Sharing Mining Benefits in Developing Countries - World Bank

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Box 2.2: Government-Authored Benefit-Sharing Schemes UsingFTFs: The Cases of Madagascar and Senegal (continued)The proposal also faced some opposition, as critics felt that the creationof the dedicated instrument would undermine existing governance institutionsand the broader decentralization process. There was also fear that thestructure might allow payments to be captured by central elites and that itwas not sufficiently owned by local communities.Senegal. An alternative approach to a comparable situation was chosenin Senegal, where the 2003 mining code stipulated that “part of the fi scalrevenues generated by mining operations are paid into a Balancing Fundto be allocated to local authorities.” However, detailed provisions were leftto subsequent regulations. After extensive consultation, Decree n 0 2009-1334 (November 20, 2009) clarified that 20 percent of mining revenues(taxes and royalties) would be used to create a national equalization fund.The local authorities from the mining region would receive 60 percentof the fund, with the remaining 40 percent being shared by other localauthorities in the country. The funds are shared between mining regionsin amounts that are proportional to the revenues generated and the localpopulation.In parallel, the government negotiated a Mining Social Plan with companies,fi nanced by annual contributions from the companies as agreed in theirrespective mining agreements. The ministry in charge of mining approvesand supervises the use of these resources. The fi rst Mining Social Plan isdedicated to the population living in the areas around the operation of threecompanies: OROMIN Exploration Limited, Mineral Deposits Limited, andArcelor Mittal.The Special Case of Indigenous CommunitiesNegotiated agreements between indigenous peoples and mining companieshave become commonplace in the past two decades in Australia andNorth America, where customary ownership has been formally recognized(ICMM 2010). Typically, the agreements cover financial payments,disbursement arrangements, employment commitments, governancestructures, and other locally important provisions. The ICMM’s GoodPractice Guide on Indigenous Peoples and Mining (2010) provides additionalinformation on this topic.16 Sharing Mining Benefits in Developing Countries
The agreements often use FTF structures to implement the agreedfinancial disbursements, both for immediate use and for longer-terminvestments. Some agreements include the allocation of funds for futuregenerations, and FTF structures are often used to make the resultinginvestments. FTFs can present significant advantages in such cases owingto their potential independence, tax-efficient status, and capacity toattract funding from other sources. The structure can also present goodopportunities for long-term sustainability and for gradual transition ofownership (box 2.3).Box 2.3: Benefit-Sharing FTFs between Indigenous Peoplesand Mining CompaniesCanada. Signed in 1995, the Raglan Agreement has been used as abenchmark for First Nations agreements in the mining industry. The Raglanmine is located in the Nunavik Territory. The agreement was signed betweenthe two closest communities to the mine (Salluit and Kangiqsujuaq), theMakivik Corporation (an Inuit owned company which oversees the political,social, and economic development of Nunavik), and Raglan mine, nowowned by Xstrata Nickel. The Agreement is governed by the Raglan Committee,comprising equal representation from Inuit groups and the company(six members in total). The profit sharing arrangement includes a commitmentto provide 4.5 percent of operating profit to community partners (thisequated to a payment of close to C$17 million in 2007). All funds are placedin a Trust which in turns distributes 25 percent of the money to the MakivikCorporation, 30 percent to Kangiqsujuaq, and 45 percent to Salluit, whothen distribute the funds to the fourteen communities in Nunavik based on aneeds assessment.Australia. The Gnaala Karla Booja (GKB), who are part of the NoongarNation, are the ‘traditional owners’ of the land in the Newmont-owned Boddingtongold mine’s area of operations in Western Australia. A CommunityPartnership Agreement was signed between the Gnaala Karla Booja andthe mine operators and owners in 2006 to acknowledge the traditional ownersand to assist in building an economic base for GKB People and theirchildren. The agreement covers employment opportunities, as well as commitmentsfor annual fi nancial assistance which started in 2009. A charitabletrust structure has been established to manage these funds for investmentin local business development and community development projects. TheExtractive Industries for Development Series17
Page 2: World Bank Group’s Oil, Gas, and
Page 6 and 7: Box 3.3: Government Funding Mechani
Page 8 and 9: AcronymsAACFAHRCALACAMPAASRPCMCACOD
Page 11 and 12: Executive SummaryMining projects in
Page 13 and 14: Chapter 1IntroductionMessageFoundat
Page 15 and 16: that process. Chapter 3 reveals bot
Page 17 and 18: Figure 2.1: Benefit-Sharing Channel
Page 19 and 20: Table 2.1: Examples of Royalty/Tax
Page 21 and 22: to be shared among project benefici
Page 23 and 24: FTFs and other dedicated instrument
Page 25: money payable to communities over a
Page 29 and 30: Chapter 3Key Attributes ofFoundatio
Page 31 and 32: • Provisions for supervision and
Page 33 and 34: Figure 3.1: Sliding Scales of Attri
Page 35 and 36: Box 3.1: The Starting Points of FTF
Page 37 and 38: Communities or local nongovernmenta
Page 39 and 40: support charitable organizations in
Page 41 and 42: externally, or by a combined approa
Page 43 and 44: Chapter 4Drawing Lessons fromExperi
Page 45 and 46: development projects. It was subseq
Page 47 and 48: objectives, and intended beneficiar
Page 49 and 50: Buying in expertise: The Anglo Amer
Page 51 and 52: Figure 4.6: Rio Tinto Palabora Mini
Page 53 and 54: Figure 4.7: Fondo Solidaridad Cajam
Page 55 and 56: and the level of financing they wil
Page 57 and 58: Figure 4.9: Ok Tedi Mining, Ltd.Pro
Page 59 and 60: ConclusionFoundations, trusts, and
Page 61 and 62: Appendix 1: MiningFoundations, Trus
Page 63 and 64: Name Associated Company Country46.
Page 65 and 66: March 2002, accessed April 2, 2010,
Page 67 and 68: Ok Tedi Fly River Development Progr
Page 69: Extractive Industries for Developme
Page 72: The World Bank1818 H Street, N.W.Wa

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