The future of responsible mining: Trust, standards, and consolidation

Keynote speech (as written) to the 34^th BMO Capital Markets Global Metals, Mining & Critical Minerals Conference
Rohitesh Dhawan, President and CEO, ICMM 

But if 2024’s trend and speculation of sector consolidation is anything to go by, it will soon represent one global behemoth called “BH-GlenRianglo! Which co-owns mines with Teck32. That are operated by NewBarrickAshanti! It’ll sure make my life easier to manage 3 all-powerful CEOs compared to a Council of 24 trying to eat each other… I’m joking of course, before the anti-trust lawyer comes for me. 

Besides M&A (mergers and acquisitions), there’s a different kind of Consolidation happening in the sector that you as investors may not be aware of but really ought to pay attention to. It is the Consolidation of Standards of responsible mining. It is less exciting than a bidding war, but arguably more important to the future of the sector, especially in present times. Let me explain.

There are an estimated 25,000 mining companies globally operating 30,000 mine sites. Between 10 and 20 percent of those are listed. The 50 largest of those have a combined market cap of approximately $1.3 trillion. This is half of the value of Alphabet, and a third of the value of Apple. Many people, most notably Gary Nagle, have stood right here in previous years and highlighted this almost unbelievably low rating of arguably the most critical sector on Earth.

There are well-known reasons for this. Mistiming supply growth, poor capital allocation, and overpaying for acquisitions. I’d argue there’s one additional and often misunderstood reason for the sector being poorly rated. And that’s the bad reputation of the sector, based on both real and perceived issues related to mining’s impact on society and the environment. That poor reputation is costing you as shareholders and short-changing responsible companies, but we might be at the cusp of being able to change that in a major way – and each of you is critical to making that happen.   

Exactly two years ago on this very stage, I shared with you that the mining industry was ranked last in the public’s perception of the extent to which we fulfil our responsibilities to society. This was based on a global poll conducted by Globescan in 31 countries – a study they’ve done every year since 2001. The results for 2024 have just been released, and I’ve got good news and bad news for you.

The good news is that the perception of mining has improved every year since 2021. Because I can see the ICMM Chair, Tom Palmer in the audience and my performance appraisal takes place later this week, I’d just like to point out that the improvement in reputation each year for the last 4 years matches exactly to my time at ICMM! Just kidding of course – as you all know better than anyone, correlation does not mean causality.

Now for the bad news. We are still ranking last of the 18 sectors in the study – below oil & gas and alcohol. Breaking it down by country, there were notable moves from last year. Our reputation improved further in countries where we were already relatively popular, particularly Saudi Arabia, China, and Indonesia. Interestingly, one of the biggest declines was right here in the USA. I should point out that Chile is not included in this list but having done special deep dives in previous years, I can confirm that Chile tends to be among the countries where mining is rated most favourably.

Now, I’ve seen national polls from different pollsters in places like Canada and Australia which show large domestic support for mining. Experts say that these two contradictory things can both be true. Depending on how the question is framed – you can get diametrically opposite results. For instance, people can believe that we don’t fulfil our responsibilities to society but still support us, driven by local jobs.

Keeping these methodological quirks aside, the bottom line is this: mining has a reputational challenge, and that’s bad for us as companies and bad for you as investors. It means challenges and higher costs in getting the permits, people, and most importantly, the social license to operate that our business depends on. All things being equal, this lowers the expected risk-adjusted returns and dampens enthusiasm for the sector.

So, what can, and should we do about it? Conventional wisdom says we should tell mining’s story better by helping people understand the importance of minerals, and the responsible ways they can be produced. I agree, and this will be a key focus of ICMM going forward. But this isn’t enough, or even the most important bit, which is this:

As a sector, we need to do better in managing the impact we have on others. This is true for leading companies like ICMM members, and it is even truer for less advanced companies. And if we can’t achieve that because there will always be enough of the 25,000 companies globally that don’t act responsibly, then we need to more clearly distinguish between those that are responsible and those that aren’t.  

Doing both those things – managing our impacts and drawing a clear line of responsible practices – depend on one thing: clear, consistent and credible Standards. These have existed for 2 decades, yet only a tiny proportion of companies adopt them – and dare I say, even fewer investors understand or care about them. If that doesn’t change dramatically, tens of thousands of companies will continue operating to less than responsible Standards, causing potentially serious harm to people and the environment and jeopardising the reputation of the whole sector – and with it the returns for investors.

And therefore, ICMM – together with the World Gold Council, Copper Mark and the Mining Association of Canada – have answered the call from society to consolidate our individual responsible mining Standards into a single system. We are four of the most widely used schemes, with decades of experience, hundreds of mine sites, and thousands of data points. By bringing together the best of the four systems, we will create a blueprint for responsible mining that any company, producing any commodity, anywhere in the world can follow without undue burden. It will be managed by an independent entity whose Board will be drawn from a variety of stakeholders who share power equitably – which is a pre-condition for building trust in the system and the sector.

The Standard will cover 24 Performance Areas ranging from human rights to Tailings. It will be broken down into 3 levels – Leading Practice for the companies that want to show leadership, Good Practice, which is the expectation of all companies, and Foundational Practice, which is the entry point for less mature companies.

This last point is crucial; one of the reasons that many companies don’t follow Standards is because there isn’t the first rung of the ladder, they can climb on the way to becoming a responsible operator, so they don’t try at all. This Consolidated Standard fills that gap, which is potentially game changing for driving impact at scale.

Will this change the reputation of the sector overnight? No, but it will put us on a much better footing and unlock value for you as shareholders. That’s why I didn’t come here simply to tell you about it, but to ask you to help make it happen – it is after all in your direct interest to do so. There are 3 things I ask of you:

1. Familiarise yourself with the Standard – I guarantee it will add to the quality of your engagement with companies, who are taking this very seriously at the CEO level. The best place to familiarise yourself with it is www.miningstandardinitiative.org
2. Ask your investee companies if they are aware of it and encourage them to adopt it once finalised – which should be in the next 12 months.
3. Tell asset owners, governments and others about it and ask them to get behind it – as proof of a sector that is changing and taking the initiative to reduce the confusion in sustainability Standards and deliver real value for all stakeholders.

The consolidation of Standards is one of the 3 focus areas of ICMM’s new Strategy from 2025 onwards. The other is to drive continuous improvement in safety, decarbonisation, nature, tailings and social performance. And finally, to improve trust in mining through dialogue and engagement with our stakeholders, particularly through data on mining’s impact on and contribution to sustainable development.

Much of the next two days will be spent on whether consolidation in the sector is a good thing. I hope you’ll agree that the consolidation of mining Standards is unequivocally a good thing, and that you will get behind it. And if that fails, well then, it’ll be a problem for BH-GlenRianglo to solve!