Dear CIMG Members,

In this edition we have included some interesting news, events, information and articles. There has been much activity over the last couple of months as well as notices from MLR to release new regulations.

Please be reminded that the next CIMG Monthly meeting will be held on Thursday February 15 at 4.00pm at the Swissotel. For more information please email Mary at mary@cimg.org.cn.

News from the last CIMG meeting held in January 2007

The last CIMG saw a record number of CIMG members given the update that was given by Mr Wei from MLR as well as the CIMG Chairman and Advisors announcements.   Nigel opened the meeting and welcomed to those attending.
Nigel made note of the officials who would be attending the Appreciation Dinner. The officials included representatives from MLR, MofCOM, CAEFI, China Gold Association and more. (please note that there is a special write up below on the dinner). He then made note of the CIMG Mission to Qinghai Province in April and noted that the final details were being prepared. Any CIMG members who wish to participate should contact Mary at mary@cimg.org.cn to register their names. He lastly made a note of the KPMG mining tax workshop that will be held at the Grand Hyatt on February 6 (if you wish to attend please contact KPMG at alexis.zirah@kpmg.com.cn).

Afterwards a presentation was given from Rockwell Automation on the topic "Automation and Mining - Optimizing your Operations". This presentation focussed on recent developments in regards to mining and automation. This technical presentation demonstrated some of the technologies that ere currently being used by Rockwell Automation and how they increase efficiency of mining operations. For a copy of the presentation please contact Michelle Chen at hmchen@ra.rockwell.com.

Auslan then presented to those attending a broad sweep of the CIMG strategy for 2007. He first provided some background on the outcomes and observations from the 2006 year of the CIMG. Almost all of the CIMG operational targets for 2006 were reached. The two targets not completed were the implementation of Advisors and enhancing the CIMG to an independent status. These two items he said would be addressed in the first quarter 2007. In developing the strategy many comments and observations from the CIMG membership had been taken into account. These comments were both positive and negative. The members found the CIMG Forums, workshops, etc very useful. The White Paper was well received as well as the CIMG’s work in the area of sustainability with the publishing of the Community Development Toolkit. Given these positive notes members did cite some areas for improvement, such as broadening the focus to more nations, increasing engagement with NDRC and MofCOM, more Provincial level engagement with DLR’s, more engagement with Chinese Industry and provision for information on commodity trends in China. The strategy then addresses these items to ensure that the CIMG is Sustainable, Reliable and Value Orientated and will focus on:

1. Positioning – Become international
2. Chinese Engagement – Increase level of engagement with Government and Industry
3. Member Engagement – Increase member input and promotion
4. Information – Provide information on industry trends, especially on commodities

There will be a number of missions to the provinces in China and workshops. Lastly he added that the CIMG speaking program had been completed and asked members to read over to express their interest to present. For a copy of the CIMG Strategy 2007 and the speaking program please contact Auslan at auslan@cimg.org.cn.

Auslan then announced the results of the voting member vote on the nominations for the CIMG Advisors 2007. The results stand as:
Nigel Clark, Richard Mundie (Teck Cominco), Frank Xu (BHP Billiton), Pat Powers (Mundoro Mining), Phillip Dobbs (Anglo American) and Wu Chengyu (Rio Tinto).

(Please note that details of the Advisors will be posted on the CIMG website in the coming week).
Nigel noted that there had been no nominations for the Chairman’s role. As such, he suggested that the Chairman would be selected from the Advisors at their first meeting.

After the announcement the floor was handed over to Mr Wei – Deputy Director General – Law Centre MLR, who presented a “Clarification of Regulations 694 and 695â€� in response to member’s to these regulations. The clarification was long and although informative little additional insight was gained. The clarification was a literal application of these regulations. In the first instance Mr Wei and Mr Fu Mingke provided a historical background to the development of these regulations. Typically they cited that Government in past years had conducted much survey work and the like and as such wished to recoup these costs.   The exploration and mining rights were therefore linked to this.   Many questions arose relating to the nature of the fees payable for such rights and whether auction or bidding would be used. Mr Wei and Mr Fu noted that DCF would be used to calculate the fees payable. Items for bidding or auction are dependant on the mineral category of which there are 3 (Category 1 – Metamorphic, Category 2 – Sedimentary and Category 3 – Surface). Minerals in Category 1 and 2 can be bid or auction. Minerals in Category 3 are all through auction.   Mr Wei and Mr Fu also noted that one should refer to “Mining Notice #12 2006 issued by MLRâ€� in relation to what   minerals fall into what category. As well, they suggested that larger projects be bidded and smaller projects be auctioned. The members raised more questions relating to the stage of development of the site as well instances where the regulation could not be applied due to multiple sales of the exploration/mining right. (Most of the questions were raised in Chinese and answered in Chinese so   the above account may differ slightly in interpretation – As such, Mr Wei has asked the CIMG Secretariat to collate all the CIMG member’s questions regarding these regulations which he will then provide a written response to. Please email your questions to Mary at mary@cimg.org.cn)

Member Update

The CIMG Appreciation Dinner 2007 held on 31 January at the Swissotel Beijing

The CIMG held its 2nd Annual Appreciation Dinner that was held in the Swissotel on 31st of January.

This dinner was a time for the CIMG to show its appreciation to the Chinese Government as well as domestic industry for their support of the CIMG. The dinner was well attended with officials attending from MLR, Shanxi Province, MofCOM and industry leaders from CMA, CNIA and the China Gold Association.

Vice Governor Song Beishan, Director General Li Zhijian,   Charge d’ Affairs – Australian Embassy – Graham Fletcher and Minister – Canadian Embassy - Ken Lewis   were the   distinguished guests at the dinner.

The theme of this year’s Dinner was “Working in Partnership for the Future� and this demonstrated throughout the dinner by the numerous conversations between the attendees.

  Vice Govenor Song BeiShan with the CIMG

Nigel Clark the Honorary Chairman of the CIMG made note of busy program over the past twelve months of the CIMG that covered programs in mining law, related taxation regimes, safety, environmental and community relations topics, as well as providing a platform for networking, information gathering and information exchange.

Attendees at the Appreciation Dinner

In closing he proposed, “That during the Year of the Fire Pig, that we all work together to prepare and complete our goals towards prosperous, safe and sustainable mining in China.�

If you are interested in recieving the list of the attendees or photos of the dinner please contact Auslan at the CIMG Secretariat at auslan@cimg.org.cn.

Feature Article

By Paul Mitchell, Secretary General, International Council on Mining and Metals

Do not be put off by the fact that this article is about sustainable development. Even if you’re investing in mining stocks simply to make money, and even if you couldn’t care less about social and environmental issues, don’t turn the page yet. Why? Because how companies perform on sustainable development is actually one of the keys to their long-term profitability. This is one of the reasons why, in 2001, the CEOs of many of the world’s largest mining companies established the International Council on Mining and Metals (the body of which I’m secretary general), with the aim of developing industry leadership in this area. Some of the world’s big financial institutions are also increasingly making the connection between sustainable development and financial value.

But what exactly is the connection? Clearly the recent rise in mining stocks has been driven by rising commodity prices, which have in turn been fuelled by generally strong growth, including in China and India – none of which is directly to do with sustainable development. However, the performance of mining firms on social and environmental issues – or put another way, their social and political acceptability – does have a major influence on a number of long-term corporate success factors. These include the firms’ ability to gain access to upstream reserves, to downstream markets for their products, to skilled and motivated employees, and to finance and insurance on reasonable terms.

Consider, for example, the issue of access to upstream reserves. This is of course the fundamental basis of long-term shareholder value in mining. There are relatively few large new available deposits in developed countries. So there’s now a shift to more investment in developing countries. But when you look at which firms actually get access to new deposits, or the terms under which this access is granted, social and sustainable development factors are key. For example, there are now growing nationalist currents in a number of developing countries. Quite a few governments, responding to popular pressure for more local and national economic benefits from mining, have recently raised taxes or royalties on mining firms. Some have even threatened nationalisation of their assets. Those firms which have worked hardest at creating, and demonstrating, positive economic impacts for host counties are likely to be better protected from such pressures.

Many prospective mines are also located in environmentally and socially sensitive regions, which heightens the reputational risks, particularly for large, high-profile companies. But, even more critical to shareholder value, community opposition can make developing these mines impossible, or disrupt their operations. We’ve seen this very recently in Indonesia and Peru. Companies which engage most proactively and sensitively with local communities, again, are likely to achieve operational security.

Or consider the issue of access to markets. Demand for products can either be boosted or killed off over the long term, depending on whether they’re perceived to be socially or environmentally acceptable. In the past, for example, health and safety concerns restricted the market for lead and mercury. By contrast, environmental concerns have recently fuelled demand for platinum: this is now widely used as a catalyst to control pollution from car exhaust. Looking forward, climate change could have shareholder value impacts in mining, with effects on patterns of demand for coal, uranium and also metals that are components of solar panels. Firms need therefore to try to understand how such environmental pressures will evolve and adapt their strategies accordingly.

Even though many of these issues are relatively long-term in nature, they have the capacity to impact valuations today. According to McKinsey, the management consultants, typically 80% or more of market value is based on expectations of cash flow beyond the next three years. Where sustainable development issues affect future profitability, in other words, this will sooner or later be reflected in today’s share price.

All of which means that the work of the International Council on Mining and Metals (ICMM) should be of direct interest to investors. ICMM works with many of the world’s major mining firms and also national and regional commodity associations to improve their performance on sustainable development.

All our corporate members, for example, have committed to ICMM’s ‘Sustainable Development Framework’. This is a set of ten principles – covering health, safety, the environment, human rights and community involvement – which is backed by a system of reporting and assurance to ensure the firms actually implement their commitments. (Admittedly, though, many of the big firms had been working to raise their social and environmental performance well before ICMM came along.)

ICMM also has a detailed work program providing greater depth on issues such as HSE, economic and community development, and materials stewardship. We work closely in partnership with other stakeholders, including governments, non-governmental organisations and agencies like the World Bank.

ICMM’s work aims to provide strategic advantage for our members, as well as bolstering their performance and reputation. For example, the management toolkits we have developed for economic and community development, can be used by members to strengthen their ‘social licence to operate’ with host communities and governments – and thereby their access to resources. Similarly our engagement with governments and international bodies on issues like metals recycling and health risk assessments will help protect downstream markets for our members’ products. In this way, the fact that any particular large mining firm is a member of ICMM should be of interest not just to those with an interest in corporate responsibility, but to hard-nosed investors too.

More detail on ICMM’s work can be found at www.icmm.com

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Regulatory Update

Latest Updates:

China to end tariff exemptions on some imported equipment - Jan 2007

China to Implement One Mine, One Company Policy - Jan 2007

State Council Number 4 - Notice to Government Departments to seek better harmony for FDI in Mining - Jan 2007 (In Chinese)

MLR Beijing issued 2 new regulations. The CIMG was recently informed that MLR Beijing issued 2 new regulations that will come into affect on the Jan 1 2007:
1.             Notice By MLR Regarding Furthering Reform of the Exploration/Mining License Issuance
2.             Equity Method for Paying for Exploration/Mining License

Provisional Regulation on Disciplining Dereliction of Duty in Environmental Protection Activity -SEPA -issued date: 20030228

Notice of Further Regulating Exploration Licenses and Mining Licenses Granting/Transfer Process Management

Notice of the People’s Government of Yunnan Province on new four laws including Management Rules of Yunnan Province for Rights of Exploitation and Mining. Laws in Yunnan were released that focus on the Rights of Exploitation and Mining, Interim Procedures of Yunnan Province for Levying and Management of Fees for Compensated Use of Mineral Resources, Interim Procedures of Yunnan Province for Management of Mineral Property Transaction, and the Interim Procedures of Yunnan Province for Management of Deposit for Security for Rehabilitation and Governing of Mine Geologic Environment. For those wishing to make comment or if you would like a copy of the laws please contact Auslan at auslan@cimg.org.cn

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Classifieds

EDITOR POSITION with Mining Journal CHINA

The Mining Journal CHINA is a monthly trade magazine covering the mining industry for the Chinese market. It is based on content from the Mining Journal, the oldest and most prestigious mining publication in the world.

As we enlarge our team, we are looking for a PART TIME EDITOR (m/f):

Tasks:
- Cooperate with advertising sales
- Liaise with business partner in UK
- develop more domestic (China) and regional (Asia) content for the magazine
- Generate content by conducting interviews, writing articles, and selecting articles from English publications for monthly issues of the magazine
- Generate story ideas
- Help to establish a website and update material on the site
- Lead editorial team by organizing monthly workflow
- Proofreading all content

Requirements:
- Native English speaker
- Ability to speak/read Chinese an asset
- Relevant degree and work experience (i.e. journalism; economics; geology)
- Attention to detail
- Interest in mining, one of the most important and quickly expanding sectors in China

Please email your resume and a cover letter to hr@businessmediachina.com, or fax them to 8454-0489 addressed to “EDITOR – MINING JOURNAL CHINA.�

NOTE: If you are interested in placing a classified-hiring, buy or sell (looking for staff, equipment, etc) please contact the Seccretariat. This service is FREE for CIMG members

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