WTW Mining Risk Review 2017 PDF

Mining Risk
Review 2017
The future of mining is now
1 willistowerswatson.com
Mining Risk
Review 2017
The future of mining is now
Introduction.....................................................................................................................................3 Part two - mining risk mitigation and

Editorial: the future of mining is now...............................................................5 transfer issues
Hot work, hidden dangers: what can be done?..............................67
Part one - four challenges for the mining BEPS, benefits and big data: the mining captive of the
industry future.................................................................................................................................................... 72
Challenge one – operating within a volatile geopolitical The global mining insurance market: towards a turning of
landscape the tide?............................................................................................................................................76
The Trump “bump”: how it’s shaping the US mining

industry’s future......................................................................................................................16
North American surety: protecting your reclamation

liability............................................................................................................................. 20
Challenge two – developing new stakeholder relationships
What communities really want: rethinking local

engagement................................................................................................................................24
Addressing social disorder: is your strategy good

enough?........................................................................................................................ 28
Challenge three – thriving in the new digital world
Digital digging: the future of work in the mining

industry.............................................................................................................................................34
From technology to people: the new frontier in mining

cyber risk..................................................................................................................... 39
Challenge four – managing people risk in an age of

turbulence
Mining their minds: optimizing the employee

experience................................................................................................................................... 44
Black lung and compliance: the great divide................................50
Risk culture in the mining industry: why should it

matter?..............................................................................................................................................55
Total cost of lost time: a game-changing approach to

managing employee absence....................................................................60
Notes

Our Review uses a mixture of American and English spelling, depending on the nationality of the author concerned.

We have used capital letters to describe various classes of insurance products and markets, but otherwise we have used lower case to
describe various parts of the energy industry itself.
Mining Risk Review 2017 2
Introduction
Welcome to our Mining Risk Review This has served the industry well.
for 2017. The global mining industry is Amongst the wider spectrum of
going through a period of tremendous natural resources sectors, mining
change and, much like the oil and gas companies are seen as leading
sector, is experiencing unprecedented the charge towards digitalisation,
uncertainty and volatility. automation and remote operations.
Driven by robust growth in emerging

New frontiers produce
markets, the mining industry’s priority
new risks
in the post-recession era leading up
to 2011 was to grow volumes. This But as mining turns to more exotic
was achieved by applying capital, but locations in volatile geopolitical
perhaps without the cost discipline environments, and pushes technical
required. With the subsequent frontiers at depths of 3 km to access
cooling of the commodities super- more complex ore bodies while
cycle, the emphasis shifted to relentlessly reducing costs, the industry
bringing down cost and maintaining risk landscape continues to evolve.
margin as prices dropped. Demand for commodities such as cobalt
and lithium for batteries within consumer
Miners have risen to the challenge electronics, renewables and electric
– rethinking their risk profiles, vehicles adds to this trend, with miners
embracing technology and exploring being driven to newer geographies and
innovative ways of working in pursuit methods of production.
of greater efficiency and productivity.
Sitting above core operating risk is the
renewed focus on linking societal outcomes
to business success, such as workforce
safety, community engagement and
environmental sustainability. This is the new
license to operate, and no longer optional.
Societal outcomes critical to We at Willis Towers Watson strongly

business success believe that human capital risk and
asset risk are inextricably linked
Sitting above core operating risk is and should always be addressed
the renewed focus on linking societal together. Our mining experts would
outcomes to business success, such be delighted to discuss how you can
as workforce safety, community better manage or transfer your risks.
engagement and environmental
sustainability. This is the new license I hope you find the 2017 Willis
to operate, and no longer optional. Towers Watson Mining Risk Review
valuable and informative. Part one
The future of mining is now! focuses on four key challenges the
mining industry must address in new
So what next? We think miners have and innovative ways - geopolitics,
done a great job at creating their stakeholder relations, digitisation
future. But with it comes a new set and people; Part two focuses on risk
of questions, and indeed, risks. For mitigation and transfer issues.
example, how will the environmental
risk profile of the mining industry We would of course love to hear from
change as climate pressures increase you and receive any feedback that
over the course of the next decade? you might have.
Or, what will the mining workforce of
the future look like? While some of Yours sincerely,
the fundamental questions will remain
(for example: where will we find the
mineral deposits of the future or what
will fuel demand growth for the next
decades?) it is clear that the future of
mining is already here and the time to Thorsten Querfurt
respond to new risks is now. Global Industry Leader,
Natural Resources

Editorial - the future
of mining is now
Introduction - a challenging business environment!
There can be little doubt that the mining industry is undergoing a period of
transition that perhaps is unprecedented in its long history - at a time when the
industry needs to present a positive, progressive image to an investor community
that is increasingly focused on environmental concerns, particularly in the light of
climate change as well as recent mining losses.
Following a time of significant expansion during 2008-11, we have witnessed:

the slowdown in the global economy (as Chinese expansion has slowed)

the geopolitical upheaval in certain countries rich in minerals

the revolution in digital technology, the need to mine in increasingly remote
locations

the need to work more closely with both governments and local communities

the need to ensure the right skills are in the right place
These developments have produced have produced new challenges for the
industry, with a significant effect on its overall risk profile. No wonder managing
both people and asset risk now presents miners with a much more formidable
task than in the past.
Copper Price
2.97 US $/lb
23 August 2017
3.05
Increased copper prices in 2017
3
have provided a welcome boost
2.95 to the industry
2.9
2.85
Copper Price (US $/lb)
2.8
2.75
2.7
2.65
2.6
2.55
2.5
2.45
2.4
Feb 1 Mar 15 Apr 28 Jun 13 Jul 25
2017 2017 2017 2017 2017
Source: infomine.com
Select mining companies - capital expenditures (US$m)
18,000
Capital expenditure
15,000 in the mining
industry has reduced
12,000
considerably in
9,000 recent years
6,000
3,000
0
2011 2012 2013 2014 2015 2016 2017 est 2018 est
Vale Rio Tinto Anglo American Glencore
Note: est = Bloomberg estimate. Source: Bloomberg, BMI
Long lead times compound miner The future has arrived!

challenges
For mining companies in 2017, there
Although we are now at last seeing is no time to lose in evaluating the
some signs of a recovery, with some new industry landscape. The future of
commodity prices (notably copper) mining really is now – we are already in
showing a pronounced recent upturn, a new technological, legal regulatory
the difficulties that the industry faces and political environment. And that
remain compounded by the long lead means new risks and challenges are
times between the commitment to a making themselves known to mining
particular project and the mining of companies that perhaps had no need
the first minerals. By the time minerals to be considered in the past.
from a new project get to market,
the industry can be in a very different In this Review we therefore focus
place; this is certainly the case today, on four challenges that all mining
with projects that were commissioned companies should be addressing as
ten years or so ago coming into we move further into the second part
production at a time when, as a result of this decade.
of the industry slowdown, miners’
focus is on balance sheet repair,
retrenchment and cost optimisation
rather than on expansion.

Key Review articles: Challenge one – been introduced to increase black
operating within a volatile ownership and revenue contribution
The Trump “Bump”: how it’s shaping geopolitical landscape requirements, while in March
the US mining industry’s future – 2017 Tanzania imposed a ban on
Mining companies need to understand unprocessed ore exports, the latest
Fred Smith IV
the driving forces behind recent regulatory measure that threatens the
geopolitical changes, as they will be country’s mining industry growth.
North American surety: protecting your
crucial to future business development.
reclamation liability –
Tracy Tucker and Lois Innes Terrorism threat increasing
Resource nationalism a key issue
At the same time, the terrorist threat
Firstly, as the mining industry expands in some key geographies remains
further in to increasingly remote and constant, with mines continually
unknown territories, the issue of under threat of attack, while the
resource nationalism is becoming an rise of protectionism in some of the
increasing concern to many mining major global economies threatens the
companies. For example in South viability of the global supply chains so
Africa, a new Mining Charter has characteristic of this industry.
Key Review articles: Challenge two – But it is surely in the industry’s best
developing new stakeholder interests to work together with other
What communities really want: relationships stakeholders to develop a shared vision
rethinking local engagement – for the region in question.
Closely allied to grasping the issue
Tom Holliday
of geopolitical change is the need However, stakeholder pressures are
to develop and enhance overall not just coming from local communities.
Addressing social disorder: is your
stakeholder relationships, due to low Regulators all over the world are
strategy good enough? –
prices and increasing government expecting companies to comply
Tim Holt
interference. Maintaining any current with a whole range of environmental
relationship impasses is no longer an disclosures, while investors are
option, either for the industry or for becoming increasingly interested in
governments; indeed it seems clear environmental issues such as a mining
that several countries are actively company’s carbon footprint and other
looking to bring the interests of related data sets.
divergent stakeholders into alignment.
Don’t take your SLO for granted!
Co-operating with governments,
local communities and regulators In short, no mining company can
take its Social License to Operate
That may mean co-operating (SLO) in a particular region for
with governments to invest in the granted and new strategies may
infrastructure required to sustain the well have to be generated to ensure
industry and to re-establish goodwill renewal in some key regions.
with local populations. Of course, there Without a renewed stakeholder
will always be some areas where local engagement strategy, some miners
hostility to the mining industry will never may find that their SLO is revoked;
be completely erased; resolving these surely everything possible should be
conflicts will require much more than done to avoid this at all costs.
simple investments in remote projects.

Challenge three – companies themselves. Now that Key Review articles:
thriving in the new digital world “digital digging” is already becoming a
reality, some tech companies now have Digital digging – the future of work in
Towards more efficient and their own in-house natural resources the mining industry -
collaborative workforces businesses. Examples include: Ruchi Aurora and team
Technological change is now the new
Goldcorp has partnered with IBM From technology to people: the new
normal across the whole business for artificial intelligence capability, frontier in mining cyber risk -
landscape, and the mining industry is Microsoft for virtual reality Glyn Thoms
no exception. The future of mining is technology and Accenture for big
truly digital; moreover, it will support data analytics, none of which are
efficient and collaborative workforces, traditional mine services firms.
encourage centres of excellence in
data management and allow miners

As of September 2016, BHP
Billiton’s relationship value as a
a shared service mix of onshore,
customer with General Electric
offshore and robotic workers.
totalled US$43.5m.
Embracing new technologies
In 2016, top copper miner Codelco
increased its ‘innovation budget’
It is hardly surprising that miners by 25% year-on-year to US $75m
are embracing new technology and in December 2016 created
and deploying it wherever possible. the Codelco Tech unit to drive
Examples abound; driverless trucks, innovative efforts.
sensors and drones; real time
In September 2016, top gold
modelling; geo-coding; and digital miner Barrick Gold partnered with
tagging of inventory critical to efficiency Cisco to develop a flagship digital
of just in time supply chain models. The operation at the Cortez mine
final frontier may be the replacement of in Nevada which will inform the
human shovel and drag line operators eventual global rollout.
with a learning, intuitive machine.
(Source: BMI)
Competition from tech firms

So now that tech firms can own
If only it was all good news for mining the mechanical, financial and
companies. Instead, they are now intellectual capital required, it may
likely to face competition from the very not be long before the current
same companies that have created mining business landscape
all this digital expertise – the tech becomes significantly disrupted.
Technology to extend the value of each dollar
Select miners - total capital expenditure (US$m) & average age of assets (years)
Technology is
extending the shelf
60,000 11
life of mining assets as
overall capex reduces
10
40,000
9
8
20,000
0 6
2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Capex (LHS) Average Age of Assets (RHS)
Note: Data based on Bloomberg Global Diversified Mining Peers. Source: Bloomberg, BMI
Automation may bring new risks Challenge four – Key Review articles:
managing people risk in an
Moreover, the deployment of new age of turbulence Mining their minds: optimizing the
technology in any industry always employee experience –
carries with it new risks – risks which The skills gap
Michael Benoit and team
by their very nature are difficult
to identify and quantify. Mining There is now a growing discrepancy
Black lung and compliance: the
companies are going to have to find between available and needed skills,
great divide -
new ways of resolving any technical especially in the new, often remote
Scott Kirkwood
faults if human labour forces are locations where miners have had
going to be stripped back in favour to invest during the course of the
Risk culture in the mining industry: why
of automation. In the event of a major last 10 years or so. Furthermore,
the range of skillsets required by
should it matter? –
technological malfunction, what is the
mining companies is changing, as Alasdair Wood
damage limitation plan? How might
the mine be impacted? What will digitalisation requires fewer workers
at the front end of the operation and Total cost of lost time: a game-
be the result? How will the fault be
more deployed away from the mine changing approach to managing
rectified? At what cost?
site itself. employee absence –
Chris Wentland and team
The cyber threat
In the meantime of course the risk of a

cyber-attack clearly increases as rapidly
as the mining industry develops its new
digital infrastructure. With connectivity
to the internet a prerequisite to modern
industrial operations, the cyber threat
is here to stay. Once again, because
the risk is still in its infancy compared to
traditional physical damage perils, it may
not yet be clear as to how to quantify
and deal with this risk. Can miners be
sure that they have taken every possible
step to mitigate the threat?

Key actions
Education training Promoting and

Leadership Effective policy and health supporting access Partnership
promotion to care
Key directions
Capacity
Increase knowledge
and skills to identify and
respond to mental ill-health
in the workplace
Prevent onset of
mental ill-health Promote recovery In Australia there is
through addressing risk through return to work now a renewed focus
All minerals
and proactive factors on mining industry
industry workers
mental health
Prevention are supported to Recovery
controls develop and maintain Preparation
Promote good health good mental health
Reduce stigna
and wellbeing in all associated with
workers mental ill-health
Create a culture that

supports wellbeing across
sites and industry
Culture
Research and development
Source: Minerals Council of Australia
Recruiting from wider talent pools that the mining industry is facing in
more detail. In the aftermath of recent
Mining companies are therefore going well documented mining accidents, we
to have to compete with other industries think it’s reasonable to suggest that the
to secure suitable workforces that industry stands at a crossroads. Smart
have the right digital skillsets to match miners will adapt to the new business
the industry’s new requirements. But environment and risk landscape in
creating the right teams for the future which they find themselves; those who
means that they will have to recruit continue to rely on outdated approaches
from much wider talent pools than the to managing both their people and asset
ones on which they have relied in the risk may find that there is not much of a
past. That means healthy and inclusive future for them at all.
workforces that can adapt to the new
era in a way that boosts productivity,
Robin Somerville is
both for the short and the long term. Global Communications
Director for Willis Towers
Conclusion – an industry at Watson’s Natural Resources
the cross roads? Industry Group and editor
of the Willis Towers Watson
Within this Review, you will be able to Mining Risk Review.
read about some of these challenges
Part one –
four challenges for the
mining industry

Challenge one –
operating within a
volatile geopolitical
landscape
The Trump “bump”: how it’s shaping
the US mining industry’s future
Introduction – a brighter outlook and early 2017. The “Trump bump”
for the US mining industry was alive and well in the US stock
market and the US coal industry had
What a difference a year can make. signs of life. Capital markets soon
If we rewind the clock to the end opened back up to coal miners,
of 2015, we see that the mining allowing the financial health of the
industry was still in a state of crisis industry to vastly improve. Some
and we seemed to have a global coal producers have even returned
race to the bottom. Mining company to the public exchanges. However,
valuations were at an all-time low, fundamental supply and demand
most commodities were still at rock dynamics soon took over primacy
bottom, many US coal companies in setting prices and the long term
were teetering on or in bankruptcy effects of actual policy change are yet
reorganization and the industry as to be determined.
a whole was searching for a path
forward on shoestring operational
budgets. However, as the first quarter Recent legislation
of 2016 began, we were starting to There is no question that the agenda
see clear signs of a recovery. of the Trump administration is pro-
mining and many changes have been
Trump presidency a surprise to most made already to positively impact US
miners through regulatory relief, but
Throughout 2016 most commodities
there is still a great deal of uncertainty
- whether bulk (coal and iron ore),
about the long term prospects in the
precious or base metals - saw some
US, most specifically for thermal coal
level of recovery (albeit a bit bumpy)
producers. Let’s look at the steps taken
with coal and iron ore leading the way.
by the Trump administration to date.
Miners continued policies of operational
excellence and capital discipline, Legislative actions through
repairing balance sheets through Congressional Review Act:
significant debt restructuring at the
expense of new projects and expansion.
Voided the Steam Protection
However, as we approached the US Rule: this rule would have redefined
presidential election in November “waterways” and increased the
2016, the mood for US coal miners was required buffer zones that had to be
particularly pessimistic; it was widely maintained around them, drastically
believed that Hillary Clinton would reducing reserve life and increasing
win the Presidential race and carry on mining costs.
with many of the anti-coal policies of
the Obama administration. But as the

Voided the Resource Management
Planning (2.0) Rule: this rule
Twittersphere began to buzz on the
impacted the Bureau of Land
morning of November 9th, the US awoke
Management (BLM) which oversees
to Donald Trump as our 45th president.
250 million acres of land in the
The Trump “bump” West. The rule would have shifted
control over land management
Speculative trading began almost to the federal government and
immediately, with volatility reaching lobbyists and away from local
new highs through the end of 2016 officials and communities.

Executive Orders:
MSHA Metal/Non-metal
Workplace Examinations:

Directs the Environmental compliance delayed until October
Protection Agency (EPA) to 2017. This new set of standards and
rescind and rewrite the Clean record keeping requirements would
Power Plan (CPP): in April 2017 lead to an increase in cost to most
there was a halt on litigation miners.
and compliance with the CPP
MSHA Pattern of Violations (POV):
not required until it reaches final litigation settlement proposed
resolution. This provides the Trump
EPA time to revoke or rewrite
EPA Ozone NAAQS (National
the plan. Under current terms of Ambient Air Quality Standards):
the Plan, coal fired power plant one year compliance extension
retirements would have accelerated.
DOI Stream Protection Rule

Clean Water Act/Waters of the Biological Opinion
United States (WOTUS) Rule:
Dept. of Interior (DOI) Coal Royalty
executive order issued to revoke Valuation
the WOTUS. This rule would have
EPA Power Plant ELGs (Effluent
shifted control away from states Limitations Guidelines)
and given the EPA broad authority
over regulating pollution of wetlands Presidential and Secretarial Memos:
and tributaries, whether dry or wet.

Dept. of Energy (DOE) issues
Administrative Stays & Extensions: Review of US Electric Grid: Energy
Secretary Rick Perry orders the

EPA Financial Assurance: decision review to assess whether federal
delayed, but final resolution required policies have hurt the grid’s supply
by December 2017. A new Federal of base load power.
financial assurance requirement
for US miners could see a US $7bn

Streamline Permitting: Interior
secretary Ryan Zinke proposes
obligation need addressing, with
a streamlined and accelerated
cost estimates to miners as high as
permitting process of hard rock
US $175m. Liabilities in perpetuity
mining and federal coal leasing.
are being mentioned which has
many mining companies and
Expediting Environmental Reviews
insurers alike on edge. and Approvals
Regulatory relief will have cost impact utilities who fear a quick reversal of
policy continue to shy away from new Despite President Trump’s
That’s quite a list for only six months. coal fired developments. best intentions, the industry
Some of these actions are aimed at
the power sector and some directly at
has other challenges, such
The volatile risk profile of the
miners, but all have some bearing on as persistent low natural
the US mining industry, particularly coal
US mining industry – and its
impact on its people gas prices coupled with
companies. Other than the legislative
actions, much of this is still pending The long term impacts of President improved transportation,
final resolution. Certainly the regulatory Trump’s administration won’t be renewables continuing to
relief is palpable and some coal miners known for some time, but it came at
become more economical
estimate an ultimate reduction in a crucial time for the mining industry
cost of up to US $2/ ton, though that which has taken a much needed deep and pressure from large
economic relief has yet to materialize. breath. Anticipation of policy change corporations that have
that would have significant impacts to
Coal industry still faces challenges
begun to wield their
a mining company, whether positive
or negative is vital to providing good influence in states’ power
Coal is going to be a major part of our advice. At Willis Towers Watson, our generation future.
energy mix for the next 10-15 years, global team of mining specialists
and likely well beyond that, but despite endeavors to help our clients stay
President Trump’s best intentions, the ahead of a changing risk profile.
industry has other challenges, such
as persistent low natural gas prices We meet with surety markets to
coupled with improved transportation, understand their willingness to
renewables continuing to gain social address possible new state and
popularity and pressure from large federal requirements for mine closure
corporations that have begun to financial assurance in order to
wield their influence in states’ power quantify what this means for mining
generation future. Non-governmental companies from a credit availability
organizations continue to be and cashflow from standpoint.
organized and well-funded. Major

Opportunity for growth as the next work with their safety and engineering
generation emerges departments as an extension of their
teams, rather than as an auditor,
With more stability on miners’ balance to create continual improvement
sheets, improved prices and the programs and best practice processes
possibility of fast tracked permit and procedures. This ensures that
applications and environmental they are prepared for changes such
reviews, we see opportunity for as the MSHA Metal/Non-metal
growth once again in the US mining workplace examinations and that
industry. Our colleagues specializing we are able to drive cost out of their
in health and benefits, as well as talent Workers Compensation programs by
and rewards, ensure that our mining demonstrating industry leading safety
clients understand what motivates cultures and practices, coupled with
today’s generation of employees and steadily improving loss rates.
what makes a satisfied employee.
We help them understand what the Volatility is here to stay regardless of
industry standards are so that they who is in the White House. Managing
can benchmark their plans, and assist that volatility will be a key challenge for
them in crafting a compelling package miners to address in the coming years.
that attracts new talent as the industry A broker that actively integrates into
positions for growth. a client’s operations, thinks creatively
and a few steps ahead can help mining
Safety and risk control team companies improve their outcomes.
engagement
Fred Smith IV heads
As mining company staff have been up Willis Towers Watson’s
thinned, there is a larger need to Mining and Metals practice
leverage broker resources. Our safety in the United States
and risk control teams are actively
engaging with our mining clients. They
North American surety: protecting
your reclamation liability
What are the key issues No uniform reclamation process
driving the demand for
surety products? Mineral and ore producers continue
to face ever-increasing requirements
Due in part to regulatory oversight, for reclamation without a uniform
financial cycles and a growing administrative process for extinguishment
awareness of environmental of the reclamation obligation. The
impacts, the call for third party extraction methods coupled with the
financial assurances to assume the lack of consistent administrative rules
responsibility of remediation and for reclamation leaves surety providers
reclamation has increased. As North with uncertainty. Providers will shy away
American dependence on fossil fuels when words such as “non-cancelable”,
has decreased or fallen out of favor, “perpetuity”, “unknown leachate”
regulatory authorities’ concern for or “water treatment“ appear in the
final reclamation and the funding of framework of the reclamation obligation.
the costs have intersected commodity
prices near the bottom of the cycle. As commodity prices have improved,
the costs of alternative energy
A regulatory pendulum over-swing? sources have climbed. Since the
change in the US administration,
Large US coal companies have the issue has abated but the lesson
reorganized their debt under bankruptcy remains: regulatory agencies are
codes as certain state regulators held charged with enforcing reclamation
little third party financial assurance and assuring the funding associated is
for reclamation. Canadian provincial secured. And Surety continues to be
authorities have announced retiring the major vehicle in meeting that need.
from the natural resources industries
altogether. This has been paired with
the backdrop of non-governmental Why is this issue so challenging
organizations’ intervention and a for mining companies?
growing social conscience towards Among the most difficult issues
non-renewable natural resources. The facing mining companies are financial
result was a regulatory pendulum that assurance for reclamation, both at
has perhaps swung too far. closure and post closure. Adequate
financial assurance must be posted
The US coal industry has faced for remediation before a development
the requirements for reclamation permit is obtained and subsequent
since passage of a federal law in expansion approvals. This assurance
1977. Surety providers have come to is required by regulatory agencies
understand the reclamation process to ensure that funds are available to
and the extinguishment of the complete reclamation regardless of
financial obligation. As consolidation the mine life cycle and the financial
of US based coal operators occurred, stability of the company.
their surety needs have been met. And
as these operators’ financial health
improves, collateral requirements will
be relaxed and pricing for the surety
product will become more competitive.

Need for funding mechanism for unencumbered assets. While surety
reclamation obligations is generally unsecured or partially- In their annual financial
secured, a balance has to be struck
presentations, mining
Unlike insurance, where the purchaser in order to satisfy the regulatory
is made whole in the event of a requirement or else – in extreme companies routinely identify
loss, the surety purchaser’s benefit circumstances – mining may not be their asset retirement
is compliance with regulatory allowed to continue.
requirements. This financial assurance
obligations; however, these
is a latent guaranty that reclamation Obtaining a bond may be unfunded liabilities.
will be completed after the resource
has been economically extracted; Obtaining a bond for a new mine or
that is to say, after the revenue or existing operations requires a review
turnover stops, the reclamation of the operation and assets to include:
expense commences. In their annual
financial presentations, mining
Current financial assurance
companies routinely identify their requirement
asset retirement obligations; however,
Current estimated reclamation
these may be unfunded liabilities. The costs
growing regulatory requirement is that

Estimated end of the mine life
there should be a funding mechanism
reclamation costs
for the reclamation obligation.

Estimated reserves and economic
Healthy appetite from surety providers assumptions

Annual production rates
To make the surety risk palatable to
the surety providers, the providers

Review of cash costs and all in
sustaining costs
may require parental corporate
guarantees, personal indemnification
Review of transportation cost
or collateral of cash or assets. This
Overview of planned development
underwriting discipline has netted costs
profitable results for the surety

Overview of life of mine plan based
providers, to be point that there
on current reserves
is currently a healthy appetite for
reclamation obligations in the mining
Overview of environment issues,
space. Competition among this line is water treatment, tailings ponds,
greater than it has been in 10 years. and control and monitoring of
containments that have been/may
Balance needs to be struck be released into the environment

Water license
The surety underwriting discipline
may be in conflict with other credit

Details and duration of contracts
related to mine operations
providers to mining companies, as
the corporate guarantees may be
Financial statements and lending
perceived as additional indebtedness agreements
or collateral requirements
Site visit by the surety company’s
as restrictions on otherwise underwriter and engineer.
What are the key benefits to In jurisdictions that have historically
the mining community? only accepted letters of credit
or cash for financial assurance
Noting that a growing component of obligations, Willis Towers Watson
the mining regulation is satisfying the has been actively working with
financial assurance for reclamation, those government agencies to
surety plays an instrumental role in have surety accepted as a financial
executing the mining plan. Typical assurance alternative.
third-party financial assurances
take the forms of cash, letters of In closing, the ever changing
credit or surety. Surety is often the environmental landscape and the
least expensive in terms of cost and increasing environmental scrutiny
collateral and should always be in the from private groups and governmental
mix of arsenal of options to address agencies will lead to additional
the financial assurance requirements. regulations and more financial
Whether surety is the sole source or assurance requirements.
part of a broader platform, the current
surety appetite suggests that mining
industry financial assurance programs
Tracy Tucker is currently
should almost certainly be revisited. Executive Vice President for
Willis Towers Watson based
Issues to consider in our Knoxville, Tennessee
office, specializing in complex

Anticipate the need to collateralize surety solutions for natural
the bond. The amount of the resource and energy clients.
collateral the surety will seek varies
on which stage the project stands. Lois Innes is Senior Vice
Poor financial results, challenged President and National
assets or new operators could Practice Leader for Willis
be required to provide as much Towers Watson Canada
as 100% collateralization of the

estimated future reclamation costs.
Collateral demands can erode the
operating capital of the project
severely impacting the owners’
ability to secure the permit.

Don’t underestimate the value of
a strong relationship with your
broker and surety. Make sure the
surety understands your long term
plan and craft the story around
it. Keep the stream of updated
information coming. Stop work
orders, regulatory changes and
reviews need to be communicated
to your external partners.

Challenge two –
developing new
stakeholder
relationships
What communities really want:
rethinking local engagement
Introduction more commonly included as part
of a company’s philosophy towards
There is a saying that goes along
Corporate Social Responsibility (CSR).
the lines of ‘everything we have,
everything we use, is either grown
or mined’. But unlike the reserves Why is this important for
from where the resources come, miners?
our appetite for commodities seems
Not unsurprisingly, in the major
endless. However, the ore bodies or
mining areas around the globe, the
deposites that provide us with these
industry forms a significant part of
commodities are becoming more
the GDP in those countries. With
scarce, and over the years head-
such an impact to a given economy,
grades have been decreasing.
mining companies have an increased
responsibility for sustainable and
The reserves are slowly becoming
inclusive development of their assets.
more depleted, and we can make an
assumption that the rate of discovery
However, a company’s CSR plan can’t
of new mineral ‘behemoths’ is also
be formulated as a box-ticking exercise.
going to diminish. Mining companies
It needs to dovetail with the business
will need to head into more remote
objectives of the company, and it needs
locations to find the deposits needed
to mirror and align with the company’s
to sustain reserves, resources and
own values and commitments.
production levels. Increased capital
expense will be needed to open a new Whilst in years gone by the general
mine, and getting the final product to theme from communities may have
market will also cost more. been for increased local benefits
and royalties, companies now are
The financial commitment of a mining
discussing and negotiating the
company will be many months in
impact an operation may have on
advance of full scale operations.
a community and how such impact
There will be scores of studies and
can be reduced. In many instances,
financial models completed, with a
the communication and interaction
pile of licenses needed in order to be
between a mining company
able to start or continue operating.
and the community is regarding
Most of these licenses will be physical
environmental concerns; water use,
documents stored in shelves of
water pollution, air pollution, impact
lever-arch folders, but perhaps the
on local biodiversity and the removal
most important will have no formal
of agricultural or arable land on which
documentation surrounding it, and it
many farmers depend. It can also
remains the ultimate ‘green light’ to
extend to working conditions, noise
any new project or existing operation
pollution, potential resettlement, and
– the Social License to Operate (SLO),
health and safety.

What are miners doing? there are usually three main areas of
focus; environmental, social (which this
A lot, it would seem. Across the
article will focus on) and economic,
spectrum of commodities and
all of which need to take into account
organisations, social responsibility
short and long-term concerns.
is high on the agenda. Mining
companies are increasingly more Need for flexibility
engaged with local communities and
progress is regularly reported to the Due to the long-term nature of such
Board or associated committees. We plans, they need the flexibility to adapt
spoke with Codelco and Hochschild as the project changes, as Hochschild
to get an insight into managing discovered as the Inmaculado Project
local communities from a mining moved into operations. “We developed
company’s perspective. a Family Strategy independently from
communities” explained Carmen
No one size fits all strategy Cuba, Community Relations Manager
at Hochschild. “It’s not sufficient
Most mining groups, and certainly
to just meet community needs; we
the three we spoke to, have either a
needed to respond to what families
defining set of principles, policies or
want. In part due to the remoteness
pillars on which their approach to CSR
of the operation, families want to be
is based. But there is no ‘one‑size-fits-
able to send their children to bigger
all’ approach. Each company needs
and better schools in Cuzco; to be
to design and implement its own CSR
able to promote them outside of their
programme according to the needs
immediate environment. Building a
of the community and the business
school for the local community was
objectives of the company. However,
not enough”.
Need for a long term roadmap prominent points of friction with
communities come from noise, air
To highlight how far ahead such plans pollution, tailings concerns, etc. Our
are made, Chilean copper producer General Managers host community
Codelco recently established their meetings every month where
‘Sustainability Master Plan’ which community leaders can share views
sets out a 25-year roadmap, with and raise concerns, and the GM
milestones at 2020, 2030 and 2040. has the executive power to move or
According to Ana Mena, Director of mitigate the risks or issues”.
Community Relations at the company,
“zero accidents and incidents affecting
What solutions can risk
our communities is our number one
short-term plan, but we are also
intermediaries bring?
investing in social risk analytics tools Extension of Strikes, Riots or Civil
which will allow us to measure and Commotion cover
validate our goals and standards”.
This will be interesting, as the success Whilst we would advocate the
of a social responsibility programme strongest and most robust Risk
is difficult to quantify – it’s usually Management practices in order to
measured in terms of what doesn’t mitigate against physical losses or
happen rather than what does. business interruption, we are still
able to bring our clients risk transfer
Need to encompass the whole solutions for when it goes wrong.
community Similarly, we have recognized that
sometimes social and community
So whilst a CSR plan should extend to relations can sour, and as such
contractors, it should also encompass we have a suite of risk transfer
the entire local community and not solutions designed to extend the
just employees of the operation. “We standard Strikes, Riots or Civil
found that training members of the Commotion cover.
local community in mining-related
roles was inefficient” says Cuba. Whether it’s through unions or
“Someone could return from 6-weeks workforce activity, the main tool at
training to learn a role doesn’t the disposal of local communities or
exist for them. So we implemented workers is industrial action – striking,
a community-wide scholarship blocking roads or otherwise inhibiting
programme, whereby locals can access to operating premises. These
train in whatever they wanted. So can be peaceful or disorderly, but
for example training to become an can also extend to violent clashes
electrician meant they could find as was seen at Lonmin’s Marikana
employment outside of the confines operations in South Africa in August
of a mining community”. 2012 and at Grupo Mexico’s Tia Maria
project in May 2015. Newmont’s US
Need for early and regular dialogue $4.8bn Conga project was derailed
by strikes in November 2011 and
But learning how to improve comes is still suspended, whereas MMG’s
from early and regular dialogue. “We Las Bambas operation eventually
are delivering on a social contract”, got going after 36 days of strikes in
explained Mena. “Some of the more October 2015 in which 3 people died.

Impairment of access Like any insurance policy, this is
not designed to replace good risk
An important trigger under a standard management or good community
All Risks Property policy is that relations. But when thinking the
physical damage has to occur. But in unthinkable, risk transfer solutions
the case of peaceful or non-peaceful exist to ensure your company is as
demonstrations, it can often be the resilient as possible.
case that no damage is suffered
to insured property and therefore
Tom Holliday heads up
there is no policy coverage. With no
Willis Towers Watson’s
risk transfer solution to fall back on,
Mining and Metals practice
operations can be down for days
in Latin America
or weeks; strikes at Escondida in
February 2017 halted operations at
the world’s biggest copper mine for
43 days.
Developed originally for some of our

fracking clients, Willis Towers Watson
has designed a policy specifically for
impairment of access which doesn’t
require a physical property damage
trigger. In other words, if access is
blocked, restricted or impaired, and
even if the demonstration is peaceful,
any impact to business such as loss of
gross profit or fixed costs is covered -
even if there is no physical damage.
Addressing social disorder: is
your strategy good enough?
Introduction – social disorder Many of these responses have been
risk for miners is global based historically on military or law
enforcement tactics with little strategic
One of the greatest risks to the mining overview or coherence. While valid in
industry in 2017 remains that of civil certain circumstances, such responses
disorder, including political violence and may serve to exacerbate tensions to
project specific protest. From Peru to the point of mines becoming fortresses.
Papua New Guinea, the mining industry This is not surprising given the saturation
continues to experience antipathy of the security industry by ex-military
extending to business interruption personnel, many of whom show brilliance
and violence, driven by myriad in understanding the importance of
grievances founded in issues such as context but are themselves often limited
environmental impact, employment by their own or corporate expectations
and hiring policies, wealth distribution, of what security teams ‘should do’ and
perceived association with corrupt with whom they should be engaging.
elites and criminals, forced resettlement
and skewed local economies. An integrated approach is essential
Miners sucked into local tensions This article does not seek to criticise
these approaches but to complement
The root causes of many of these what is already practised with
may initially be extraneous to a mining an integrated approach that may
company’s presence and activities. involve managers, security advisors,
However, in the preparatory stages social responsibility teams and the
and once established, a mine may vital communications strategies of
bring its own drivers of tension or community engagement groups. Its
exacerbate those already present in purpose is to introduce a number of
the context within which it employs approaches to contextual understanding
staff and then extracts, transports and that lead to pragmatic and practical
sells resources. Furthermore, local action from project inception to closure.
and national political entrepreneurs
may harness criticism of mining These are drawn from experience
activities to their political cause, and include those borrowed from
resulting in proximate causes of development agencies. Many of these
protest or violence targeted at a agencies have come to realise that
mine’s assets, people and reputation their well-intended interventions are:
on the ground or in the social media.

inevitably political
Company responses lack strategic
coherence

have social and economic
consequences among and beyond
Special Contingency Risk’s (SCR’s) their target beneficiaries
research and advisory consultancy
may do harm by exacerbating conflict
with the mining industry indicates (unless the impact of programming
that the corporate response to upon the factors that divide and
such frictions is often to engage in connect societies are taken into
protective and deterrent measures, consideration during the design and
accompanied by sometimes reactive implementation of the project)
‘community engagement’.

The business costs of conflict
Conflict has many definitions and is often used synonymously with violence.
This is the tip of the iceberg, as conflict generally occurs as a result of friction
when two or more parties believe their interests are incompatible and then
express hostile attitudes or take actions that damage the other’s ability to pursue
its interests. Unless resolved through dialogue, these tensions may result in
violence. All conflicts vary but some examples of costs to companies are shown
in the table below:
COSTS OF CONFLICT TO COMPANIES
Direct Costs Example

Security Higher payments to state/private security firms; staff time
spent on security management
Risk management Insurance, loss of coverage, specialist training for staff,

reduced mobility and higher transport costs
Material Destruction of property or infrastructure
Opportunity Disruption of production, delays on imports
Capital Increased cost of raising capital
Personnel Kidnapping, killing and injury; stress; recruitment difficulties;

higher wages to offset risk; cost of management time spent
protecting staff
Reputation Consumer campaigns, risk-rating, share price, competitive loss
Litigation Expensive and damaging law suits
Indirect costs Example

Human Loss of life, health, intellectual and physical capital
Social Weakening of social capital and cohesion
Economic Damage to financial and physical infrastructure; loss of

markets
Environment Pollution, degradation, resource depletion
Political Weakening of institutions, rule of law, governance
Source: International Alert, Conflict-Sensitive Business Practice: Guidance for Extractive

Industries, March 2005
Given these potential costs, it is sensible to devise both strategic and local
strategies in order to identify, monitor and manage conflicts before they become
violent, while ensuring that the company minimises any contribution that it may
itself be making to these conflicts.
The SCR approach
There is no fixed method to the introduction of conflict sensitivity to project
planning and implementation, although some generic processes are described
below. Experience indicates that the benefits of conflict analysis are greater
when the approaches are integrated throughout the project cycle as opposed to
being introduced only when conflict surfaces mid-flow.
PHASE WHAT’S INVOLVED

It is vital that the state
Rapid Screening A rapid assessment to identify key conflict issues early in of community opinion,
Assessment the pre-investment phase. The Screening Tool provides
an initial analysis of the country and its conflict dynamics,
politics and the security
flags key issues of concern and identifies the level of risk, situation are monitored
as well as potential ‘showstoppers’.
and responded to – both at
Macro-level Conflict Risk An expert-led national and regional level context analysis.
project and country level.
and Impact Assessment This further explores issues of concern raised in the
screening and identifies potential interactions of the
project with these issues.
Project-level Conflict Risk Building on the understanding of conflict generated thus

and Impact Assessment far, make an analysis of the potential interactions between
the project and its context to a deeper level.
At each stage, but most importantly The importance of image and

the Project Level Conflict Risk and acceptance
Impact Assessment, a mapping of
stakeholders in the political economy Throughout the project lifecycle good
would take place in order to identify security is based on three strategic
specific tensions that currently cause pillars: Acceptance, Protection and
or may produce friction. Deterrence. It is interesting to note that
most conventional security operations
However, the process does not focus on the last two, whereas
end here – projects change and so security professionals in development
do countries and communities. It programmes focus on acceptance,
is therefore vital that the state of deploying protection or seeking to deter
community opinion, politics and the only where the level of threat becomes
security situation are monitored and unmanageable through dialogue.
responded to – both at project and
country level. This will demonstrate a Gaining a degree of acceptance is
continued interest in and willingness often viewed as the responsibility of
to adapt to the circumstances of the community engagement or similar
host communities, thereby increasing departments, many of whom fail to
levels of acceptance and trust whilst engage intimately with security teams
mining continues and ultimately as the strategy demands. This can
informing a sustainable withdrawal. result in mixed messaging, which
erodes the credibility of the company
and can foster mistrust.

Relationships-
Activities-
Behaviour
A professional
approach to conflict
management involves
a more sophisticated
Messages ? methodology and results
in more effective risk
management and better
Implicit Explicit business practice
Messages Messages
?
Other’s Our
Preceptions ? ? Preceptions
!
Effects of
Preceptions
Divider Connecter
Effect Effect
Negative Image Positive Image
Acceptance
Risk to and Safety
Safety and
Implementation
Good Development
Practice
Source: DFID/GTZ-Risk Management Office (RMO), A guidebook to safe and effective development in conflict.
A tool for analysis. Mera Publications: Kathmandu, 2005
The diagram above demonstrates shot at after issues of ‘broken

how negative feeling and division promises’ over schooling, housing and
can increase when the explicit – employment (as well as doubts about
usually positive – messages put out the distribution of benefits under
by a project conflict with the implicit the current government) had been
messages perceived by others harnessed by political entrepreneurs.
through its activities and behaviours. This was partly due to a drop-off
in community engagement and the
This can, in turn, lead to risks both to lack of an information gathering
safety of staff and the implementation and monitoring network at national,
of the project. In one project where regional and local levels.
we assisted, mining staff had been
Conclusion – are you confident
Do they monitor the space and
“We were happy, as people in your own operations? identify contradictions between
told us we would be rich, To conclude with a few questions:
what your marketing and
communications team are saying,
but now, this has turned into your imported and local staff
a nightmare and the black
How closely do your security
behaves and how local stakeholders
specialists collaborate with your
gold has become a black perceive the impact of the project?
environmental specialists, community
snake that is displacing us outreach, communications staff and If they do you are most likely on the path
general management?
from our ancestral land.1” to a secure and sustainable project.

Could they list the dividers and If not, it may be time to take advice and
connectors in their project area ask a few questions yourself.
Mehmood Halepoto, villager,
and how their project increases or
Thar desert, Pakistan decreases them? Tim Holt is head of
“Inform” at Alert 24,
Special Contingency
Risks security and crisis
management consultancy
http://www.eco-business.com/news/pakistans-coal-expansion-brings-misery-to-villagers-in-thar-desert/
1

Challenge three –
thriving in the new
digital world
Digital digging – the future of
work in the mining industry
Introduction – the future of work is now! change that affect the future of talent
management and HR:
Daimler’s first self-driving truck hit the
1. Exponential technology change.
road in 20152, driverless cars are being
The rapid developments in artificial
tested by car manufacturers and tech
intelligence and automation impact the
giants alike and the first autonomous
workforce and skills required, making
ship is planned to set sail in Norway in
many skills obsolete and/or creating
20183. Kiva robots speed around Amazon
new ones. Jobs are changing more
warehouses and the company’s check-
quickly, and workers must be able to
out free grocery store made headlines
adapt to these business changes.
earlier this year. IBM’s Watson currently
offers 15 cognitive services such as virtual 2. A truly connected world. As the
agents, language and visual recognition, ability to connect with almost anyone,
personality characteristics prediction and anywhere, at any time increases, the
advanced data analytics4. nature of work also shifts, impacting
how work gets done and the nature of
Welcome to the Fourth Industrial the employee/employer relationship.
Revolution 3. Human-automation collaboration.
Jobs and tasks previously performed
The World Economic Forum’s Global Risk by humans are being replaced by
Report 2017 refers to this advancement automation, or require a human-
of technology as the Fourth Industrial automation interface. Businesses
Revolution and identifies 12 key emerging will require workers to adapt to this
technologies and their impact on the change to optimize work.
global risk landscape5. It is accepted by
4. All inclusive, global talent market.
all commentators that technology will
The potential workforce is growing,
change the future and with the pace of
with increasing diversity and longevity
technology ever increasing, balancing the
of workers. As the nature of work
benefits of such technology against the
changes, the potential talent market
risks will determine success.
will expand with more flexible work
relationships, ways of working, policies
Five forces impacting the future of work
etc. to suit different talent needs.
HR leaders have recognized that 5. Social and organizational
this Fourth Industrial Revolution is reconfiguration: The democratization
fundamentally different from the of work is changing the nature of the
previous three as the pace of change employee/employer relationship. As
and its impact being much further work and work relationships become
reaching. CHREATE6, a consortium more flexible, traditional hierarchies
of more than 30 CHROs and other and contracts are being replaced with
HR leaders, identified five forces of collaboration and collective leadership.
2
http://media.daimler.com/marsMediaSite/en/instance/ko/World-premiere-on-US-highway-Daimler-Trucks-drives-first-autonomous-truck-
on-public-roads.xhtml?oid=9919773
3
http://yara.com/media/press_releases/2103105/press_release/201705/yara-and-kongsberg-enter-into-partnership-to-build-worlds-first-
autonomous-and-zero-emissions-ship/
4
https://www.ibm.com/watson/products-services/
5
http://reports.weforum.org/global-risks-2017/part-3-emerging-technologies/3-1-understanding-the-risk-landscape/
6
http://chreate.net/

Table 1: How technology transforms the extraction process
PHASE WHAT’S CHANGING? CASE STUDIES7
Exploration The processes of exploration

A major mining company uses drones to more closely monitor and
is being modernised through evaluate the rock face at mines in real time when blasting away rock to
the use of sensors, wireless build mine slopes.
communication and computers.
Operation Extractive operations can

A global mining company has introduced automated drilling in Africa,
be performed by computer with good acceptance by workers.
operators who are hundreds
A gold miner is using smart sensors to ensure the safety and efficiency
or thousands of miles away, of workers and equipment.
requiring a new set of skills
to monitor and execute

Mining companies in Australia are providing field workers with smart
baseball caps (known as SmartCaps) that monitor their brainwaves to
operations.
measure fatigue.

In 2013, a global mining company opened an Integrated Remote
Operations Centre (IROC) in Perth. The IROC provides the company with
a real-time view of its entire Western Australia iron ore supply chain.

A global specialist energy management company’s Integrated Planning and
Optimization Solution is designed to optimize supply chain efficiency for
mining companies.
Processing Processing can employ
A world leading mining company deploys visual and heat sensors to scan
technology that increases the surface of molten metal in order to quickly assess steel quality, and
the efficiency and quality of automatically identify process adjustments to improve product quality.
the operations improving the
refining process and quality of
the material.
New work in the mining industry new approaches to work and

continuous improvement through the
This revolution won’t pass by the
introduction of new technologies.
natural resources and mining
industries. Whilst change and Traditionally mining is a capital and
innovation in the mining sector has labour intensive industry, however
been generally incremental in nature, technology and innovation are
a surge of cost pressures as a result transforming the world of work across
of declining commodity prices and all phases of the extraction process
margins has demanded greater (see Table 1 above).
operational excellence, radically
7
http://reports.weforum.org/digital-transformation/wp-content/blogs.dir/94/mp/files/pages/files/wef-dti-mining-and-metals-white-paper.pdf
Strategic implications for the Faced with these economic and
mining industry environmental challenges the industry
has shown that it is able to think out
An analysis by the World Economic of the box to redefine strategy and
Forum revealed that digitalization invent new business models:
could bring8:

Collaborating and connecting

More than US$425 billion of value – New partnerships within and
(equalling 3-4% of industry revenue) across industry as well as with
for the mining & metals industry, research institutions and the
customers, society and environment public sector produce innovative
over the next 10 years (to 2025) opportunities for increased

A reduction of 610 million tonnes of productivity and growth. Mining
CO2 emissions, with an estimated companies have also become
value to society and environment of more flexible by building
US$30 billion networks of suppliers, partners

Improved safety, with around and customers. Customer
1,000 lives saved and 44,000 centricity is being adopted, for
injuries avoided example through collaboration on
developing advanced materials.

A potential loss of about 330,000
jobs, or nearly 5% of workforce,
over the next decade
8
h
ttp://reports.weforum.org/digital-transformation/mining-and-metals-digital-transformation-and-the-industrys-new-normal/

Operational excellence – mining How can HR contribute?
companies optimize operations
1. Start at the top: work strategy and
in terms of efficiency and quality,
culture are pivotal
e.g. by using technology to
First of all, work strategy and culture
operate less location-dependent
guidelines need to be aligned
operations and collaborate more
with the new strategic direction.
across functions. Predictive data
Many mining organizations have a
analytics help identify and monitor
people strategy that needs to be
key performance indicators. Focus
transformed into a work strategy that
on safety, environmental concern
includes AI, robotics and alternative
and sustainable development
forms of labour. Collaboration across
actually create new business value
these work options can only be
and bring benefits for business
fostered in a company environment
and society. New technologies,
that supports open, seamless
such as collision detection and
communication and mobility.
cybersecurity measures improve
safety and security. Big data helps 2. Rethink how works gets
monitor environmental impacts and done: assess the potential for
sustainability goal achievement. automation of tasks and its
consequences for the organization

Employee Value Proposition
Secondly, HR has to rethink how
– CSR reduces energy and
work gets done, how work is
regulatory costs and enhances
structured and what organisational
company and employer image.
structure best supports new ways
Even remote operations offer
of work. As jobs become more
benefits in that vein: talent can be
fluid in the mining sector, take the
located where they want to live and
work to be done as the unit to be
where its best for them to share
analysed instead of the job role.
knowledge and it becomes easier
Deconstruct the work into discrete
for leadership to lead and oversee
elements, and then decide which
staff. Enabled by technology,
tasks are best done by whom and in
employees and managers can
what type of work setting.
make better informed decisions
and find better solutions through
broader collaboration.
3. Decouple work from the Starting from a strategic perspective,
organisation our consultants can help you to Our view is that
In addition, think about who can translate business strategy into work companies who embrace
best do a task – does it need strategy, to define a compelling work
to be a traditional employee or value proposition and set up the
this change and effectively
would a contingent worker offer organisation for future needs. We help organise their HR, Talent
benefits, e.g. in terms of flexibility you to carefully redesign your people and Reward practices
of employment or specific programmes and define governance
expertise. Online talent platforms as well as technology for seamless
will have a competitive
may make it easier to find and execution and agility, allowing them to advantage in the Forth
access freelancers/contractors. easily adapt to changes. Because as Industrial Revolution.
Companies can even start Heraclitus recognized: “The only thing
building internal talent markets to that is constant is change”.
deploy talent inn a more flexible
and efficient manner across the
organisation.
Ruchi Arora is the Western
4. Identify the skills of the future – Europe Talent Management
and structurally start building them Leader at Willis Towers Watson
New ways of working in the
evolving and changing mining
world require new skills or even
Anne-Marie Jentsch
different types of traits and is a Senior Consultant at
attitudes. Most important will be Willis Towers Watson’s
for every worker to be adaptable, Amsterdam office
flexible, and willing to continuously
learn, upskill or even reskill. Being
able to realise the full potential of John Pymm heads the
new technologies will be pivotal. Natural Resources sector
group for Talent and Reward
Conclusion - How to prepare for the at Willis Towers Watson
future of work
As we are seeing, technology is Ravin Jesuthasan, CFA,

significantly changing the way is a Managing Director of
Willis Towers Watson based
mining companies work and will
in the firm’s Chicago Office
need to operate, the introduction
of AI will undoubtedly impact how
HR programmes are designed
and implemented. Our view is that
companies who embrace this change
and effectively organise their HR,
Talent and Reward practices will have
a competitive advantage in the Forth
Industrial Revolution.

From technology to people: the new
frontier in mining cyber risk
No immunities, no boundaries – the Transformation of working practices
risk is systemic…
Technology has transformed working
Cyber security represents a practices leading to increasing
fundamental challenge for organisations productivity and driving operational
and is seen as a top priority for boards. efficiency and innovation. However,
Malicious hacking, ransomware attacks, this increased adoption and reliance
data leaks and electronic fraud are on technology does not come without
occurring on a global basis, where the increased risk and as devices become
motives vary from financial, political or more connected and processes
merely to cause disruption. The recent more digitised, mining companies will
global ransomware incidents WannaCry need to contend with an increased
and NotPetya have shown us that: number of network born security
threats. Never has industry been more

No one is immune. Attacks do not susceptible to operational derailment
need to be targeted at a specific and ultimate financial loss due to a
company or industry sector. cyber-attack.

Cyber-attacks lack a geographical
boundary. Rogue actors are easily Connected mining sites and their
able to bridge the geographical supply chain require an ongoing
boundaries of an organisation’s programme of investment and
operation that do not exist in the monitoring to ensure security and
globally connected world. availability are maintained across
the entire IT & OT estate to prevent

The potential systemic risk which
business disruption.
can arise from a cyber-attack is far
from theoretical. It’s not just a technology issue! Never has industry been
Mining industry particularly vulnerable
more susceptible to
In our recent 2017 Cyber Risk
Employer Survey (include link) 76%
operational derailment and
Within the mining sector, the ultimate financial loss due to
of companies reported that they
convergence of IT and operational
have improved their technology a cyber-attack.
technology (OT) through industrial
systems and infrastructure over the
automation, the uptake of smart
last three years. While this shows
devices for real-time operations
that companies around the world are
management and remote operations,
focusing their time, resources and
and the adoption of cloud services
budget on technology solutions, most
are driving significant change to a
companies still perceive themselves
mining company’s operational model.
vulnerable to cyber incidents.
The modern mining company is a
transnational corporation, running While critical to protecting the
highly coordinated production enterprise, technology is only one piece
operations across multiple sites of the solution. This is again evident
in multiple countries with varied from our survey, which shows almost
geopolitical climates, all the while 75% of organisations report that in
responding to the supply and demand the next three years, they intend to
needs of a market-driven economy. allocate more capital to human capital
solutions (such as comprehensive
training programmes for employees)
and business processes.
Human Resources and CISO and minerals by competitors to hijack
personnel now playing key roles sales, could all be potential motives. In
a competitive market, the importance
Although IT departments – and to and value of this information cannot
some degree, risk managers – are be overlooked. Having a robust
seen as responsible for cyber risk information security programme
management strategies, other should not be viewed as a cost but
functions such as Human Resources rather an essential investment and
and Chief Information Security an opportunity to gain competitive
Officers (CISOs) are increasingly advantage, generating increased
playing an integral role in protecting confidence with customers and
the enterprise and creating a cyber- investors seeking to protect the value
savvy workforce. of their investment.
The majority of cyber incidents are Regulation continues to tighten

ultimately sparked by employee
behavior (whether through negligence, Regulation relating to cyber and
accidents or intentional acts). Our cyber information security has historically
insurance claims data shows two- been focused around data privacy
thirds of incidents are the direct result and data protection issues; however,
of employee behavior – for example, regulatory scope is expanding
negligence leading to lost devices and to encompass infrastructure and
malicious and disgruntled insiders providers/operators of essential
seeking to profit from corporate services. This is a trend which
espionage. When analyzing the other will continue, particularly with the
33% of incidents, a large portion can increasingly connected nature of
ultimately be traced back to additional systems, data and services providers.
human errors that can be linked to As with any regulation, this will drive the
issues such as talent shortage, skill behaviour of organisations to achieve
deficits and employee engagement. compliance, as the potential financial
and reputational consequences of not
The value of information is rising doing so can be significant.
The theft of individuals’ personal Managing the consequences of an

information and personal financial incident
information has long been a motive
behind a number of highly publicized The cascade of events and disruption
cyber incidents. While this continues following a cyber-incident can
to be an area of focus, cyber criminals be far reaching; for example, the
increasingly understand the value of financial impact on some of the
a much wider range of sensitive data, companies impacted by the NotPetya
whether in terms of an opportunity ransomware outbreak is estimated
for direct monetary gain or in to be in the hundreds of millions
manipulating business dynamics. of dollars. The insurance market in
this area has continued to evolve,
Examples such as theft of intellectual particularly for those sectors where
property around production methods both IT & OT exposures exist.
or theft of pricing data for metals

Risk Transfer solutions arrangements within the next two
years, with a view to identifying
From a coverage perspective gaps in existing insurance coverage.
the insurance market draws a In addition 71% of respondents
distinction between: advised that they expect to enhance
their insurance coverage within

Cyber-attacks leading to physical the next two years. The insurance
outcomes (e.g. property damage, market continues to develop its
bodily injury etc.). In this context, understanding of the cyber risk
the insurance approach can vary environment through the collection
from coverage being specifically (and modelling) of more consistent
excluded, specifically included data and this is driving a willingness to
or silent ( i.e. neither specifically develop new products and services to
included or excluded). keep pace with this evolving exposure.

Cyber-attacks leading to non-
physical outcomes (e.g. loss of What should organisations do?
data, network outages, extortion
demands). The insurance market To manage cyber risk effectively
has developed broad stand- across the enterprise and ensure
alone product offerings for these resiliency, organisations need a
exposures some of which can fully integrated, comprehensive
include added access to added value plan that emphasizes people,
services around incident response to capital and technology protections.
support recovery post event. Understanding the risk exposure
across both IT and OT and investing
Our 2017 Cyber Risk Employer in the appropriate security is vital
Survey shows that nearly nine in to remain ahead of the curve and
ten companies have reviewed or present financial, reputational and
will review their cyber insurance intellectual property risk. In particular
mining companies should remember;

IT solutions can’t be adopted
Assume it’s going to happen. The
and implemented in a vacuum. notion that ‘it won’t happen to us’
People and technology need to continues to be disproved therefore
have a symbiotic relationship to preparation is key. When a cyber
ensure Cyber security is connected incident occurs, having a well-
to the business and not simply developed and well-rehearsed cyber
a superficial wall surrounding incident response plan will be critical
an organisation. Cyber risk is to ensuring a quick recovery, thereby
complicated; as such, the constantly mitigating the longer term financial,
evolving and dynamic environment regulatory and reputational damage.
demands agile solutions to combat
Transfer the risks you can’t remove.
new threats that many organisations A robust cyber risk management
may not be tracking. programme will reduce the

People risks are the next frontier probability of an event occurring,
in cyber risk management. but you can never fully eliminate
Understanding that technology the risk. Cyber insurance risk
solutions are only as effective transfer solutions exist to mitigate
as the people operating and the financial impact when things go
managing those solutions is critical. wrong. As a starting point, check
Organisations need to engage with your existing insurance coverage;
their IT department and uncover understand what cover you’ve got
skills deficits and talent shortages and what options are available.
in critical roles to ensure that talent
strategies align with overall cyber-
security objectives. By taking these Glynn Thoms is Executive
steps, you can ultimately help Director Cyber & TMT at Willis
improve your employees’ “Cyber Towers Watson London
IQ”, create a cyber-savvy workforce
and ensure cyber resiliency across
all levels of your organisation.

Challenge four –
managing people risk
in an age of turbulence
Mining their minds: optimizing the
employee experience
Introduction – the value of A key outcome of this broad and

an optimum employee work deep research is that we can share The results provide consistent
experience a clear set of criteria for human and comprehensive insights
capital success in the mining industry.
Managing talent in the mining industry Our conclusions point to the design
into the overall employee
has its challenges. When stagnant of an employee experience which experience that mining
demand, diminishing budgets and combines i) visionary leadership with
cost orientation is the order of
companies will need to create
a human touch, ii) employee pride
the day, how does one create an in the purpose and external image
to secure their future success.
outstanding employee experience of the organization, iii) empowered
to help drive both organizational operations associated with a safe,
performance and financial results? team oriented culture iv) a fair total
To answer this question, Willis Towers rewards package.
Watson has conducted research at
both macro and micro levels of the
mining industry, leveraging the world’s How does the natural
most comprehensive database of resources sector compare to
employee opinions. The results provide the world’s best companies?
consistent and comprehensive insights On the macro level, we leveraged
into the overall employee experience insights from the Willis Towers Watson
that mining companies will need to global database of employee opinion,
create to secure their future success. comparing our cross-industry high
performance companies group with
This research, drawing on our
our natural resources industry group.
unparalleled database of employee
opinion, analyses a) how the mining
industry benchmarks against the
world’s leading companies; b) sector
specific drivers of employee
engagement and c) a research study
from a leading global mining giant,
that has determined the direct impact
of employee engagement upon key
operational and people performance
indicators related to productivity,
safety and staff turnover.

Figure 1 - 2016 Global Natural Resources Companies Norm comparison to Global
High Performance Norm
Source: Willis Towers Watson Normative Benchmark Databases
The Global Natural Resources Norm sector based employees responding

is comprised of a weighted average favorably to a variety of employee
of employee survey results from a opinion survey topics (purple bars)
cross-section of natural resource and the percent point difference
companies. The data are derived from from the Willis Towers Watson high-
recent client studies conducted by performance companies norm (red
Willis Towers Watson and are updated bars). The topics are ranked by the
annually. The norm includes the difference to the high performance
opinions of more than 150,000 natural companies group. This illustrates
resources industry employees. clearly some organizational level
competencies that the natural
Figure 1 above illustrates the resource sector lacks.
proportion of natural resource
Problem one: lack of leadership have found ways of demonstrating
effectiveness authentic environmental concern,
giving back to society, as well as
Natural resources organizations are noting the benefits achieved from the
fifteen percentage points behind the end products of exploration. Other
Willis Towers Watson high performance Willis Towers Watson research shows
companies group on leadership how a positive organizational image
effectiveness. Leaders in high has a direct impact upon employee
performance companies communicate retention rates.
a strong vision and drive the operational
business agenda, while at the same Compared to those working in the
time demonstrating a genuine concern natural resources sector, employees
for the well-being of employees, in high performance organizations are
striking the right balance between more likely to believe not only in the
professional (expertise, analytical and company’s overall success, but that
problem solving capability), pioneering they can themselves prosper and grow
(seizing commercial opportunities, their careers within the organization.
driving imaginative solutions and setting
the long-term vision) and people- It is notable that the natural resources
related behaviors. High performance industry hold up well against the high
organizations also communicate a performance group with regard to local
far stronger vision, creating a sense level functioning, including employee
of two-way dialogue with employees, access to work tools, teamwork and
demonstrating authentic interest in their quality of supervision – all proven
opinions and well-being. prerequisites of a culture focused on
local empowerment and safety.
Problem two: brand and footprint do
not inspire confidence
Engagement drives the bottom
line – but are mining companies
The world’s high performance
organizations create a more positive
extracting full value?
brand and footprint in society, creating Willis Towers Watson research has
real confidence among employees shown that companies with high
in the image of the organization. The engagement outperform their sector
topic of organizational image (which in terms of earnings growth by an
by and large is driven by both internal average of 18%. Furthermore, the high
and external images and perception engagement companies outperform
of corporate social and environmental their sector in terms of growth in
responsibility) is a challenge, given the gross profit by 5% and growth in total
nature of the mining industry. However, assets by 7%.
some successful mining companies

Low engagement across natural stands for, building confidence
resources industries in them, acting with integrity and
authenticity, and expressing genuine
Our findings from a study of 29 concern for employee well-being.
organizations in the natural resources
Largely supervisor-driven, local level
industries show that levels of employee
functioning fills the remainder of the
engagement are low across the sector.
top five factors predicting higher rates
Specifically, findings indicate that
of employee engagement in mining:
only 22% of employees in the natural
resource sector are highly engaged, 3. Empowerment. Employee
compared to 40% globally. In addition, involvement, voice and authority on the
34% are completely disengaged, job, reflecting how well employees are
compared to 24% globally. able to influence the work environment
through their direct actions.
With this grim outlook, the next
question becomes: what are the key 4. Performance evaluation. The
aspects of the employee experience fairness of annual review processes
in mining which will most significantly and company’s effectiveness in
positively impact engagement levels? using nonmaterial recognition to
encourage excellence.
The five key drivers of engagement 5. Safety. Organizational effectiveness
in addressing unsafe work conditions,
Via multiple regression analysis, the observing safety rules continually and
Willis Towers Watson research team ensuring a generally safe workplace.
derived the top five predictors of
employee engagement in the mining Collectively, this list of engagement
sector. Note how similar the following drivers provides a set of marching
drivers are to the characteristics orders, both for efforts required
of high-performance companies at the senior leadership level and
outlined above. The top two drivers important competencies needed for
of employee engagement in natural local managers. Notably, it matches
resources companies have a top- many of the leading indicators of high
down focus driven primarily through performance organizations. KPI linkage study in a global
senior leadership behaviors: mining giant
1. Company image. This is an
Rock solid proof: the impact of
engagement upon company- The study of a leading global
organizations’ ability to create a
favorable reputation, especially level KPIs mining company looked at the
externally to stakeholders and the relationship between the overall
Willis Towers Watson frequently
general public. As noted earlier, conducts client specific studies, employee experience at site
environmental and social forms of statistically connecting employee level (as measured in the annual
corporate responsibility are vital to opinion data to financial and employee survey) and KPIs
public perception, and companies operational data, determining related to people (e.g. turnover),
that are more successful in the strength of connection safety (e.g. injury frequency rate)
crafting a positive image in the between employee engagement and operations (e.g. production
eyes of their people have more and company performance. One
vs plan, work delivered to
engaged employees. such study illustrates statistically
schedule). The data includes the
2. Leadership. Leadership must have significant connections between
employee engagement and
opinions of tens of thousands of
the ability to motivate and support
employees by delivering a bold operations and safety KPIs across a employees, linked with KPI data
vision for what the organization number of mines. from dozens of sites.
Figure 2 - connections between employee engagement and KPIs
HR KPIs SAFETY KPIs OPERATIONAL KPIs
Work
Employee Employer Lost time
Injury Potential delivered Schedule
Initiated Initiated through
frequency injury to compliance
Turnover Turnover injury
schedule
ENGAGEMENT INDEX
I believe in what the

organisation stands for
I have a clear understanding

of the goals and objectives
of the company as a whole
I would recommend my
business as a great place
to work
I work beyond what is
required to help my part of
the business succeed
Figure 2 above shows how key on the sector specific key drivers of
performance indicators related to HR, engagement, including leadership
safety and operations are connected effectiveness, company image, total
with employee engagement. reward and an empowering, team –
Engagement is represented both oriented culture.
with an overall index and the specific
questions that make up that index. The importance of strong leadership,
The colored cells highlight KPIs that communications and positive
were proven to be positively impacted corporate image is underlined
by employee opinion related to in this linkage study, where sites
engagement (based on a Pearson scoring higher on these big picture
correlation coefficient significant at components performed notably better
95% or 99% level of confidence). – for example, in terms of scheduled
work delivery rate. The more positive
The significant connections observed views of supervisory effectiveness,
between employee engagement levels associated with significantly lower
and safety and operations metrics in employee initiated turnover, suggests
this mining company provide further the sector can retain its talent if it
supporting evidence for following maintains this relative strength.
the high-performance company
blueprint and driving up performance

Conclusion: A better employee experience in the mining industry
The research outlined in this article The analysis also proves how
demonstrates that both macro and improvement in these areas will
micro research findings lead to the directly impact the bottom line of
same conclusion: better organizational mining organizations. Employee
performance is associated with engagement has been found to drive
leaders that create an employee financial outcomes such as earnings
experience which outperforms the growth and gross profits, as well as
competition in some fundamental KPIs related to productivity and safety.
areas. In brief, mining organizations
will be more successful if they:
Aage Seljegard is Senior

Foster employee belief in the Consultant and market leader
vision, purpose and image of the for Employee Insights services
for Willis Towers Watson in
organization at the overall level.
Toronto and New York

Connect at the personal level.
While the mining industry is leading Angela Paul is Senior
the way in terms of co-worker Consultant & Employee
relations that foster empowering, Research Lead, EMEA, Willis
safe work, there remains a Towers Watson Londonk
significant gap to close with regard
to leadership effectiveness, in Patrick Kulesa is Global
particular supporting connections Research Director at Willis
between both the practical and Towers Watson New York
emotional aspects of work.

Provide employees with a total
rewards package which couples fair
remuneration with the opportunity
for long-term career growth.
Black lung and compliance:
the great divide
Introduction with health and safety obligations and
“The first priority and concern effective workplace protection. The
Black lung, or Coal Workers’
of all in the coal mining industry parliamentary report was scathing,
Pneumoconiosis (CWP) to use its
must be the health and safety finding “a catastrophic failure, at almost
formal name, is most often found in
every level of the regulatory system,
of its most precious resource – the coal mining industry or where
intended to protect the health and
the miner.” graphite or man-made carbon
safety of coal workers in Queensland”.
products are manufactured. The
Section 2(a), Federal Coal Mine disease is commonly known as “Black As the human tragedy of this plays out,
Safety and Health Act of 1969. USA lung” because those diagnosed with it there are implications for the mining
typically have lungs which look black industry, the way its workplace health
instead of the pink associated with and safety is audited and, of course,
healthy individuals. risk management, mitigation and
transfer – particularly when it comes to
The “Black lung, white lies” report
Workers’ Compensation coverage and
Directors’ and Officers’ liability.
CWP was the subject of a report
tabled in the Queensland parliament
Court filings inevitable
in May 2017 after 27 public hearings,
conducted from October 2016 to A key finding of the situation in
March 2017. The government pulled Queensland is that no person or
no punches in the ‘Black lung, white entity has ever been prosecuted for
lies’ report, saying the illness has failing to meet a health and safety
not “re-emerged”, describing the obligation in relation to respirable dust
re-identification of the disease as in this state. Court filings, whether for
a “catastrophic failing” of public individual cases or a class action, are
administration in the state. therefore only a matter of time.
With at least 22 cases confirmed in What about the medical fraternity?

Queensland in the past two years,
and more diagnoses expected to The ‘Black lung, white lies’ report
come, the government acted swiftly was also highly critical of Queensland
to determine how the regulatory medical professionals. Chair Jo-Ann
environment and health and safety Miller was quoted as saying the
systems had failed, and how to better systemic failure also applied to doctors
protect workers exposed to coal dust and radiologists:
in the workplace.
“There have been 30 years whereby
The failure of the regulatory system the doctors have been asked to look
in Queensland after the coal miners’ health and they
have failed catastrophically as well as
While all mining companies look to the Department (of Health). The failure
protect the health and safety of their in relation to the health scheme is
workers, ultimately this crisis has something that every single officer of
revealed the “great divide” between that department should be ashamed of.”
what is considered to be compliance

So you’re compliant – but are Too much focus on catastrophe
you effective? scenarios?
The lesson to be learned here for One of the issues in Queensland

all mining jurisdictions is simple. and Western Australia, unlike other
There needs to be a renewed focus Australian states and territories,
on the effectiveness of Health and is that specific mining safety
Safety protocols in the workplace, regulations exist outside the main
rather than merely checking with and workplace Health and Safety laws.
adhering to compliance. These regulations could have
been construed as being more
Clear lack of protocols focused on the ‘big bang’ that is,
avoiding scenarios that could lead
A report prepared for the Queensland
to explosion, mine collapse or other
Department of Natural Resources
major disasters. The Queensland
and Mines, by the Monash Centre
government has now clearly signalled
for Occupational and Environmental
that CWP is no less a catastrophe.
Health and the University of Illinois
School of Public Health had an equally All mine operators have a
blunt assessment. The Coal Mine responsibility to implement suitable
Workers’ Health Scheme “revealed dust suppression. Clearly, in many
major system failures at virtually all cases, that hasn’t worked.
levels of the design and operation”
when it came to respiratory health, 2017 changes
including a lack of clear protocols to
report cases of Coal Mine Dust Lung In Queensland at least, legislation
Disease (CMDLD) to the department. to reform the regulatory framework
for coal mining has been introduced report is a willingness to strengthen
and made effective as of 1 January laws to ensure an ‘eradicated’ disease
2017. Employers in the industry stays that way.
are on notice to ensure the health
surveillance of their workers is carried
The risk management
out by a medical practitioner with the
implications
requisite expertise to diagnose CWP.
So we’re seeing something of a
What about the US? “Brave New World” here – the very
real likelihood that a number of
In the US, Black Lung has continued to Workers’ Compensation claims may
be cited as a cause of death on former be revisited and the need to re-assess
coal workers’ death certificates. whether these workers are entitled to
US expert Dr Robert Cohen, the access benefits.
principal investigator at the University
of Illinois at Chicago’s Black Lung Workers’ Compensation
Centre of Excellence, gave evidence scheme failings
at the Queensland parliamentary
inquiry. In response to a question from The Queensland report found significant
the inquiry’s deputy chair Lawrence failings in the Workers’ Compensation
Springborg MP on whether as many as scheme affecting coal mine workers
70,000 US workers had CWP listed as diagnosed with, or concerned about
contributing to their death, he said that CWP. Among them was no mechanism
was a “significant underestimate”. for workers with CWP to access lump
sum payments if there is no permanent
Fully independent compliance impairment and no capacity to re-open
auditing? claims if impairment progresses. It made
a number of recommendations that will
A major part of the problem is also no doubt be looked at by other
the auditing of compliance. The states, should cases of CWP come to
Queensland report called for a light in their mines:
“truly independent” Mine Safety and
Health Authority that would report
Transitional one-off medical
to a parliamentary committee, have assessments at no cost for retired
an expert medical advisory panel or former coal workers (six months’
(with US expert Dr Robert Cohen as exposure to coal dust in Queensland)
a consultant) and a full-time expert
Provision to reopen a claim if the
medical director. disease progresses
But what happens on the ground needs

Lump sum compensation payment
to change. In the wider health and awarded even if there is no
safety process we see inspectors come permanent impairment
from many sources – some from the
Enhanced rehabilitation (including
industry, others from law enforcement. pulmonary) and retraining
If we look at Queensland’s Mines
CWP and Coal Mine Dust Lung
Inspectorate, inspectors are almost Disease (CMDLD) to be ’Notifiable’
invariably ex-miners. While there’s no diseases under the Public Health
doubt they have specialist knowledge, Act 2005
they have never seen safety from any
other point of view.
Qld Chief Health Officer to report to
Parliamentary Committee annually
Ultimately, it is the employer who must on CWP and CMDLD
be held to account and what we have
Permanent Parliamentary
seen in the Queensland parliamentary Committee on Public Administration

Queensland’s Office of Industrial The need to audit
Relations was moved to issue advice
for workers diagnosed with CWP, Ultimately, to ensure compliance and
outlining workers’ compensation minimise risk, the auditing regime in
for a successful claim. It stated that mining and other industries where dust
workers will be entitled to weekly suppression is required, must be robust
compensation for lost wages, among and timely. Under Australian standards
other benefits, but this does not there are 100 elements to an audit
insure the worker against a drop process in mining and these must all be
in income if they are redeployed to captured within an optimal timeframe.
a lower grade or where additional Healthy companies look to do four or
loadings are paid for specific tasks. five audits within an 18-month period
to capture all the elements that are
Entitlements relate level of worker’s required. Other companies may take
incapacity appreciably longer.
WorkCover has also issued advice We believe mining, like many other
that, after a successful claim, industries, needs appropriately
entitlements relate to the level of the qualified and certified auditors.
worker’s incapacity and how this might A degree in safety or a related
be reassessed over time/progression discipline should be a minimum, but
of the disease. It does outline that it’s important for the mining industry,
cases of permanent impairment could in the light of what has happened
be eligible for statutory lump-sum with CWP, to attract auditors with
payments of up to A $314,920. If the the widest possible experience
degree of permanent impairment is base. Companies need to satisfy
30% or more, there could be additional themselves that they have the right
lump-sums of up to that amount, plus people auditing their practices. The
other possible allowances. health of their employees, and their
businesses, depends on it.
WorkCover’s advice notes that
workers diagnosed with CWP may
Scott Kirkwood is global
have the right to sue their employer, client relationship director,
or former employer under common mining at Willis Towers
law and suggests contacting their Watson Australia
union or a solicitor. While Australian
plaintiff lawyers have not yet filed any Graham Kenafacke is
class action suits with regard to CWP, national WHS manager
the volume of cases suggests this at Willis Towers Watson
may not be far off. Australia
Risk culture in the mining
industry: why should it matter?
The concept of business risk has strong risk culture, supports business
evolved to encompass all day-to-day resilience while minimising risks
issues, driven by the realisation that and potential losses. This forward-
often success or failure is dependent looking approach, founded on a clear
on the behaviour of an organisation’s understanding of the organisation’s
people – either individually or in groups. risk culture and its influences, gives
leaders the power to shape strategy
In an increasingly complex corporate to match desired outcomes.
world, managing risks related to an
organisation’s ‘human capital’ is critical. What is risk culture?
Given the new developments in the
mining industry outlined elsewhere in Risk culture is the sum of the
this Review, this is especially the case organisation’s “shared values,
for the mining industry. beliefs, knowledge, attitudes and
understanding about risk” (Institute of
The management of these risks Risk Management). It is built, shaped
is often perceived as challenging and reinforced by individuals, groups
because it’s thought within the mining and leaders within organisations.
industry that people-related risks can’t For example, rogue traders have
be quantified. However, it is precisely caused millions of pounds of losses
the intangibles and uncertainties for investment banks and nearly all
inherent in this ‘human capital’ industrial accidents can be traced
asset that are critical to today’s back to flaws in risk behaviour.
evolving corporate risk and safety
management strategies. The role of leaders
A good, balanced risk culture helps The role of boards and chief risk
miners identify and take advantage officers, as well as other risk
of the right opportunities, to gain specialists, is to clearly articulate a
competitive advantage and reduce the balanced and business orientated
total cost of risk. view of risk. It is crucial that this is
used as the basis for educating and
advising the rest of the organisation.
Setting the right risk culture
Taking an overly cautious approach Risk and safety cultures develop over
to behavioural risk can lead a mining time and leaders play a crucial role in
company to achieve below-potential helping culture to mature. Business
growth, while a risk culture that is leaders need the knowledge and
high on the risk spectrum (without skills to take an organisation towards
suitable frameworks in place) can an incident-free environment. As well
lead to extreme losses. Additionally, as knowledge and skills, leaders
pressure from shareholders to achieve need to reinforce the right messages,
quarterly performance results forces as well as role model behaviours
longer-term risk management to take required of employees. If leaders
a back seat to short-term targets. say one thing and do another, or
worse, spread contrasting messages,
Establishing a consistent and employees will either disregard
enterprise-wide risk management corporate messages about risk, or
framework, that is supported by a imitate the behaviour of management.
Aligning risk appetite to risk culture
Understanding risk appetite informs effective assessment of current, baseline risk culture. The subsequent
assessment findings help identify areas to address and suitable interventions that, combined with ongoing
monitoring, enables organisations to effectively manage risk culture.
Determine risk Conduct analysis

appetite Assess current to identify
risk culture priorities
Reassess to Implement and Develop

monitor success engage employees interventions to
influence risk
culture
A focus on risk culture must be ‘risk aware’ and that the

board should establish a company’s
To influence and improve risk culture,
culture, values and ethics.
an organisation must understand both
a top-down and bottom-up perspective. The Code demands that risk
This understanding highlights risky management and internal controls
behaviours which, if eliminated, will lead are incorporated within day-to-
to a reduction in incidents, accidents, day management and governance
fines and claims, reducing the total cost processes, and not treated as a
of risk. separate compliance exercise. Each
company must report on how they
An organisation can look to improve risk
have applied the Code.
culture holistically and/or by focusing on
specific businesses or functions via an The Code also specifies that risk
operationally focused approach. considerations are embedded into
reward systems, asking the board
Corporate risk culture – the
to consider how its human resource
board’s duty
and reward policies support business
objectives and risk management.
A well-managed risk culture supports
business objectives and reduces the
A holistic approach to corporate risk
total cost of risk. Responsibility for risk
culture, starting at board level, will
culture is also one of the board’s duties.
ensure all activities from strategy to
communications are correctly aligned
The Financial Reporting Council’s
to influence employee attitudes
(FRC) Corporate Governance
and behaviours. To influence and
Code states responsibilities and
improve an organisation’s risk culture,
offers guidance for boards of listed
corrective strategies need to be
companies and standards for auditors.
embedded throughout.
It directs that each board member

Operational risk culture – The combination of a driver survey,
target specific functions identifying issues from the perspective
of drivers that management may
Risk culture can be applied to units not otherwise be aware of, and
or operations within an organisation; individual driver assessments, enables
vehicle or fleet risk management is organisations to target elements of the
a good example, especially for the driver experience that are most likely to
mining industry. Whether fleet is the have a positive impact on the number
primary business or not, addressing of incidents and subsequently claims.
risk culture in relation to drivers can
influence areas such as recruitment, The financial benefits for an
retention and training, while reducing organisation are clear – a robust
claims and the total cost of risk. mitigation approach and fewer claims
will have an impact on insurance
By undertaking a screening premiums and retained costs. In
assessment and a survey of drivers, addition, this approach to managing
fleet operators can identify links risk will significantly reduce the
between drivers’ attitudes, beliefs threat to brand and reputation by the
and behavioural tendencies, and the potential for fewer incidents and more
frequency and severity of incidents. impactful communication.
For example, there is a strong
correlation between engagement in A targeted risk culture approach can be
the work place and the frequency and applied to any part of an organisation.
severity of incidents across industries.
Measuring risk culture – the
Do performance management or
importance of quantification bonus metrics make employees
more prone to risky behaviour?
Measuring risk culture is important
for internal assessment and risk Analysis and reporting tools in these
culture management, and will help two areas not only provide key insights
companies meet the requirements for senior management but are also
of the Corporate Governance Code. suited to engaging and involving line
Much of an organisation’s risk culture managers in the local risk culture of
lies ‘beneath the surface’. Important Armed with a better
their own areas of control.
cultural characteristics may not be understanding of current
immediately apparent but they can be Setting priorities risk culture and how it links
identified, measured and understood
using two key assessments. The outcomes of both assessments
to key risk factors, leaders
can help risk and HR functions and managers can utilise a
1. Psychometric assessment identify key interventions that will range of tools to shape their
improve risk culture. In combination
Applying a well proven psychometric with HR data, claims statistics and
organisation’s risk culture
assessment to employee groups that risk exposure data (for example, going forward.
manage risk or represent material telematics data in the case of
risk exposure can help organisations drivers), the outcomes of the
understand their combined risk profile. two assessments become more
For example, assessing leadership powerful, helping shape targeted
can help organisations measure interventions that lead to improved
their senior management group’s risk management and stronger
propensity for unduly risky or risk- risk cultures. Armed with a better
averse behaviour, and whether the understanding of current risk
tone set from the top matches the culture and how it links to key risk
desired risk profile. factors, leaders and managers can
utilise a range of tools to shape
2. Employee risk survey their organisation’s risk culture
going forward.
A risk survey uncovers the collective
impact of employee views and
behaviours. A survey enables Tools to influence risk culture
measurement of key aspects of risk Integrated risk management is achieved
culture and an assessment of findings, through a structured and coordinated
in the context of external norms, approach that identifies, assesses and
to identify the drivers of employee manages relevant business, asset and
risk attitudes, highlight potential risk people risks.
‘hotspots’ and answer core questions
such as: Willis Towers Watson works with
organisations to transform risk

How safe do employees feel it is to culture and ensure a successful
speak up? implementation of new integrated

How do employees view the risk frameworks.
example set by leaders?

Do employees feel a sense
of personal responsibility for
managing risks in the business
and do they feel it is necessary to
adhere to risk controls?

A unique perspective highlights
Organisational effectiveness
the critical intersections between – governance, compliance and
talent, assets and ideas, the dynamic controls - review of an organisation’s
formula that drives business structures and processes to ensure
performance, through: optimal outcomes, such as effective
decision-making, regulatory reporting

HR interventions - aligning HR and and role accountability, against
risk policies to design and implement market best practice. An employee
more effective processes. Typical perspective of these measures often
interventions include review, redesign identifies unforeseen incentives not
and implementation of compensation to follow procedure, incentivising
and incentives, manager selection risky behaviour.
and development, and performance
management.

Risk management - independent Alistair Wood is Director,
review of policies, procedures Human Capital and Benefits, at
and documentation to influence Willis Towers Watson London
an organisation’s risk culture.
Assessment of existing risk
management frameworks enable
an organisation to understand
its strengths and identify where
processes require enhancements,
measured against market
best practice.
Total cost of lost time: a game-
changing approach to managing
employee absence
Introduction The total cost of lost time consists of

the economic (implicit and explicit)
In the year since the merger of Willis costs of worker injury, sickness and
and Towers Watson, the “business presenteeism9. Explicit costs are
proximity” of our Risk Management readily identifiable, such as workers
and Human Capital consultants compensation and health care claims
- traditionally separated up until and increased premiums. Implicit
now - has already generated many costs are considered opportunity
successful connections between costs and include loss of production,
these two domains, undoubtedly to costs associated with replacing
our clients’ benefit. that lost production and possible
equipment damage.
The Willis Towers Watson Natural
Resources Risk Index, published last The attempt to mitigate the causes
year, analysed the severity of impact and monetary impact of the total
and ease of management of the top 50 cost of lost time has historically been
risks facing the industry. One of the five managed by two distinct and separate
megatrends identified was Workforce operations – the Risk Management
Management and Talent Optimization. and Human Resources departments.
Many companies in the mining industry However, we believe that energy
face the challenge of doing more companies should now consider a
with less, as a shortage of industry- more holistic approach that removes
specific skills, less experience due this historical divide to create an
to recent layoffs, lack of international enterprise wide solution.
mobility, global competition for talent,
the requirement for new skillsets According to the Willis Towers
and a volatile industry combine to Watson’s 2015/2016 Staying @
make talent attraction, retention Work survey, produced in the US, an
and engagement a key risk for any unhealthy workforce is an expensive
company working in this business. workforce, as evidenced in a summary
chart of its key findings overleaf:
The mining sector saw a huge decline
in activity up until 2016 when things
began to show improvement and by
2017 had recovered quite a bit of lost
ground. Those bad years led to mine
closures, projects being shelved and
having to optimize an operation to
do more with less due to major cost
control efforts.
9
resenteeism is the concept of working while sick or injured and its consequences are productivity loss, exhaustion leading to exacerbated sick
P
time off, decreased engagement and workplace epidemics like workplace infections

Workforce risks Impact on Risk and Health
~50% of Americans have at least Workers Compensation serverity

impact (85% of claims can be
one chronic health condition
attributed to lifestyle and chronic
conditions), absenteeism, STD, LTD and
medical benefits
~67% of US adults are obese Lead to higher healthcare costs and

contribute to WC incidence and severity
The workforce is aging: Lead to higher healthcare costs and
Mean age is 41 and is expected to

contribute to WC incidence and severity
increase in the near term
Compliance requirements are Impact on wellness programs and

increasing; ADAAA and Wellness WC accommodation; non-occupation
regulations through ACA and occupational medical event
exposure equalizes
The situation is of course similar in Start with a high quality business

many other areas of the world and is a hypothesis
familiar one to the energy industry. So
how can mining companies respond? Creating and working with
sophisticated analytical models is
Analytics that encompass a broader much more than applying algorithms to
enterprise view data. Effective models start with a high
quality business hypothesis such as:
Today’s more sophisticated analytic
frameworks use a broader enterprise “We have a higher than expected claims
view to allow a company to identify and and a longer cost-tail on some workers
design targeted solutions to reduce compensation claims versus others.”
lost time and improve productivity.
Often times the framework starts with An effective analytical partner would
a more foundational view – examining then work with the business to identify
performance data to create baseline the broad range of data sources
benchmarks. Additional sophistication is that are most relevant to the issue
added so that the company’s workforce at hand. Examples of this include
performance relative to external medical, pharmaceutical, disability, and
benchmarks and trends over time can workers compensation claims. A more
be assessed to manage risk. Finally, comprehensive view would include PTO,
modern tools and techniques afford us safety and incidence reports, health risk
the opportunity to accurately predict factors and employee census.
risk and by doing so design optimal
programs to manage the total cost of
loss time across a broad spectrum.
Bringing order to the data In measuring the risk, we were looking
to determine two things:
Of course it is likely that some data
collected would be valuable whereas 1. the probability of someone getting
other data would not. For example, into an accident; but also:
the model would test if the longevity 2. if they got into an accident, what the
of cost is due to the type of injury or size of that accident would be.
efficacy of care. With this in mind,
the analytical process, in partnership The combination of these two
with the business team, brings order measures is particularly useful for
to the data. This allows companies to the employer.
understand what drives the underlying
business problem. Willis Towers Watson collected a
significant amount of data on these
The solution should engage leaders 11,000 employees, from which perhaps
in the results and include implications some 30 pieces of information were
for action. In this example a population predictive in nature and could therefore
of employees that have a higher be modelled effectively.
incidence of claims, more missed
days and lower performance might Of these 20-30 pieces of
also have opioid prescriptions from information, there was some
several providers that could lead to information that the employer could
abuse issues. The goal would be to do nothing about – an employee
separate out these issues so that an having children or getting married,
appropriate mitigation program can be for example. But there was also a
implemented. significant amount of information
that the employer could indeed have
A case study – Workers some control over, such as whether
Compensation losses they had received training or
whether they had had bio-screening.
Consider the following case study. So out of the original pieces of
A model was built to study the information, we identified 10 over
underlying risk drivers for Workers which the employer did have control.
Compensation losses for a specific
company that had some 11,000 The model was applied to the active
employees. The objective was workforce and the following exhibit
to identify the relative Workers overleaf was produced.
Compensation risk of each employee
for the year ahead so that the risk
could be identified and managed
more effectively.

Workers comp expected losses
8,000 900
7,000
Expected Loss:
US $2,767 per employee year 800
6,000 700
5,000 600
Employee Count
Employee Score
4,000 500
3,000 400
Expected Loss:
$656 per employee year
2,000 Expected Loss: 300
$217 per employee year
1,000 200
0 100
391 Employees
-1,000.00 0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Employee Category
In the model above, the last four average risk – these 450 employees
employee categories produced by far are forecast to cost the company on
the most significant expected losses, average some $217 each per year (i.e.
allowing the company to identify $97,650 in total). However, further up
where their real WC exposure lay the scale in Category 27, these 391
employees are each going to cost
The chart above reflects the output the company on average $2,767 each
of the modelling process. Instead of year (i.e. $1,081,897). Indeed, the last
11,000 different results, we grouped the four categories make up by far the
employees into 30 categories of risk so largest part of the overall risk.
we could manage the results effectively.
Each of these 30 employee categories Actions taken from knowledge
had roughly the same number of gained from the model
employees in them and are reflected in
the horizontal axis of the chart. So far we have discussed the output of
the model. The next step is to apply the
We then created the two vertical axes model in a business as usual setting.
which were: The model also told us that, all things
being equal, if employees receive proper

On the left, the expected loss in training the company could expect a 15%
dollar terms for each employee reduction in risk. If employees received
(by category) the bio-screening, the company could

On the right, the number of expect a 2% drop in risk.
employees in each category
Instead of blanketing these programs
If we plot the expected annual loss across the entire population of
from each employee per category employees, we can now surgically
on this chart as calculated by the target which employees would benefit
model, we can identify where the real the most and as such optimize our
risk lies. For example, the category investment. In this case it was
10 employees represent only an identified that investing $35,170 in
these two programs (training and bio-screening) for this population of employees
would lower workers compensation losses by $86,169 – a 145% ROI. While
seemingly a small amount in absolute dollars, keep in mind that this was only 3%
of the workforce for a single risk type.
Expanding this model to multiple risk types across broader employee populations
will expand the monetary returns exponentially.
Why does it matter?
All our research to date suggests that companies with the most effective health and
productivity programs have a financial advantage, summed up in the chart below:
Health Risks/Engagement Financial/Productivity
24%
Fewer cases with
hypertension
(>130/89)
2x
more likely
1.0
fewer days
“significantly” of unplanned
outperform peers absence per year
23% 67% Lower annual

Fewer High
Glucose Risk
More likely
to have
medical plan
costs PEPY $1,000
employees
29% participate in
50%
at least one
higher revenue
well-being
Fewer users of per employee*
activity
Tobacco
Source: Willis Towers Watson 2015/2016 Global Staying@Work Survey, United States.
We’ve shown that that a sophisticated

actuarial analysis of a company’s Chris Wentland is Willis
Workers Compensation risk profile Towers Watson’s Oil & Gas
can do much to lower overall risks Client Relationship Director
costs – a clear example of the value specialist for North America
to be gained when risk managers and

HR professionals combine and work Serhat Guven is Willis
together to identify and mitigate a Towers Watson’s P&C Sales
company’s people risk. and Practice Leader for the
Americas
Andrea Walsh is a
Director in the Talent &
Rewards practice of Willis
Towers Watson

Part two –
mining risk mitigation
and transfer issues

Hot work, hidden dangers:
what can be done?
What is hot work and why does it
Surface mining – from the fluid
matter? contents of large and complex
machinery
The term hot work is used in industry

Surface treatment plants – through
to denote work involving equipment
the extensive use of rubber-lining
which causes a significant rise in
temperature, sufficient to cause In each of these there are specific
ignition. The ignition might be of hazard characteristics that highlight
materials, resulting in smouldering or the need for increasingly effective
flaming combustion, or of flammable controls for the hot work activity.
gases, resulting in explosion.
Hot work can be lethal… Underground mining

For hot work activities, the
Fires and explosions resulting from
underground environment presents
Hot Work activities in the mining
four main challenges:
industry have consistently been a
significant contributor to insurance
the role of mine ventilation in the
claims over the years; indeed, spread of fire
during the last two years we have
witnessed as many as 10 separate hot
access and escape for personnel
works losses that have significantly and fire-fighting equipment in case
impacted the insurance market, with of fire
some insurers walking away from
location of immobile equipment away
affected programmes (see our market from designated hot work areas
round-up article later in this Review).
the presence of methane
Mining is characterised by some
home grown issues which give rise Mine ventilation
to serious hazards; this means hot
work activities need to be constantly Ventilating the underground workings
managed with consistency and results in large quantities of air
diligence. With a better awareness flowing at speed along tunnels to
of the mining context and how it maintain safe working conditions
might erode our efforts to control the (temperature and air quality) for
risk, the industry can move forward workers at the production faces.
in achieving ever safer and more Some mines have faces located
effective systems to carry out this several kilometres from the shaft.
necessary activity.
Any uncontrolled ignition in, say, a
Where do the key operational risks lie? conveyor belt after hot work repairs,
is likely to spread quickly along the
Mines and mining sites are exposed belt, fanned by the air flow. Typically,
to hot work risks in three key areas: the air can travel at speeds of up to
five metres per second (11mph) in

Underground mining – driven by conveyor haulages; not only will the
ventilation, methane, immobile fire be driven along the belt, but the
equipment and escape routes smoke will be transported through the
particular district.
Access and escape Surface mines
It remains that whatever the
It is easy to see that smoke and For surface mines, hot work often
entails repair and maintenance
source of fire underground,
fire damage could be extensive as
equipment, infrastructure and possibly on large earthmoving machinery, the unique environment
workers are caught in the in the path of which are high value, complex adds a level of risk that
the advancing fumes and fire. It is worth units containing large quantities
of combustible fluids. Lengthy makes control of hot work
noting here that the provision of belt-
mounted portable breathing apparatus lead times for major replacement absolutely vital.
and underground refuge bays (safe parts or machines themselves are
havens) within a short distance of common in these instances, leading
working places has been widely to production loss with potential
accepted within the industry and made impacts on the business.
a legal requirement in many countries.
With large mining machinery,
Location of immobile equipment because of the complex systems
and potential for general fire hazards
Hot work is also necessary to from a number of sources, each
maintain and repair equipment that machine constitutes a hot work
cannot realistically be removed to a risk situation, requiring a proper
safe area, such as transfer chutes in procedure.
conveyor systems or heavy mining
machinery. Stationery equipment can Surface plants
be located anywhere along the main
Apart from the generic fire risk on
haulage tunnels, where products of
any large plant where a number of
combustion from fire or explosion can
sub processes exist, in mining plants
quickly be borne through the mine.
one area of note is the use of rubber-
Presence of methane lined equipment. Because of the
sometimes abrasive characteristic of
In some cases, primarily coal mines, the ore it is necessary to use rubber-
the presence of methane, a naturally lined process equipment. Rubber
arising flammable gas adds an lining is used in pipes, pumps, mixing
extra level of risk that prohibits the and storage tanks, cyclones and other
use of hot work underground in all associated equipment and can be
but exceptionally well controlled present extensively throughout the
designated safe areas. Ignition of plant. Because the lining is often out
methane has the added hazard of sight, inadvertent ignition is a risk
of generating a self-propagating with potentially large consequences.
coal dust explosion, a potentially Clear labelling of all such equipment
catastrophic event for a mine. is good practice.
It remains that whatever the source

of fire underground, the unique
environment adds a level of risk
that makes control of hot work
absolutely vital.

What are the main hot work occurrence is not uncommon, but
challenges for miners? should be detectable.
In countries with established industrial

Proper management and
and mining legal frameworks, safe supervision of the hot work
work requirements demand the policy across the business.
use of hot work procedures as Human behaviour will naturally
binding requirements. However, this govern whether a procedure
is not always the case and, where remains sustainable or whether
absent, should be introduced as a it deteriorates over time because
minimum requirement and as good it is seen to be ‘just another set
management practice. of rules’. The challenge here
is twofold: a) to maintain the
The principal practical elements are: effectiveness and relevance
of the procedure in the face of

awareness of the risks change and b) to motivate users to
understand and utilise the hot work

preventative measures taken
procedure as an essential enabler

immediate contingency measures in for their continued safety and the
case of an incident well-being of the business.

post-hot work fire watch
The use of contractor staff: The
increasing use of contractors
The risk has been successfully in the mining industry over the
mitigated only when the management years has been a significant
and control measures, i.e. proper feature in the mines’ ongoing
authorisation, supervisory checks drive for productivity. However
prior to, during and after the work and the varying level of training and
final sign off to recognise successful skills amongst contract workers
completion, are effective. sometimes increases the risk of
an ignition when hot work has to
What about people risks? be carried out.
Given the industry’s deep focus on

safety and workforce welfare, why How should miners respond?
do hot works incidents continue to The physical realities of mining make
occur? Our experience with clients it all but impossible to eliminate hot
and insurers points to a set of four work scenarios. We think miners must
people-related risks: do better at preparing their workforce
to effectively assimilate, gauge

Proper preparation prior to the and prepare for the risks involved
work. If a fire or explosion is a in working in hot work areas. Four
consequence of the hot work, it actions are critical:
is probably because the worker
was not aware of the risk before 1. Encourage relentless adherence
starting the job. to process. It’s no accident that the

Checks that ignition cannot take formal hot work procedure continues
place from smouldering material to be the primary tool for preventing
or embers after the work is fires and explosions when working
completed. Some fires are the result with welding and cutting gear. The
of post work ignition. An undetected difficulty comes in making sure the
smouldering becomes an ignition procedure is fit-for-purpose and that
and the fire takes hold, sometime workers are using it correctly and
after the worker has left the job. This diligently, all of the time.
2. Create a deep awareness of In the final analysis, it is clear that
risk and the consequences continual scrutiny of the effectiveness
of it materialising – critical to of the hot work policy will rest on the
the preparation phase prior to ability of those workers, supervisors
the hot work activity. A proper and managers who understand and
understanding of the risk are aware of the risks of hot work. The
assessment process will enable final challenge rests with them.
a supervisor and worker to best
identify the risks in carrying out
the intended work. This implies Don Hunter is a member
that risk assessment training is a of the Willis Towers
critical requirement for workers Watson Engineering
and supervisors. This is not always Risk Management team
the case. specifically responsible for
3. Establish a post hot work ‘fire the Latin American region
watch’ – essential in any hot work
Alistair Forbes worked
procedure, it can easily lose its
for Willis Towers Watson
effectiveness, by not being thorough
in London for many years
enough in either the procedure or
in our Engineering Risk
the execution. This is a key step
Management team before
and its value should not be under-
retiring becoming a
estimated. It should be audited
freelance consultant.
regularly for effectiveness.
4. Regularly review and manage

the hot work procedure – regular
critical review of the procedure
should be built in to the policy. Audits
and work study can give valuable
information about changes that are
required to the procedure. They
can also indicate if the workers
and supervisors require additional
training in the use and execution of
the procedure. Feedback from other
sources may also enable procedures
to be improved; for example,
insurance risk engineers are often
able to share best practices from
other operations.
BEPS, benefits and big data: the
mining captive of the future
Introduction – a renewed In addition to this, some observable
interest from the mining trends in mining industry captives
community? include, for example, losses
associated with process disruption/
Captives have historically been key machinery breakdowns. Captives
quite prevalent in the mining sector. can also provide access to greater
The ability to build cash reserves capacity for risks associated with pit
through risk retention, access greater wall collapse or tailings dam failure.
capacity and exert greater control
over insurance programme design has Parametric insurance is also garnering
traditionally appealed to the larger more interest as familiarity with the
mining corporation. concept grows. Water availability
based metrics can prove particularly
However, like everything, the relationship relevant for mining based parametric
the mining sector has with captives is solutions and help smooth the impact
subject to change. A slight downturn of any costs associated with the
in captive utilization was experienced unavailability of water.
during the extended period of macro-
economic depression and then How are captives adapting to a new
uncertainty from 2008 until relatively environment?
recently. Despite this, there has been a
renewed interest in captive utilization The emerging trends that provide an
amongst the mining community over the insight into the evolution that captives
last 24 months or so. are currently experiencing is arguably
more interesting and exciting.
The explanation for this renewed
interest can be explained by the In general, the two most notable
desire for the core risk financing evolutionary traits that captives have
benefits that a captive can provide, displayed in recent times have been:
but also in some new developments in
the captive industry.
the utilisation of data to optimize
risk financing arrangements
How are captives being used for

the way in which they mirror the
mining risks?
evolving risk profile of mining
corporations accommodating a far
Mines introduce a particular set of
broader range of risks
risks, for which, a captive can be part
of a solution. Although the risk profile
Data and captives
associated with mine operation (low
frequency/high severity liability risks)
Data has become valuable currency
is not typically viewed as conducive
in all facets of life in recent years and
to a captive participation, mines also
the capacity of captives to act as a
contain their fair share of higher
repository for risk management data
frequency and lower severity claims
has grown exponentially as a result.
that a captive could accommodate.

Through the correct use of their own areas such as human capital benefits,
data, mining corporations now have a political risk and cyber liability to name
wealth of insight to inform what and but a few – these represent the fastest
how they retain risk and this has led growing risks of most major corporates.
to an emergence of captive owners
who speak in terms of “optimal Captives are rapidly adjusting to the
retention structures”, “portfolio benefit new reality of a more interconnected
maximization” and “maximization of global economy, where human capital
return on equity” – a genuine insurance is more than ever seen as the greatest
mind set. This has led to the pursuit asset a company can have.
of more sophisticated structures such
as multi-year, multi-line programmes, The emergence of captives as viable
to refine and optimize how corporates insurers of employee benefit risk is one
finance their risk and provide additional of the most noteworthy developments
cash flow benefits – something that in recent years and exemplifies the
most mine operators would welcome. evolution of captives from vehicles
for ‘traditional P&C’ risk to enterprise
In a sector with complex and wide risk solution vehicles. The ability
potentially high severity risks, with for mining corporations to have more
high degrees of interdependencies flexibility in employee benefit design
between loss events, the ability to and execution could have a profound
firstly model the operations risk impact on talent attraction and retention
profile, and then use these insights to in a period of a well – documented
make financially beneficial retention ‘talent war’ within the sector.
decisions is of paramount importance.
This broadening of captive’s risk profiles
Broader risk profile associated with has also improved the efficiency
new ways of working of captives through increasing
diversification benefits but also ensured
It is not a coincidence that the major that they remain relevant to the key
trends and innovations of the captive risks corporations face today.
industry in recent years have been in
Increasing globalization of captives not specifically aimed at captives,
as subsidiaries of large multinational
Another trend which has become companies they fall within its remit. It
more evident in recent years is the is likely that many companies in the
increasing global spread of captive mining sector will own captives in
hubs or domiciles. Historically, locations where the corporate tax rate
captives congregated in a handful of is lower than that of the headquarter
captive strongholds such as Bermuda, jurisdiction, and if this characteristic
Luxembourg and Guernsey. However, applies, so may BEPS.
there are now over 60 recognized
captive domiciles with insurance However, it is important to stress that
legislation specific to captives. having a captive in a location where
corporate tax rates are lower (relative
This development underlines the growing to the organization average) does not
demand for captive solutions outside imply wrongdoing, nor should captive
Europe and the US, and is a reflection owners be unduly concerned.
of the globalization of modern business
environments. This is particularly However, what is important is
encouraging for the mining community, positive preparation. Although the
which is truly globally spread and will ultimate guise of BEPS in all
likely provide mining corporations in jurisdictions is still to emerge, there Historically, captives
locations such as Australia and South is enough in the principles covered congregated in a handful of
Africa having more genuine choice of in the OECD guidance for captive
where they locate their captive. owners to be preparing for. A captive strongholds such as
sensible first step on the preparation Bermuda, Luxembourg and
project journey, through our
Current challenges to the Guernsey. However, there
proprietary proposition, RADAR, will
industry – Base Erosion and are now over 60 recognized
be to review the captive’s position in
Profit Shifting (‘BEPS’)
relation to the principle expectations captive domiciles with
One of the most significant challenges of the BEPS package. Measuring
insurance legislation specific
facing the captive industry is the captive against key metrics,
BEPS, which is an Organisation and documenting where positive to captives.
for Economic Co-Operation and compliance can be demonstrated
Development (OECD) led taxation - and where remedial action - is
initiative, expected to become a required will allow captive owners
global taxation standard. This initiative to begin thinking about BEPS in
aims to renovate global taxation specific terms that are actionable.
frameworks and ‘close the loop’ in tax This can lead to a BEPS preparation
legislation which allows multinational plan which ultimately puts the
corporates to artificially shift profit captive owner in control of the
to lower tax jurisdictions and reduce challenge and removes much of the
their overall tax bill. Although the uncertainty that currently exists for
measures introduced by BEPS are many captive owners.

Implications for the mining volatility, together with the numerous
sector external forces impacting a captive
approach, results in the “shelf life” of
So what conclusions can the a given captive strategy becoming
mining industry draw from these potentially shorter.
developments?
However, this should not be viewed
Utilization of data to achieve a more as a negative development as the
analytical approach greatest benefit of a captive is its
ability to adapt and transform to meet
A common theme ties the various
the demands of the group as and when
developments observable in the
they change. If reviewed regularly, the
captive industry of today – captives
enhancements to strategy will take the
have continued to keep pace with
form of incremental improvements as
economic and risk management
opposed to any fundamental change in
developments. Big data, cyber
the strategic direction of the captive.
risk, changing work places and
practices, and challenges related to To conclude: a captive remains a
the governing of an interconnected flexible and dynamic tool for the
global economy are all terms that will management and financing of the
be encountered when reading any traditional risks associated with
commentary of today’s economy. operating a mine, but significantly
Utilization of data to achieve a more it can also prove an effective tool
analytical approach, accommodating for dealing with emerging risks
risks such as employee benefits and associated with more sophisticated
cyber, and aligning to regulations work practices. The benefits of
designed for interconnected global a captive strategy also now span
economies through BEPS suggest further than the risks typically under
that captives have more than kept the remit of the risk manager and can
pace and are displaying the ability to be considered on a truly enterprise -
‘future proof’ themselves. wide basis.
Periodic review and realignment of

captive deployment
Ciarán Healey is
Director of Consulting and
However, none of these benefits Development for the Willis
will happen automatically. Captive Towers Watson Global
owners who derive the best value, Captive Practice in Dublin
and maintain the greatest relevance
from the captive strategy, employ
an approach of periodic review
and realignment of their captive
deployment. The rate of change in
the risk profile of mining companies,
with changing work practices,
regulations and commodity price
The global mining insurance market:
towards a turning of the tide?
The London market perspective do at least sense that things may be
beginning to change, at least in some STOP PRESS: Gulf of
Commenting on conditions in the
areas of the mining portfolio.
mining insurance market is somewhat Mexico hurricanes
akin to the playing of a scratched A large number of parallels can be drawn
record on an old gramophone between the mining and insurance As this Review went to
belonging to your grandmother: a industries at present. They have both press, the (re)insurance
repeated mantra, year on year, of experienced a prolonged downturn, with
increased capacity, more competition, market was beginning
margins disappearing and oversupply
reduced rates and dwindling premium persisting. Some consolidation has to assess the impact of
income streams. In last year’s edition
of the Review we highlighted the main
occurred and they have either neared or hurricane Harvey, will
seen the bottom of the cycle. While the
reasons for the continual excess mining industry is ahead of the insurance
hurricane Irma was crossing
supply of capital which has plagued industry in terms of pricing recovery, we the Caribbean.
the (re)insurance markets for some see that trend emerging in the insurance
time now and while there is certainly
no let-up in this excess supply we
market for miners as well in the second Clearly the potential loss
half of 2017.
to the global (re)insurance
Selected mining industry losses, 2015 - 17
markets will be significant,
Quarter Year Territory Cause Estimated although the full effects
Quantum (US$)
on the mining insurance
Q4 2015 Brazil Tailings dam failure open
market may not be able to
Q1 2016 South Africa U/g fire 100m
be measured until the next
Q1 2017 Australia Cyclone Debbie 125m
reinsurance treaty renewal
Q1 2017 Australia Long Wall Collapse 50m
season at January 1 2018.
(Queensland)
Q1 2017 Australia Fire in Iron Ore 30m

Processing Plant (WA)
Q1 2017 Australia Flood 27m
Q1 2017 Peru Conveyor failure 15m
Source: Willis Towers Watson
Please also note there was an underground flood with fatalities earlier this year in Chile - no
information on quantum is available as yet.

North American mining: still prepared to follow the global carrier
competitive lead and offer terms on this basis are
the ones that are most likely to thrive
Let’s start with the area of the in this competitive environment.
portfolio that still remains relatively
competitive – the North American As ever, risk quality and the prospect
mining book. The loss record for this of fresh premium income are the
sector has improved significantly key drivers in generating the most
in recent years and so competition competitive terms from the market.
remains robust. In particular, the entry
to the market of Sompo Canopius Casualty developments
has provided a significant leadership
alternative within the Lloyd’s market; For North American business,
this insurer can write either on a the market continues in the same
primary or quota share basis and direction that it has for the last half
furthermore has the benefit of offering decade, showing no great movement
an engineering service. Moreover, in capacity or conditions. However,
the Blenheim syndicate has hired certain pockets are showing signs of
two underwriters from the Cathedral ingenuity and expansion as capacity
syndicate which has also boosted continues to increase. At the same
Lloyd’s profile in this sector. time the market continues to deal
with attritional losses – these have
We are therefore finding that the had a particular impact on the fresh
softening process has shown little underwriting capacity. These insurers
signs of abating in this sector; have been seen to be underwriting to
miners and their brokers still have establish market share, and the timing
plenty of choice between opting of these losses into the market has
for a Lloyd’s based programme brought havoc to some.
featuring layered placements and a
more straightforward quota share For International, i.e. non – North
programme featuring the major global American business, more capacity is
carriers such as Swiss Re, Munich Re, the order of the day as well. Indeed,
AIG, SCOR, FM, Allianz and Zurich. this has been the most prolonged
Indeed, the London insurers that are period of expansion since the
mid-1980s when a capacity crisis significantly impacted, which in turn
prompted the development of the has led them to begin to turn away The mining portfolio from
Bermuda Excess Casualty market. those programmes that have been
North America may be
But as well as new capacity and a affected. And as a further result,
wider choice of leaders, we have brokers have had little option but to as competitive as ever;
also seen some notable withdrawals approach London insurers to secure however, in recent months
from this sector, including Axis in the required capacity to complete
we have seen a change
London, Marketform (i.e. Neon) and their renewal.
Novae. Furthermore many carriers in market atmosphere as
have sought to cut staff, offshore their Given that rates in the general a result of more business
back office operations and create Property insurance markets have
cost saving synergies by merger and been softening ever since hurricane
coming to London from
acquisition, thereby reducing their Katrina in 2005 (with mining rates South Africa and Australia.
liability premium reserves. starting to fall a few years later), this
development is probably the first
Premium income thin on the ground time in several years that London
insurers have felt that they can
Mining remains a popular area of hold out for more favourable terms
focus for London market insurers, than they or the buyers might have
with few withdrawals from the sector initially imagined. This in turn is giving
in recent years. However, the over- them the confidence they need to
supply of capital continues to depress press for improved terms from their
overall premium income levels. Given perspective, secure in the knowledge
that mining is but one element of that they represent the insurers of
the overall general property/heavy last resort. For the first time in many
industry portfolio, it is not easy to years, they have found that they did
ascertain exactly how much premium not need to chase the market down;
from mining programmes is still finding instead, they have been able to press
its way into the London insurance for improved terms and indeed have
market; however, there seems little secured firm orders on this basis.
doubt that the spate of losses in
2014-15 in particular has done much to Time to consider long term deals?
throw the declining premium income
for this sector into sharp relief. Given this unusual (and indeed
unanticipated) development, we are
But is a market turnaround on the perhaps now seeing a possible turning
horizon? of the tide in the London market. So
now might be an appropriate time for
The mining portfolio from North certain buyers and sellers to consider
America may be as competitive as a suitably robust three-year non-
ever; however, in recent months cancellable programme. The upside
we have seen a change in market for the buyer is securing a budgeted
atmosphere as a result of more three-year insurance spend which
business coming to London from would protect the company from
South Africa and Australia. any upturn in the insurance market;
the upside for the seller would be
We understand that in the last year or guaranteed premium income at a
so there have been several hot works time when, regardless of the recent
claims from these countries. As a developments outlined above, the
result, some of the less robust primary market needs to generate additional
markets in these countries have been income to keep this class sustainable.

The United States market to suffer from heavy loss activity across
perspective all industries, partially driven by the
proliferation of the smart phone. Workers
A pricing recovery later in 2017? Compensation in general has levelled
out, though some areas continue to
In the Unites States, Property insures
see massive rate hikes, namely federal
have seen double digit rate decreases
black lung rates for underground coal
piled on top of reduced exposures for
miners where in Appalachia we have
many years. However, in 2017 we have
seen Federal rates increase by 167% and
seen many markets begin to stand
125% the past two years respectively,
their ground, with low single digit
with the five year cumulative increase
rate decreases being the norm and
averaging 285% (Source: NCCI).
some finally choosing to walk away
from business rather than acquiesce More casualty insurers active in
to further reductions. Legacy clients mining segment
with good loss records and proactive
loss control efforts continue to obtain However, we see more casualty
preferential terms. While the flattening insurers active in the mining segment
trend is growing, there is still plentiful than we have in many years. Starr
capacity, allowing miners to choose a continues to add experience to their
lower priced program at the expense team, many from AIG, and Liberty
of conventional insurers and long term as well has begun ramping up
relationships, if so desired. their mining expertise. Rather than
opportunistic rate hunting due to
Massive Primary Casualty rate hikes a soft market, we see a concerted
for Appalachian coal effort by insurers to hire and train the
right teams that will be in a position
Primary Casualty markets are an
to support the US mining industry
interesting case in the US. Auto rates
for some time. Other than a few like
are escalating as that class continues
Zurich and Chubb, the Liability mining
underwriting community in the US financials without bearing a loss to
has been rather transient over the the markets which has caused a
past few years, allowing companies to response of them increasing their
obtain seasoned teams in a relatively overall capacity to the product. Rates
short timeframe. However as rates and collateral requirements continue
move upward, insurers’ fortitude to to relax as commodity prices improve.
sustain mining losses and continue Expectations are that the current
underwriting will have to be tested. federal administration will cause a
favorable effect on the mining and
Environmental market still limited extraction industries, further improving
conditions for our clients. Barring
From an environmental standpoint the an economic event, the near-term
market is still very limited since AIG future is brighter for the space than
left this sector, with Ironshore and experienced the past several years.
Zurich being the only key markets.
Coverage for tailings dams is still the
The Canadian market
biggest challenge, where markets
have instituted sub-limits, leading
perspective
to layered programs to achieve Property – still a buyer’s market
required limits, inevitably driving
prices upwards. However, there The oversupply of capacity in the
has been some interest from new Canadian property market continues
carriers though, notably Channel 2015 to support a buyer’s market; insurers
(supported by Scor Re) in Lloyds, are supporting single digit rate
where creative approaches have decreases for buyers with good
gained some favor and we have been loss history and solid preventative
successful in structuring two recent maintenance programs. Insurers’
new programs for mining companies. focus continues to be on risk
management, loss prevention and
Surety remains competitive engineering; insureds that can
differentiate themselves from their
Broadly, North American surety peers in these areas will receive
remains competitive, with new preferred rates.
entrants quarterly. Performance by
the product line of a combined ratio There have been some changes in
in the lower 70 percentile attracts market appetite, especially given the
capital resulting in markets returning recent mergers and acquisitions in
(such as XL Caitlin), markets entering this sector, as insurers review their
(such as Euler Hermes and Sirius), portfolio to determine fit and limits.
reinsurance markets growing their Meanwhile there has been some
primary writings (such as Swiss Re) market restructuring at AIG and Zurich,
and – not surprisingly – underwriting and internal operational changes at
talent moving as competition for these insurers could impact capacity
senior teams intensifies. and coverage in the future.
Specific to mining, underwriting In general terms the recent loss

terms and conditions are favorable record has been benign for the last 12
to our clients as the appetite for months or so, although the portfolio
remediation and reclamation bonds continues to be impacted by the
is at an unprecedented level. The significant losses incurred during
surety markets have witnessed the past 3 years and 2016 also saw
the US coal industry reorganize its several hot-work claims impact the

market. Tailings dam exposures are maintaining flat premiums. Rate
remain a focus, with specialist reductions can still be achieved,
mining insurers requiring detailed but this will likely involve a full
information, while risks with high remarketing exercise and replacing
Natural Catastrophe or marginal risk the incumbent insurers.
management standards will continue
to prove to be more difficult to place.
The Australian Market
Perspective
As mentioned in the London market
perspective, increasingly Canadian Mining insurance programmes in
clients are opting for 2-year Long Australia continue to require the
Term Agreements (i.e 24-month participation of key mining insurance
policies), reinforcing the view that the markets if the risk profile features
market softening may be beginning to natural catastrophe exposures or
bottom out. where large underground policy limits
are required.
Casualty – additional excess market
capacity but basically flat Diminishing rate reductions
From a casualty perspective, Consistent with our 2016 viewpoint,

Zurich has been reducing capacity we can report that rate reductions
from C$30m to C$15m on larger have continued to diminish in the
mining accounts, although they second quarter of 2017. However, Following Tropical Cyclone
are still comfortable in deploying competition continues for those risks Debbie, insurers continue
these limits on a primary and that demonstrate a commitment
umbrella structure. Other key
to monitor accumulations
to ongoing loss control and risk
liability markets that are providing management; this commitment arising from natural
the “buffer” layer and comfortable allows insurers to either review or catastrophe and contingent
in playing down low include AIG, maintain their level of participation
Allianz, XL Catlin and Ironshore. at favourable terms. As part of the
business interruption
request for risk profiling, significant exposures.
Meanwhile breach of tailings facilities information around tailings dams’
and foreign employers’ liability are management and design remains a
continuous concerns for Canadian feature of renewal negotiations with
carriers, with additional requests the insurance market.
for underwriting information on
inspection process and protocols – Cyclone Debbie poses CBI
design of TMFs are now required to aggregate issues
underwrite the risk properly.
Following Tropical Cyclone Debbie,
We have also seen some renewed insurers continue to monitor
interest and additional Excess Liability accumulations arising from natural
market support from the likes of catastrophe and contingent
Berkshire Hathaway, Liberty, AIG, business interruption exposures.
Temple and Ironshore. However, Lloyd’s The improvement in commodity prices
syndicates continue to dominate the has resulted in increases in declared
Excess Liability sector by offering larger Business Interruption values, particularly
capacity and more competitive pricing. as a percentage of overall values. With
base rates for Business Interruption
For the best risks, Primary GL and being higher than material damage, this
Umbrella programmes are seeing is also placing further pressure on the
flat to minimal premium increases, ability to maintain existing pricing.
while High Excess Liability markets
Most programmes still placed As rating reductions continue to
domestically diminish, clients will have to balance long
term relationships (and the associated
Capacity for most programmes consistency of coverage and capacity)
continues to be sourced in the against any further potential savings by
local Australian market. Large and selecting new markets to participate on
complex programmes are led by their programmes.
markets that remain dedicated to the
mining sector, such as Swiss Re. The
The South African market
consistent offering of lead capacity
is supported in both the local and
perspective
global markets. Global markets The market begins to stabilise
that provide significant capacity
include Munich Re and Scor, while Following a series of mainly general
mid-tier programmes can be led by property losses (which have affected
competitive local markets, including profitability), the South African
Zurich, AIG and Vero. mining market appears to have
stabilised, following several years
QBE steps away of rate reductions. At this stage it
is still possible to negotiate small
Berkshire Hathaway Specialty discounts for quality, well-engineered
Insurance, Allianz, AXA, Liberty, programmes with good claims
CGU and CV Starr remain significant experience, whereas stable rates
supporters of Australian risks. with coverage restrictions are the
Support from these markets normal outcomes for lesser quality
remains dependant on operation risks. Interestingly, the market is
type, commodity, and risk profile also currently less eager to provide
of each client. FM Global has also competitive terms for new business,
been competitive through the back in contrast to other mining markets
end of 2016 continuing into 2017. around the world.
However, some incumbent insurers
such as QBE have been unable to
support ongoing rating and terms
of programmes such that their
participations have been replaced.

Emerald involved in hot works losses Conclusion: is this the turn of
the tide?
Emerald is considered one of the
lead South African markets for We have seen that our review of the
mining risks and has a deep technical global Mining insurance markets
understanding of the sector. They shows some very differing underwriting
were reportedly the lead market in trends, largely depending on
two large property losses at just under geography. It is perhaps a little early
US$100 million, both caused by hot to suggest that some of the signs of
works. Their rates are often higher resistance in South Africa and Australia
than other local insurers but they have are indicative of an overall market
the capacity, technical expertise and turnaround – particularly when one
market security to secure the business. considers the continued glut of (re)
insurance capital and the continuing
Axxis the new kid on the block soft insurance market conditions in
North America. However, we should
Axxis is a new underwriting remember that Mining is only a part of
manager (MGA) established by two an insurer’s overall Property or Heavy
respected mining underwriters, with Industry portfolio, and choosing to
we understand about US$40m of deploy capacity away from Mining and
underground capacity; they use towards other areas would for most
Centriq Insurance Co’s licence (a not be a difficult decision to make.
wholly owned subsidiary of SA’s Buyers should therefore be alert to any
largest insurer Santam). It is possible further changes in market conditions
that this new entity may be able to and be prepared to react quickly to
reinvigorate the competitive tension ensure optimum terms and conditions
in the market that was lost with the continue to be secured.
closure of AIG South Africa’s Energy
& Engineered Risks division in 2016.
Chris Neame is
However, as a new entrant in the
Senior Vice President at
market they are not quoting as a lead
Willis Towers Watson Natural
market for the moment. Resources London
Most markets retaining a cautious

Fred Smith IV heads up
approach
Willis Towers Watson’s
Mining and Metals practice in
Larger mining risks have become
the United States
treaty referrals following Hollard’s loss
of its two senior sector underwriters,
while Old Mutual Insure (formerly Andrew Torr is Corporate
Mutual & Federal) remains a potential Risk and Broking Leader at
lead market for mining risks and Willis Towers Watson Toronto
are able to quote for underground

risk which many other markets
are reluctant to do. However, their Scott Kirkwood is Client
underwriting philosophy does remain Relationship Director,
conservative on new business, despite Willis Towers Watson Brisbane
the fact that they will aggressively
defend existing accounts. Meanwhile
other markets are generally adopting Adrian Read is Industry
a more cautious approach than in the Specialist Leader for Natural
past, following recent large mining Resources at Willis Towers
losses in South Africa. Watson Johannesburg
Contributors
Apart from those featured as article authors, the following Willis Towers Watson
personnel also took part in contributing to this Review:
David Bagnall London
Michael Benoit Toronto
Arif Kamruddin London
Stephen MacDermott Brisbane
Rupert Bedford London
Mike Newsom-Davis London
Andrew Wheeler London
Editor: Robin Somerville
© Copyright 2017 Willis Towers Watson.
All rights reserved: No part of this document may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, whether electronic, mechanical, photocopying,
recording, or otherwise, without the written permission of Willis Limited.
Some information contained in this document may be compiled from third party sources we
consider to be reliable. However, we do not guarantee and are not responsible for the accuracy
of such. Willis Limited accepts no responsibility for the content or quality of any third party
websites or publications to which we refer.
This publication and all of the information material, data and contents contained herein are for
general informational purposes only, are not presented for purposes of reliance, and do not
constitute risk management advice, legal advice, tax advice, investment advice or any other
form of professional advice. This document is for general discussion and/or guidance only, is not
intended to be relied upon, and action based on or in connection with anything contained herein
should not be taken without first obtaining specific advice from a suitably qualified professional.
Bangkok Johannesburg Miami
Multi-Risk Consultants (Thailand) Ltd. Illovo Edge, 1 Harries Road 1450 Brickell Avenue
21st Floor, Vongvanij B Building Illovo, Johannesburg 2196 Suite 1600 Floor 16
100/64-66 Rama 9 Road, South Africa Miami, Florida 33131
Bangkok 01320, Thailand T: +27 11 535 5400 United States
T: +66 2 645 0040 T: +1 305 421 6227
Knoxville
Beijing 265 Brookview Centre Way Perth
18th Floor, West Tower Brookview Promenade Willis CKA
Twin Towers Suite 505 Level 4
B-12 Jian Guo Men Wai Avenue Knoxville, Tennessee 37919 88 William Street
East Chang’an Street United States Perth, Western Australia 6000
Chaoyang District T: +1 865 588 8101 Australia
Beijing, PRC 100022 T: +61 8 9214 7400
T: +86 21 3887 9988 Lima
Avenida De La Floresta 497 Singapore
Brisbane San Borja 602, 603, 604 6 Battery Road
Level 1, 10 Eagle Street Lima Floors 05-01, 06-01, 06-02
Brisbane, Queensland 4000 Peru Singapore 049909
Australia T: +51 1 700 0202 T: +65 6 591 8000
T: +61 7 3167 8500
London Toronto
Calgary 51 Lime Street 100 King Street West
350 7th Avenue S.W. London, EC3M 7DQ 1 First Canadian Place
West Office Tower, Suite 2200 United Kingdom Suite 4700, Floor 47
Portion of Floor 22 T: +44 (0)20 3124 6000 Toronto, Ontario M5X 1E5
Calgary, Alberta T2P 3N9 Canada
Canada Melbourne T: +1 416 368 9641
T: +1 403 263 6117 Level 4, 555 Bourke Street
Melbourne, Victoria 3000
Australia
T: +61 3 8681 9800
Follow us on LinkedIn.com (search for ‘Willis Towers Watson Natural Resources Industry Group’)
Download our 2016 Natural Resources Risk Index:

https://willistowerswatson.com/en/insights/2016/06/natural-resources-risk-index-2016
About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and
solutions company that helps clients around the world turn risk into a path for
growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees
serving more than 140 countries. We design and deliver solutions that manage risk,
optimize benefits, cultivate talent, and expand the power of capital to protect and
strengthen institutions and individuals. Our unique perspective allows us to see
the critical intersections between talent, assets and ideas — the dynamic formula
that drives business performance. Together, we unlock potential. Learn more at
willistowerswatson.com.
willistowerswatson.com/social-media
Copyright © 2017 Willis Towers Watson. All rights reserved.

20502/08/17
willistowerswatson.com

WTW Mining Risk Review 2017 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

WTW Mining Risk Review 2017 PDF

Uploaded by

Copyright:

Available Formats

Mining Risk

Introduction.....................................................................................................................................3 Part two - mining risk mitigation and

The Trump “bump”: how it’s shaping the US mining

North American surety: protecting your reclamation

Challenge two – developing new stakeholder relationships

What communities really want: rethinking local

Addressing social disorder: is your strategy good

Challenge three – thriving in the new digital world

Digital digging: the future of work in the mining

From technology to people: the new frontier in mining

Challenge four – managing people risk in an age of

Mining their minds: optimizing the employee

Black lung and compliance: the great divide................................50

Risk culture in the mining industry: why should it

Total cost of lost time: a game-changing approach to

Driven by robust growth in emerging

Societal outcomes critical to We at Willis Towers Watson strongly

Mining Risk Review 2017 4

Following a time of significant expansion during 2008-11, we have witnessed:

Vale Rio Tinto Anglo American Glencore

Note: est = Bloomberg estimate. Source: Bloomberg, BMI

Long lead times compound miner The future has arrived!

Mining Risk Review 2017 6

Mining Risk Review 2017 8

Competition from tech firms

Total Capex (LHS) Average Age of Assets (RHS)

In the meantime of course the risk of a

Mining Risk Review 2017 10

Education training Promoting and

Create a culture that

Research and development

Source: Minerals Council of Australia

Mining Risk Review 2017 14

Mining Risk Review 2017 16

Mining Risk Review 2017 18

Mining Risk Review 2017 20

as 100% collateralization of the

Mining Risk Review 2017 22

Mining Risk Review 2017 24

Mining Risk Review 2017 26

Developed originally for some of our

Mining Risk Review 2017 28

COSTS OF CONFLICT TO COMPANIES

Direct Costs Example

Risk management Insurance, loss of coverage, specialist training for staff,

Material Destruction of property or infrastructure

Opportunity Disruption of production, delays on imports

Capital Increased cost of raising capital

Personnel Kidnapping, killing and injury; stress; recruitment difficulties;

Reputation Consumer campaigns, risk-rating, share price, competitive loss

Litigation Expensive and damaging law suits

Indirect costs Example

Social Weakening of social capital and cohesion

Economic Damage to financial and physical infrastructure; loss of

Environment Pollution, degradation, resource depletion

Political Weakening of institutions, rule of law, governance

Source: International Alert, Conflict-Sensitive Business Practice: Guidance for Extractive

PHASE WHAT’S INVOLVED

Project-level Conflict Risk Building on the understanding of conflict generated thus

At each stage, but most importantly The importance of image and

Mining Risk Review 2017 30

Negative Image Positive Image

The diagram above demonstrates shot at after issues of ‘broken

Exploration The processes of exploration

Operation Extractive operations can

But what happens on the ground needs

In countries with established industrial