“Diversified [miners like Rio Tinto] can position for the upside of every aspect of economic development. Iron ore and metallurgical coal are the girders of infrastructure and industrialisation, copper wires in electricity, aluminium is used in transport solutions, and titanium and diamonds are geared to the wealth of developing economies and their consumers,” he said.
Davies highlighted Rio’s activities in Madagascar, one of nine African countries in which the world’s second-largest mining company operates, to demonstrate how miners can be underwriters in what is predicted to be “the African century”.
QIT Madagascar Minerals is a mineral sands operation based around an ilmenite orebody near Fort Dauphin at the southeastern end of the island nation, and is accessible only by plane, according to Davies, who visited the site on the way to Indaba. Rio Tinto owns 80% of the operation and the Madagascan government owns the remaining 20%.
“What makes a successful partnership? All partners must see, share and recognise the benefits,” Davies said.
“With the support of the World Bank, a robust framework agreement was put in place to set the fiscal and legal foundation for the operation. By bringing the state in as a shareholder, we increased the number of people who shared directly an interest in seeing the project succeed. They helped us meet our objective of sharing the benefits widely and fairly.”
This partnership went beyond government, he explained. Rio Tinto employed 700 people in Madagascar, of which 96% were locals, in addition to 1000 contractors. There was a boost of about 5000 jobs from indirect employment.
With the help of the World Bank, a programme was established to complement the mine project with investments in a port, roads, power, water supplies, sanitation, tourism and training, he said, creating a “framework that avoided isolated enclaves of development".
At the end of the mine’s life, Rio Tinto would hand ownership of the port to the government, Davies said.
“The approach I’ve just outlined is not altruism. It’s about good business practice,” he said.
“If you lack a common vision, if you ignore broader opportunities, if you neglect socio-economic development of the host country, if you weigh contracts disproportionately in favour of industry, if you turn a blind eye to corruption, if you fail to invest in local people, if you ignore environmental impacts, if you fall for any of these short-sighted approaches, you risk undermining the partnership with your host nation and in doing so you risk the long-term viability of enterprise.
“To succeed there is a need for generational thinking by industry to prioritise long-term benefits.”
This was the same reason Rio Tinto employed and trained local workers at its projects throughout Africa, he said, giving the Richards Bay operation in South Africa – which also produces ilmenite from mineral sands – as another example. And he also singled out the Simandou iron ore project in Guinea for its potential to directly create thousands of jobs and to spread a wider benefit for the country through the provision of railways, fibre-optic cables and a seaport.
“If the future is increasingly African, that future needs to be underwritten. Africa has the opportunity to use its resources, leveraging investments that are measured in decades rather than years, to underwrite an African future of economic diversity and prosperity.
“This places a big responsibility on our industry and on our partners to collaborate in effective, innovative and lasting ways.
“The infrastructure required to catalyse growth in Africa is huge and we have the opportunity to create immense value together.
“I can think of no good reason why Africa should not – with its abundant resources and demography – make this the African century, and with the right environment I believe mining can play its part as a catalyst in that transformation.”