Thank you, Mr. Chairman. I have a prepared statement before the Q and A.
I'd like to thank the House of Commons Subcommittee on International Human Rights for hosting this hearing and for your interest in learning more about Nevsun Resources Ltd. and our work on the Bisha mine in Eritrea, our only mining operation. We're very conscious of the responsibility we bear, not only to Eritrea but also to Canada.
As you have heard from other speakers, Eritrea is an underdeveloped country. It presents a challenging environment for a Canadian company, especially a small company like Nevsun. Challenges notwithstanding, Nevsun is unequivocally committed to responsible operations and practices at the Bisha mine, based on international standards of safety, governance, and human rights. All who work at Bisha are there of their own free will. Nevsun does not condone or permit the use of military conscripts at the Bisha mine.
We believe Canadians can be proud of the work we have done in Eritrea. Nevsun has been a positive force for Eritreans, both economically and socially. The mine offers a safe and supportive working environment, with training, opportunities for advancement, and higher wages and benefits than most other types of employment available in Eritrea.
The owner of the mine is Bisha Mining Share Company—an Eritrean venture that I will refer to as BMSC, to distinguish it from the mine itself. Nevsun owns 60% of BMSC and the Government of Eritrea owns the remaining 40%. That means Nevsun must take into account the views of the Eritrean government in terms of its political sovereignty and as our business partner.
Bisha commenced production as a gold mine in early 2011, and we expect it to continue producing gold until early 2013, when the gold reserves will be exhausted. The mine is now transitioning for copper production, which we expect will start in mid 2013 and continue for at least 11 years.
Over the life of the mine, remittances to Eritrea are likely to exceed $1 billion. In addition, Bisha will contribute hundreds of millions of dollars to the economy of Eritrea through salaries, wages, benefits, local supply chain purchases, and community assistance.
We adopted the International Finance Corporation’s, or IFC's, social and environmental performance standards of April 2006 and developed our mine management plans accordingly. Our commitment encompasses the local community, public health and safety, an emphasis on local purchasing, and responsible environmental practices, amongst other things. Our social responsibility programs and contribution to Eritrea are described in detail in our 2011 CSR report, which has been filed with your committee and I invite you to review, if you haven’t already done so.
I would now like to turn to employment and human rights at Bisha. There are currently approximately 1,350 people working at the site, of which 1,194, or 88%, are Eritrean nationals. This reflects our deliberate policy to provide the greatest possible economic and social benefits to the people of Eritrea.
BMSC directly employs the most Eritreans, at 864. Our South African contractor, SENET, employs a further 200 employees. Their pay is far above Eritrean standards. They have free medical care and unlimited amounts of free food at the mine. Those who live in the five nearby communities have free transportation to and from home, while those who live farther away have free accommodation at the mine.
These 1,064 Eritreans, along with approximately 160 expatriates employed by BMSC or SENET, manage and operate the mine, provide the many services required by a mine, and oversee ongoing mine development.
We are not aware of any concerns by human rights organizations regarding these employees. To the extent that there has been controversy at Bisha, it has involved a third group, those employed by an Eritrean subcontractor that BMSC has been required by government to use for certain construction projects since 2008.
During the year 2010, the peak year for employment by this subcontractor, it had an average of 440 personnel at Bisha, or 34%, of the Bisha project workforce at that time. For most of 2011, there were no employees of this subcontractor on site.
In the first quarter of 2012, some subcontractor employees began returning to Bisha for the copper development phase. The current level of 130 is what we believe will be the peak for the copper project. That's approximately 11% of the Eritreans and 10% of the total workforce at Bisha.
In the first quarter of 2013, or in the next few months, after the subcontractor's work is completed, all subcontractor employees will leave Bisha.
BMSC is cognizant of the recommendations given by international human rights organizations and their specific allegations that this subcontractor makes use of conscripts. We have taken all appropriate steps to ensure that this is not true of staff used at Bisha.
BMSC established a rigorous process during the gold construction phase to ascertain that all staff were working of their own free will. The process involves a careful inspection of military demobilization documents and state-issued identification papers, supplemented by internal audit after the presentation of these documents. The penalty for non-compliance with the documentation policy is employment dismissal.
In January 2012, which coincidentally is when the subcontractor's employees began arriving at the mine for the copper phase, BMSC added a requirement that all personnel working at the mine carry photo ID to access the mine site. The identification cards are issued once the appropriate demobilizations have been presented. Among other things, the photo ID helps ensure that there will be no switch of personnel after the presentation of demobilization documentation. BMSC conducts random on-site spot checks to ensure that the individuals at Bisha have ID cards, and that the individuals are indeed the rightful holders of the cards.
In the second quarter of 2010, early in the peak period of subcontractor employment at Bisha, BMSC also conducted an investigation of the living conditions at the subcontractor's camp. The results of the investigation indicated that residential conditions were substandard and that food inventories were low.
As a result, BMSC launched a complaint with the subcontractor's senior management. BMSC asked the subcontractor to improve housing conditions, and it did so. In addition, BMSC began providing food directly to the subcontractor camp at no cost to the contractor or its employees.
I should note that the subcontractor's employees also have access to free medical care at a BMSC-supported medical clinic located at the mine site.
We're aware that for 2012 the subcontractor has now established its residential camp at a different location from the one used in 2010. The current location is one that was formerly used by a North American exploration company. It's reasonably modern and was developed to North American standards.
Further, since January 2012 BMSC has provided the subcontractor's employees a hot midday meal at the mine site. The meal consists of an unlimited amount of food at no charge to the employees or the contractor.
With such measures, along with our policy of prohibiting conscripts, we have attempted to address our human rights obligations to the employees of our subcontractor.
Nevsun has only a limited ability to influence and control events in Eritrea, but neither are we without influence so long as we exercise it judiciously. We are practising the tried and true Canadian approach of quiet diplomacy. It is our policy that Nevsun at all times conduct itself in a forthright manner with the Eritrean government, and we intend to continue to do so while respecting the government's sovereign rights.
In summary, in this presentation I've described the valuable work that Nevsun performs in Eritrea and our unequivocal commitment to responsible operations and practices in Bisha, based on international standards of safety, governance, and human rights. I have reviewed BMSC's human rights practices and policies, which prohibit the use of military conscripts for labour at the mine. I've described BMSC's strict enforcement of that policy, especially as it pertains to the Eritrean subcontractor that the government requires BMSC to use. I have described the effort that BMSC took in 2010 to understand and improve the conditions faced by that subcontractor's employees.
I can assure you that Nevsun will continue to use whatever influence we have as a positive force for the people of Eritrea, both economically and socially. We will do so by working cooperatively with the Government of Eritrea and respecting the sovereignty of that government.
We believe our influence is best exercised by demonstrating in a non-confrontational manner that positive change is in Eritrea's best interest.
That concludes my presentation. Thank you for your attention. I welcome your questions.
