Development Banks and Green Mining – Focus on Artisanal and Small Scale Mining

Len LaVardera

Finpro Stamford, CT USA

May 8th 2014

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Development Banks and Green Mining

Development Banks, the World Bank (WB) and InterAmerican Development Bank (IDB) in particular, are significant players in the mining sector in developing countries.

The overall volume of WBG Extractive Industries financing in FY2012 was US $695.5 million. Inter-American Development Bank (IDB), which is the biggest development financier in the Latin America and Caribben, recently restarted it’s mining sector financing in the region.

For over 20 years the WB has been instrumental in providing technical assistance to countries in Latin America, Africa, and Eastern Europe, East Asia and the Pacific, and Central Asia to help reform mining sectors.

However, since the mid-1990s, the need to improve the environmental performance of the sector became an essential part of the reform effort.

Source: The World Bank Group In Extractive Industries 2012 Annual Review

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Focus on Artisanal and Small Scale Mining (ASM)

An estimated 20 million people in more than 80 countries around the world make up the artisanal and small-scale mining (ASM) workforce. Over 100 million are dependent on the sector for their livelihood.

ASM production accounts for 80% of global gemstones, 20% of gold mining and up to 20% of diamond mining. Widespread in developing countries in Africa, Asia, Oceania, and Central and South America.

The focus of WB support has been to formalize the sector and to improve livelihoods and enhance its productivity and environmental performance.

ASM is visible both in the WB and IDB mining sector agendas. The environmental sustainability of mining has become increasingly more important.

On a global scale, ASM of gold production presents the biggest environmental challenge due to mercury use.

Source: Communities and Small Scale Mining: An Integrated Review For Development Planning; World Bank 2005

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Communities and Small-Scale Mining Initiative (CASM)In response to the need for a coordinated approach towards ASM, the WB established a Communities and Small-Scale Mining Initiative (CASM). CASM aims to reduce poverty by building sustainable communities in those countries where ASM is an important economic.

CASM’s strategy to achieve this goal is based on four pillars:

Better governance and formalization of the sector

Initiatives to enhance environmental and technical

performance, and socio-economic development

Network building for more effective partnerships

Knowledge development and best practice sharing

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Distribution of ASM Activities around the World

Source: Communities and Small Scale Mining: An Integrated Review For Development Planning; www.casmsite.org

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The Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) is a global coalition of governments, companies and civil society working together to improve openness and accountable management of revenues from natural resources. As of March 2014, there were 44 countries implementing, or in the implementation process of the EITI standard requiring full disclosure of government revenues from their extractives industries.

The WB supports the initiative through:

administration of the EITI Multi-Donor Trust Fund (MDTF) that provides support to governments to implement EITI; (Finland is a MDTF donor)

support to civil society to enable effective participation in the multi-stakeholder process;

global knowledge work, including assistance to the EITI Secretariat in its coordination function and serving as an observer on the EITI Board.

By end FY13, the facility had established partnerships with four supporting countries and had financing commitments totaling US $26 million.

As more countries attain EITI-compliant status, WB/MDTF technical assistance and funding are shifting to support broader areas of EI governance.

Source: http://eiti.org/eiti

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Environmental Impacts of Small Scale MiningThe impacts of small scale mining on the environment varies according to geographical setting and methods of mining used. Risks involved include:

- deforestation and the discharge of mine tailings into natural waters

- destruction of vegetation and top soil exposure

- soil erosion

- river/water pollution through the use of mercury and discharge of particulate matter

- acid mine drainage

- mercury vapor and clouds of dust emissions and the emission of harmful chemicals

Environmental degradation is severe when thousands of miners are spread throughout the country.

Threats posed by these environmental destructions include:

- loss of biodiversity and extinction of unique and endangered species.

- excessive and unnecessary clearance of vegetation without revegetating the land results in high occurrences of soil

erosion, landslides and destruction of public infrastructure

- pollution of rivers by mercury and sedimentation threatening fisheries downstream

- river diversions to recover alluvial gold destroy low lying villages and roads

- forest destruction and emissions of dust are also contributing factors to global warming

- mercury and other chemical spillages may contaminate ground water that most people around mining

communities depend on.

Source: World Bank, IADB

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Inter American Development Bank – ASM Mining

IDB provides loans to Government’s for R&D and technology cooperation. The investments are typically seed funds for public and private economic development

Loans for assessment and execution are overseen by IDB and Gov’t along with the regional offices, aimed primarily at improving mining governance.

Bank can contract with companies or experts to provide advice to Gov’ts for assessing new technology or other requirements in identifying, evaluating and developing mineral resources.

Gov’ts want the bank to be more involved for improving mining governance as it relates to royalties and transparency.

How to improve efficiency up the value chain is key, i.e. water use, energy efficiency, reprocessing of mine tailings…How to incentivize technology and introduce value?

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ASM Mining – What is Needed Today? Technology

- mercury abatement; what alternatives can be used?

- smaller mining equipment to improve efficiency and productivity across the value chain

- technical support and equipment for appropriate and effective comminution techniques

- detection equipment

- exploratory equipment

- engineering and technical expertise for dam and collective tailings impoundment design

- user friendly data management tools for Banks for inspection reports & planning services for local Gov’ts

- updated geological data & services for both Gov’ts and miners to prevent unnecessary destruction of land

- training for the revegetation of ASM sites

Health Issues

- diesel is a health issue; clean alternative energy systems are needed.

- ventilation equipment

- water pumps and containment equipment

- waste management solutions - in conjunction with clear advantages

- training of ASM miners, doctors and village officials in health issues and mercury alternatives

Safety Issues (from operational side)

- training and education regarding the use of technology for more efficient mining practices

- a sustained, on-the-ground effort to address the occupational health and safety challenges in ASM

- reduction in the use of mercury through improvements in technical processes -the use of retorts (mercury recycling

technologies )

- safety “gear”

- risk prevention training

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ASM Mining – What is Needed? (cont’d) Socio-economic Impacts

- Up the value chain opportunities with respect to gemstones and precious metals – jewelry making or bricks from artisanally

mined clays

- Gender mainstreaming including legislation, policies or programs. Developing clear targets and mechanisms for measuring

progress

- Implementing programs to train women in various aspects of mining, as well as in marketing, management and bookkeeping

- Development of national and local public policy dealing with child labor

- Community development and poverty reduction and support in integrated sustainable development

Source: World Bank, IADB

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Where are the ASM Opportunities?

Geographically, the portfolio of activities spans the globe (Latin America, Africa, and South Asia). Moving forward, African countries will remain a source of demand for advisory services, but the team will work towards a more diversified country portfolio.

Active country-level grants include: Colombia, Guinea, Kenya, Kyrgyz Republic, Liberia, Mauritania, Mozambique, Pakistan, Seychelles, and Sierra Leone (total commitment amount US $5.8 million).

The pipeline of 11 potential projects includes Republic of Congo, Guatemala, Guinea, Haiti, India Orissa State, India Federal, Lesotho, Mauritania, Morocco, Pakistan, and Peru (total value US$5.0 million). Projects in Cote d’Ivoire, DRC, Guinea Bissau, Mongolia, and Togo are also under discussion.

It is important to recognize that the borrowing country is responsible for managing the implementation of the project. As a result, the borrowing country, not the World Bank, is responsible for buying or “procuring” goods and civil works and selection consultants. The Implementing Agency that was established during project preparation is the main point of contact for companies on procurement matters.

Source: Extractive Industries Technical Advisory Facility Annual Report 2013

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ASM Disbursment of Funds

EI-TAF Disbursements, FY10-13 (US$ ‘000)

Source: Extractive Industries Technical Advisory Facility Annual Report 2013

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Where are the ASM Opportunities?Extractive Industries Technical Advisory Facility (EI-TAF) Potential Pipeline

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Where are the ASM Opportunities? (cont’d)

Extractive Industries Technical Advisory Facility (EI-TAF) Potential Pipeline

Source: Extractive Industries Technical Advisory Facility Annual Report 2013

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What Do Finnish Companies Need to Do? In an effort to expedite the deployment of advisers, the WB put together a consultant roster on which EI-TAF recipient

countries can draw. This roster is used to provide governments with vetted long or shortlists of consultants that fit the profile of the type of assistance sought.

 

Going forward, the EI-TAF proposes creating a mechanism whereby a group of pre-qualified consultants will be contracted through the Bank under a retainer-type arrangement. These arrangements will be particularly relevant in Bank-executed projects, allowing task managers to rapidly deploy experts on a short-term basis.

Finnish consultants/companies should begin by accessing the public sector in countries where there are potential projects. Companies can make presentations to the Ministry of Industry and Mines (or other appropriate agency) in specific countries regarding their technical expertise.

Consultants/companies should also register with the WB for potential procurement opportunities at the WB’s eConsultant2 website : http://siteresources.worldbank.org/EPROCUREMENT/Resources/eConsultant2_Firm_Experience.pdf ; Vendors can also follow WB project advertisements and search mining projects at:.

http://search.worldbank.org/projects?qterm=artisanal+mining&projname=&id=

Finnish companies should also participate in WB conferences, and fairs . They can also make arrangements to present and demonstrate innovative technologies directly with the Bank at specific times.

World Bank Procurement Policies and Procedures http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/PROCUREMENT/0,,contentMDK:50002392~menuPK:93977~pagePK:84269~piPK:60001558~theSitePK:84266,00.html

Inter-American Development bank projects can be found at: http://www.iadb.org/en/projects/projects,1229.html

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Thank You

Len La Vardera

Sr. Consultant

Finpro USA

Email: leonard.lavardera@finpro.fi

Tel: +1 203 524 2050