Mining transparency abroad, but not at home?
Marc McCrum and Grégoire-François Legault say global initiative not just for developing nations

Canada is a mining powerhouse, both at home and abroad. Domestically, 418,000 people are employed in mining and related services. In 2012, the industry contributed $52.6 billion to Canada’s GDP, or 20.4 per cent of the value of Canadian goods exported that year. Globally, there are more than 3,200 Canadian companies supplying engineering, geotechnical, environmental, financial and other services to mining operations worldwide, and close to 60 per cent of the world’s public mining companies are listed on the Canadian stock markets, while 70 per cent of the equity capital for mining globally is raised on TSX and TSX-Venture Exchanges.
With such a significant stake in the extractives sector, understanding where payments are going and how money is being used is of critical importance for Canada. As in other countries blessed with a wealth of natural resources, a lack of transparency on who benefits from resource extraction breeds mistrust between communities, governments and companies. In turn, this generates unstable business environments, threatens the security of supply, and in extreme cases, contributes to violent conflict.
This is precisely why the Extractive Industries Transparency Initiative (EITI) was created in 2002, bringing governments, companies and civil society together to improve openness and accountable management of revenues from natural resources. The organization is founded on the premise that while extraction and exploitation of these resources can lead to economic growth and development, the reverse can also be true.
So, where does the Canadian government stand when it comes to transparency in the extractives sector? Almost a year ago, Canadian Prime Minister Stephen Harper announced mandatory reporting requirements for all of Canada’s oil, gas and mining firms. Under the new policy, all public as well as medium and large private companies would be legally required to disclose payments of $100,000 or more to governments, both at home and abroad.
While being heralded by the government as a commitment to developing a stronger standard of transparency, critics of the new policy have derided it for missing the point and lacking in substance. They question the government’s commitment to the measure citing that no timeframe for implementation exists and penalties for non-compliance have yet to be established. They also argue that the Harper Government proposal would create “secrecy by obscurity” by failing to establish a central payment disclosure database like the EITI, thus making it difficult for the public to access information.
The Canadian government has outwardly demonstrated support for the EITI and its ability to help developing countries manage their extractive sectors in a more responsible and transparent manner and avoid the “resource curse”. In fact, Canada is a leading supporter of the initiative and is currently listed as an EITI supporting country. According to the EITI website, Canada helps to promote more effective resource revenue management through policy advice and technical assistance to governments of participating nations. It also lends financial support to the EITI Trust Fund, which is tasked with “providing technical and advisory support to countries seeking to implement the EITI.” In 2012, the Harper Government announced that it would contribute $20 million over four years to support the initiative.
But, more than 10 years after the creation of the EITI, Canada has yet to implement the initiative at home, despite its willingness to help fund the initiative and advocate the value of the EITI to other nations. As it regards the EITI as a tool only for resource-rich developing nations, it believes that nations like Canada are already well equipped to manage corruption in the extractive sector.
Domestically however, much can still be done to improve the accountability of mining corporations and the management of revenue by governments. At the moment, an EITI-like database of company payments remains conspicuously absent from existing reporting policy, which signifies that those interested in viewing the records are required to track down companies individually. Canada’s reluctance to adopt the EITI stands in stark contrast with the United States.
Transparency: Not exclusive to developing nations
President Obama announced on September 20, 2011, its intention to apply the EITI standard to companies operating in the U.S.’s extractive sector. According to the U.S. government, greater transparency in mining and extraction activities is necessary to rebuild trust in offshore drilling, reduce corruption in transactions with the government, and ensure that companies are paying the required taxes and royalties.
The EITI is not just about promoting transparency and openness, but also improved natural resources governance. Canada should follow the steps of the United States and become an EITI candidate nation. Rather than leading from behind on the issue of mining transparency, Canada should lead by example. While the vast majority of Canadian mining companies already operate in a responsible manner according to existing industry standards, there still exists a minority of corporations damaging Canada’s solid reputation. With increased foreign investments in Canada, this situation is unlikely to change.
In this respect, the Canadian government’s line of thinking runs contrary to those of many of its developed nations counterparts. Participation in the EITI is not exclusive to developing nations and will be increasingly less so in the future. While Norway is currently the only member of the OECD to be designated as EITI compliant, a designation it has held since 2009, over the past few years, other economic powers such as the United Kingdom, France, Germany, Italy and the U.S. have all formally expressed their commitment to join the initiative. In countries like Norway, already known for its expansive set of laws pertaining to transparency in their oil and gas sector, the EITI provides an additional means to inform its citizens as and foster greater trust in extractives industry transactions.
For Canadian society at large, the adoption of the EITI standard in Canada would lead to increased availability of information in the public domain on revenues that governments manage on behalf of citizens. It would also increase the ability of citizens to hold companies operating in the country as well as the provincial and federal governments accountable. EITI laws in Canada would also assist in improving governance contributing to sustainable development and poverty reduction while strengthening relations with companies and governments.
For Canadian corporations, the adoption of EITI could mean the mitigation of investment risk and political instability, the reduction of operational risks, as well as a more predictable operating environment. In addition to improving access to markets, the EITI seal of approval would also contribute to reduced cost of capital through the prevention of corruption, the strengthening of shareholder relations, and a greater access to capital as a result of an improved social license to operate.
Already, five major Canadian companies adhere to the EITI at home. Barrick Gold Corp., Goldcorp, Talisman Energy, Dundee Precious Metals and Kinross Gold have all signed on to apply the initiative to their Canadian operations.
Other Canadian companies participate in the EITI internationally. Centerra Gold Inc. and its Mongolia-based Boroo Gold mining operation for example, was one of the first in the country to sign on to the initiative. As an EITI participant, Boroo Gold has not only reported its annual payments but has also been part of efforts to further improve upon the EITI reporting process in Mongolia since 2006. In addition to advocating for greater transparency in the Mongolian extractive sector, the company has demonstrated corporate social responsibility through good mining practices, hiring local residents and investing in over 160 community development projects in Mongolia. Boroo’s remediation efforts have also served as a blueprint for other international extractive companies.
Although operating in a manner in which Canadians would expect from their companies, strong corporate social responsibility practices in operations can place Canadian companies at a marked competitive disadvantage in certain parts of the world. For other international groups not restricted by the same ethical and environmental standards it becomes much easier to generate greater profits by paying smaller wages and avoiding remediation costs. Through corrupt practices such as the bribery of political officials, these operations are much more easily able to obtain essential licenses and permitting.
As most of the profitable gold deposits at the Boroo have been extracted, the company has been waiting for licenses from the local and national government to begin operations at its new site 90km away. In the meantime, the company has had to lay off most of its locally hired workers while site operations have slowed to a virtual standstill. According to one senior official at Centerra Gold, an important part of this delay is the company’s unwillingness to partake in corrupt practices. Having seen Russian and Chinese competitors able to provide new SUVs and suitcases of “gas money” to key government officials receive the required permitting much quicker, the official decried the lack of Canadian government support to help the company maintain a competitive edge while still maintaining clean business practices.
Currently, the ability of the Canadian government to assist Canadian companies operating in these environments is limited. Although technically a “supporting country” of the EITI, the failure to implement the internationally recognized standard for the extractive industry in Canada leaves the Canadian government without a leg to stand on when preaching the need for greater transparency in mining operations throughout the world. As more economically developed nations continue to subscribe to the tenets of the EITI, Canadian criticism of other countries’ corrupt business practices risks becoming increasingly toothless.
Greater political leadership is needed on this matter, but this has to run through Ottawa. In practice, this will mean recognizing the importance of the EITI in both improving resource governance, but also giving a competitive edge to Canadian mining companies looking for political support in hostile environments. By joining the EITI, Canada will be in a better position to support policy change, as well as the interests of its mining companies. Otherwise, Canada’s role in resource governance is very likely to diminish even further.