Politics of Poverty

Company-by-company, project-by-project, no exemptions. Your move, SEC.

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1,000+ mining companies endorse mandatory disclosures of payments to governments.

Isabel Munilla is Senior Policy Advisor, Extractive Industries at Oxfam America.

A major announcement today in Canada constitutes the biggest endorsement of mandatory payment disclosure by extractive industry firms in the history of the Publish What You Pay movement. Today’s announcement is a landmark in the fight for transparency, and it also marks a rare day when companies call for new regulation en masse!

This unprecedented endorsement came in a new framework co-authored by the Mining Association of Canada, the Producers and Developers Association of Canada, and civil society groups Publish What You Pay Canada and the Revenue Watch Institute. These mining associations represent about 1,300 companies, including the world’s largest mining companies—BHP Billiton, Vale, Rio Tinto, AngloAmerican, Newmont, GlencoreXtrata, and Barrick Gold.

Canada's mining assets represented include properties, plant and equipment, deferred exploration expenditures,  based on audited annual reports. Compiled by Natural Resources Canada: http://bit.ly/LaKfD8
Canada’s mining assets above include properties, plant and equipment, deferred exploration expenditures, based on audited annual reports. Compiled by Natural Resources Canada: http://bit.ly/LaKfD8

The Resource Revenue Transparency Working Group recommendations emerged from over a year of rigorous consultation, honest negotiation, and a call on the Canadian government to require that the 1,600 mining companies listed on Canadian stock exchanges, which represent 60% of the world’s mining companies, publicly disclose their payments to all host governments. The working group recommended that this occur on a company-by-company and project-by-project basis.

Unlike some oil companies, the mining companies who are part of the announcement see no need for any exemptions. This seems to be a trend in the business community. The Canadian government heard the same call from investors with a total of $5.8 trillion in assets under management in August last year.

Heeding the call, the Canadian government committed to adopt mandatory reporting rules at last year’s G8. Given its commitment to the success of its mining industry, it’s obvious that the Canadian government will and should take these recommendations very seriously.

For us in the US, the mining industry’s endorsement of mandatory reporting in Canada is important because it comes as the SEC gets set to re-write its own extractives disclosure regulations after last year’s court ruling, which vacated the rules and ordered a re-write. (The Securities and Exchange Commission (SEC) also heard from US investors last September, this time with $5.7 trillion in assets.) Despite the court’s ruling, the underlying law and deadline are still in place and the SEC should quickly reissue a rule requiring public, project-level reporting on a company-by-company basis, with no exemptions.

The second largest capital market in the world, the European Union, endorsed this approach when they adopted disclosure rules last summer, and the UK is aiming to adopt their final regulations for the massive London Stock Exchange by the end of this year. Today’s announcement continues that trend, with the largest mining companies in the world, in essence, endorsing the SEC’s August 2012 transparency rules and calling on their regulators to hop on the train.

But it’s not just Canadian miners that support this approach. In a statement given to the Globe and Mail today, the Canadian Association of Petroleum Producers (CAPP) says it supports the principle of mandatory disclosure. (In case you were wondering, Canada is the third-largest producer of natural gas, the fifth-largest energy producer and the sixth-largest producer of crude oil in the world. Thirty-five percent of the world’s oil and gas companies are listed on Canadian stock exchanges.) According to the article, CAPP “says it would support reporting on a project-by-project approach, so long as there is some flexibility on the definition of what constitutes a project.” Well, that’s excellent, because that is precisely what the SEC required in its August 2012 rules.

The writing is on the wall. The SEC now needs to publicly announce a timetable for a new rule that serves the interest of the public and investors. But for those diehards out there who still don’t get what today’s announcement means for the SEC, here you go:

(1)    The economic footprint of the Canadian mining sector, and companies listed on Canadian exchanges is huge.  Almost 60% of the world’s mining companies are listed on Canadian exchanges. In 2011, the Toronto Stock Exchange handled 90% of the world’s mining equity transactions. The footprint of Canadian companies in foreign markets is also significant. According to the Canadian government, Canadian mining companies have over $200 billion invested in 1000 projects spanning 100 countries, with $31.6 billion of investment in Africa alone. (Need more stats on the scope of Canada’s mining sector? See here.)

(2)    There are over 150 Canadian mining companies that are cross-listed on US stock exchanges and will have to report under both the Canadian standards and the SEC rules. The recommendations released today were modeled after the SEC August 2012 rules, and specifically require public reporting. No exemptions and project-by-project reporting.

For over 10 years, the Publish What You Pay movement has been advocating for companies to shed light on the billions of oil and mining dollars flowing into government coffers. Despite pressure from bitter enders in the oil industry, a new SEC rule that will promote regulatory convergence and reduce reporting costs for companies will be welcomed not only by investors. Citizens around the world are working to stop the rampant corruption, waste, and abuse that prevents this money from pulling people out of poverty.

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