Governments around the world have become stricter on what they expect from mining companies.
Deloitte, in its 2017 Tracking the Trends report, explained that governments in a growing number of jurisdictions now demand greater levels of transparency from their domestic extractive industries.
Mining companies now find that they are under greater scrutiny than ever, with the governments in mining-focused regions wanting to confirm that the industry’s players are meeting certain demands, such as paying the right amount of tax.
Australia and most governments in mining jurisdictions have followed this trend by becoming stricter in their requirements of resources companies to pay appropriate taxes, while also reporting on other activities, to operate in their country.
As Deloitte states in the report, to ensure companies are paying their fair share of tax, governments will increasingly be reviewing not only their financial disclosures, but their non-financial disclosure as well to check for consistency.
In Canada, for example, its government has adopted the Extractive Sectors Transparency Measures Act (ESTMA), which requires mining companies to track and report payments made to governments of more than C$100,000, including taxes, royalties, fees, production entitlements, bonuses, dividends and payments for infrastructure improvements.
These demands from governments are being matched by the investment community, which expects companies to report more than just their minimum requirements and deliver more coverage of material issues.
This includes disclosure of sustainability reporting, environmental impact reports, carbon emission reports, corporate social responsibility reports, labour and working conditions, community work health and safety guidelines, and more.
Deloitte Global Mining Tax Leader James Ferguson summarises this new situation for the mining industry in the report.
“Mining companies are coming to terms with a step change in the reporting environment, which is no longer confined to financial disclosures. True transparency enhancements are turning out to be more complex than some companies expected, raising strategic aspects that warrant executive level attention,” he said.
Deloitte recommends that mining companies adopt an integrated approach to reporting to ensure they are delivering the right information to these governments.
Nicki Ivory, Deloitte Australia’s national mining lead, said these reporting demands were putting massive burden on internal systems at mining companies, reinforcing the emphasis on the digital projects that many are either implementing or considering.
“Historically we don’t have this digital mine where all the systems are integrated – the truth comes out when you put a request into the data base,” Ivory said.
“There are different systems putting out different numbers, and companies are really grappling with if what they are reporting is right.
“It is really important that mining companies get this right for their social licence to operate. They need to not only get their financial number right but now their non-financial numbers as well.”
Ivory said the disclosure challenge placed even more importance on how mining companies implement new technology systems to transform their operations into digital mines.
How these systems integrate, however, would determine the effectiveness and accuracy of what the company’s report to governments, Ivory added.
“This ties in beautifully with the digital mine concept because when you implement an integrated technology system with everything linked the reporting becomes very easy,” Ivory said.
“It is very easy to pull out the reports that you require, whereas it becomes almost impossible when you have a legacy set of systems that don’t talk to one another.”
According to the Deloitte report, mining companies should assess if their systems are “sufficiently robust” and have the capacity to generate country-by-country disclosures for various purposes.
The miners’ internal processes and technology solutions must ensure consistent data measurement and reporting, treating financial and non-financial disclosure with same rigor in the process.
While the major miners moved on the digital implementation to strengthen their systems many years ago, and now mostly have efficient reporting processes in place, the junior and mid-tier sectors are still working on or considering these projects.
Ivory said Deloitte was working with many companies in this part of the industry to advise them on how to execute the projects.
“We’ve been having this discussion with the junior and mid-tier miners – they don’t need a big bang digital mine,” Ivory said. “We ask them what are the things that can actually make a big difference to an organisation and then say focus on those first.
“For juniors looking to start they are probably not going to put in all the wiz bang stuff out in the field. The widgets and gadgets are nice to have but they are pointless if you can’t harvest the data and do something with it.
“They are better off starting with their core systems and then adding more pieces to them over time.”
Deloitte offers other strategies to help companies to adopt an integrated approach to reporting, including to standardise information.
According to Deloitte, companies must ensure their financial reports remain consistent on a global basis, and that their non-financial disclosures align with their regulatory disclosures.
Deloitte also recommends that miners consider the benefits of over-reporting, adding that some companies may choose to release voluntary disclosures to supplement mandatory ones to provide greater context for their actions from a policy perspective.
This article also appears in the December edition of Australian Mining.