Minmetals Resources Limited 2011 Sustainability Report (PDF)

CASE STUDY: Primary gold potential at SeponSepon mine currently mines and processes oxide goldore – gold ore that is at, or very close to, the surface.A study of primary gold ore, which lies beneath theoxide gold ore, is expected to report later this year. Iffavourable, a substantial investment would be neededto modify the processing plant in order to process thisdifferent type of ore.Since its commencement, the Sepon gold operation hasproduced over one million ounces of gold through openpit mining and conventional treatment of oxide gold ore.Current reserves of oxide gold are not expected to lastmuch beyond 2012.Customer economic sustainabilityOur customers are smelting businesses who on-sell ourproduct after refining it further, for consumption in arange of end uses, such as construction materials orautomotive vehicles. When global demand for these enduses falls, our customers may respond by reducing theirdemand for our product.While we have life-of-mine contracts in place for a largeportion of our current production, we negotiate annualtreatment and refining charges. In addition to this, we sellproduct to customers on short-term, spot-market contracts.To maintain our economic sustainability, we must be ableto sell our products to market, and therefore the demandfor our products from customers is pivotal to our economicsustainability. Through the IZA, the ICMM and the MCA,we are working on various initiatives to promote ourproducts to the global market for established and new uses.We believe that access to growing economies, such asChina, provides our products with strong customer markets.As with commodity prices, we monitor customer demandfor our products and adjust our internal forecasts andoperational plans accordingly.Financial implications of the Australian Government’sClean Energy legislationThe Australian Government’s Clean Energy Bill willintroduce carbon pricing to Australian industries from1 July 2012.In 2011, the Australian Government announced aproposed carbon tax on selected businesses of A$23.00per tonne of carbon dioxide equivalent (CO 2 -e). The taxwill apply from 1 July 2012 and will increase at 2.5% plusinflation annually until 1 July 2015, when an emissionstrading scheme will be introduced.Loading ore at Sepon.Our operations contribute greenhouse gas emissions bothdirectly, mainly via on-site consumption of diesel fuel, andindirectly mainly through grid-sourced electricity. Basedon the legislation currently proposed, the company will beexempt from the direct carbon tax as its emissions producedfrom Australian sites are under the threshold. However,it will see increased costs on fuel due to a reduction ingovernment fuel tax credits. In addition, it is likely that afurther indirect cost from the carbon tax will arise throughincreased costs passed on by suppliers, most notably forgrid-sourced electricity. The cost impact for the businessassociated with the current carbon tax proposal is estimatedto be approximately A$18 million per annum, during theinitial two years under a fixed-price regime.Major disruptive event impactsA key risk for the business is that of a major disruptiveevent, such as a fatality, mine closure, reputational damageand loss of community support or legal action, that leadsto a disruption to production.In order to manage these risks, we implement a varietyof preventative measures, including site emergencymanagement and corporate crisis management plans.In addition, our approach to sustainability management,as detailed earlier in this report, incorporates site andcorporate risk registers, governance structures, includingreporting of performance and issues to a Board committee,and operating standards, such as certification to ISO14001 at all of our operating sites.SUSTAINING OUR ECONOMIC PERFORMANCE RESPECTING OUR ENVIRONMENT WORKING WITH OUR STAKEHOLDERS HEALTH AND SAFETY OUR PEOPLE71