Mining and Human Rights in Guatemala

Concordia University

Montreal

June 1, 2005

Table of ContentsTable of Contents

I. IFC and the World Bank Group

II. Background on the Marlin Gold Project

III. Why IFC Supported the Marlin Project

IV. What the Company Has Done

V. Government’s Approach to Mining

VI. World Bank Group Action Plan

International Bank for Reconstruction and Development International Development Association

• Lending and support for Governments

International Finance Corporation

• Lending and investments for private sector projects

Multilateral Guarantee Insurance Association

• Political risk guarantees for private sector projects

International Center for the Settlement of Investment Disputes

The World Bank Group – Four InstitutionsThe World Bank Group – Four Institutions

International Finance CorporationInternational Finance Corporation

Part of the World Bank Group. Set up in 1956: 50 years old next year.

Net Worth of over $6 Billion

Mission: Promote Sustainable Private Sector Investment in Developing Countries to Reduce Poverty and Improve People’s Lives

Operates commercially - profitable every year since 1956

AAA Rating allows IFC to offer competitive financing to its clients

Syndicates finance (B loans) and mobilises co-finance from commercial banks, other financial institutions

Provides loans, equity, quasi-equity and technical assistance

Strong focus on poverty reduction and sustainability on all projects

Joint World Bank-IFC Global Mining GroupJoint World Bank-IFC Global Mining Group

World Bank Mining Policy Division

Works with Governments to facilitate Investor-friendly economy Reformation and modernization of

mining Sector Privatization of state-owned assets Community relations & equitable rent

sharing

IFC Mining Investment DivisionWorks with Private Companies to ensure

Sound economic fundamentals Sufficient funding and financial strength Environmental rigor Sensitivity to the community

World Bank Global Mining Group

Some IFC mining deals in Frontier CountriesSome IFC mining deals in Frontier Countries

SADIOLASADIOLAAuAu

MALIMALI

US$ 39.8 millionUS$ 39.8 million19951995

MARLINMARLINAuAu

GUATEMALAGUATEMALA

US$ 45 million US$ 45 million 20042004

KOLWEZIKOLWEZICu & CoCu & Co

DRCDRC

Board ApprovalBoard Approval20052005

KOMIKOMIAlAl

RUSSIARUSSIA

US$ 75 millionUS$ 75 million20042004

MOZAL I & IIMOZAL I & IIAlAl

MOZAMBIQUEMOZAMBIQUE

US$ 145 MillionUS$ 145 Million1997 & 2001 1997 & 2001

ZERAVSHANZERAVSHANAuAu

TAJIKISTANTAJIKISTAN

US$ 7.5 millionUS$ 7.5 million19971997

The LandThe Land

BackgroundBackground

1954-1996: Protracted, bitter civil war.

1996: -- Peace Accords. Government program to encourageinvestment: including reduction of mining royalty on gross revenues from 6% to 1% (on low side but reasonable compared to other countries; must look at entire tax package including income tax).

-- ILO 169 ratified by Guatemala (effective in 1997).

1998: Marlin deposit discovered.

1999: Previous owner initiated discussions with communities and local governments. Land acquisition started.

2000: Initial exploratory drilling started.

2002: Glamis Gold acquires Montana.

2003: Extensive consultations.

Background (continued)Background (continued)

Aug 2003: Local disclosure of ESIA by Company.

Sept 2003: IFC starts appraisal.

Jan. 2004: President Berger elected. March 24, 2004: IFC discloses ESIA. June 3, 2004: IFC Board approval. IFC loan for $45 million. December 3- 4, 2004: Government holds Mining

Conference to promote stakeholder dialogue. Sponsored by WBG, Canadian government and local NGOs.

2004-2005: Various Bank / IFC missions meet with government, Catholic Church

and local communities.

Why IFC Supported the Marlin ProjectWhy IFC Supported the Marlin Project

Mining with sustainable development can be a key to poverty reduction, but all risks and issues must be evaluated.

Glamis and Montana had demonstrated their commitment to sustainable development (including social and environmental issues).

Impressive consultation and community development work already had been done.

Employment generation, including opportunities for local suppliers in one of poorest regions of Guatemala.

Opportunities for additional community development programs.

Revenues to Government and benefit sharing with local municipality.

What Company Has DoneWhat Company Has Done

Up to 1,500 construction jobs (870 local indigenous; $2.4 million in salaries in 2004). 400 operational jobs; estimated 80% local indigenous people.

Company spent $1.5 million on non-project related local improvements.

Company has established community development foundation (contribution of $400,000 per year) to benefit municipalities. Provision of health services to local communities. Trained 250 people in vocational skills. Local reforestation program (with support from IFC trust funds).

Company voluntarily will pay “royalty” of 0.1% (about $100K per year) to Sipacapa.

Company renews their community engagement and communications strategies.

ConsultationsConsultations

IFC reviewed and was satisfied with extensive local consultation and that there was local community support in the communities affected.

Land acquisition used willing buyer / seller process, i.e., free, prior and informed consent of all local land owners.

ILO 169 provides flexibility as to mechanisms for consultation.

IFC confirmed with new Berger government its support of project and its satisfaction with consultation process supervised by prior administration.

Government’s Approach to MiningGovernment’s Approach to Mining

Policy Promote mining investments that are technically and

financially viable and socially and environmentally responsible

Link mining operations to local development Strengthen the rule of law

Modernize the legal framework: More specific environmental regulations and procedures Consultation processes and ILO Convention 169 Streamline cadastral procedures Distribution of fiscal revenues: royalties

Strengthen the institutions Mining Cadastre Information and transparency

Government’s Approach to Mining (cont.)Government’s Approach to Mining (cont.)

Develop its capacity as a facilitator of Civil Society – Private Sector – Government Partnerships Promote dialogue and information (“foros mineros”) Build capacity of local governments to manage revenues Build capacity of communities to participate in local

development planning Independent and participatory monitoring

GovernmentMEM and other Ministries

Civil SocietyNGOs, Local Communities

Private Sector

Government’s Approach to Mining (cont.)Government’s Approach to Mining (cont.)

Government is more sensitive to mining concerns, taking a more proactive approach:

Government has formed high level commission to address mining issues at the

national level (participants include government, Catholic church, local universities

and an NGO).

Government is undertaking national and regional forums to discuss responsible

mining with stakeholders.

Positive response to working with Bank on mining regulatory and institutional

reform.

Government is trying to set up a national and local mediation mechanism for mining.

WBG Action PlanWBG Action Plan

Help the Company and Glamis to address key stakeholder concerns.

Assist the Company with its plans to establish an independent

community-based monitoring of project’s impacts.

Work with the Company to :

Bolster the Sierra Madre Foundation

Target investments in communities

Building partnerships and relationships

WBG Action Plan (cont.)WBG Action Plan (cont.)

Provide SME linkages support.

Provide technical assistance to municipalities if requested.

Support the government’s mediation and conflict resolution

process.

Provide technical assistance to improve mining code and

regualtions.

Profitable long run investment

The Mining CompanyThe Mining CompanyThe Mining CompanyThe Mining Company The GovernmentThe GovernmentThe GovernmentThe Government

The CommunityThe CommunityThe CommunityThe Community

Employment, income, improved social services, infrastructure, spin-off businesses

Income and economic

growth

           

Desired outcome: Sustainable Mining Providing Benefits to all Stakeholders

Sharing of Benefits Sharing of Benefits

END OF PRESENTATION