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Mining Innovation: Myths and Challenges “First Meeting of the Network of Mining Regions” Mining Innovation: Myths and Challenges Mauro Valdés Raczynski Chairman Alta Ley Program mauro.valdes@programaaltaley.cl OECD Mining Regions: building a network to enhance productivity and well-being 5th October 2017 Antofagasta, Chile

How to understand the relevance of innovation in mining? “First Meeting of the Network of Mining Regions” How to understand the relevance of innovation in mining? 1. Dynamic Productive Process: The challenges that mining is facing today were not the same in the past and will not be the same in the future. 2. Socio-environmental impacts are also dynamic: Depending on different variables (mine age, depth, ore grade, etc.) the impacts of the process will be different. 3. Unlike other production processes, the local context does matter: Local specificity must be considered in the productive process. 4. In many countries mining is a priviledged leverage for knowledge, innovation, technology and capabilities: This aspect is an increasingly relevant part of the social license.

Disputing some myths about mining development “First Meeting of the Network of Mining Regions” Disputing some myths about mining development Sustainability Mining development Policy

“First Meeting of the Network of Mining Regions” Myth Nº1: Tension between mining development and sustainable develpment: Recent events have established in Chile's public opinion that mining development is opposed to sustainability. The case of water consumption: Innovation and technologies have enabled amazing efficiency and decreasing enironmental impacts. Mining accounts for only 3% of the country's water consumption (DGA, 2016). Recirculated water represents 73% of total consumption (COCHILCO, 2016). By 2027, sea water consumption is expected to account for 46% of the total water required by mining (COCHILCO, 2016). Side effects: NCRE (solar) Minerals and metals, particularly cooper, have a key role to play in the sustainability digital and technology revolution. The development of sustainable mining is possible and relevant. Innovation is the key to this goal.

“First Meeting of the Network of Mining Regions” Myth Nº2: Mining development only needs more investment: The discussion on mining development has focused on investment and regulatory aspects. To compensate for the decreases in the ore grades and maintain production, mining investment was similar in the periods 1990-2004 and 2004-2016 (SONAMI, 2017) Through innovation, Chilean mining must generate competitive advantages 1990 2004 2016 5,5 mill TM 1,6 mill TM 5,4 mill TM US$ 40 bill US$ 48 bill Production Investment

Myth Nº3: State or market, two irreconcilable paradigms: “First Meeting of the Network of Mining Regions” Myth Nº3: State or market, two irreconcilable paradigms: Usually the visions about the role of the state and the market in the productive development are presented as opposites. International experiences, such as Australia and Canada, suggest some lessons for mining suppliers development. Exports from Australian METS reached AUS$ 11.400 mill in 2013 (DIS,2013). The case of Australia shows key roles of public sector through CRC, CSIRO, Mining3 and METS ignited. National Collaboration Strategy for Canadian Mining Industry seeks improve collaboration betwen various sector stakeholders for support mining innovation (DAI; IM4DC, 2015; National Diamond Strategy, 2003) The strategy followed by Chile through Alta Ley, Valor Minero and Cluster Minero Antofagasta ensures the focus on mining development and strengthens public-private alliances. Private-public partnerships have shown greater economic and social returns

“First Meeting of the Network of Mining Regions” The challenge…

“First Meeting of the Network of Mining Regions” A false dichotomy trapped us during the 20th century A new enabling paradigm for mining economies to play a leading role in the 21st Century 20th Century 21st Century Axis that frame the debate Axis that frame the debate Natural Resources as knowledge-based activity Transactional relationship State-Market Natural Resources as rent seeking activity A Shared Vision: Public-Private Consensus + Shared Value Natural Resources (Minerals) Knowledge Technology State Market Mining economies in the 21st Century The Chilean experience What is the next stage? 20th Century Coordinating the transition+

“First Meeting of the Network of Mining Regions” Resource-based development is a moving target Successive stages in a evolutionary and long-term process (e.g. Supply chain development) _ Productivity Social and environmental performance + Internationalization and economic diversification Chile today (2016) Stage III Creating an innovation ecosystem Stage II Creating local supply chain Chile in 1990 Innovation ecosystem and METS exports Stage I Incubating critical capacities Consolidation of a local supply chain Transition period How to support succeeding transiting to the next stage ? Factor-driven economy Investment-driven economy Creating productive and absorptive capabilities Innovation-driven economy 1975 1985 1995 2005 2015 2025 2035 Comparative advantages

Operations and planning mining “First Meeting of the Network of Mining Regions” Alta Ley agenda and impact Impact 8,5 million tons produced yearly in the next 20 years 250 world class suppliers Traction Cores (Challenges) Exploration Operations and planning mining Concentration ores Tailing Hydrometallurgy Smelting and refining Nwe uses of cooper US$ 4.000 million of exports of goods and services linked to the mining sector 80% of production in the first cost quartiles of the industry, at the global level Supliers and innovation Human capital Enabler Cores Smart Mining Green mining

Mining Innovation: Myths and Challenges “First Meeting of the Network of Mining Regions” Mining Innovation: Myths and Challenges Mauro Valdés Raczynski Director Alta Ley Programme Mauro.valdes@promaraaltaley.cl OECD Mining Regions: building a network to enhance productivity and well-being 5th October 2017 Antofagasta, Chile

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