Responsible business strategies
Environmental, social and governance are key issues in the mining, oil and gas industries, so how important is responsible business strategy in the current climate? Former Shell and Rio Tinto leaders recently discussed the approach to responsible business strategies in a LinkedIn chat. Here, Mining Global sums up the key messages.
A long-term approach
Tom Albanese, former CEO of Rio Tinto and current Chief Executive of Vedanta Resources, believes the industry needs to stop focussing on the short term. "Projects that would have taken 3-5 years to develop in the 1980s are now taking 8-12 years and they need to be developed in this type of cycle." He says.
This need for a more long term approach is a result of increased budgetary pressures placed on companies to complete projects, a by-product of "the incredible expansion of the Chinese economy punctuated by an extraordinary recession".
A larger focus on projects taking longer is born out of a demand induced recovery in what Albanese believes is an “equally extraordinary” response from the world’s central banks.
But of course there are other key factors which affect the time scale of projects. Namely, the finances and infrastructure of local economies.
"There are some very large projects where the budget can start at $5 billion but then you put it in a remote community where those communities don't have electricity. They don't have the amenities that you would normally expect when working on a larger project. These communities simply don't have the infrastructure." Says Albenese.
The former chairman also discussed the impact of these projects on the local rural communities. Extensive extractive programmes can produce a significant change in the country's economy, sometimes contributing up to 30percent of its Gross domestic product (GDP). When a project of this magnitude receives what can be anything up to a 75percent budget cut, mining companies must adopt a long-term approach.
Sir Mark Moody-Stewart, former chair of Royal Dutch Shell emphasises this need for a long-term approach, also warning of the dangers of recruiting employees, investing money in training and then being forced to let them go in more difficult financial situations.
When companies make employees redundant in this difficult financial climate, they lose out on workers with valuable skill sets. Moody-Stewart believes that one way to look at this situation is "to seize it as an opportunity".
"Try to make sure that the sustainability and social aspect of the work are spread into everybody's job,” He says.
“When people are made redundant you are going to lose specialists, so we better make everybody into something of a specialist."
Acknowledging the difficulties of approaching the industry with this outlook, resulting in a more constrained workload as they have a lot of work to do in other areas, Moody-Stewart adds "If you want to be robust over cycles, you better embed it everywhere."
Use minimal expats
Both men agree that in some areas expats must be used at the start-up as local talent is not available.
"As we develop these programmes, they can't be staffed by expat specialists. There has got to be a few, but staffed by local residents and people from these countries" says Albanese. He points out that major projects can handle the strain of resource reductions when a project moves into that phase.
When a project winds down or reduces its capacity, expat workers are the first to be pulled out, but as Albanese points out, "the local residents have developed those skills so if they are given a sufficient level of resources then they can continue at least in some capacity."
Learn from China
Over the last few years, China has fast become a dominant force in the global resources industry and has seen a huge boom in the economy as a result. Sir Mark Moody-Stewart believes that despite centuries of mining resource experience, businesses in more developed countries have a lot to learn from China.
"We shouldn't think it's all about us explaining to them how to do it,” he says.
Tom Albanese is the Chief Executive Officer of Vedanta Resources. Previously he was the CEO of Rio Tinto. He has also held positions in other mining companies including Ivanhoe Mines and Palabora Mining Company.
Sir Mark Moody-Stewart
Sir Mark Moody-Stewart is the former Chair of Royal Dutch Shell. He first worked for the company in 1966 as a geologist before leading exploration teams and eventually he moved into management. He retired in 2005 and received a Knighthood in 2000.
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Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
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The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
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Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
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“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.