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Zijin Mining

Improvements on environmental and social factors

Home / Hermes EOS Case Studies / Zijin Mining

Background
Zijin Mining is engaged in the exploration, mining, processing, refining, production and sale of gold and other non-ferrous metals. In 2010, one of the company’s subsidiaries leaked waste water containing acid copper into a river in China, which significantly damaged the local ecosystem and resulted in large fines. In the same year, China Daily, a local newspaper, reported that a dam at the company’s tin mine collapsed and killed 22 people. The company also suffered an industrial accident in 2012 because of a violation of its work procedures, resulting in the death of three workers.

Zijin has long faced criticism from investors and researchers1 over a lack of transparency in relation to its environmental accidents and health and safety violations, as well as its slow response to engaging with the public on related enquiries2. International investors also challenged the company’s investment in the Rio Blanco mine in Peru and its antagonistic relationships with communities that live close to its overseas operations.

What we did
In our engagement, we urged the company to increase the resources it dedicates to environmental protection, to disclose the relevant environmental measures once put in place and to provide onsite training to improve the safety awareness of its staff and contractors. We recommended changes to the process that ensures compliance with operating procedures and the appointment of an independent non-executive director with an international background and sustainability experience in the sector. We put the company in contact with a human rights organisation that is introducing extractive companies to global best practice on labour and human rights. We also recommended that the company leverages local expertise when conducting bottom-up social and environmental impact assessments.

Results
Since the 2010 accidents, the company has invested over CNY800 million ($126 million) in its environmental management system at the Zijinshan copper mine alone. Zijin Mining has also set up an environmental and safety committee, a department of environmental preservation and safety, as well as a social responsibility department for significant projects, all with board level oversight. All projects are subject to operational audits, which are chosen at random to reduce sample biases.

With regard to the health and safety for its workers, targets have been set at zero casualties. Since the industrial accident in 2012, there have not been any reported fatalities or other safety related accidents. All staff moving overseas are trained in health and safety, whistleblowing and anti-bribery and corruption measures prior to their relocation. In Peru, the company moved its head office from Lima to Piura where staff live among the local community to aid integration. In January 2016, it appointed a new project head who has engaged a local organisation to assist the company in managing community relations.

In relation to the disclosure of its labour practices, the company now reports on ethnic and gender diversity in its employment across the group and staff training on health and safety. It has also introduced a 360-degree feedback system to enhance the fairness, transparency and objectivity of staff performance assessments.

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  1. 1 According to independent research firm Sustainalytics. Through conversations with other asset owners, including a large Dutch pension fund, we understand that many institutional investors find the company difficult to reach out to.
  2. 2 As noted in the government website in Footnote 2, “The Zijin Mining Group … delayed public announcement of this grievous incident for a period of nine days.”
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Christine Chow Dr Christine Chow is responsible for the financial services, technology and extractive sectors in Asia ex-Japan. She has 19 years of experience in portfolio management, research and investment consulting. Christine's PhD thesis on shareholder engagement for responsible investment was short-listed for a UN award in Sweden for industry relevance and academic excellence. She is an adjunct associate professor in the Department of Finance at the Hong Kong University of Science and Technology. She is a governor of the London School of Economics and a member of the university’s investment committee. She was also a member of the greater China committee of the Hong Kong Retirement Funds Association between 2014-2016. Christine has worked at a number of multinational corporations such as Merrill Lynch, Schroders and Hewitt. In the 1990s, she was responsible for establishing strategic partnerships in fund management for the Schroders Group, especially in Mainland China. Christine is a graduate of the London School of Economics and the University of Melbourne. She also completed an executive education course on financial engineering at Stanford University.
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Engagement objectives:

Environmental: Environmental risk management
Social & ethical: Human rights