Financial Effects of Local Procurement and Employment around Mine and Exploration Sites

When minerals or metals are monetised, the revenue is broadly shared between four main stakeholders in the following ways:

50–65% of mining revenue goes to operating and capital expenditure, such as the suppliers who are paid for their inputs.
15–20% goes to government, which receives its share through royalties and taxes.
15–20% goes to investors who receive profits, typically a residual after the other payments have been made.
10–20% goes to employees who are paid their wages.

A World Gold Council (WGC) study showed that out of the total annual spending in 2012 of USD 55 billion by the 15 WGC members studied, some USD 35 billion were payments to other businesses, mostly subcontracting and procurement. Less than USD 10 billion were royalty and tax payments to governments.

Given the huge numbers involved, if even a small additional share of the capital and operating expenditures can be captured by domestic enterprises and workers in host countries, then it can have a significant impact on local economic development and job creation. What is more, in addition to enhancing the company’s reputation and helping it to obtain the crucial ‘social license to operate’, increased local procurement can help the company reduce logistics and holding costs as well as increase security of supply.

The presentation will highlight the value of maximising local procurement spend for both the company and the community, outline ways in which companies can track and manage their local procurement spend, and share some case studies of innovative work that ICMM members have done in this area.

  • 18th October 2018
  • 10:40