative vision and commercial drive have built a portfolio of successful international brands. The kind of brands that ensure your world class brand gets maximum value on a global stage. Our brain power stimulates yours And we believe in the inventive power of the right brain. We’re a creative organisation and use design, story, play and meaning to make our events stimulating experiences that help shape your big ideas. Snapshot: Chile Chile’s copper exports amounted to $2.542 billion this July, according to the central bank. This was the highest level in almost a year as copper prices recover. Totalled exports were valued at $3.247 billion in July of last year. Chile is the top global copper producer, mining approximately a third of global supply. A steep fall in copper prices has curtailed South America’s revenue intak —according to economists.