2. Lifting the Veil Exploring the Transparency of Canadian Extractive Companies 3. Motivation
Establish a working agenda for PWYP Canada
Improve general understanding of transparency in Canada
Help groups, such as PWYP Canada, to utilize publicly availableinformation to hold companies accountable for their actions and decisions.
4. Research Question
What regulations/laws govern disclosure in the extractive industries in Canada?
Map the regulations/laws governing disclosure of information amongst Canadian extractive companies
Reserve, Pricing and Cost Data
Payments to host governments
Contracts/Leasing/Rights(not discussed in this presentation)
Focuses solely on public companies
Looks at disclosure guidelines and not industry practices
Focus solely on Canada
7. Findings 8. Conclusions
Canada has relatively strong disclosure regulations, therefore, Canadian companies should be quite transparent.
Despite strong regulations, actions can be taken to improve Canadas disclosure regime
based on the concept of materiality
variation between sectors
Disclosure aimed at shareholders and not stakeholders
Publicly available information is underused by NGOs and other stakeholders
9. Implications for PWYP Canada
1. Increase PWYP Canadas engagement with the TSX, the provincial stock exchanges, andCanadian accounting organizations.
2. Support domestic and global initiatives which would improve the clarity of Canadian reporting and which would increase the level of disclosure in Canada
3. Play a role in helping to disseminate information disclosed by companies and made publicly available through SEDAR
4. Address gaps in the legislation and advocate for mandatory and not material disclosure
10. Future Research
Research transparency in practice in the Canadian context.
Compare what companies are required to disclose with what they actually disclose.
Compare disclosure regulations in different countries.
Conduct similar research in other countries with influential stock exchanges
11. What is available and where to find it? 12. Country-by-Country Disclosure
Generally, information is disclosed on a country-by-country or mine-by-mine basis
Oil and gas companies can receive an exemption to disclose by foreign geographic area for operations outside of North America (rarely used).
Companies listed on two stock exchanges can apply for an exemption to file in accordance with another exchanges regulations (this can affect country-by-country based disclosure)
Only information consideredmaterialis disclosed.
AMaterialfact or change consists on something that has or could be expected to affect the share price
Materiality is a subjective concept, that is interpreted by companies
Professional advice and guidance is relied upon to determine what is material
Smaller companies must disclose more than larger companies
14. Reserve Data
Regulations NI 51-101, 43-101, 51-102.
Documents to look for Annual Reports, Annual Information Forms, Technical Reports
There is a high level of disclosure of pricing, production, and cost data.
Provides information about future revenue flows of a particular project
Provides information about how long an extractive project might last
15. Reserve Data Contd
When production and pricing data alongside average costs are examined a rough estimate of the revenues of a project can be generated
Production X Price - Costs = rough estimate of revenues from a particular period
16. Example: Banro Corp.DRC,Twangiza Property(Information taken from the 2009 Feasibility Study/Technical Report available at www.sedar.com)
Total Proven and Probable Reserves- 4.54 million ounces of gold.
Capital costs - US$377.43million.
Average annual production of 312,979 ounces of gold over the first three years of the project at average operating cash costs of US$261 per ounce.
Gold price of US 850.00/ounce
Price of gold/ounce -Operating costs/per ounce X Production = revenues (after costs)
850 - 261 X 312, 979 = 184,344,631
Life of the mine 20.86 years.
17. Payments to Host Governments
Regulations NI 43-101, NI 51-101, NI 51-102
Look for Annual Reports, Annual Information Forms, Material Change Reports, Technical Reports, and MD & A reports.
Significant information is available concerning royalties and tax payments made by extractive sector companies to host governments.
Companies with mineral properties are required to provide more detailed information concerning royalties, taxes, and any other government levies applicable to a project, than is required of oil and gas companies.
When royalties paid per quarter/per barrel/per day are disclosed alongside average daily production rates (different in each quarter) the amount of royalties paid by a company to a host country can be approximated.
Canadian Natural Resource Limitedin the Ivory Coast
Average daily production: 28.5
Royalties per barrel/per day in that quarter: $3.70
Number of days in a quarter: 91
Royalties Paid to the Ivory Coast: 9 617 040
First quarter 2008
19. Example: Banro Corp.
The Twangiza Property is not subject to any royalties, back-in rights, payments or other agreements or encumbrances.
10 year tax free holiday, after 10 years taxes of 30%
5% administrative tax on the importation of machinery and consumables
Est. 4 million over project life span
In the 11th year Banro estimates that they will pay 13 694 000 in tax. This will steadily decline over the next 10 years reaching just over 10 million in the 20th year of the mine.
20. Banro contd
Employment -estimate a need for 200 local, expatriate and senior level staff
Local labour costs of 822, 464/annum
Expat costs of over 1 million for the first four years and 411,000/annum for the next five years
21. Social and Environmental Factors
Regulations NI 51-101, NI 43-101, NI 51-102, TSX Policy on Timely Disclosure.
Information that might be available
Risks and uncertainties believed to be material
Including political and social risks
Environmental and political issues that can affect property development
Social and environmental issues policies fundamental to a companies operations
Ex.Human rights policies
Waste disposal, liabilities
22. Social and Environmental Factors Contd
Mining companies are required to disclosure far more social and environmental information than oil and gas companies.
Mining companies can rely upon external experts with knowledge specific to social, political and environmental issues,
Must include a discussion of the political, legal, and environmental issues that can effect resource estimates.
23. Banro -Social and Environmental Policies
6,000 per annum for Community relations
20,000 per annum for years 1 to 4 for training, 13, 700 for years 5 and up
5,500 per annum per month for environmental monitoring, nursery upkeep
Environmental assessment -aim to follow Equator principles standards
Banro commits to hold public disclosure meetings to discuss the draft of the environmental and social impact assessment before it is released.
24. Banro Contd
Anticipates social conflict over resettlement.
Cost of the resettlement actions plan is estimated to be 13.2 million.