IFC backs Laos gold mine

8 May 2002

In February the International Finance Corporation, the private sector arm of the World Bank, approved a US$30 million loan to develop a gold mine at Sepon in Savannakhet province in Lao PDR. Questions have been raised about the mine’s impacts and whether the IFC‘s support is justified.

The mine is owned by Oxiana Resources and Rio Tinto, two foreign mining companies. They estimate that the gold deposits at Sepon are worth about US$1 billion. The companies have negotiated generous tax breaks from the Lao government. There are also no restraints on repatriation of money from the project. In return, the Lao government is to receive 2.5 per cent of the value of the ore mined (after subtraction of costs). The government also has an option to buy a 10 per cent share in the mine.

IFC hopes that its involvement in the Sepon gold mine will encourage further mining projects in Laos. Oxiana and Rio Tinto plan to use the profits from the gold mine to develop a US$100 million copper mine at nearby Khanong. Although this is described in project documents as Phase 2 of the operation, the IFC has approved its loan without studies of the combined impact of both mines.

Oxiana commissioned consultants to carry out an Environmental and Social Impact Assessment, completed last November. IFC describes the project’s environmental and social impact assessment as “detailed”, yet the consultants are very vague about the possibility of harming endangered species of fish in the Nam Kok River. The consultants merely report that “should these species actually occur”, the impacts could range from “severe” to “very minor”.

Waste earth will be dumped on villagers’ land, the water table is likely to fall, and cyanide will be used to extract gold from its ore. Forests, farmland and scrub will also be cleared to make way for the gold mine which will cover 27.6 square kilometres. Two villages will be moved and land in other villages may be affected. The project’s Resettlement Action Plan acknowledges that in these villages, “relocation might eventually be necessary” and adds that “one other village, not currently listed for relocation, Ban Vieng (25 households), may require relocation.”

Rio Tinto has a record of human rights violations and of causing damage to communities and their environments. IFC‘s support primarily benefits the companies developing the project, Rio Tinto and Oxiana, while putting local communities’ livelihoods and environment at risk.

Extracted from a longer article by Chris Lang for the World Rainforest Movement Bulletin

Profiling Problem Projects: Making the Case for Change at the International Finance Corporation