Episode 33: We are all miners: Rethinking mining investment featuring Appian Capital

Mark Lee

Welcome to this next episode of the Sustainable Connections Podcast. We're going to be traversing some of the world of mining and particularly the finance and capital elements of it. I know this is an industry that makes a lot of people a little bit uncomfortable and maybe concerned, it involves digging big holes in the ground, it's sometimes messy, it affects communities. All those things and more are true. When I look ahead at the low carbon transition that we're trying to generate as a society and as an economy, it's also true that we need so much more mining. We need so much more stuff to make the low carbon transition happen. That's copper and other critical minerals, iron ore for steel, for infrastructure, you name it. This is an industry that we have to get into, and we have to do well to make our ambitions in the climate space possible and for us to be able to deliver them.

I have a couple of guests here with me, delighted to welcome Silvio Lima, who is the Global Head of Corporate Affairs, ESG and Community Engagement at Appian Capital Advisory. Also, Conor Grieve who is my colleague at ERM. He is one of our Principal Consultants in sustainability and his role encompasses a range of strategy, transformation and transaction-related work.

Silvio, would love to hear a little bit about you and your career. How did you get to Appian?

Silvio Lima

Absolutely, mark. Thanks for having me. It's a pleasure to be here with you and Conor. Great to have the chance to share this with you. I'm an engineer by background. I'm an automation engineer and an aeronautical engineer by background. And later after those two engineering degrees, I decided to go back to school, this time to business school to get a business degree, after which I joined a management consulting firm, at a time back in Brazil when there was a sort of commodity boom. It happened that all my clients at the time were in the mining space. I ended up serving major mining companies as a management consultant. One of those clients decided that it would be a good idea to hire me, so I switched from management consulting into one of those companies, at the time it was Anglo American. I stayed a number of years within Anglo American and then later I left to join another major company called Kinross before I joined Appian just under six years ago.

Mark Lee

It’s called Appian Capital Advisory, so really involved in mining, but not a miner, so to speak. Tell us about the company.

Silvio Lima

We are a private equity house, multi headquartered across London, New York, Dubai. We invest primarily in the mining and metal sector. We are also an operator. We invest and operate the mines that we invest in. We essentially are comfortable in operating across the entire value chain from early-stage projects through construction and ramp up operation until we exit and have operations in different jurisdictions. We have a strong presence still in Brazil, my home country, we have an asset in the US, Canada, Namibia, and in Australia.

Mark Lee

One more question for you Silvio about the tagline, “"Somos todos mineradores” and translated it means “We are all miners”. I wonder, what does it mean to you?

Silvio Lima

I'm glad that you brought this up, Mark. It essentially comes around what the definition of a miner actually is. Usually, we associate a miner with someone that takes stuff from the ground and uses that stuff to transform the world somehow. When we think about that, we typically think about people extracting minerals, but we can extrapolate the definition and think more broadly. For instance, a professor or scientist is a miner of knowledge. An athlete is a miner of their own potential. Mark, you are a miner of talent, creativity and good stories. In the end, we are all miners. It’s essentially an attempt to approximate people to mining, perhaps connected to things that you mentioned at the beginning, that this is something that some people have some sort of an allergic reaction to. So, this is an attempt to alleviate that reaction and approximate people to mining. We are all miners somehow.

Mark Lee

Conor would love to hear a bit about your background and how you have ended up at the role you are in at ERM today. How's that connected to Appian and where did this relationship come from?

Conor Grieve

My experience comes from almost entirely consulting like Silvio. I started my career largely in that space. However, I came out of the social sciences position, I did a lot of my academic research around the role of industrial development in socioeconomic development, and particularly how large industrials, including mining companies, start to spur economic growth in the areas they're in. And that naturally drew me to the mining sector when I started my career, where I began doing work around what the value both socioeconomically as well as financially was of improving sustainability of mining operations. I've continued to do that work through a number of consultancies, ranging from strategy houses through to engineering places and have landed in ERM about four years ago and have been here since. A lot of my work at ERM is with our clients in the mining and metal sector around these particular questions. It's really how they understand the world that they're in. How they interpret that and make choices, and in the way that helps them maximize value, whether it be the impact they have or the financial value that they're hoping to return from doing better around sustainability.

Through that, I'm lucky enough to work closely with Silvio. Silvio and I started working together, I think almost two years ago now, on a deal where one of our colleagues in Brazil made the introduction to someone in North America who could help them look at a particular asset. Since then, I think it's been near constant at this point and all over the world. I've worked with Silvio across commodities, jurisdictions, parts of the deal cycle and type. In addition to Silvio, with many of his other wonderful colleagues at Appian in terms of how they think about environmental and social risk, and the opportunities that may be presented for the business to really help out some smaller mining companies and generate both financial value for the firm and bring important materials to market.

Mark Lee

Before we move on Conor, Silvio told us there were a couple of engineering degrees in his background and then he moved on to business school, you referred to the social sciences. I'm curious how do you find your social sciences education and training still coming to life in the work you do now?

Conor Grieve

It comes out in everything I do. I say social sciences, but it's really economics and I still think like an economist in almost everything I do. So how do things move through the economy and how do you have a system that works and creates positive benefits and feedback loops within that system. And it really translates well into sustainability. As you opened the podcast Mark, it's not one actor and it can't be in isolation, it's that connectivity is where we see a lot of the advantages come through it. Every day, some of the things that I learned in school show up and how I think about the problems I work with.

Unlocking value through technical arbitrage

Mark Lee

Silvio, can you tell us how Appian is unique in industry. What's an example of how Appian might do things differently compared to some of your peers and competitors.

Silvio Lima

There are many ways and instances that this happened, I guess one of the elements in the private equity (PE) space is that PE is very intense. We can move very fast. We don't have time for corporate politics and usually you have a very clear plan and a very clear set of incentives that allow us to work as a team towards a common goal. So that, compared to major mining companies that I have had the chance to work with, is materially different in terms of this setup. Usually at that side of the table, it's much harder to steer the build and here we need to move fast and move towards the goal without losing sight of anything at any point in time.

But I guess above and beyond this we leverage a concept that we internally adapt, and we call technical arbitrage. We believe that we have a good ability to reimagine things that are actually critical rather than leaning on documents. This is how things are done so we consistently look for outside of the box alternatives that for whatever reason may have been overlooked over time. We leverage a very strong in-house technical team, all focused on identifying, optimizing undervalued mining projects and we are able essentially able to leverage this concept of technical arbitrage to create significant value for our investors. So I would say this is the two main elements in terms of how we position ourselves differently compared to standard mining operating company.

Mark Lee

If it's technical arbitrage, is that Appian looking in and having a unique way to apply technical knowledge and therefore can get more out of a potential asset. What does that mean?

Silvio Lima

That's exactly it, perhaps get more out of a potential asset, or perhaps make a latent resource become an actual cash operating asset that has been lying there for years, thinking in a certain way that would not have allowed that asset to become an actual operation. And when we apply this technical arbitrage concept and approach with outside of the box thinking, we can identify other ways to make that project work and actually become real, become an operation rather than being a resource lying there generating zero value for anyone.

Mark Lee

Conor, here we have Appian Capital, they are a private equity looking for opportunities where there's technical arbitrage. This is all about mergers and acquisitions in a sense. One of my observations is that there's an increasing amount of M&A (Merges and Acquisitions) activity in mining in recent years related to commodity prices and the impact that that's having on access to capital. First, how have lower commodity prices and the shift to mergers and acquisitions changed the mining industries’ approach to assessing sustainability risk and opportunity as all those transactions take place?

Conor Grieve

I think there's a few things going on with that, Mark. Of course, there's the low-price environment and that makes things challenging from both an economic standpoint. When we talk about the ability to develop mines in that case, where you only have so much resource in the ground and the ability to extract that economically and get returns is often a direct function of both prices and the way in which you're going to do it. And price is something you have very little control over in most cases. But it's also a function of where we started this, we have so much need for new metals and with that, the medium and long term demand is going to be so significant that there's an increased push to build out the pipeline of some of these major companies here. Mining has an inherent roll up in the way the sector is structured. There's a lot of very small companies that are out prospecting, out doing exploration, maybe have a single project at this time. And then there are a lot of bigger companies that maybe do some of that on their own. But they're also looking around at the smaller companies to pick them up when they think they're at the right stage that they can start to maximize value, add them to their existing asset base where they might have synergies. Together these two things will create some of that opportunity that we're seeing in M&A and some of that intensity.

So, you have junior miners who can't hold out as long or struggling with some of the economics that return there, so they have a push to sell. And you have major mining companies that have this medium to long term demand that really is going to drive some of that need to buy at a more rapid pace here. And this is in part because of the nature of the sector, it takes a very long time to develop. It can take between 10 and 20 years from early exploration all the way through development, in many cases even longer. So with that, if you want to have some of these minerals we need for net zero in 2050, you're looking right now to find some of those, and that's what a lot of the major companies are doing. And I think connecting to some of what Silvio mentioned here is what this creates a higher price as well for purchasing some of these assets. So that means that this idea of technical arbitrage becomes very, very important. So, to have success in M&A at this point in the world, it's about having a real strong thesis in your deal as to why you can create value where perhaps the current operator can't or someone else may not be able to for various reasons.

Mark Lee

In that environment Conor, low cost for the actual commodities, high prices in many transactions, does that bring more attention to bear on the sustainability risk and opportunity side or less, how do those factors play in this environment?

Conor Grieve

It really brings more attention, with that you're starting to see more marginal projects become of interest in that case, you have to go to more risky areas in order to get the type of resource you need in the high price environment. You have to, maybe look at more complex environmental circumstances, maybe have to consider potentially dealing with a community that has some degree of unrest associated with it. In that case, sustainability comes to the forefront because really what we look at from an environmental and social due diligence standpoint is, what is real in terms of the risk? What is someone missing that could create value? And how do you manage those effectively? Silvio talked about the technical arbitrage which will immediately make people think about engineering, how you best optimize costs, flow sheets and other pieces within the mining structure. But there's an opportunity to do this on your environmental and social as well and the capability to do that shows up more and more in the market with some of the current circumstances.

ESG as a strategic lever in mining investment

Mark Lee

Silvio, let's bring this back to you and what it looks like in the market from an Appian perspective. Could you even walk us through an M&A deal cycle, and where does the sustainability due diligence fit into that? How do you factor it alongside the technical arbitrage opportunities you're looking for?

Silvio Lima

Essentially, we analyze every opportunity from at least three perspectives. One is the technical perspective, of course the financial perspective, but we always bring a softer approach. We always look at the management team and the people side of things as well. On the technical side, we look at the resource potential, mine plans schedule, CapEx and obviously the ESG (environmental, social governance) elements. On the financial side, the team looks at structuring the deal itself, the capital structure, offtake agreements and whatnot. Given my role, I'll focus more on the ESG side of things. For us, at any point in time in the deal cycle or in the asset life cycle, we do not see ESG as some sort of a check box exercise. We embed this across the entire deal cycle from screening to exit and Appian has been operating this way since inception back in 2012.

In this screening phase we have already brought up a very systematic approach, so we start assessing the main elements that could potentially play a role as a binary risk. We need to understand the main elements from the capital and environmental side of things and the social risks to create our initial hypothesis. Can we find a realistic path to permit this? Is there any legacy issues with respect to communities, land access, environmental liabilities, any biodiversity elements? Can we finance this project going forward? So we need to go through and identify what that could actually play a role as binary risks that could prevent us from generating any value at all in that asset.

And then after the screening phase, we go to a deeper level of the due diligence phase, where we actually go to site, then we do a very deep analysis and cross check that against international frameworks such as the IFC performance standards, Equator principles, when they look at tailings facilities, we bring along the ICMM (International Council on Mining and Metals) on the standards for tailings management, so we can see whether or not there is a clear path to meet those standards, at what cost and under which timeline. And can we again finance this project, connecting this to the discussion earlier in terms of the capital structure within the financial side of things. So, we need to find very clear evidence that this path does exist in line with best international practices, irrespective of the jurisdiction and obviously, that there are ways to do things that others perhaps would overlook or decide not to, for many reasons.

One of them, perhaps applying the technical arbitrage concept into the ESG side of things. We are patient investors, so we have more time than others. We are looking long term. We can wait 10-12 years to collect our returns. So we have time to do things properly, meaning that we have time to take, if need be to actually engage with the surrounding communities, bring their views, perceptions, needs expectations into the development of the asset and engineer that asset in a way that's going to work properly, connected with the outside world. Not everyone would have perhaps the patience to do that, or perhaps even dare to say the capability of doing this, because this may sound simple, but it is complex. For those predictions that are connected to that side of the business they would recognize that this is a complicated element for sure and this allows us to unlock value where people would see perhaps issues that they would not be willing to sort out. And when the asset makes it into the portfolio, ESG becomes a lever for value creation. We don't just manage the risks, we professionalize the operations, broadly speaking. And we also have a set of intellectual property elements that we call the blue book and we do have an ESG or E&S section in the blue book that allows us to apply replicable and scalable approaches across any jurisdiction that we decide to invest.

Typically, we see mining companies talk about social license, and we avoid as much as we possibly can, even discussing anything about social license because we believe in a different, I would say more elaborate concept of social integration. When we shift from a social license concept, which is a transactional relationship. I give you something in exchange for your acceptance of my presence in the territory. To a long-term view, building trust dialogues, long term mutual benefit. So that's another element of the technical arbitrage in the E&S space that we leverage. When it comes to exit, we are not selling an asset with unresolved liabilities or providing uncertainty. We have a very clean exit and that again helps us protect any downside and generate value to our investors and give confidence to any banks and buyers to underwrite investment in assets that used to belong to us.

Mark Lee

Conor, ERM works with Appian on some of the due diligence, what is the role that we can play as a partner, maybe as a semi-independent third party to assess and kind of cut through the challenge of the ESG sustainability related risks.

Conor Grieve

Our role with Appian is really to help with some of this due diligence process. It's really twofold as I see it here. Number one is we bring local context. Appian is a great team as Silvio mentioned, but there's only so many folks in in that team as opposed to our large breadth of skills. So whatever country we're in, we bring the local knowledge and expertise that helps address some of the more contextual based risks with it. The second way that we really help is the role that I play with a relationship with Appian across all of the deals. It's working with Silvio to help interpret some of those risks and provide perspective back to the Appian business as well as some of their limited partners around a semi-independent but also well truthed and well-founded perspective on how we can deal with this risk within the business as a whole.

I'm lucky to have the chance to work with Silvio to that effect, because you really do see some of this concept of social integration and how we go about doing that and the level of creativity that comes with it, is something that's not always apparent with every mining client, because often we're constrained by what our imagination can do, as opposed to what can physically be done on this specific site itself. Fitting into that regional context becomes particularly important for opening up opportunities, managing risks effectively, and addressing those going forward. In summary, really our role is to provide a second set of eyes and a bit of local context to help Appian around understanding and interpreting these risks and how they fit into their deal thesis overall.

Mark Lee

Silvio, especially as you move through potential acquisition of smaller mining companies. What's the different challenge about assessing sustainability risks with the juniors? Do you have to do it in a different way? Are there different risks that tend to surface more often?

Silvio Lima

This is a great topic. I'll just start answering this question saying that this is my own experience, I don't mean to be the spokesperson of the mining industry and I do appreciate that people will have different views or would even disagree with me. I'll share my perspective. Essentially when we are evaluating potential acquisitions of assets that belong to smaller companies, in my view, there is a pattern in terms of how things emerge and come across. When you talk to management teams, they all say that sustainability is generally overlooked. They generally think that they can fix this eventually later. Also, there is some sort of perception that doing things in line with international standards can cost too much and does not generate value per se. And I tend to disagree with that. My experience tells otherwise, it doesn't cost more, primarily because it avoids you investing and redoing things down the road and then always functioning as a very good enabler, so doing things right from the get go, simply cannot cost more than running the risk of having to rework things down the road, so that that's another element.

And there's another topic that perhaps is not precisely connected to smaller mining companies but I've had the chance to come across this very often, even in the majors that I had worked for and with. Typically, you see people with the belief that the E&S elements are less complex than one could imagine. Everyone inside the company, irrespective of the discipline that they are responsible for, they believe that they know everything about E&S, even much more than the E&S expert for that matter. So it's a challenge because it's hard to convince people that what they're saying, what their beliefs, cannot be sustained in reality and obviously that needs to be accounted for when we are doing our evaluation of that asset and that could eventually come at the discount that people are not exactly ready to digest. Those are the main elements that we typically come across and we have to be cautious and cognizant on those topics to make sure we can evaluate those properly and understand those as much as you possibly can. So, we can cross check that against our risk appetite and make sure that we are investing in something that will make sense for us.

Mark Lee

Conor, I want to bring us back to you, is the approach and the way we're talking about it here becoming the norm across the industry and in the range of deals that you look at? What are the other ways in which you see this playing through the M&A world?

Conor Grieve

I'll borrow Silvio’s disclaimer as well about it being my experience on this. I think a lot of what Silvio has mentioned here rings true throughout the industry. I think there's often a comment around how we don't need to do this because we are in safe jurisdiction is a common thing you'll hear, or our project is different and this is overkill too, and many other pieces in that vein. Some of this is born out of the assumptions that management teams make about their knowledge of E&S factors and some of it is also a bit of human nature. We tend to be optimistic as a species, and we don't like to think about bad things happening. So we push those down in how we do it.

But I'd also highlight another thing I think is really important here and some of it is to just recognize the circumstance many of these mining companies are in. They're in a perpetual capital raise trying to fund their next program in order to advance the project, develop their resource, hoping for someone like Silvio and Appian to come by and say, this is something that we think we can fund and we can pick up and move forward with it. In that, it can create an aspect of short termism which gives a different perspective than what Silvio and Apian are allowed to take on, in this case which is a more long term perspective, being in a private equity fund in that case. There is a component of it and I don't necessarily think that it's an excuse because often you don't need to do as much drilling, you could do a little bit more engagement, you could look at some of your core environmental factors a little earlier in the process. All of which are helpful getting to that point and de risking the asset. But broadly, the situation that Silvio has described is pretty typical across the industry in that context.

Mark Lee

So if we are making the case that that ESG and sustainability play a role in value creation opportunities through the deal cycle and in mining generally. But we've still got folks at all different stages of development, operating in different regions, different levels of maturity, probably as organizations. Conor, when you're talking to junior miners and developers thinking through developing a new asset to sell later, is there a checklist they must consider as they begin?

Conor Grieve

I don't like to think of a checklist approach to this, but there is somewhere that you should start. That's the way you take your resource and your technical risk incredibly seriously and you work to reduce that risk, increase your degree of certainty, whether it be through more detailed engineering design or more evaluation of the resource. Bring the same care and attention to your social and environmental risk. As has been noted a few times by all of us on this conversation, those are the ones that really cripple you. You can always optimize for cost, you can look at different recovery methods and different head grade cut offs in order to manage your resource and your engineering components. But many of these environmental and social risks, if they're not addressed early, they become baked into your project, and that creates challenges throughout your entire life cycle. It will extend how long it takes you to permit and build the mine. It will increase your costs of operating in perpetuity. It will increase the degree of scrutiny that you receive, it will harm your reputation as a business as a whole if those risks are not necessarily managed.

So as opposed to a pure checklist, really taking those risks as seriously as you take some of your technical or mine engineering and geology risks seriously. If you're not sure where to start, there are plenty of resources, some of which Silvio has listed out here. The IFC performance standards in non-OECD (Organization for Economic Co-operation and Development) countries, are a good place to start. You can look at the various commodity or industry standards that are out there in terms of what the major players are doing and perhaps what customers are often expecting from a base metals mine. All of these pieces can help you really understand it from a blank page. But many times, I don't think it's as much that, as it is we thought a lot about our engineering and our geology, we didn't think about as much how we interact with the environment that we're in. And when I say the environment, I mean the social and biophysical environment in this case.

Building community trust through social integration

Mark Lee

Silvio, connecting that back to the emphasis that Appian places on social integration as opposed to just social license to operate. What is essential in Appian's experience and in your experience about managing that community relationship?

Silvio Lima

This is a very difficult topic, but I'm happy to elaborate on that one. Many people tend to disagree with me on this one, maybe because I have a very strong view, but based on my experience and my long life doing this. The main challenge to get things properly done is having the right people in place. It's pretty obvious that having the right people is the starting point. But the thing is, it is extremely hard to find the right people to do this type of work. I cannot emphasize this enough, how difficult it is to find the right people. You find a lot of people that can do the work, they eventually can do a check the box type of work. But this work is not a check the box exercise that I've alluded to earlier. You have to actually be involved with it, you not only have to like it, it cannot only be your job, you need to find purpose in doing that kind of work. And this is a difficult job, it's not an easy job. Maybe not precisely from a technical perspective. One could think that from a technical perspective it can be not necessarily easy but the solutions are somewhat known.

But everything that involves dealing with people, people's interests, expectations, perhaps dreams, even people's lives in some sense, it becomes a very difficult task. This is the reason why someone that would do this kind of work needs to see purpose. Finding people that can actually see the purpose in doing this, at the same time, are able to look at this work, not from a task execution perspective, but from a business perspective is extremely hard. So this is the main element and we have been very fortunate to been able to find very good people that can do the job, can find purpose, and can connect their tasks with business imperatives while still protecting the interests, needs and expectations of the outside world. This has been extremely crucial for us to being able to deliver what we have been delivering, but it remains very hard to find these people. They're very scarce.

Conor Grieve

Cannot underscore the livelihood piece more than Silvio has here. It is not sometimes people's livelihoods, it's always people's livelihoods and their lives with it. Mining, particularly in the African continent, the South American continent and in many places in Southeast Asia. You will have formal resettlements in the physical sense where you are uprooting communities in order to move them. You will often find economic resettlements as well, where people's livelihoods will need to change, but it's not just that as well, when you come to other countries, including Canada, where I sit, you see a lot of change in socioeconomic circumstance. Particularly in highly indigenous populated areas where the traditional territories are disrupted and these traditional practices where rural communities that may be non-indigenous see changes in lifestyle associated with the income that comes in with the mine. It can often be a transformative experience for the locality with which it's in. So, to Silvio’s point, there's no checklist that you can hit that says, well we looked at this part and we looked at this part because it's inherently emotional. Its identity based, it's tied to it. Balancing the needs of the company and the needs of that community in order to come up with something that is financially and socially sustainable becomes critical in those circumstances. Often recognizing the environmental connectivity of mining, digging very large holes, processing things with chemicals and all of the other things that we do. It’s also about how does it impact the ecosystem services provided in that third intersection of environmental sustainability that comes into it.

From theory to practice, lessons from Mineração Vale Verde

Mark Lee

Silvio, I wonder if we can take the various threads we've had in the conversation all the way from technical arbitrage through interpretation, the importance of environmental and safety performance and put that in a concrete example. One of the things we talked about preparing for the podcast was an asset that Appian recently sold, Mineração Vale Verde. Can you close us out by talking how that illustrated the success you're trying to have, managing sustainability related risks and opportunities through a deal cycle?

Silvio Lima

Absolutely, I will talk a little bit about some technical aspects and then one example within the E&S space connected to Mineração Vale Verde, we usually refer to it as MVV. This is actually a great example of Appian’s ability to identify an asset that had been overlooked for many years, with the in-house technical team realizing the potential to optimize value. Appian acquired MVV back in 2018, there were ten people, that was the whole essence of MVV at the time. And then Appian completed the definitive feasibility study (DFS) but not based on what the previous owners had in mind. Based on the rescoped version of the project that Appian’s technical team envisaged during the due diligence. So rather than focusing on a large pit or large plant throughput, the changes led to a lower initial CapEx. A higher grade portion of the pit, a smaller throughput of the plant and this brought CapEx down from $420 million to just shy of $250 million. So this actually made the project viable. The $420 million CapEx as the previous management would foresee would essentially not make the project viable and that's precisely the reason why it was there. We were able to rescope build, commission, operate and recently exit that asset.

Going a little bit more of detail about the E&S space. To give you some context, this asset was built in one of the poorest states in Brazil, the state of Alagoas. In the state of Alagoas, they used to leverage cultivation of sugar cane and tobacco, zero mining history through to the first ever mine operation in that state. From the get go, we wanted to make sure that we would leave a legacy there. The easy path would have been to go elsewhere and hiring people to move them to the location of that site and have them operate that asset. But we elected very early to do a completely different approach. We elected to design and implement a long training effort to hire and train locals. We hire them, pay them a salary, train them for over a year and after their training was complete we flew them to another asset belonging to a sister company called Atlantic Nickel, where they could hone their skills. And then we brought them back to MVV, to operate that asset, being coached by master operators that we brought for a limited period of time, a few months. Essentially that allowed us to retain more than 80 per cent of local hiring in that scenario, where there has been historically zero mining. That changed dramatically the lives of those people, I perhaps would dare to say that we have had a chance to break generational cycles of vulnerability in that region. Some of those people that we hired used to work in a context in which they would have to ask permission to go to the toilet. Now they have a decent job, a decent salary, decent health insurance, paid leave, they have dignity essentially, so they can provide for their families. They become role models in the region and they now inspire others to achieve similar conditions. So, this is a good example of going the extra mile, going to do things that are not exactly obvious and more difficult than it would have been just to hire people with experience, because that would have been easier for us. But we elected to go with what would have been better for the territory and not exactly for us in the short term, but obviously in the long term it's a great thing and this has been paying off a lot because I cannot underscore how great these employees are and the level of turnover is minimal.

Mark Lee

Conor, I opened by talking about how much we need the mining industry to expand and to deliver what we need for a low carbon transition and to meet societal needs generally. It's going to take a ton of capital, sustainability risk as part of that. What's your prediction for how that plays over the next few years? What’s happening next?

Conor Grieve

I think there's two core parts to this, one of it's external, and it's the capital provision and the other is internal to the sector as well. I'll start with the external side of it. We need more of the major capital players to come into the sector, some of which have eschewed it, many institutional investors, longer term holders like sovereign wealth funds. Many of these investors have chosen to avoid this sector and that needs to change and we're starting to see that change. Some of these companies are starting to explore what it would take to invest in that sector, what types of things would need to be true. And we're also seeing some of the supply chain partners begin to invest directly as well, whether it be technology, automotive or manufacturing sectors, they are also quite active in investing in the mining sector now.

But where I really want to focus my time is on the mining sector and what needs to change. There's a reason why some of these capital providers have eschewed the sector, and it's for the challenges the sector has when it comes to managing its environmental and social impact, as well as some of the technical challenges that they have as well in terms of delivering on time and on budget. The mining sector needs to really understand some of these risks and understand what is going for it, because regulatory regimes are reacting to, you're not able to escape some of the cost implications, these are killing projects at this point in terms of your ability to advance on environmental or social risk. So, if you're not necessarily doing these things the right way, you're not going to be able to operate. You're not going to get the capital that you need and the trust from society as a whole in order to deliver some of these minerals. And while there are great operators and I don't want to suggest that all of the mining sector is a monolith. Broadly, there are still gaps in how we've operated, and even those who are doing very well right now need to continue to push and drive and demonstrate why this is such a great sector to work in and the great things that the industry does do in many cases in the landscapes and in the communities that we've worked in, not the least of which the example that Silvio has just provided.