HOMEWORK #5: DESIGN A STRATEGY

It is time to evaluate your homework to this point. The following questions will help you make the assessment:

• Are we clear about our long term interests? What are they?
• What are the key trends in the mining industry – in the region, the country, and globally? Where are the sectors that are growing in the mining industry? What results are mining companies achieving?
• What benefits are we bringing to the table? What does the company need that we can provide?
• What benefits should this deal capture for us? What benefits will the mine create upstreamUpstream: the actual mining operations owned and controlled by a mining company. ? What downstreamDownstream: downstream business refer to suppliers of products and services such as exploration, production, processing, product development, technical services, marketing and sales that supply the mine but are not owned by the mine. opportunities will it create?
• How does the range of benefits that a deal could capture compare with our community vision? Does the opportunity serve our long-term interests?
• What are our community’s strengths and weaknesses? What can we handle, given our community’s current capacity and our members’ skills and experience? What other resources (government support, investmentInvestment: the purchase of a financial product or other item of value with an expectation of favourable future returns. Generally, “investment” means the deliberate use of money in order to make more money., or grants, for example) can we realistically expect to bring to this deal?

The 6 Steps of Strategy Design

To design an effective negotiating strategy, follow these six steps. Make sure you can answer each question clearly and in detail:

1. Decide which benefits you want to gain from the deal. What is the maximum you hope to gain? What is the minimum you can accept (your “bottom line”)? Outline the consequences for the community of these maximum and minimum objectives, were you to achieve them.
2. Write down the most important benefits a deal would bring to the mining company. Why will they be better-off after signing the deal then they were before? Be clear and honest about their interests. Put yourself in their shoes.
3. Describe in greater detail the benefits you want to negotiate as well as the protection (from environmental harm, for example). Might there be ways to “piggy-back” one of these benefits with others?
4. Consider very carefully how to “package” the benefits you and the other party want from the deal. You have to help the company’s representatives see that by agreeing to what you want, they will get what the company wants. What line of reasoning might achieve this? In other words, determine how both parties will win from a deal, and figure out how to express this as persuasively as possible. Sell benefits!
5. Decide how, in the event of an agreementAgreement: any explicit, signed document that is negotiated and includes mutual concessions or limitations placed on both sides. Examples are Negotiation AgreementsNegotiation Agreement: an early agreement in the mining process, likely to occur in the Exploration Stage, which would outline the basis of the relationship between the Aboriginal group and the mining company and how the relationship will evolve if the mine moves forward. , Exploration Cooperation Benefit Agreements, Socio-Economic Participation AgreementsSocio-Economic Participation Agreements (SEPAs): private, confidential contracts between Aboriginal communities and resource developers, like mining companies. SEPAs specify how the communities that will be affected by the development of a resource will also benefit from that development. Many SEPAs include terms about the employment and training of Aboriginal people, compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury). payments, protection of the environment, and profit-sharing. SEPAs are often called Impact Benefits Agreements (IBAs) and Cooperation Benefit Agreements (CBAs), and other names. The Aboriginal Mining Guide calls them all SEPAs.., you want to measure the delivery of benefits. What measures and targets will reassure the community that the company is truly holding up its end of the bargain? (See Measuring the Delivery of Benefits, below.)
6. Write an explanation of the importance of each of the major benefits or issues that you want to negotiate. You need to be able to express your position on these matters so clearly that the other party will understand you – even if they don’t agree.

You now have a strategy. Read Homework #6 (p. 4-25, below) in order to assemble a negotiating team that can carry out the strategy with confidence and competence.

Target a Wide Range of Benefits

To design an effective strategy, look for ways to exchange the benefits your community can offer for the widest range of benefits that the mine could possibly offer. Some key benefits to target may be those of value not only to your community, but to its neighbours and to non-Aboriginal companies.

For example, you may learn from the Bankable Feasibility StudyBankable Feasibility Study: a comprehensive analysis of a project's economics that banks and other financial institutions can use to make investment or lending decisions. that the mining company will need to build roads and bridges to the mine site. Building that infrastructureInfrastructure: the basic facilities, equipment, roads, transmission lines, sewage, water, and other installations needed to support the functioning of a mine. will create a variety of job and business opportunities that are a good fit with your community’s vision. Of course, the infrastructure will also have an impact on some of your traditional lands. What benefits can your community offer that will help the mine proceed and create these job and business opportunities? What benefits could you get in return?

Building that infrastructure will require environmental approvals. These approvals can be difficult and time-consuming to get. During negotiations, you might agree to make submissions supportive of the mine to regulators. In exchange, you might negotiate compensationCompensation: something (such as money) given or received as payment or reparation (as for a service or loss or injury). for the impact of the infrastructure on your land. You could also make your support conditional on receiving preference when contracts are awarded for certain downstream services – fuel hauling and road construction, perhaps. That negotiation strategy will target some important short-term benefits for community members.

But let’s take things a step further. To meet the business needs of a mining company, you must also consider the capacity of your community. How many community members and businesses are ready, willing, and able to take these jobs and bid on these contracts? Are training programs necessary to close gaps in trade skills and business management? Those programs may also be benefits to capture in the SEPA negotiation. Now your negotiation strategy targets a wider range of short-term benefits.

Still, even with the training programs, it may be unwise to assume that your community alone can meet all the mine’s needs in terms of those downstream services. So if you intend to target them for negotiation, start to scope out partners with whom you might share the opportunities. That preference in the award of downstream contracts would be a key benefit that you could offer to prospective Joint VentureJoint Venture: commonly, a business to which two or more parties contribute the essential land, capitalCapital: cash, property, equipment, services, and contracts or leases., and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.) partners, both Aboriginal and non-Aboriginal. In return, Joint VenturesJoint Venture: commonly, a business to which two or more parties contribute the essential land, capital, and services, in return for a share in its ownership and control. (Note: the Joint Venture is very strictly defined under Canadian law.) would become opportunities for your community to capture profits and management experience from the construction and operation of the mine. (See *Case Study #3: Brewery Creek Mine, p. Intro-30.)

Now your strategy aims to capture a very wide range of benefits, for others as well as for your community. A SEPA negotiated on this basis could be expected give your community capacity a solid boost over the long term.

Measuring the Delivery of Benefits

Prior to negotiations it is very important to decide how you will measure the delivery of benefits.

A mining company might be able to deliver benefits. Its track record may confirm a willingness to deliver them. So might its representatives during negotiations. They may even sign an agreement that says they will deliver. But in the years to come, how will the community know for sure that the company has come through? If you don’t determine in advance which results to measure, and targets for them to reach, you won’t really know how well the agreement is serving the community.

Quotas

Quotas are a common way to measure the results of agreements that are supposed to deliver jobs and business opportunities. For instance, you could negotiate for a quota (usually measured in percent) of the jobs a mine creates. You could then set a target of 20%, that is, 20% of the jobs must be filled by members of your community. That may be reasonable if enough of the community members have the skills and experience to help the company meet that quota. If they are too few, the quota would be unfair to the company. (Meeting it might also put the wrong kind of pressure on the community, too.) Instead, you may choose a more flexible measure and target. You may suggest that community members with the necessary qualifications get considered first during hiring.

Quotas, in short, place a responsibility on both parties to an agreement. Before you choose a quota for measuring results, figure out whether your community can deliver on it too.

In 1995, Makivik Corporation signed the Raglan Agreement with Falconbridge Ltd. (See *Case Study #2: Raglan Mine, p. Intro-10.) This agreement made commitments to create jobs for members of Inuit communities within a region of northern Quebec. It also established a trustTrust: a legal arrangement in which an individual (the trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries. fund that grows over the life of the mine. However, the agreement made no mention of how the implementationImplementation: the carrying out or execution of an agreement, decision, or plan. of these promises was to be measured. The mine’s workforce has never been more than 20% Inuit. Does that figure mean Falconbridge has kept its commitment to create jobs? Or that it has reneged on that commitment?

Likewise, Falconbridge provides information on the mine’s operations to the community and publishes an annual report on its environmental sustainability. But no targets have been set against which this performance can be compared.

Overall, the agreement’s success is due to the goodwill that has grown up between Makivik and Falconbridge. For some, this lack of performance measures gives the mine more flexibility, and helps it succeed. For most others, it is a serious weakness of the Raglan Agreement. How do you know if you’re approaching your destination if you haven’t said where exactly you want to go in the first place?

Other Considerations in Performance Measurement

Cut-and-dried performance measures and targets are not for everyone. Tracking such results will take time and skill. You will have to project the capacity you will require to monitor the implementation of the agreement, and the cost of hiring or building up that capacity if it is not already available.

Hard numbers also leave no room for error. Should your partner fail to achieve the results specified in the agreement, that should have consequences. These consequences should be written into the agreement, too.

And remember: what’s good for the goose is good for the gander. Just as you take performance measurement seriously, so might the mining company. It too will likely want the agreement to specify what benefits the community will deliver, and by when.