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Environment

News

Unearthing the IFC’s links to mining abuses

3 October 2012

As mining projects in South Africa and Peru face violent opposition, critics are questioning the International Finance Corporation’s (IFC) stakes in the companies at the centre of the controversies. IFC funds for mines in Mongolia and Guinea have also caused alarm, prompting renewed interest in the recommendations of the Extractive Industries Review (see Update 38).

The South African platinum mine in Marikana at the centre of violent protests and strikes by miners in August is operated by London-based company Lonmin, which in 2007 received a $100 million loan and $50 million in equity investment from the IFC, the World Bank’s private sector arm, to “help to fund the company’s expansion and community development plans”. Strikes first erupted last year over pay and living conditions for mine workers. The conflict intensified this summer, and led to clashes in mid August, when police opened fire on protesters and over 40 people were shot dead. The shooting attracted international attention to the condition of mine workers, and prompted the spread of strikes to dozens of other mines in South Africa.

A few days later the IFC said in a statement: “The issues are serious and IFC encourages all parties to resolve the dispute through constructive dialogue and negotiation,” without mention of its performance standards or any intention to review Lonmin’s compliance with them.

An investigation by NGO Centre for Study of Violence and Reconciliation (CSVR) was conducted after the Marikana shooting, because, according to CSVR researcher Jasmina Brankovic, “the dominant commentary on the massacre in South Africa has not dealt with Lonmin’s responsibility.” CSVR’s draft report was tabled at an end August meeting with the South African Human Rights Commission, which has launched its own investigation into the incident. Brankovic said “While Lonmin signed an agreement in 2007 with the IFC to develop the local community, interviewees said they saw few benefits or changes and did not perceive how Lonmin is contributing to the sustainability of the community, especially with a view to the mine’s limited lifespan. While the IFC’s interventions may have benefited medium-sized or small businesses that have contracts with the mine, as well as small numbers of other beneficiaries, a visit to Marikana and the comments of miners in the wake of the massacre suggest that its reach has been limited. It also appears that Lonmin has not met its obligations under the [South African] Mining Charter.”

An early August report into platinum mines by Bench Marks Foundation, a Johannesburg-based NGO that monitors corporate performance, detailed Lonmin’s failures in Marikana relating to worker safety, intimidation of striking workers, poor planning and execution of community development projects, and strong-arm tactics in acquiring land from local farmers. In terms of environmental impacts, the report found that “the situation seems even worse than more than five years ago. With the expansion, more and more slime dams are being built adjacent to the farmers, and even on their properties. This situation has of course an influence on the quality of surface water. Regarding water responsibility, it just seems as if mining companies are passing the buck.”

Aside from wages, Bench Marks said one of the primary causes of unrest has been living conditions. The report found that “the residential conditions under which Lonmin and other mine company employees live are appalling,” with a lack of electricity, and, in one workers’ township, “broken down drainage systems spilling directly into the river at three different points.” Despite five years of complaints by residents, no action had been taken and the report “found that children showed symptoms of chronic illnesses associated with such spills.”

The report concluded: “What struck the research team after having dealt with the farming communities is that not much has changed since the 2004/5 investigation in the area. Even more alarming, is the huge amounts being reflected by companies for corporate social investment and [corporate social responsibility]; unfortunately, very little of that expenditure could be picked up from this survey.” It finished with the statement “corporate citizenship and sustainability are currently still illusions on a far horizon.”

Indiana University-based researcher Alex Lichtenstein commented: “In retrospect, it is hard to avoid the suspicion that Lonmin secured a major infusion of capital from the IFC five years ago by pimping its vastly overstated claim to corporate social responsibility. Indeed, the poverty of North West Province, historically abetted by a system of apartheid designed to insure cheap mine labor, by 2007 represented another investment opportunity for the nimble forces of global capital that had impoverished the region in the first place.”

More violence in Peru

In a similar case, violent opposition to the development of a new gold mine by Minera Yanacocha, a Peruvian venture majority-owned by US multinational Newmont Mining and in which the IFC has a 5 per cent stake (see Update 79), led to five deaths after police and protesters clashed in July. A late August poll showed that the Congas mine development, in the northern Peruvian state of Cajamarca, is opposed by 78 per cent of the state’s residents. The IFC’s equity stake relates to the 1999 development of a still-operational gold mine in the same area. The IFC has retained the stake despite the project being listed as “concluded”. To quell the protests, the Peruvian national government instituted a 60 day state of emergency in July. The IFC has made no public comment on the company or the allegations that the mine expansion would contaminate local water supplies and be detrimental to local agriculture.

Another IFC-funded Peruvian mining project is the subject of a complaint filed in November 2011 with the IFC’s accountability mechanism, the Compliance Advisor/Ombudsman (CAO). The Quellaveco mine in southern Peru, majority owned by multinational Anglo American, received an IFC equity investment for a 20 per cent stake in 1993. The mine is still in the pre-construction stage. The complaint to the CAO alleged that land was acquired without the consent of landowners, toxic waste from the project had a negative impact on local communities, and water quality and availability was degraded. Despite the IFC selling off its stake in the project in February 2012, the CAO will conduct an appraisal of the IFC’s compliance with its environmental and social policies.

New mine concerns

The IFC investment in a mine in Colombia was criticised by local NGO network Comité por la Defensa del Agua y el Páramo de Santurbán, which filed a case with the CAO in June alleging that the IFC’s nearly $20 million investment in the project, operated by Canadian miner Greystar, was in violation of a number of IFC safeguard policies. The complaint stated that “there is evidence that significant, irreversible, adverse social and environmental impacts could occur in the future” because the area to be mined is “essential to supplying fresh water for at least two million persons, and to mitigating climate change. Furthermore, the project would cause serious local socio-economic impacts and irreversible loss of key ecosystems for biodiversity and climate change mitigation and adaptation.” The group argues that “the IFC was also remiss in its due diligence and failed to ensure that the client fulfilled performance standards 1, 4 and 6, since the project is not in compliance with Colombia’s constitution and environmental and mining laws, the impact assessment is inadequate and incomplete, the project is located in a critical ecosystem, and the IFC failed to ensure that the client had really identified the affected community and included in its review process the cumulative impacts that a mining district would have on the project area.”

Moreover, a proposed IFC loan to the Oyu Tolgoi mine in the South Gobi desert in Mongolia is being challenged, particularly over the availability of water resources for local inhabitants and the destruction of pastureland for local herders. Oyu Tolgoi is expected to be the second largest copper mine in the world. In early November the IFC board will discuss up to $900 million in loans to the copper and gold mine, which is two-thirds owned by Canada-based mining company Turquoise Hill Resources, previously known as Ivanhoe. Mining multinational Rio Tinto owns a controlling stake in Turquoise Hill. The Multilateral Investment Guarantee Agency (MIGA), the Bank’s political risk insurance arm, is considering a guarantee worth $1 billion to the private banks financing the project. The environmental and social impact assessment (ESIA) was not released until late August, despite Turquoise Hill advertising to investors: “First delivery of ore to primary crusher in July 2012″ and “overall phase one construction topped 97 per cent at end of August 2012″.

According to Sukhgerel Dugersuren of Mongolian NGO OT Watch, an organisation working with local herders, the lack of information in the ESIA about the true impacts of the project is made worse because “Rio Tinto has not organised meaningful, participatory, and culturally appropriate public consultations with the affected herders. Although Rio Tinto organised one meeting on the ESIA in Khanbogd, it was deeply flawed and inaccessible. Notice was given only two days before the meeting, making it impossible for many affected herders to attend, given that they live between 20 and 60 kilometers from Khanbogd. Additionally, only two copies of the Mongolian translation of the ESIA were provided during the meeting, thus those attending were not able to review the document before the meeting. Instead of organising further meetings, Rio Tinto intends to speak with affected herders individually. This tactic of talking to herders one-on-one tends to intimidate them, making it unlikely that they will raise their concerns about the project.”

Rio Tinto is also the major force behind the Simandou Iron Ore project in Guinea along with Chinese mining firm Chinalco. The IFC made its third investment in the project in late June, providing another $150 million. It had invested $5 million in 2006 to finance feasibility studies and a further $30 million in 2007, resulting in a 5 per cent stake in the project. It is estimated to be the largest ever private sector investment in Africa. The IFC views its role as “to provide significant input regarding the assessment of environmental risks, especially those regarding bio-diversity”, but the decision to invest in a further rights issuance in June was taken before the completion of environment and social impact assessments. The US government refused to back the loan, issuing the following statement: “given that the large scope and timeline for investment triggered a reclassification of the project from Category B to Category A, and because the project site is – by the project team’s own definition – a ‘bio-diversity hotspot,’ the United States believes investors as well as Guinean authorities should have agreed to wait for the [environmental and social impact] assessments to be completed and posted before proceeding with the investment plan.”

Alhassan Atta-Quayson of Ghana-based NGO Third World Network Africa, said: “The African mines supported by the IFC, from Guinea to South Africa, show the IFC’s complicity in the sub-optimal exploitation of Africa’s natural resources and the escalation of conflicts. The least we expect from the IFC is a return to the recommendations of the Extractive Industries Review and the divestment from these projects.”