Energy and Metals & Mining Transparency
Why should investors care about transparency in the energy and metals & mining industries?
Many resource-rich countries suffer from corruption, conflict, and under-development. Increased disclosure of information on payments made between natural resource companies and host governments can reduce risk premiums on financial assets, improve sovereign and corporate governance, reduce corruption, and help alleviate poverty by improving public service delivery. The Cardin-Lugar Energy Security Through Transparency (ESTT) provision of the Dodd-Frank Wall Street Reform Act requires SEC-registered companies to annually disclose this information on a country- and project-level basis.
Major tailings accidents in recent years such as at Samarco and Brumadinho in Brazil have awoken investors to risks posed by the long-term storage of mining waste. With an estimated 3500 tailings storage facilities (TSFs) worldwide, and more being built every year, accidents are likely to continue. We provide a primer on tailings risk in emerging markets and assess the new Global Tailings Portal dataset as well as the Responsible Mining Index to identify which countries and companies have the greatest exposure to tailings risk. Chile, Russia, South Africa, Peru, Brazil and Poland are the most exposed EM countries. Top exposed stocks are Vale, Anglogold Ashanti, Evraz, Severstal, Sibanye-Stillwater, Phosagro, Antofagasta and KGHM. We suggest ways investors can assess tailings risk in their portfolios and questions to ask management when engaging on this issue.