Speech to the Divine Word University forum on PNG’s prospects for sustainable development
16 August 2007; Divine Word University, Madang, PNG
Australian High Commissioner to PNG, HE Mr Chris Moraitis
Ladies and gentlemen
I am delighted to be here today to speak to you about sustainable development issues in the mining industry. I will first discuss how the mining industry in Australia has sought to tackle sustainable development issues, then explore some of the key sustainable development initiatives that the industry has put forward at the global level. Finally, I will look at how the principles of sustainable development apply to the mining industry in Papua New Guinea.
Mining industry in Australia
As is the case in PNG, mining contributes significantly to the Australian economy, with mining activity occurring in all states and the Northern Territory. Mining accounts for approximately 5 per cent of Australia's Gross Domestic Product. A large number of multinational mining companies operate in Australia including BHP Billiton, Newcrest, Rio Tinto, Alcoa, Chalco and Xstrata.
In response to community concerns and perceptions about the negative social and environmental impacts of mining, the Australian government is now more actively involved in regulating the planning, operation and closure of mines.
The natural environment was once regarded as largely being the responsibility of government, and the community was content to leave environmental regulation in the government’s hands. However, with the development of a better understanding of the environment, its value, diversity and vulnerability, the community now has a greater sense of ownership of environmental issues. To date, the focus of governments’ regulatory activities has mainly been on minimising the adverse environmental impacts of mining. However, an increased awareness of mining’s social impacts has prompted successive Australian governments to take a holistic view in developing the regulatory framework that governs the industry.
We are confident that Australia is now recognised as a leader in sustainable development due to its commitment to protecting the natural environment; its implementation of best practice occupational health and safety; the stability, certainty and efficiency of its regulatory environment; and the high level of community engagement and community appreciation of the industry's contribution to a sustainable future.
Challenge for Government
The challenge for governments in countries with significant mining industries such as Australia and Papua New Guinea is to set a regulatory framework that both protects the community’s social and environmental values and encourages industry to put forward project proposals that embrace cutting edge practices and technologies. Regulations that are too prescriptive will stifle innovation and suppress the industry’s appetite for continuous improvement.
What the community requires from governments is a structure for sustainable development. Communities want jobs, and rising living standards, but not at the cost of unsustainable economic growth.
Sustainable growth depends on harvesting the resources that are renewed by nature and controlling the use of resources that are not. The only way to achieve this goal is for industry, the community, and government to work together.
The mining industry needs to earn and then maintain a sense of legitimacy and social acceptance from affected communities – it cannot do this simply by claiming to be in compliance with national and local environmental laws. It is particularly vulnerable to criticisms from a combination of local and international non government organisations (NGOs). The mining industry is increasingly recognising these responsibilities and in recent years has taken steps to build a more responsible approach into its corporate structures. There is no doubt the impetus for some of these changes has resulted from cases where the industry has failed to meet its obligations to local communities and the environment.
In Australia, the Government welcomes industry-led initiatives that recognise its responsibilities to the community. Effective and ongoing relationships with stakeholders that go well beyond legislation are vital if mining projects are to be sustainable. Achieving broad acceptance by both the community and regulators is often described as 'having a social licence to operate'. A social licence is a kind of unwritten contract between the mining company and affected communities, by which the company is granted the right to carry out its mining operations on the proviso that it conducts itself in a responsible manner and treats affected communities and the environment with respect.
Should a company break that contract, it could face legal challenges and protests from local communities, and its workers may desert it in favour of more responsible employers.
Today, a ‘licence to operate’ covers not only the ability to conduct mining operations at a particular site but also the ability to sell products in the marketplace. The point is a significant one, since the mining industry is the start of the life cycle for many products that are essential for modern society.
Australian approach to sustainable development in the mining industry
I would like to turn now to the approach Australia has taken in recent years to ensure the sustainable development of its domestic mining industry.
In Australia, the Government works with industry and the community to develop initiatives that further the goals of sustainable development. One of these initiatives is the Leading Practice Sustainable Development Program for the Mining Industry, or LPSD.
The LPSD program has compiled information on a range of issues related to sustainable development, and presented it in a series of freely available handbooks.
The handbooks address environmental, economic and social issues as they arise in all phases of mineral production from exploration through to construction, operation and mine site closure. They have been developed in consultation with a number of government organisations, community groups, mining companies, technical research organisations, consultants and civil society organisations. The handbooks are designed primarily for use by mine management at the operational level and for people with an interest in leading practice in the mining industry such as environmental officers, mining consultants, governments and regulators, non-government organisations, mine communities and students.
Each of the handbooks is available on the website of the Australian Department of Industry, Tourism and Resources. I am happy to provide the details to anyone who is interested. The web address is www.industry.gov.au/sdmining
Many of the topics addressed under the Leading Practice Sustainable Development Program are as relevant in PNG as they are in Australia.
They include for instance the issue of stewardship. In the mining context stewardship means the care and management of a commodity through its life cycle. Ideally, stewardship will involve an integrated program of actions that ensures all materials, processes, goods and services are managed throughout a product’s life cycle in a socially and environmentally responsible manner.
Stewardship is an evolving concept within the mining industry. While participants in each stage of a product’s life cycle have a responsibility for stewardship in their specific industry, it is a fundamental principle of the concept that each participant’s sense of responsibility extends beyond their own industry.
A concrete example of the stewardship concept in action is the Green Lead project. The project, which began at BHP Billington’s Cannington site in north west Queensland - the world’s largest silver and lead mine - is designed to minimise the risks to both people and the environment from exposure to lead at any stage in the life cycle of lead acid batteries (LABs). It has since evolved into the Green Lead Consortium that includes dozens of leading Australian and international mining companies, industry associations and multilateral organisations. The Consortium has developed a series of protocols and guidelines as well as an assessment tool that can be used to measure facilities anywhere in the lead acid battery life cycle against the Green Lead protocols.
Another issue covered by the Leading Practice Sustainable Development Program which has a particular relevance in PNG is mine rehabilitation. Rehabilitation is the process used to repair the impacts of mining on the environment. The long-term objectives of rehabilitation can vary from simply converting a former mine site to a safe and stable condition, all the way up to restoring the site, as closely as possible, to the conditions that prevailed before mining began.
Xstrata’s Mt Owen coal mine in Australia’s Hunter Valley provides a living example of mine rehabilitation at work. The Mt Owen mine runs through the Ravensworth State Forest, one of the largest remaining areas of remnant woodland on the central Hunter Valley floor and home to 145 types of bird and nearly twenty threatened species.
In recognition of the significance of the animal and plant life within the project area, the company, in cooperation with government departments and a local NGO, has developed a flora and fauna management program that includes, among other things, the establishment of biodiversity conservation areas to offset mining impacts, progressive rehabilitation of disturbed areas to native woodland and the implementation of specialised flora and fauna management techniques.
Yet another issue addressed by the Leading Practice Sustainable Development Program with a particular resonance in PNG is that of mine closure. One of the realities of the mining industry is that, eventually, every project will have to close down, whether through resource exhaustion or a change in the project’s economics. In some instances, mining needs to be suspended for a period of time, in which case the project will need to be placed under care and maintenance.
Poorly closed and derelict mines impose an ongoing and undesirable burden on governments, communities and companies, and ultimately tarnish the mining industry as a whole. Increasingly, mining companies need to be able to demonstrate a reputation for effective mine closure and completion processes before they can start developing new projects. Taking a more integrated approach to mine closure planning, and doing it as early as possible in the life of the mine, is likely to lead to more effective mine closure and completion processes.
Central to any mine closure or completion process is the development of a progressive rehabilitation plan which ensures:
1. the post-mined landscape is safe and protected from the erosive forces of wind and water;
2. the quality of the surrounding water resources is protected; and
3. the agreed sustainable post-mining land use is established to the satisfaction of the community and government.
A final issue covered by the program which is of relevance to both Australia and PNG is community engagement and development.
Like other corporate citizens, mining companies need to be able to adapt and respond to changes in social behaviour, community expectations and political environments. They need to understand that what works in one community may be ineffective or even counter-productive in another. Moreover, the outcomes of some community development activities may not be known until many years later.
An example of positive engagement between a mining company and a local community is BHP Billiton’s $1.4 billion Ravensthorpe Nickel Project on the south east coast of Western Australia. The project is located in a farming district of less than 100 residents, many of whom have close and long-standing ties to the land.
The project team has established close relationships with local councils and the state and federal governments to provide multi-user infrastructure such as roads, water supplies and educational facilities. It also encouraged local and regional businesses to participate in the construction phase, and has established a Community Liaison Committee to provide a forum for the local community to discuss with the company concerns it may have about the impact of the mine on the area’s farming activities and about the influx of mining personnel and their families.
Another key contribution to the sustainable development debate in Australia was made by the Mining Minerals and Sustainable Development project, or MMSD. The project provided a forum, held over 15 months between December 2000 and March 2002, that allowed representatives from the mining industry, governments, unions, NGOs and indigenous groups to express their views on sustainable development in the mining industry.
The end result was a report entitled Facing The Future, which set out an agenda for future actions that included proposals for companies involved in the industry to make clearly articulated statements about their commitment to sustainable development principles, to introduce independent third party verification of their social and environmental performance and to improve their understanding of mining’s impacts on community health, economic well-being and cultural and social relations.
International Developments
I would like to look now at how various international fora have grappled with the issue of sustainable development in the mining industry.
One such forum is the APEC Ministers Responsible for Mining meeting, held most recently in Perth in February 2007 under the theme 'Improving Leading Practice Sustainable Development in Mining'.
At that meeting Ministers – including PNG’s then Minister for Mining, Sam Akoitai - agreed to 10 Mining Policy Principles , many of which related to sustainable development. For example, Ministers undertook to:
“Pursue polices that enhance the sustainable production, trade and consumption of minerals and metals, thereby improving the economic and social wellbeing of our people”
and also to
“Encourage, support and promote initiatives by the minerals and metals industry and stakeholders that contribute to national and international sustainable development goals”.
The meeting also focused on one of the most innovative recent sustainable development initiatives in the mining sector: Life Cycle Partnerships. These involve participants at each stage of the life cycle of products that are derived from the mining industry working together to ensure that materials and products are produced, consumed and disposed of in a responsible manner. When applying a life cycle approach, participants take responsibility for the product not only at the stage of production where they are directly involved, such as a mining company at the extraction phase, but also as the product moves through the later stages of its life cycle.
In May 2003, the International Council on Mining and Metals, or ICMM – which includes among its members such global mining giants as BHP Billiton, Rio Tinto and Placer Dome – agreed on a set of 10 principles aimed at enhancing its members contribution to the industry’s sustainable development goals.
Among the principles are:
i) integrating sustainable development considerations within corporate decision-making processes;
ii) seeking continual improvement in environmental performance; and
iii) contributing to the social, economic and institutional development of host communities.
ICMM member companies are required to report on their progress in implementing the sustainable development principles in accordance with the Global Reporting Initiative’s (GRI) Sustainable Reporting Guidelines and the GRI Mining and Metals Sector Supplement.
As some of you may already know, the GRI is a large multi-stakeholder network of thousands of experts who both contribute to, and use, its Sustainable Reporting Guidelines to measure their performance on sustainable development against a set of objective performance indicators and principles. The GRI Mining and Metals Sector Supplement is an adjunct to the Sustainable Reporting Guidelines that includes additional performance indicators specific to the mining industry.
The Minerals Council of Australia has developed its own framework for sustainable development, based on the ICMM’s ten principles, known as ‘Enduring Value – the Australian Minerals Industry Framework for Sustainable Development.’ A commitment to ‘Enduring Value’ is compulsory for full membership of the Minerals Council and non-member companies are also free to join.
Commitment to Enduring Value obliges council members to:
(i) progressively implement the ICMM Principles;
(ii) provide public annual reports using either the Global Reporting Initiative (GRI),the GRI Mining and Metals Sector Supplement or a self-developed reporting mechanism, and
(iii) regularly assess the systems they use to manage key operational risks.
As noted by the Australian Minerals Council, a commitment to sustainable development is good not only for affected communities and economies, but also for a company’s bottom line. There is solid evidence that companies with a firm commitment to sustainable development tend to be more profitable and can more easily attract and retain staff. In an age when intangible assets, such as a reputation for environmental responsibility, are becoming increasingly valuable, it is in all mining companies’ interests to act as responsible social citizens.
Mining in PNG
I would like now to turn briefly to the situation in Papua New Guinea.
Historically, mining has played a prominent role in the development of PNG’s economy. The minerals sector contributes around 15 per cent of PNG's gross domestic product and accounts for around 55 per cent of its export earnings.
It goes without saying that some mining projects in PNG have had a negative impact on the environment and on local communities, to the detriment of the mining industry’s reputation both within PNG and abroad.
However, recent changes to the taxation regime governing the mining sector, including the phasing out of the mining levy and reductions in corporate income tax rates, increases in global commodity prices and improvements to community consultation processes have focused international interest on PNG once again.
A new wave of exploration and mine development is now under way. We all know about the Ramu Nickel project but we shouldn’t forget other significant mining prospects that are either already being developed - such as the Hidden Valley and Wafi/Golpu gold and copper deposits in Morobe and the Simberi gold mine in New Ireland - or show great potential for future development, such as the Frieda River gold and copper deposit in West Sepik and the Mt Kare gold deposit in Enga.
It is important that PNG move into this new phase of exploration and development with sustainability as a priority. The sustainable development of these resources will ensure a bright future for PNG and its people.
PNG’s mining industry can already point to several sustainable development success stories. One example is the closure and rehabilitation of the Misima Gold Mine in Milne Bay Province. The Misima mine began operating in 1987 and was successfully deconstructed and rehabilitated in April 2005. Detailed planning for the closure and rehabilitation of the mine was undertaken many years before the last ounce of gold was poured. Risk assessments were conducted and suitable control measures were put in place prior to mine closure. An action plan was then developed and included in the site's closure plan. The success of the Misima mine closure has made it a shining example of sustainable development practice in PNG. Companies contemplating future mine closures in PNG will look to Misima as an example of how to do things right.
Conclusion
The bilateral relationship between PNG and Australia goes back many years. Australia sees the continuing development of this relationship as an important priority and considers itself a close friend and neighbour of PNG. Australia wishes to advance this relationship in a way that will make a fundamental and positive difference to PNG and its people.
Mining, minerals and metals are important to the economic and social development of both Australia and PNG. There is a need not just in Australia and PNG, but throughout the whole Asia Pacific region, for closer cooperation on the sustainable development of the region's mineral resources. We all face a significant challenge in ensuring mining activities go ahead in a way that will maximise value while minimising harmful impacts.
There is much that both countries can do to enhance the contribution mining makes to sustainable development including offering support to address the three key pillars of sustainable development – namely, social, economic and environmental development; enhancing the participation of stakeholders throughout the life cycle of mining operations; and fostering sustainable mining practices through the provision of financial, technical and capacity building support.
The policy environment needs to be dynamic to keep pace with an active and growing industry, and we look forward to further partnerships with PNG in the future sustainable development of our mining sectors. Continued cooperation and collaboration between the two countries is essential to the pursuit of sustainable development.
In the areas of market trends and transparency, regulatory approaches, mining sector initiatives, and life cycle partnerships and capacity building, there is much that our two countries can learn from one another.
Thank you.
End