Mining News

Recommendations to increase transparency in disclosure of payments to government released by industry and NGO partnership

Posted by Alana Wilson on 1/22/2014 10:49:10 AM

By Alana Wilson

On January 16th, the Resource Revenue Transparency Working Group released its recommendations on Mandatory Disclosure of Payments from Canadian Mining Companies to Governments. The working group was formed by the Mining Association of Canada, the Prospectors & Developers Association of Canada, Publish What You Pay Canada, and the Revenue Watch Institute with the overarching goal or establishing greater transparency in the mining sector in Canada and overseas.

According to their report, approximately $3 trillion in mineral, oil and gas resources are exported worldwide and these revenues have the potential to catalyze economic development, spur growth, and reduce poverty. Unfortunately, this potential is often not achieved in many cases due to poor governance, corruption, or mismanagement of the collection and use of these resources leading to slower growth and in some case concern for a ‘resource curse’.

secret payments and a lack of clarity around who benefits from resource extraction breeds mistrust between communities, governments and companies, generating unstable business environments, threatening the security of supply, and even, in extreme cases, contributing to violent conflict.

Greater transparency surrounding the collection of resource revenues can help to address these issues, and improve the development outcomes of resource extraction for billions of citizens in oil, gas and mineral producing countries. In particular, improved revenue transparency can help to provide citizens and communities with the information necessary to hold their governments accountable; deter corruption and bribery; inform public debate on resource development; assist investors to properly analyze the financial and political risks inherent in extractive sector development; and help companies secure a social license to operate.

The Canadian mining sector can play an important role in this issue since almost 60% of the world’s mining companies are listed on Canadian stock exchanges, with the TSE alone handling more than three quarters of global public mining financings. Many of the large Canadian mining companies listed on the U.S. stock exchange must already disclose payments they make to government as a result of the “Dodd-Frank” act, and European countries recently passed new payment reporting requirements into law as well. The working group supports a move towards a globally consistent reporting standard to avoid creating undue reporting burdens for companies listed in multiple markets, and therefore recommends incorporating appropriate equivalency mechanisms into its framework.

Other key recommendations from this group:

  • That disclosure requirements for Canadian mining companies be mandatory, not voluntary
  • Implementation would take place through securities regulation with a strong equivalency provision to align with other jurisdictions (such as the USA and EU)
  • Disclosure requirements need to include explicit recognition and acceptance of equivalent reporting regimes
  • Equivalent regimes include the current requirements of Section 1504 of the U.S. Dodd-Frank Act and those established by the EU Transparency and Accounting Directives
  • Reporting framework would require all mining companies that are reporting issuers under Canadian securities legislation disclose certain types of payments made to Canadian and foreign governments, including payments made to national and sub-national authorities, that exceed or meet a minimum reporting threshold in each country of operation and for each project
  • The reporting framework would include not only parent companies, but their subsidiaries and any other entities over which the company exerts control or influence, be it directly or indirectly
  • Companies would disclose information disaggregated by project in an annual securities filing made available to the public in full.

One issue still to be resolved is the disclosure of payments made to Aboriginal governments. This issue is has been highlighted in previous posts and, according to a footnote in the report, the working group did not address payments to Aboriginal governments but is aware that such payments are being considered for inclusion in the process currently being led by Natural Resources Canada.

Regardless, the release of the working group’s recommendations provides greater clarity on how disclosure could be implemented in Canada. The partnership also shows how NGO’s and industry can work together to address global issues collaboratively, to the benefit of all parties including the citizens of countries receiving revenues from mining, oil and gas who will benefit from greater disclosure and information on the management of these revenues.

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