Last week at the annual meeting of the Intergovernmental Conference on Mining and Sustainable Development, the World Gold Council published a ground-breaking report. “Responsible Gold Mining and Value Distribution” provides, for the first time, a consolidated view on the economic contribution of responsible large-scale gold mining.
The report aggregates data from fifteen leading gold mining companies, all members of the World Gold Council, to assess their combined economic contribution to the countries where they operate. The report covers 28 countries and includes information from 96 operating mines in 2012 and from numerous additional sites in their development or decommissioning phases. It provides an analysis of how much expenditure remains in the host country and, for each country, what the distribution of value is between major stakeholder groups.
Collaboration to facilitate scrutiny
The report marks the first time that companies in a sector have collaborated to facilitate scrutiny of their combined contribution to the economies of the countries where they work. It covers gold producing OECD countries (e.g. US, Canada, Australia, Mexico and Chile), four of the BRICS countries (except India) and many developing nations including important gold producers, such as Ghana, Papua New Guinea, Tanzania and Suriname.
The findings are notable. In 2012, the participating companies spent over US $55 billion to produce 804 tonnes of gold. Of this, some 80% was expended in the countries where the operations are situated. Of the US $55 billion, 62% ($35 billion) went to suppliers; 15% (US $8.3 billion) went to employees and 15% (US $8.4 billion) to government entities in taxes and royalties. Shareholders and lenders, between them, received US $3.4 billion.
The report confirms that gold mining makes a significant contribution to economic growth, foreign exchange earnings, government revenues and the socio-economic development of host countries. The figures also show however, that whilst mining’s fiscal contribution is sizeable, it is important for stakeholders to understand the importance of supply chain opportunities to the broader economy, especially since these may generate a very significant indirect economic contribution, including jobs. This goes beyond the focus on government revenues that lie at the heart of EITI, but provides important contextual information of the sort envisaged in the new EITI Standard.
The methodology is not optimal for analysing the distribution of local benefits and impacts. It identifies community social investments, but it cannot capture whether community members may also be mine employees, contractors or suppliers or the extent to which tax revenues are recycled by host governments to relevant communities.
The report highlights the transformational potential of gold mining including in the form of high safety, environmental and social standards, capacity-building, infrastructure investment and skills development. But it is essential that all actors understand the long lead times in mine development, the financial risks and cyclicality inherent in mining investment and how the distribution of benefits will evolve over a mine’s life cycle.
The report has been produced at a time of debate about what constitutes a ‘fair’ return for a country’s resources. As the report makes clear, that ‘return’ may have many facets. For countries to benefit from their resources a number of stakeholders need to be involved including governments, communities, companies and the investors who fund them.
Responsible gold mining, consistent with high safety, environmental and social standards has the potential to contribute to sustained socio-economic development in countries and communities across the globe. In providing a comprehensive view of the economic contribution made by gold mining companies, it is hoped that this increased transparency can support sustained growth and development. However, these companies are not able to provide unlimited job creation, wholesale improvements in the standard of living, and eradication of poverty by their efforts alone. Collaborative efforts are required - with governments, civil society, communities and the donor community.It is our hope that this report will lead to better informed and continuing discussions about how the benefits of mining are shared.
Terry Heymann is the Managing Director Gold for Development at the World Gold Council. The World Gold Council is the market development organisation for the gold industry and the global voice of authority for gold.