ESG Annual Report Interpretation is a column co-sponsored by Sohu Finance and Value Company 100 on the disclosure of each company's ESG report.

With reference to the SSE's “Code of Corporate Governance for Listed Companies” and the HKEx's “Code on Environmental, Social and Governance” and other documents, we iteratively improve the standards of ESG star rating system for each industry, and evaluate the environmental resources, social responsibility and corporate governance of companies in 2023 based on the latest standards and the 2023 Corporate ESG Report as the main source of data. More industry lists can go to the small program

--This article is about Zijin Mining.  

The Internet rumor of 3 tons of gold looted by drug cartels comes on the heels of   several armed conflicts at the mine

On November 14, a news about “Zijin Mining's gold mine in Colombia was plundered by drug cartels for 3.2 tons of gold in 2023, with a loss of about RMB 1.5 billion” hit the news.

According to the company's disclosure information, the gold mine in 2021-2023 production of 6.1 tons, 7.7 tons, 8.3 tons of gold, respectively, 2024 plans to produce 8.6 tons. The amount of gold lost in the online rumor accounted for 38.5% of the gold produced by the mine in 2023.

That night, Zijin Mining published an announcement on its official website to explain the situation. The company said that when it acquired the gold mine and rebuilt the site, it signed a security and defense agreement with the relevant Colombian government departments. The government stationed armed forces and police to combat illegal and violent mining activities and to guarantee the safety of mine construction, production and personnel.

However, since the second half of 2022, there has been a significant increase in illegal mining and violent attacks due to insufficient law enforcement and police presence on site. In response to the Colombian government's failure to provide comprehensive security protection for the project in accordance with its international treaty obligations, the Company has filed a request for arbitration with the International Center for Settlement of Investment Disputes (ICSID). As for the amount of losses rumored on the Internet, Zijin Mining said that due to the complexity of the site environment, the exact figures in the report still need to be verified.

The Vuritica gold mine in Colombia was acquired by Zijin Mining in 2020, and according to the 2023 annual report, Zijin Mining holds a 69.28% interest in the mine. In fact, the aforementioned gold mine has been the scene of continuous conflict. in May 2023, Zijin Mining published a statement on its official website condemning the bombing terrorist attack by a local illegal mining organization, and disclosed that the incident resulted in a total of two people from the outsourced security company and the labor company being killed, as well as 14 people being injured, including four local policemen.

When reporting on risk management at the operation site in the ESG report, the company had disclosed that a very small percentage of illegal mining activities may be accompanied by armed conflict, drugs, violence and other criminal acts, posing a threat to community security. However, in the face of security challenges in complex situations, the company has not been able to give specific risk management measures in its statements or reports, but has indicated that it will continue to inform local supervision of the situation in the mining area and condemn mining theft through various channels.

In line with this, the Company has placed the topic of “Human Rights and Security Practices” at the top of the ESG materiality matrix for several years. According to the 2023 ESG Report, the Company has 2,278 security personnel, of which approximately 65% are outsourced to third-party security companies.

Figure: 2023 Zijin Mining ESG Report Substantive Issues Matrix

Although at present, due to the complexity of the situation, it is difficult to curb armed conflict, mining theft and other security problems in local mining areas in a short period of time, Zijin Mining has always had clear principles for the protection of human rights in its security activities. The company requires security personnel to protect the personal and property safety of employees and communities in a lawful and minimal use of force manner, and regularly conducts relevant training for security personnel and mine police; for high-risk security projects, the company also requires security personnel to use technological security equipment such as cameras and drones, etc. In 2023, more than 99% of security personnel will have received human rights training.

In addition, Zijin Mining has fully considered the impact of illegal mining on the environment. The company said it has cooperated with local colleges and universities and environmental management units in Colombia to analyze and study the damage to the environment caused by disorderly mining and mercury abuse due to illegal artisanal and small-scale mining, and to carry out work such as filling the empty areas of the wells and restoring the surface environment. In the future, Zijin Mining will also support the collective formalization of small-scale and traditional miners to help them conduct mining activities legally and sustainably.

As Zijin Mining expands through overseas acquisitions, the company has established production operations in many locations around the world. However, as many of its mines are located in underdeveloped regions, the company must take more effective measures to address illegal mining, ensure the safety of its employees and security personnel, and improve its communication mechanisms with local communities.

Figure : Zijin Mining's 2022 ESG report describes offshore mineral layout

In the ESG report, Zijin Mining 2023 received a total of 396 community grievances, mainly related to the destruction of community property, environmental issues and migrant relocation. In the face of grievances, the company achieved 100% response as well as more than 98% resolution.

Figure : Volume of Community Grievances Disclosed in Zijin Mining's 2023 Report

2023 Several safety accidents caused workplace deaths Three-year safety  improvement initiative has been launched

In the ESG report, Zijin Mining stated that it has established its own safety management system and is conducting ongoing system certification at each mine and smelter. At the same time, the company has included contractors in the integrated management of safety production, and has carried out access reviews and process assessments of contractors' safety qualifications and on-site management.

However, several safety accidents still exposed the company's shortcomings in safety management. In February and April this year, the official website of the State Mine Safety Supervision Bureau separately notified a safety accident case involving Zijin Mining. According to public information, the two 2023 shaft fall accidents occurred in Lhasa, Tibet, and Longyan, Fujian, respectively, resulting in a total of nine people killed in the contracting unit and a direct economic loss of nearly 14 million dollars. In addition, there were other undisclosed production accidents in 2023 resulting in the work-related deaths of one owned employee and one employee of the contracting unit.

According to an in-depth investigation conducted by the regulatory authorities, Zijin Mining had a series of production safety management deficiencies, including negligent prior review of construction programs; inadequate maintenance of equipment; lax supervision of production operations and personnel training of outsourcing units; and irrational staffing of safety personnel, etc., as well as failure to report and rescue in a timely manner after the incidents.

The company had set a target in its ESG report for 2021 to obtain ISO 45001 (Occupational Health and Safety Management System) certification for all manufacturing operations by 2023, using 2020 as the baseline. However, this target has not been accomplished at present.

In addition, the number of hours of safety education and training for production personnel in 2023 has also declined in relative terms. According to Zijin Mining's disclosure, the per capita hours of safety education for employees on duty in 2023 will be 20.85 hours, down nearly 30% from 30.7 hours in 2022. The first disclosure of on-the-job contractor safety education also shows that the per capita hours of safety training for employees of construction outsourcing units is only about 80% of that of their own employees.

In the face of several safety accidents, Zijin Mining has for the first time placed “production safety” as one of the most important ESG substantive issues in its ESG report released this year. Specifically, the company has taken actions in the areas of responsibility assessment, organizational structure of production safety, and management system.

In terms of management responsibility, Zijin Mining's remuneration assessment program for executive directors and executives includes ESG indicators of no less than 20% of the annual incentive salary assessment, of which climate change, environmental pollution and production safety, as an important part of the company's ESG strategy, occupy a relatively high weighting. In terms of organizational structure, Zijin Mining has appointed an executive director and vice president to join the production safety committee to take charge of the specific work of production safety and occupational health, and has set up a safety management organization for mining and smelting units with full-time safety management personnel.

Source | Sohu Finance
Author | Wang Xiao Xiao