Decisions about mine design and development are often made on the basis of engineering feasibility and cost, with the wider impacts typically being ‘mitigated’ later in the design process. The intangible implications for the business (e.g. reputation) are often not taken into account.
In this example, the mining company is developing a new mine design, and wants a balanced view on the wider long-term impacts of the access road options. Proactively understanding and comparing the long-term impacts of widening and repairing the existing access road or building a new access road will help the company make informed decisions and mitigate and manage stakeholder challenges on granting approval for the mine design. Since these external impacts affect the mining company’s ability to obtain and maintain its ‘social license to operate’, this is also the first step towards understanding the resultant internal costs and benefits for the business, for example, in terms of brand value, reputation and ultimately the bottom line.
TIMM can be used to value not only the business financial performance, but also the wider social, tax, economic and environmental implications. The TIMM wheel provides a simplified analysis of the results of the TIMM analysis for the two options. The inner circle shows the Financial Performance in terms of total upfront capital costs and ongoing expenditure, and overall net present value (NPV) for the road over the life of mine. Each bar represents a positive (green) or negative (red) impact. These different impacts can now be compared and aggregated.
Trade-off: Do the savings from fuel costs and the shorter journey times in Option 2 justify the higher upfront capital costs?
Trade-off: Are the environmental impacts in Option 1 greater or less than the impacts on biodiversity in Option 2?
Trade-off: Which Option will deliver greater economic benefits both during construction and after completion?
Trade-off: In both Options 1 and 2, how do the social benefits that the road upgrade/construction weigh against the health risks and disruption caused?
Trade-off: Taxes payable are likely to be higher for Option 2.
In this hypothetical example, in the absence of total impact thinking, the decision would have been made largely using financial analysis with some qualitative overlays.
TIMM brings a new perspective. Using TIMM to put a value on the qualitative overlays, the total impact of each decision is clear and the many trade-offs between Options 1 and 2 can be identified in a holistic manner:
TIMM may not be able to provide the empirical answer, but gives management significantly more insight into how mining operations impact external stakeholders so that decision-making can be undertaken on a more informed basis. These external impacts affect the mining company’s ability to obtain and maintain its “social licence to operate”, which is vital to the success of the mine. Quantifying external costs and benefits is the first step towards understanding the resultant internal costs and benefits for the business, for example, in terms of brand value, reputation and ultimately the bottom line.