Enduring Community Value From Mining: Tracking and

Mapping The Flow of Money from Mines

Dr Boyd D BlackwellDr Boyd D BlackwellPost-doctorial Research Fellow

BEPP, UNE and CRC REP

Why a CRC for Remote Economic Participation Research ? Source: http://crc-rep.com/research Accessed

17 May 2012

Why a CRC for Remote Economic Participation Research ?

85% of area BUT 4% of population(Chany 2008)

Why a CRC for Remote Economic Participation Research ?

Mineral Deposits and Operating Mines, Australia

Mineral Deposits and Operating Mines, Australia

Nth of Tropic of Capricorn 5% of Australian population produces 50% of nation’s GDP (with only 12 representatives in Canberra) (Young C

2012, pers. comms, CEO NTCoC, Darwin)

CRC REP Research Programs and subprograms

3 Key research programs:

1. Regional Economies2. Enterprise Development3. Investing in People

Why a Regional Economies program?

• Goal – build robust regional economies in remote Australia by providing:• Sustainable employment• Enterprise opportunities

• Will use partners in government, industry and communities:

Source: http://crc-rep.com/research Accessed

17 May 2012

• Will use partners in government, industry and communities:• Rio Tinto• Newmont Asia Pacific• CSIRO (Minerals Futures)• State and Territory Governments for Western Australia, South

Australia and Northern Territory• Minerals Council of Australia• Communities engaged through individual projects

CRC REP Research Programs and Subprograms

3 Key research programs:

1. Regional Economies2. Enterprise Development3. Investing in People

3 sub-programs within Regional Economies:3 sub-programs within Regional Economies:

1. Population Mobility and Labour Markets2. Enduring Community Value from Mining and3. Climate Change Adaptation and Energy Futures

Enduring Community Value from Mining

1. PhD – Impact of mine lifecycle on communities and regions and building resilience in mining cycles – Mine Lifecycle Planning• Supervision• Assoc. Prof. Neil Argent – Geography, UNE

2. PhD – Corporate Social Responsibility Strategies• Prof. Guy Robinson, UniSA

3. PhD – Mining royalties, taxes and State Agreements for resource communities in remote locations. communities in remote locations. • Western Australian Royalties for Regions

4. Post-doc – Track and map economic impact of mine operation expenditure

5. Principal Research Leader - Long distance commuting and automated mine sites • Compares socio-economic costs and benefits of different workforce

arrangements6. Synthesis

Background to CRC REP and UNE relationship

• 5 year post-doctoral research project, • began Nov 11• Arrived with family in Armidale Jan 12

• CRC REP pays my salary and UNE pays my on-costs• Based in BEPP, UNE• Report to:

• Prof. Brian Dollery – BEPP, UNE, Armidale• Prof. Fiona Haslam McKenzie - CU, Perth• Prof. Murray McGregor – Head CRC REP Research, CU, Perth

• Fiona leads Regional Economies Program

My Project – Background – Goals and Objectives

• Goals and objectives:• track and map the economic impact of mine operation expenditure• demonstrate how money flows from mine operations and • demonstrate whether current public policy and community

investments around mines reap the anticipated benefits• Examine

• who benefits from mine operation expenditure• who benefits from mine operation expenditure• the community costs associated with a mine• the spending patterns of mine workers• local leakage and how that impacts on the long-term viability of

a community • public investment in mining communities and

• whether enduring benefit is a consideration• the local capacity for increased local expenditure..

My Project & the Goals of Regional Economies Progra m?

• Will use partners in government, industry and communities:• My project is based in the Newmont Tanami mine

• Met with Head of Corporate Social Responsibility Asia Pacific and site manager in April

Source: http://crc-rep.com/research Accessed

17 May 2012

• Last week met with NT government• Department of Resources• Treasury• Business and Development• Mining Council of Australia• Chamber of Commerce• Inpex

• Closest communities are around 350kms from the mine:• Yuendumu to the South-South East• Kalkarindji to the North

Economic Participation?

Methodology – primary study site and communities NT

Tanami Newmont

Source: NT

Government 2012, p.

118

Newmont Mine

Yuendumu Community

Methodology

• An input-output model will be developed • to estimate regional economic accounts to gain an insight to the

functioning of a regional economy. • Actual expenditure will also be mapped using GIS

• to provide a graphic income flow generated from the mine operations and assessment of regional leakages and loss of multiplier potential.

• Face-to-face interviews will be conducted with mine workers at Tanami• Face-to-face interviews will be conducted with mine workers at Tanami• to develop an understanding of their spending patterns , both where

they spend and what they spend on.• to provide an indication of the willingness to invest for the

future and hence the enduring value derived from the expenditure

• Strong possibility and case for a comparator site• Tanami ‘first cab off the rank’

Findings so far – 1 Input-Output

• Can not simply scale down National ABS accounts to NT and regional level

• not be sufficient (NT Treasury)• see major gaps, missing data and errors• NT economy small and highly volatile• NT Treasury use a micro-based growth model for their

growth forecasts• Small population in a relatively large area• Small population in a relatively large area

• Theoretically confirmed by regional and geographical economists• Means including surveys as part of methodology is critical• ACILTasmin (2009) and Ivanova and Rolfe (2011)

• Examples at NT and regional level• Ivanova and Rolf in regional Qld (not remote)

• Denniss (2012) also highlights pros and cons of I-O versus Computable General Equilibrium (CGE)

• I-O – multipliers over exaggerated• CGE – reverts to LR equilibrium

Findings So Far –2 Royalties in NT

2009-10 NT:• Produced $3.5 billion AUD of minerals• Gov’t Collected $146.6m in mineral royalties

= 2.33’ % •Gold production = $331.4m•2.33%”*$331.4m = $7.62m•ACIL Tasman (2009, p. B2) Granites Gold from Newmont is on of four major producers•Assume most of this Royalty is paid by NewmontRoyalty is paid by Newmont•Other producers are for:

• Manganese •Lead-Zinc and •Bauxite

•Accounting Profit based royalty system (Guj 2012)

•Efficient and equitable from production viewpoint•BUT Administrative burden Source: Guj 2012, p. 11

Findings so far – 3 Market and cultural incongruence

• Hannah Bell (1998) Men’s Business, Women’s Business• Aboriginal culture in NW WA

• Cultural heavily connected from birth with the physicalenvironment;

• Rhyme and reason for various cultural traditions e.g. predetermined marriage, men taken away from women in adolescence etc.

• ‘Pattern thinking ’• Sharing – e.g., Humbug

What does this mean for I-O modeling?• Sharing – e.g., Humbug

• Western culture juxtaposed:• Distinction between men and women’s business blurred;• Extensive freedoms• Market and materialism – self interest paramount• Physically disconnected from natural environment from birth• ‘Pyramid thinking ’

• Clash of cultures and the need for ‘two way thinking ’• Empathy• Bush University, Caulfield Grammar exchange

for I-O modeling?

Findings so far – 4 Difficulties faced in Remote Aus tralia

• Tyranny of distance• Poor resources

• Limited human capital (?)• Limited essential services (health, water, power, roads etc.)• Disconnected socially, economically (REP), institutionally• Poor information and communication

• In many and large tracts of Australia NO local government • Blackwell (In-print) – idea of Prof. Dollery

Forget economic modeling, more basic requirements?

• Blackwell (In-print) – idea of Prof. Dollery• Indigenous remote communities difficulties compounded and complex :

• Illiteracy (re: QuickSmart program run from Prof. Pegg UNE)

• Poor Health (NT MCA 2012, pers. Comms)

• Cultural ‘dislocation ’• Cultural clash – pyramid versus pattern thinking -> ‘two way thinking’

• Informal or ‘grey’ economy (DBE 2012, pers. Comms):• Gambling through card games (very popular)• Alcohol (prohibition) and other drugs• Others?

Findings – 5 Sui Generis: Unincorporated Australia Blackwell (In-print) – idea of Prof. Dollery

• One group of a particular kind: in a class of its own• Unincorporated Australia

= not incorporated into the jurisdiction of a local government• Usually managed by the state/territory or a hybrid version of

management• Likely to have a high proportion of Aboriginal people

• Local land councils• Local land councils• Non-members

• No locally democratically elected and accountable representatives• Other interests

Forget economic modeling, more fundamental ethical requirement?

Findings – 7 Assessment ApproachesBlackwell (In-print)

• Given difficulties and hurdles for remote Australia• Limited resources, limited information, tyranny of distance

• Given no local government – what’s the solution• NT incorporated into local government large areas of unincorporated

territory• State of play, socially, economically, environmentally?• Range of assessment methods with pros and cons:

• Strategic Environmental Assessment (early)• Strategic Environmental Assessment (early)• Cumulative Impacts Assessment (synergistic, complex)• Integrated Assessment (trans-multidisciplinary)• Social, Economic, Environmental Impact Assessment (disciplinary)• Cost benefit analysis (project versus social, $ unit of measure)• Cost effectiveness analysis (not max net benefits, but easier)• Multi-Criteria Assessment (depends on criteria and weightings)• Risk Assessment (institutionally hamstrung)• Citizen Juries (democratic – expertise?)• Remote sensing and GIS (can physical layers tell social story?)

Conclusion and future activitiesSummary• Input-output not simple and needs to account for:

• Informal market economy in community• Significant leakages captured through survey micro based approach• Incongruence between aboriginal culture and market based

philosophy• Sui Generis of remote Australia

• NT is a unique culturally, socially, economically, environmentally, institutionally and politically – and this needs to be accounted for the institutionally and politically – and this needs to be accounted for the approach – remote NT even more so.

Next steps• NT I-O model and scale down• Build funding case for second case study location• Survey design• Ethics approval (drafted)• Into Field• Supplemented scaled down model from field work• Apply model to answer policy questions

References

ACIL Tasman (2009) Economic Impact Study of ERA’s Operations in the Northern Territory.Prepared for Energy Resources Australia. ACIL Tasman, Darwin.

ACIL Tasman (2006) The Spiritual Role of Gender in the World’s Oldest Culture. Inner Traditions, Rochester, Vermont.

Bell HR (1998) Men’s Business, Women’s Business: The Spiritual Role of Gender in the World’s Oldest Culture. Inner Traditions, Rochester, Vermont.

Blackwell BD. In-print. Local government in remote and unincorporated Australia: Sui Generis? Public Policy. Special Issue: Local Government and Regional Governance.

Chany F (2008) Addressing Australia’s Disconnectedness. Recorded presentation. Thursday 25 September 2008, EDU, Joondalup Campus. Accessed 17 May 2012 http://www.ecu.edu.au/about-ecu/vice-chancellor/distinguished-orator/addressing-australias-disconnections

Dennis R (2012) The Use and Abuse of Economic Modelling in Australia: Users’ Guide to Tricks of the Trade. Technical Paper No. 12, The Australia Institute, Canberra.

Guj, P (2012) Mineral Royalties and Other Specific Taxes, International Mining for Development Centre, Perth, pp. 11-12.

Ivanova G and J Rolfe (2011) Using input output analysis to estimate the impact of a coal industry expansion on regional and local economies. Impact Assessment and Project Appraisal 29(4): 277-288.

NT Government (2012) Northern Territory Economy - Mining and Manufacturing. NT Budget Papers 2012-113. NT Government, Darwin.