Message from J. Paul Rollinson, CEO
I was appointed CEO of Kinross only a few weeks before this report was published, and am pleased to have the opportunity to offer some introductory remarks.
While I am new to the position of CEO, I’ve been part of the senior management team since 2008. I have been deeply impressed by the commitment of our people at all levels to the basic principles of responsible mining. I believe that corporate responsibility is core to both our overall strategy and day-to-day activities, and it will remain a key priority for Kinross Gold.
Since our last corporate responsibility report was published two years ago, Kinross has experienced major changes. We have expanded into an entirely new region, West Africa, with our acquisition of two new mines – Tasiast in Mauritania and Chirano in Ghana. We have increased our workforce to approximately 8,000 employees. We have announced a new capital and project optimization process for preserving our financial strength as we advance our portfolio of development projects. Our operating and financial performance has been strong, and thanks to a rising gold price and solid production from our operations, we achieved record revenue and cash flow both in 2010 and 2011.
Meanwhile, the past two years have seen the mining industry buffeted by rising capital and operating costs. Equity markets have become increasingly risk-averse, due to the debt crisis in Europe and other geopolitical and economic factors, which in turn have led to a frustrating and unprecedented disconnect between higher gold prices and gold equity performance. This has produced a sharp decline in the market multiples of senior producers, including Kinross. The pressures on capital costs have also led Kinross to take a more measured and cautious approach to sequencing our growth projects.
Amid these challenging market conditions, our industry is seeing the continued growth of resource nationalism, as host states faced with revenue shortfalls, high debt, or both, are demanding a larger share of revenues from the companies licensed to extract their natural resources. The expectations of civil society institutions and local stakeholders also are on the rise, fuelled in many cases by the upsurge of instantaneous communication via social media.
In short, we are seeing an increase in the expectations of all stakeholders. And, in turn, resource producers are being subject to greater scrutiny – regarding their impact on the environment and communities, their relative risk as an investment vehicle, their governing principles, and their potential to act as an economic springboard for local development.
Understanding and balancing these diverse and evolving stakeholder needs and expectations is key to how we approach corporate responsibility at Kinross. That approach is founded on our Ten Guiding Principles for Corporate Responsibility, and realized through our Corporate Responsibility (CR) strategy. Our CR strategy incorporates a robust policy framework articulating our specific commitments in key areas, and annually updated Site Responsibility Plans (SRPs), which help to provide a consistent approach to community engagement wherever we operate.
In the past two years, we have deepened our CR commitment in a number of areas. These include an expanded network of CR-based partnerships and commitments. We became a signatory to the United Nations (UN) Global Compact, engaging in the global dialogue on best practices in the areas of human rights, labour, environment and anti-corruption. We joined the Extractive Industries Transparency Initiative (EITI), a multi-stakeholder coalition that supports improved governance and transparency in resource-rich countries and the companies that operate in them. We implemented a comprehensive Human Rights Adherence and Verification Program that aligns our Company with the objectives of the Voluntary Principles on Security and Human Rights. Early in 2012, we began to work with the Devonshire Initiative, a forum for international development non-governmental organizations (NGOs) and mining companies that co-operate to respond to mining-related community development issues.
Arguably our most significant achievement has been the strong grassroots effort by our local community relations teams to implement our SRPs. The SRPs are designed to incorporate such features as stakeholder advisory committees, stakeholder mapping, grievance-response mechanisms, and community survey processes into local community plans. They are based on the “benefit footprint” concept, through which we seek to measure and optimize the net benefits of our activities to the communities and host countries where we operate. This means working in close partnership with communities to support long-term economic sustainability that extends beyond the life of our mining enterprise.
We are honoured by the recognition we have received for our corporate responsibility initiatives. In 2011, we were pleased to be named to the Dow Jones Sustainability World Index (DJSI World) for the first time and to maintain our position on the DJSI North America Index for the second year. Kinross was placed on the Ethibel Excellence investment register and the ECPI Global Carbon and Ethical Global Equity Indices. We were also named among Canada’s 50 Most Socially Responsible Corporations by Maclean’s magazine and the Jantzi Social Index for the fourth consecutive year and as one of Canada’s Best 50 Corporate Citizens by Corporate Knights magazine for the past three years.
Still, we recognize that we will continue to encounter new and ongoing challenges, the most important of which is the need to focus relentlessly on the safety of our employees and contractors.
Sadly, we experienced a fatality at our Kupol operation in 2010 and another at Fort Knox in 2011. Early in 2012, a worker at our Chirano facility in Ghana also suffered fatal injuries. We took immediate action to analyze the root causes that led to these accidents and put further safeguards in place. In April 2011, to reinforce safety as a top priority across the Company and to refocus our efforts to improve safety performance, all Kinross employees and contractors at every operation, project site and office stopped work and took two hours to reflect on our safety performance during a Global Time Out for Safety.
We face other challenges: the ongoing integration of our acquisitions, including building out Tasiast, an important project, in a country with limited infrastructure and a developing workforce; the need to attract the best talent in a highly competitive global market to support our development projects; and the ongoing engagement of our stakeholders, who are critical to our success and value-creation.
Addressing these challenges will be a key focus going forward. A strong commitment to corporate responsibility will remain an absolute non-negotiable standard for us as we build and maintain trust with host communities – securing our licence to operate both at our mature operations and development projects.
As a mining company investing billions of dollars around the globe, we have the opportunity to make a dramatic impact wherever we operate. Our goal is not just to be a good neighbour, but to make a sustainable improvement in the quality of life for people and communities where we work.
As with everything else, the commitment of our people to our core values and guiding principles is key to our success. I would also like to acknowledge the contributions of the Corporate Responsibility Committee of the Board, who continue to encourage the evolution of corporate responsibility at Kinross.
We do not pretend to have all the answers to what “responsible mining” looks like. We continue to learn from our experience and the best practices of others. I believe that we are making steady progress, and I trust that the performance reported in these pages will help to bear that out.
J. Paul Rollinson
Chief Executive Officer
Kinross Gold Corporation