Community Investment and Sustainable Development
Why are community investments and sustainable development important?
Mining companies can have significant economic impacts in their host countries. Mining companies are under increased pressure to provide value to a broader range of communities of interest (COIs), in particular to the communities located near their operations. The support of these communities is essential for continued operation and can help companies avoid disputes and project or operational delays or disruptions. Companies create value in local communities through taxes, royalties and fees paid to governments, direct investments in community programs, development planning and infrastructure, and local hiring and procurement. At Pan American Silver, we want host communities to see our presence as a positive factor in their lives. We work hard to understand community needs and interests and identify beneficial and viable legacy social programs and community investments opportunities.
2019 Goals Social
|2019 Goals Social||2019 Results||2019 Performance||2020 Goals|
|Improve access to quality education in the communities near our mines||Our team at Dolores worked with the community of Arroyo Amplio to encourage the return of essential services to the community, who had left due to local security incidents unrelated to the mine||Improve access to quality education in the communities near our mines|
|Improve access to health care in the communities near our mines||We continued with our health campaigns and added special campaigns at San Vicente on AIDS and Human papillomavirus protection.|
We ran health campaigns in La Colorada COIs
|Improve access to health care in the communities near our mines|
|Develop additional alternative economic opportunities in communities near our mines||We are developing a program around alpaca breeding that will involve 500 producers compared to only 50 in the previous program.|
We extended the local vegetable production through the greenhouse program in Bolivia until 2020.
|Develop additional alternative economic opportunities in communities near our mines|
We invest a significant portion of our economic value generated back into host countries and local communities in line with our sustainability pillars. Our social management framework provides the processes and tools we need to recognize and manage our actual and perceived impacts, understand community needs and interests, and identify opportunities for long-term investment in local communities.
Programs and initiatives:
- Socio-economic development programs – We create and sustain programs focused on education, health, and alternative economic opportunities.
- Local infrastructure and services – We invest in and upgrade infrastructure and services such as schools, health facilities, water, and sanitation.
- Jobs and business opportunities – We hire and procure locally and provide training and capacity building in roles at or related to our operations.
- Community Development Initiative (CDI) Tool – We use this tool to identify and develop socio-economic programs with a high likelihood of long-term success and measure these programs’ impacts.
Economic Value Generated and Distributed
Our core business activities generate economic value for COIs at the international, national, regional, and community levels, both directly and indirectly. Our direct investments include wages paid to employees, community investments, and payments to government in the form of taxes, royalties, and fees. Payments to government can be reinvested in social and economic programs that benefit the communities and regions where we operate.
Direct economic value generated and distributed
(1) Based on 2019 accrued revenue as per annual Financial Statements for fiscal 2019, dated March 12, 2020. Financial metrics for Shahuindo, La Arena and Timmins are as of the acquisition date, February 22, 2019.
(2) Local refers to the expenditures in communities within the direct area of influence. Regional captures expenditures in the indirect areas of influence within surrounding regions. National includes all other areas within a country that are excluded from either local or regional. Local, regional and national expenditures include wages, supplies and services, and community investments.
(3) This is the economic value retained by the company after expenditures from mining activities, but prior to distributions to providers of capital (shareholders and debtholders). Expenditures from mining activities include production costs, royalties, general and administrative expenditures, exploration and project development, mine care and maintenance, income taxes paid, payments for mineral properties, plant and equipment and payment of lease obligations as described in the annual Financial Statements for fiscal 2019, dated March 12, 2020. Production costs exclude purchase price allocation inventory fair value adjustments and NRV inventory adjustments.
(4) Excludes $335M drawn from our revolving credit facility for the acquisition of Tahoe, and $125M paid to cancel Tahoe’s revolving credit facility.
Spending by country
OPERATIONAL SPENDING BY COUNTRY
(1) Spending excludes Corporate expenditures
(2) Community investment includes expenditures for education, health, economic development, infrastructure, charitable expenses and others
COMMUNITY INVESTMENT AND SUSTAINABLE DEVELOPMENT
Socio-economic development programs
We invest in socio-economic development programs that provide lasting benefits to host communities. Our mines have limited lifespans, and as automation and mechanization increases, fewer direct jobs are available for community members. Consequently, we prioritize programs related to education, health, and alternative economies, which we have found to provide long-term positive benefits. Our intent is that the benefits will long exceed the lifespan of our mines.
Following our acquisition of Tahoe Resources, we conducted a review of our community investment and sustainable development programs with the objective that every program:
- addresses community needs and interests
- is implemented with the acceptance and involvement of the community
- is appropriate to the local social context
- considers mine closure
- incorporates key performance indicators
Local Economic Development Projects
Our alternative economic development programs support local communities, families or groups in creating or sustaining economic opportunities not directly related to our mines. These programs are developed in consultation with local communities. We provide equipment, tools, supplies, capacity building, training, and other support for a specific duration of time, with the aim that these programs will be self-sustaining beyond our involvement.
Our local economic development projects include:
- Nutritional Greenhouse Program, Bolivia – provided supplies, training, and capacity building to 436 community members from 11 local communities for sustainable food production, access to fresh produce, and improved family nutrition.
- Passion Fruit Project, Peru – provided 73 passion fruit producers with training on efficient irrigation techniques to improve passion fruit production in Shahuindo. This program indirectly supported 272 community members.
- Guinea Pig Program, Peru – constructed sheds and provided technical assistance to 394 local producers and their families to increase guinea pig production in Chungales, Raumate, La Arena and La Unión.
Education helps prepare individuals for life and is key to career success. Wherever possible, we guide and support students to pursue careers that will allow them to return to their communities and provide much needed services. Our education programs include:
- Child and adult literacy and education programs
- Scholarship programs for university students
- Support for or payment of teachers’ wages
- Career counselling for secondary students
In 2019, we provided university scholarships for 196 students in the countries where we operate. In total, our programs provided direct and indirect support to 8,277 students.
Our health programs are intended to facilitate access to health services for all community members, with an emphasis on identified vulnerable groups such as young children, women, and elders. Our programs include:
- Health campaigns that provide training and education on issues such as nutrition and hygiene and health services such as dental check-ups and vaccinations
- Funding for doctors and health care practitioners
- Provision of medical care in communities with limited or no access
Infrastructure and services investments
Some of our operations are near communities that have basic services and amenities whereas others are in remote, sparsely populated regions with little or no infrastructure. We regularly make investments in and upgrades to local infrastructure and social services in the communities near our operations. In 2019, our infrastructure initiatives included:
- Construction of a bridge in Chuquibamba in Shahuindo
- Construction of one Health Unit in La Arena community
- Rehabilitation of school facilities in Orion, Las Tapia and La Colorada
- Rehabilitation of school facilities in Moyan Alto, Moyan Bajo, La Fila, Huajo, Chorobamba and Malcas near our Shahuindo mine
- Construction of river flood defence works for six communities near our Shahuindo mine
Local Hiring and Procurement
Given the remote location of some of our sites, our operations may provide one of the few opportunities for long-term, stable employment in the area. Consequently, community members look to us to provide jobs through direct employment or as service providers for our mine sites. In 2019, 99% of our employees were nationals of the country where the mine is located.
Our procurement practices also create opportunities for local businesses. We purchase a substantial amount of necessary goods and services from within national economies. We also help community members launch and/or sustain small businesses by matching a site’s business needs to the interests of community members. This approach supports our ability to operate profitably over the long term by deepening our sites’ relationships with local suppliers, providing a higher level of service, and helping us build a more resilient supply chain. In 2019, 48% of goods and services were provided by local or regional suppliers. Our mines currently provide support for 558 small businesses.
Key goods and services sourced locally include:
- Materials for road construction
- Machinery and small parts
- Food and catering services
- Maintenance services
- Earthmoving equipment for road maintenance and smaller construction projects
Where local suppliers cannot meet our needs or business standards, we invest in their capacity by offering programs and support focused on:
- Business skills, such as accounting and bookkeeping
- Bidding processes
- Pan American Silver’s business standards and expectations
- Health and safety training for contractors
- Health and addiction workshops
- Continue to improve existing processes, such as our COI mapping systems and response mechanisms at all our operations and align with the Towards Sustainable Mining (TSM) guiding principles
- Update indicators to measure the social impact of our programs based on participatory baseline assessments
- Continue to conduct social audits to evaluate the effectiveness of our social management systems and the implementation of our CSR and Global Human Rights policies
Passion fruit Project – Shahuindo mine
Pan American Silver’s alternative economic development programs are intended to support local communities in creating or sustaining economic opportunities not directly related to our mines. Programs are designed to respond to needs and challenges identified by the community and be self-sustaining, beyond the program’s duration.
In 2017, the Shahuindo mine initiated an alternative economic development program designed to support farmers within Shahuindo’s direct area of influence by providing them with the technical skills to increase passion fruit production and bolster the fruit market in the Cajabamba Province, Cajamarca Region. The three-year program was based on an agreement with the Peru’s Northern Institute for Research and Social Promotion (IDIPS), and co-financed by the Peruvian Government through the Fondo Empleo Program.
|Identified challenges||Program objectives|
|Limited availability of freshwater for agricultural activity|
Local climate and growing conditions
Limited awareness of or access to modern agricultural production methods
Lack of coordination among farmers
Inability of small farmers to meet supply demands of the regional market
|Promote alternative economic activities appropriate for the local climate and land conditions |
Increase the income of local farmers
Promote the efficient use of freshwater and organic farming practices
Build the capacity of local farmers to use new agricultural production technologies
Enhance the business management skills of local farmers
The Northern Institute for Research and Social Promotion provided the technical support and training, which focused on the use of modern agricultural practices, such as building geomembrane micro-reservoirs for efficient irrigation. Training also promoted the use of organic farming practices, with the intention that farmers could obtain organic certification in the future. Shahuindo also helped to formalize the farmers’ cooperative, Redes Unidas, which sells the collective produce of local farmers to the regional market in sufficient quantities to meet requirements. The cooperative is key to facilitating the commercialization of fruits on a larger scale.
The project ended in December 2019. Key achievements included:
- Alternative economic activity and income for 73 farming families
- Construction of 73 geomembrane micro-reservoirs, 20m3 each
- Cultivation of 15.5 hectares and production of 13,214kg of passion fruit
- Development of a farmers’ cooperative and increased passion fruit commercialization
Material Topic: Community investment and sustainable development.
- Economic impacts
- Socio-economic development programs
- Infrastructure investments
- Local hiring and procurement
Definition: Contributing to the social and economic well-being of local communities.
Feedback from COIs: Community members request local employment opportunities.
How we’re responding: Our Social Sustainability teams work with community members to identify potential job opportunities and provide the necessary training and capacity building.
potential risks and impacts
- Community opposition to mine operations or development resulting in project or production delays, loss of or failure to obtain permits, and/or loss of social acceptance
- Potential negative impacts in the industry could create economic dependence by or wealth disparity within local communities, or harm to vulnerable groups
- Political, social, and economic instability
201-1 Direct economic value generated and distributed.
203-2 Significant indirect economic impacts.
204-1 Proportion of spending on local suppliers.