Montserrat Mining and Quarrying Report - FINAL mining and quarrying industry study final report 16...

MONTSERRAT MINING AND

QUARRYING INDUSTRY STUDY

FINAL REPORT

16 May 2011

This assessment was carried out by Oxford Policy Management and Synergy Global Consulting. The project manager was Dan Haglund. The remaining team members were Davied Elliot (Team Leader), Ed O’Keefe and Olle Ostensson. For further information contact [email protected].

The contact point for the client (DFID) was Kato Kimbugwe.

Oxford Policy Management Limited 6 St Aldates Courtyard Tel +44 (0) 1865 207300 38 St Aldates Fax +44 (0) 1865 207301 Oxford OX1 1BN E-mail [email protected] Registered in England: 3122495 United Kingdom Website www.opml.co.uk

Acknowledgements

OPM and Synergy are grateful to all those people who contributed to this study by providing their time, knowledge, views and information. The analysis and views contained in this report are the authors’ own and should not be attributed to DFID or any other agency.

Any errors or omissions are the responsibility of the authors.

3 © Oxford Policy Management

Table of contents

Abbreviations.............................................................................................................. 6

Executive summary .................................................................................................... 7

1 Introduction ........................................................................................................ 14

1.1 Background .................................................................................................... 14

1.2 Objectives of the study ................................................................................... 14

1.3 Framework for analysis................................................................................... 14

1.4 Report structure.............................................................................................. 15

2 Country context.................................................................................................. 16

2.1 History ............................................................................................................ 16

2.2 Volcanic activity .............................................................................................. 17

2.3 Economy......................................................................................................... 18

2.4 Government priorities and projects................................................................. 19

2.5 Concluding remarks........................................................................................ 20

3 Mining and quarrying in Montserrat.................................................................... 21

3.1 History of mining............................................................................................. 21

3.2 Mineral resources ........................................................................................... 22

3.3 Sand-mining companies ................................................................................. 22

3.4 Sand and aggregate export market ................................................................ 24

3.5 Competitor analysis ........................................................................................ 28

3.6 Value-addition................................................................................................. 29


4 The policy environment...................................................................................... 31

4.1 The GoM and the reform programme ............................................................. 31

4.2 Governance and institutional capacity ............................................................ 31

4.3 Legislation governing the mining sector.......................................................... 32

4.4 Draft legislation and mining ............................................................................ 32


5 Stakeholder analysis.......................................................................................... 34

5.1 Introduction..................................................................................................... 34

5.2 Identification of stakeholders’ roles, interests, and influences ........................ 34

5.3 Economic contribution .................................................................................... 36

5.4 Tourism impacts ............................................................................................. 37


5.5 Road deterioration .......................................................................................... 39

5.6 Noise .............................................................................................................. 39

5.7 Road safety .................................................................................................... 40

5.8 Volcanic activity .............................................................................................. 40

5.9 Other environmental impacts.......................................................................... 41

5.10 Concluding remarks .................................................................................... 43

6 Options analysis and impact assessment .......................................................... 44

6.1 Introduction..................................................................................................... 44

6.2 Criteria for assessment................................................................................... 44

6.3 Assessment of the current situation................................................................ 45

6.4 Assessment of the ‘do nothing’ scenario ........................................................ 46

6.5 Incentivising the industry ................................................................................ 47

6.6 Legislation, regulation, enforcement and governance .................................... 48

6.7 Resources and export facilities....................................................................... 50

6.8 Export facilities cost analysis .......................................................................... 52

6.9 Risk and sensitivity analysis ........................................................................... 56

6.10 Concluding remarks .................................................................................... 62

7 Conclusions, recommendations and next steps................................................. 64

7.1 Conclusions and recommendations................................................................ 64

7.2 Next steps....................................................................................................... 66

References ............................................................................................................... 67

ANNEX A Documentation reviewed ...................................................................... 68

ANNEX B Consultations with interested parties .................................................... 69

ANNEX C Legislative review.................................................................................. 70

ANNEX D Minutes of final stakeholder consultation .............................................. 75

ANNEX E Halcrow report: Export Facilities in Montserrat (pre-feasibility study).... 78


List of figures, tables and maps

Figure 1: Map of key competitors in sand mining and aggregate 9

Figure 2: Assessment of options for export facilitation 11

Figure 2.1: Tourist activity 2001-2009 19

Figure 2.2: GoM revenue and expenditure 2009 19

Figure 2.3: Corporate and personal income tax paid by sand-mining companies 19

Figure 3.1: Mining activity in the Belham Valley 22

Figure 3.2: Mining and quarrying activity in Little Bay 23

Figure 3.3: Domestic sales of Phoenix Quarry products 24

Figure 3.4: Montserrat exports 2005-2010 25

Figure 3.5: Phoenix aggregate exports 2005-2010 25

Figure 3.6: Destination of sand products by volume, 2007-2010 26

Figure 3.7: Exports by volume and destination, 2007-2010 26

Figure 3.8: Total volume of exports by commodity, 2007-2010 27

Figure 3.9: Average prices received for sand and aggregate products 2007-2010 27

Figure 3.10: Map of key competitors in sand mining and aggregate 29

Figure 5.1: Impact and influence of key stakeholders 34

Figure 5.2: Sand-mining value chain and economic impacts 37

Figure 7.1: Overview of policy recommendations 65

Figure 7.2: Next steps 66

Table 6.1 Assessment of options for export facilitation 51

Table 6.2: Cost/Benefit NPV analysis (EC$ million) 55

Table 6.3: Cost/Benefit NPV analysis (base case/unrestricted access with 50% fall in

production) 58

Table 6.4: Cost/Benefit NPV analysis (base case/unrestricted access with large volcanic

event in 2016) 59

Table 6.5: Sensitivity analysis of tourism expenditure (EC$ million) 60

Table 6.6: Sensitivity analysis based on a 15% discount rate (base case/unrestricted

access, NPV relative to current levels) 61

Map 2.1: Location of Montserrat 16

Map 2.2: The volcanic exclusion zones 17

Map 3.1: Overview of Montserrat’s mining activity in recent years 21


Abbreviations

BEPG Belham Environment Protection Group

Caricom Caribbean Community

CSME Caricom Single Market and Economy

DMCA Disaster Management Coordinating Agency

DFID Department for International Development

DoE Department of Environment

EIA Environmental Impact Assessment

EITI Extractive Industries Transparency Initiative

FTE Full-time Equivalent

GoM Government of Montserrat

IFC International Finance Corporation

MDP Minerals Development Plan

MSC Mining Steering Committee

MSG Mining Steering Group

MTEF Medium-Term Expenditure Framework

MVA Minerals Vesting Act

MVO Montserrat Volcano Observatory

NPV Net Present Values

OECS Organisation of Eastern Caribbean States

OPM Oxford Policy Management

PPA Physical Planning Act

SAC Scientific Advisory Council


Executive summary

Study context

The Department for International Development (DFID) leads the UK’s support to the island of Montserrat and in recent years there has been an increasing focus on opportunities for the sustainable development of the private sector. The purpose of this study is to provide the Government of Montserrat (GoM) with a clear government policy and regulatory framework to assist the development of a vibrant, dynamic and environmentally sustainable mining and quarrying sector. Whilst it is acknowledged that growth in this industry may be an important component of economic development in Montserrat, experience to date shows that the negative social and environmental impacts and concerns have not been adequately addressed. Since the eruption of the Soufrière Hills volcano started in 1995, Montserrat has struggled to re-establish itself. Two-thirds of the island has been permanently affected by the volcanic activity and remains in the exclusion zone, including the former capital city of Plymouth and the best agricultural land. The population is currently around 5,000 people and a large proportion of them are economically inactive. This population is around half the pre-volcano level, which was 10,899 in 1991. A large number of former residents have emigrated within the region or to the UK and North America, and non-nationals from other Caribbean countries have swelled the current population.

The economy has become heavily dependent on the public sector, which employs 60% of the workforce. Tourism is the major private industry in Montserrat, primarily based on ‘residential tourism’, with higher-end tourists and expatriate home-owners staying in villas for longer periods compared with shorter-stay package-resort tourism in other islands. Tourists to Montserrat are typically attracted by the island’s peaceful environment, sea views and forested hills. However, tourism has virtually collapsed in recent years due to the ongoing volcanic activity, economic downturn and limited access facilities, with visitor numbers falling from a high of over 40,000 prior to the volcanic eruption to 7,600 in 2009. Many of the current visitors are visiting friends and relatives. Imports account for over 95% of consumption and volcanic sand is the only significant export.

The GoM has produced a Sustainable Development Plan for 2010-2020. This plan recognises the importance of supporting and developing the mining sector as one of the key drivers for economic growth, along with the other key sectors of agriculture, tourism, renewable energy and manufacturing. Key projects include a new port and a new town development in Little Bay, which will generate significant local demand for sand. However, the current practice of extracting sand from the Belham Valley and transporting by road to the port at Little Bay raises complex social, environmental and developmental issues. One of these issues is the damage that would be done to the main A01 road shortly to be reconstructed at a cost of £3.7 million funded by DFID. The road project has been made conditional on resolving the issue of sand-mining trucks currently using the road.

The sand-mining and quarrying industry

The concentration of sand mining in the Belham Valley is a relatively recent phenomenon resulting from the pyroclastic flows that ended sand mining at Trant’s on the eastern side of the island in February 2010. The Belham Valley is currently the only accessible location for sand mining, although other locations may become available in the future (e.g. Trant’s may


be minable again once the more recent volcanic deposits cool down). There are estimated to be several tens of millions of tonnes of good grade resources in the Belham Valley and this is likely to increase over time as material continues to be washed down from the slopes of the volcano.

The mining in Belham Valley is taking place in an area that was formerly the island’s golf course. The valley is flanked on either side by residential villas, approximately 100 of which overlook the valley. Most are owned by expatriates and some of these villas are occupied for part of the year by the owners and visitors, whilst others are currently unoccupied. The valley is in a zone at risk from volcanic activity and residents may therefore be evacuated if activity increases. Two landowners own the land on which mining is taking place, and they charge a small common royalty.

One company had been mining sand in the Belham Valley prior to the volcanic events of 2010 and a new company commenced operations in September 2010. Of the five companies previously mining at Trant’s, two are currently dormant and three are operating at low levels of activity extracting material from the valley, screening and stockpiling the sand in the Carr’s Bay/Little Bay area. The island’s only quarry, Phoenix, is also located in Little Bay and produces aggregate, which is mainly for use in the local construction industry. It is also dormant pending an upturn in construction activity on and off the island.

The industry is currently operating at a very low level, estimated to be at between 10% and 20% of total capacity, and employing around 50 people, many of whom are part time or employed on a temporary basis. The low level of activity is partly due to the regional market being depressed by the economic downturn, as well as the additional costs arising from transporting the material to Little Bay. This adds up to one-third of total operating costs and hence reduces the industry’s competitiveness. The jetty at Little Bay is also a serious limitation, as it is unable to handle larger barges, requires shared use with other vessels (such as the ferry service) and there are periods when barges are unable to dock due to the rough sea conditions.

The main local competitor is Dominica, which has a beach-front export facility located in close proximity to the resource. Further afield, Guyana and the Dominican Republic have significant sand-mining and export activities. Montserrat’s location does, however, give it a competitive advantage with regard to its closest neighbours, as illustrated by the fact that Anguilla and Nevis accounted for 80% of Montserrat’s exports between 2007 and 2010.


Figure 1: Map of key competitors in sand mining and aggregate

Source: Google Maps.

Policy and regulatory framework

The overall governance of Montserrat reflects many of the constraints often found in small island economies. The policy and regulatory framework suffers from low levels of institutional capacity, an often-outdated legal framework, and limited experience and technical capability in relation to the mining and quarrying industry. Revenue collection is weak, in particular in relation to employee PAYE taxes, and there is a practice of granting tax holidays to companies on a case-by-case basis.

There are inconsistent definitions of minerals in the Physical Planning Act (PPA) and the Minerals Vesting Act (MVA) and different licensing requirements for mining activity on public and private land. These legal differences will need to be resolved for the industry to move forward and achieve its full potential. Similarly, the requirements in the forthcoming Road Transport Bill and the Conservation and Environmental Management Bill will need to provide transport and environmental frameworks within which the industry is able to operate effectively. Ensuring this is achieved will require technical and enforcement capacity to be strengthened, particularly in the Department of Environment (DoE).

In a move towards long-term budget self-sufficiency and improved financial governance, Montserrat is adopting the Medium-Term Expenditure Framework (MTEF) process. With DFID currently contributing 60% of government revenues and the volcano showing no signs of ceasing activity, budget self-sufficiency is highly challenging and very much a long-term aspiration.

Stakeholder analysis and impacts

A wide variety of stakeholders is affected by and has influence on the mining sector in Montserrat. Stakeholders were highly consistent in their priority issues and these included:

• Increased deterioration to road surfaces from trucks;


• Disturbance to communities from noise and dust from operations and trucks;

• Safety risks to other road users and residents adjacent to road;

• Health and safety risks to employees, particularly volcanic risks;

• Incompatibility with neighbouring land uses, particularly villa tourism;

• Level and distribution of economic benefits to Montserrat through jobs, royalties, taxes, etc. from the mining sector;

• High operating costs (including trucking costs, taxes, royalties and wharfage rates) reducing competitiveness and returns on investments; and

• Effectiveness of the policy and legal framework, planning processes and enforcement in managing the mining sector.

Nearly all stakeholders were supportive of a vibrant, dynamic, and environmentally sustainable mining and quarrying sector, with most supporting improved governance of the mining sector, as well as developing an alternative location for an export jetty.

Key differences in views were around the level of perceived impacts of mining on residents and the tourism sector, the importance of reduced operating costs and the value of potential trade-offs between negative impacts on residents and the tourism sector and positive impacts through economic growth and revenues to government.

Residents near the Belham Valley operations were particularly concerned about noise disturbance and the incompatibility of mining with tourism, also expressing concerns about the potential development of a jetty at Isles Bay. Resident groups have threatened to pursue legal action, including seeking compensation, if faced with a plan to export sand from Isles Bay.

Companies were particularly concerned about the transport costs to Little Bay and payments to government (taxes, royalties and wharfage charges) making the industry uncompetitive.

Options assessment

Various options were assessed against a wide range of criteria. These included sustainable development of the industry, contribution to Montserrat’s overall development, volcanic risk and all other health, safety and environmental impacts, as well as ease of implementation and financial and economic costs and benefits.

The ‘do nothing’ scenario has negative impacts in relation to most of these criteria. Although mining activities would continue, this would be at low levels of extraction. The industry would remain fragile and fragmented and make little contribution to the economic development of Montserrat. Negative environmental and community health and safety impacts would continue and could in fact worsen, given that several aspects of the legal framework are unclear and enforcement is limited. The benefits of other major development projects will be reduced, and there will be increased maintenance costs relating to the A01. The amenity value of Belham residents will continue to be impaired, with consequent unrest amongst some of these community stakeholders.

Aside from Little Bay, the two main alternative options are to develop a jetty at either Fox’s Bay or Isles Bay for the purpose of exporting sand. In addition to these locations, an export


facility at Trant’s, on the east side of the island, was also considered. However, this option was discounted due to the high cost and technical difficulty involved in building a jetty under the coastal conditions prevalent on the east side of the island, as confirmed by the pre-feasibility study undertaken by Halcrow.

Figure 2 below shows an indicative side-by-side assessment of the three export location options subject to more detailed consideration.

A jetty at either Fox’s Bay or Isles Bay would significantly reduce road-safety risks, road-maintenance costs, community impacts and transport costs relative to the current option of exporting from Little Bay. A dedicated jetty in one of these sites may also enable better docking for barges, allow access to more frequent and larger barges and reduce operating costs. Initial assessments indicate that the two options are broadly similar in the way they meet the criteria, but have three major differences. First, the increased distance from the point of extraction to the point of export in the Fox’s Bay option means higher transport costs, and therefore reduced cost competitiveness and lower levels of exports than for Isles Bay (but still at much higher levels than current exports from Little Bay). Second, the impacts on villa tourism are significantly higher under the Isles Bay option, with a likely decrease in tourist activity and continuing stakeholder opposition in the Belham Valley. Finally, Fox’s Bay has advantages over other options in being located close to a major new geothermal project, and could be used for delivering supplies to this project as well as for evacuation purposes.

There are numerous options for the way in which a jetty could be financed, most of which involve a wharfage or user charge on the industry. As the facility would fall under the jurisdiction of the Port of Montserrat, the best way forward would be to initiate a design, build and operate tender process to obtain the best solution and best value for money.

Figure 2: Assessment of options for export facilitation

Fox’s BayCriteria Little Bay Isles Bay

1. Development of mining & quarrying sector

2. Economic development of Montserrat

3. Complementarity with other projects

4. Resilience to volcanic risk

5. Health and safety risks (workers and communities)

6. Minimising adverse environment impacts

7. Ease of implementation

8. Financial and economic feasibility

Fox’s BayCriteria Little Bay Isles Bay

1. Development of mining & quarrying sector


3. Complementarity with other projects


5. Health and safety risks (workers and communities)

6. Minimising adverse environment impacts

7. Ease of implementation

8. Financial and economic feasibility

Largely meets criterion

Partially meets criterion / variety of impacts

Largely does not meet criterion

Largely meets criterion

Partially meets criterion / variety of impacts

Largely does not meet criterion


Recommendations

There is a huge potential resource of volcanic sand in Montserrat, representing a significant opportunity if the industry is able to scale up and mining the sand is managed in a sustainable way. This will partly be dependent on increased market demand but would also be aided by reduced transport costs and better port access. A sustainable future for the industry will depend upon resolving the tensions between the economic benefits the industry could bring and the social and environmental consequences of mining activities.

With regard to financial incentives and support for the mining sector, it is recommended that current incentives, duties and royalties are maintained and reviewed once the location of an export facility is resolved. It is also recommended that the GoM, through the newly created Trade and Investment Promotion Agency, work with the mining sector to develop a regional marketing initiative.

The recommended approach to legislation, regulation and enforcement recognises the limitations in Montserrat and therefore includes a strong emphasis on voluntary arrangements where practical. The main measures are:

• Prioritising legal reforms in a few critical areas, including harmonising the definition of minerals throughout legislation and clarifying that operating licensing requirements apply on both private and public land;

• Establishing standards and norms for regulating environmental, health and safety impacts and specific requirements for company reporting on environment, health and safety;

• Preparing a Minerals Development Plan (MDP), including a strategic environmental and social impact assessment, to help in setting permitting and operating conditions, assuming that the GoM decides to develop mining in the Belham Valley;

• Agreeing a Code of Conduct between the industry, GoM and community representatives. Developing such a code should be the responsibility of a multi-stakeholder group, which could be an evolution of the Mining Steering Committee (MSC) formed to guide this study;

• Continuation of the ministerial MSC to develop policy and ensure that changes in legislation and the regulatory environment are implemented;

• Improving the monitoring and reporting of tax and government revenues collected from the industry in line with the requirements of the Extractive Industries Transparency Initiative (EITI);

• Increasing capacity in the GoM to ensure that there is effective education and enforcement. Such a resource could be located in the DoE (although there are also other options); and

• Introducing an eight-tonne axle limit in the forthcoming Road Transport Bill and a mechanism to ensure that trucks transporting sand meet roadworthiness requirements.

Many of the negative noise, traffic and visual impacts on local residents in the Belham Valley could be mitigated by restricting sand extraction and screening activities to higher up the Belham Valley at further distance and out of direct line-of-sight from residential properties.


However, this raises several technical issues needing further investigation, including the relative quality and quantity of the resource in this area and the relocation of existing screening facilities. Restricting extraction to higher up the valley would fit well with the Fox’s Bay export facility option from a residential and tourist perspective.

Based on an analysis of the main costs and benefits, it is difficult to reach a clear conclusion on which is the best location for an export facility (Fox’s Bay or Isles Bay). The analysis of costs and benefits suggests that a new facility at either location would be justified in economic terms. The analysis does, however, point to a trade-off between the economic impacts from increased mining activities (including increased government revenues) and the negative impact on residents and tourism expenditure. For example, under the Isles Bay option, higher production leads to higher local industry expenditure and government revenues but greater disturbance to communities, which may lead to an offsetting reduction in occupancy rates and tourism expenditure. A jetty in Fox’s Bay does have another advantage, however, in that it could be used to supply a potential geothermal project in the area, and also provide an evacuation route for people working on this project.

Halcrow was commissioned to do a pre-feasibility study on constructing an export jetty for sand products at Fox’s Bay, Isles Bay, and on the east coast. The report (included as Annex E to this report) assessed the suitability and indicative costs of building a jetty in these different locations, taking into account transportation, maritime and coastal perspectives. On this basis, it concluded that Fox’s Bay was the preferred option. Whilst a jetty in Isles Bay benefits from being closer to the resource, a jetty in Fox’s Bay benefits from lower downtime due to lower sedimentation maintenance costs. A full technical feasibility study will be required before an alternative export facility is constructed.

It will be necessary to conduct a risk assessment regarding access to the Belham Valley and to the export facility (if other than Little Bay). This must be done in accordance with the Disaster Management Coordinating Agency’s (DMCA) formal process for access to areas prone to volcanic risks. A risk assessment for the Belham Valley will be needed under both the Isles Bay and Fox’s Bay options, since a jetty in either location is likely to significantly increase the level of activity in the Belham Valley (in Zone B).

Recommendations from the study were presented to stakeholders at workshops on 9 and 10 March 2011. A summary of the discussion around options for multi-stakeholder governance of the mining sector is included in Annex D.


1 Introduction

1.1 Background

DFID leads the UK’s support to the island of Montserrat and in recent years there has been an increasing focus on opportunities for the sustainable development of the private sector.

Montserrat’s mining and quarrying industry, whilst small, has been growing since 2004. The industry has been subject to periodic volcanic interruption, which entailed that the mining at Plymouth and later Trant’s had to cease. The industry has the potential to grow significantly given the large sand and ash deposits, concentrated in the Belham River valley on the island.

Montserrat could benefit from further development of the industry through the increased generation of much-needed employment and government revenues. However, whilst it is acknowledged that growth in this industry is crucial for economic development, experience to date shows that the negative social and environmental externalities and concerns have not been adequately addressed and that there remain challenges to them being effectively addressed in the future. Of particular immediate concern to DFID is that the funding being provided for refurbishment of the main A01 road running from the Belham Valley to the only operational jetty at Little Bay has been made conditional on resolving the issues related to trucking of sand along that route such that health, safety and environmental risks are significantly reduced and there is no major damage to the road.

1.2 Objectives of the study

The purpose of this study is to provide the GoM with a clear government policy and regulatory framework to assist the development of a vibrant, dynamic and environmentally sustainable mining and quarrying sector.

As described in the terms of reference, the objectives of the study are two-fold:

• To assess the economic, social, technical, legal and environmental impact of the mining and quarrying sector in Montserrat; and

• To provide recommendations for realising the potential of the sector to generate economic growth and public revenue, in a sustainable way.

1.3 Framework for analysis

The framework applied to this study is based on the International Council for Mining and Minerals Toolkit, ‘Mining: Partnerships for Development’. This toolkit was developed by OPM in conjunction with leading development agencies to identify areas of partnership to enhance positive impacts from resource extraction whilst minimising negative impacts. This study also draws on relevant international best practices, such as the EITI and the International Finance Corporation (IFC) Performance Standards.

In pursuing the objectives of the study, the report draws on the following sources of information:


• reports and documentation as listed in Annex A;

• stakeholder analysis based on consultations with interested parties as listed in Annex B; and

• initial methodology as shown below:

1

Phase 1

Inception, Background Research and Review

Phase 2

Field work and Stakeholder analysis

Phase 3

Analysis and Reporting

Phase 4

Consultation and Revised Report

Phase 5

Workshop and Final Presentation to Stakeholders

1.4 Report structure

The report is organised into the following sections:

• Country context sets out the economic and political context;

• Mining and quarrying in Montserrat describes the main features of the mining and quarrying industry;

• The section on the Policy environment provides an overview of the policy and regulatory environment as it affects the industry;

• The Stakeholder analysis presents the results of the stakeholder consultations and discusses in detail the main economic, social and environmental impacts from sand-mining activities;

• The Options analysis introduces the main options and assess their impact; and

• The final section sets out the Conclusions, recommendations and next steps based on the analysis above.


2 Country context

2.1 History

Montserrat is one of the Leeward Islands in the eastern Caribbean. It covers an area of 104km2 and is located approximately 480km east-southeast of Puerto Rico and 48km southwest of Antigua, as shown on Map 2.1 below. It is one of 14 British Overseas Territories that fall under the direct jurisdiction of the UK.

Map 2.1: Location of Montserrat

During the 1970s and 1980s, the country moved towards economic self-sufficiency and independence based on vibrant local industries, including agricultural products, upmarket tourism and purchase of villas by wealthy foreigners. One of the unique attractions at this time was the country’s association with the music industry, as the island became a popular destination for people who wanted to ‘get away from it all’ including Elton John, Stevie Wonder and Boy George. The importance of music to the island is illustrated by the recently constructed Cultural Centre in Little Bay, which is a donation from the Beatles producer Sir George Martin, partly financed by former visiting stars performing at the Royal Albert Hall in 1997.

In 1989, Hurricane Hugo devastated the country. Reconstruction took place over the next five years but was followed by the eruption of the Soufrière Hills volcano in 1995, which continues to be active to this day. Montserrat’s slow economic recovery has been exacerbated by the global economic downturn, resulting in significantly reduced private sector activity. Pre-1995 Montserrat was a net exporter of food, but now imports over 90% of food consumed on the island. Tourism arrivals have dropped from over 40,000 per year in the early 1990s to 7,600 in 2009. High expectations of return migration have not


materialised, and the population of Montserrat in 2010 was estimated to be around 5,000, showing little to no change in the first decade of the 21st century. A large number of former residents have emigrated within the region, and to the UK and North America. A significant minority of the current population are estimated to be non-nationals from other Caribbean countries. The census due to take place in 2011 should provide a clearer picture of the overall population dynamics.

2.2 Volcanic activity

The eruption in 1995 was the first activity in 400 years, and radically altered the economy and demography of the island. Up to two-thirds of the population of just over 10,000 left Montserrat, with the remainder remaining in or relocating to the north of the island. Two years of continuous eruption ensued, resulting in 1997 in the evacuation and subsequent burial in pyroclastic flows and ash of the former capital city Plymouth.

Following the volcanic eruptions of the mid-1990s, the island was split into several different zones as shown on Map 2.2. The area around the volcano is an exclusion zone, considered too high risk for human activity except for the regular monitoring missions conducted by the country’s resident Montserrat Volcano Observatory (MVO). The northern part of the island, about a third of the total surface area, is designated a safe area, and is where people now reside. Access to other zones (A, B, C and F) is permitted depending on the risk level of the volcano.

Map 2.2: The volcanic exclusion zones


Source: MVO. For detailed explanations of zoning and access at different levels of volcanic activity, see http://www.mvo.ms/es/education/safety/hazard-level-system/hazard-level-system.

The volcanic hazard remains significant. The 2001-10 Development Plan assumed that volcanic activity would subside and the economy would quickly return to pre-volcanic levels of activity. This has proved not to be the case and the volcano remains active, now in its 15th year of the current eruption. A series of volcanic explosions occurred during November 2009 to February 2010 and included the largest eruption since the volcano became active in 1995 (expulsing around 6 million m3 of material).1 Despite detailed monitoring, research and modelling, the volcanic activity has remained unpredictable and it has not been possible to provide any indication of when activity at Soufrière Hills will cease.

2.3 Economy

Montserrat’s total GDP in 2009 was EC$121m (economic data in this report is expressed in Eastern Caribbean dollars, EC$)2. The island’s economy is currently heavily orientated towards public-sector services, which constitute the largest contributor to GDP, estimated at around 30%.

High outward migration in the aftermath of volcanic activity in the mid-1990s particularly affected the economically active and higher-skilled population, leaving the island with a dearth of skilled technical staff. In 2006, the population was estimated at 4,886, of which 62% (or 3,006 people) were part of the labour force. There were 413 registered unemployed, which equates to 14% of the workforce. The public sector is the largest employer, and it is estimated that public expenditure influences over 60% of economic activity on the island. Any delays in implementing public projects therefore have significant effects on the levels of employment and unemployment. Employment in sectors linked to tourism is also highly seasonal, and is higher around the festival seasons of December (Christmas festival) and March (St. Patrick’s week)3.

The main activities that generate economic income are sand mining and tourism. Production by sand-mining companies constitutes Montserrat’s dominant export and source of foreign exchange, accounting for 99% of the country’s exports by volume in 2010 (Montserrat Port Authority). Recent official estimates of the contribution of tourism and sand mining to GDP were not available at the time of this study, but the Sustainable Development Plan estimated mining and quarrying contributed 3.4% of GDP in 1997. Expenditures linked to tourism were estimated at EC$16m in 2009, or 14% of GDP.

Tourism has historically played a prominent role in Montserrat’s economy. In the 1960s and 1970s, a concerted strategy was followed whereby investment was promoted through zoning of several residential areas around the Belham Valley, including the areas of Isles Bay, Old Towne, Olveston and Woodlands. Montserrat’s tourist industry remains based on residential tourism, where visitors either rent villas or visit friends and relatives who own villas on the island. The attractions are a tranquil environment, low crime rate, sea views and forested

1 This is twice the amount of the volcano’s previous record set on 17 September 1996. See Scientific

Advisory Committee (2010), 14th Report on Montserrat Volcanic Activity (paragraph 5).

2 The EC$ is also used by seven other members of the Organisation of Eastern Caribbean States

(OECS). The EC$ has been pegged to the US$ since 1976, with a current exchange rate of US$1=EC$2.70. At the time of writing GBP1=c.EC$4.20.

3 Montserrat – known as ‘the Emerald Isle’ due to its lush vegetation and settlement by Irish refugees

from St. Kitts and Nevis – is the only country outside of Ireland that celebrates St. Patrick’s Day with a public holiday. It coincides with parades and activities throughout the week.


hills, as well as more recently the volcano. Only a handful of commercial hotels and guesthouses exist on the island.

Limited facilities and high access costs have constrained the development of Montserrat’s tourism sector relative to most other Caribbean islands. The sector has contracted significantly from the approximately 40,000 annual arrivals pre-volcano to 13,000 in 2005 and has continued to fall over the past five years to arrivals of 7,592 in 2009, as shown in Figure 2.1.

Figure 2.1: Tourist activity 2001-2009

2005 2006 2007 2008 2009

Stayover tourists 9,707 7,991 7,746 7,360 6,311

Day visitors 3,395 1,765 1,231 1,192 1,281

Total 13,102 9,756 8,977 8,552 7,592

Growth -25.5% -8.0% -4.7% -11.2%

Source: Montserrat Tourism Statistics 2001-2009.

Montserrat is heavily dependent on budgetary assistance from DFID, which provided 60% of the government’s revenue in 2009. One of the main aims of DFID’s assistance is to deliver private sector-led economic growth helping to progressively reduce Montserrat’s budgetary deficit on the current account (See Figure 2.2).

Figure 2.2: GoM revenue and expenditure 2009

Revenue EC$m % Expenditure EC$m %

Taxes on Income, Profits 17.9 17.8% Pensions and Gratuities 17.3 17.6%Taxes on Domestic Goods/Services1.2 1.2% Personal Emoluments 32.0 32.6%

Licenses 2.5 2.5% Wages 5.9 6.0%

Taxes International Trade 14.3 14.2% Allowances 3.5 3.6%Fees, Fines, Permits 1.2 1.1% Services 39.4 40.2%

Rents,Interests, Dividends 0.6 0.6%Reimbursements 0.0 0.0%

Budgetary Assistance 60.3 60.0%

Other Revenue 2.6 2.6%Total 100.5 100.0% Total 98.1 100.0%

Source: DFID (2010)

Tax receipts from the mining sector have thus far been limited, averaging EC$250,000 per annum over the past five years, as illustrated in Figure 2.3. This equates to just over 1% of collected taxes on income and profits in 2009 shown in Figure 2.2 above.

Figure 2.3: Corporate and personal income tax paid by sand-mining companies

2005 2006 2007 2008 2009 2010

Corporate Income Tax 178,595 255,597 257,151 183,063 263,520 162,406PAYE 68,122 16,256 42,431 63,906 41,935 16,256

Total 246,717 271,853 299,582 246,969 305,455 178,662

Source: Montserrat Inland Revenue

2.4 Government priorities and projects

The GoM’s overarching development strategy is set out in the Sustainable Development Plan for the period 2008-2020. This document contains a commitment to support the development of the mining sector as one of the key drivers for economic growth (along with


the other key sectors of agriculture, tourism, renewable energy and manufacturing), including a commitment to develop an alternative export facility by December 20124.

The Sustainable Development Plan identifies several major projects with significant implications for the costs and benefits of developing the mining and quarrying industry:

• Continued use of the main road for transporting sand and the consequent potential damage has been identified as a major risk to the major road project to be funded by DFID (at £3.7m), such that funding has been made conditional on resolving issues of overloading and road safety.

• The redevelopment of the existing port in Little Bay is expected to start in 2011 and take an estimated three years, at a cost of US$60m. This project is largely funded by the European Union. There are concerns regarding the compatibility of shipping sand during the period of construction and the future ability of the new port to simultaneously cater for mining and the cruise ship tourists targeted in Montserrat’s tourism strategy. The funding is part of European Development Fund 10, which has also been made conditional on resolving the current sand-mining transportation and environmental issues.

• Lastly, there are also concerns regarding compatibility between sand exports from Little Bay and development of a new town centre, estimated at a total public and private investment cost of £86m. This project envisages a series of new public, commercial and residential property developments, which may be adversely affected by continued trucking of sand to and from the port. This development may also change the composition of tourism in Montserrat, with a shift from longer-term villa-based tourism to increasing the importance of day visitors, smaller cruise ships and shorter-stay hotel-based visitors.

Finding solutions to the issues created by the current configuration of sand-mining activities is therefore crucial to the future sustainable development of Montserrat.

2.5 Concluding remarks

Since the continuing eruption of the Soufrière Hills volcano that started in 1995, Montserrat has struggled to re-establish itself. Two-thirds of the island, including the former capital city of Plymouth and the best agricultural land, remain in the exclusion zone. The population hovering around 5,000 people is half the pre-1995 levels and the economy has become heavily dependent on the public sector, which employs 60% of the workforce. Tourism has virtually collapsed, with visitor numbers falling from a high of over 40,000 prior to the volcanic eruption to 7,600 in 2009, many of whom are visiting friends and relatives. Volcanic sand is the only significant export and imports account for 95% of consumption.

The GoM recently produced a Sustainable Development Plan 2008-2020, which makes a commitment to support the mining and quarrying industry. However, the current practice of extracting sand from the Belham Valley and transporting it by road to the port at Little Bay raises complex social, environmental and developmental issues. One of these issues is the damage that would be done to the main A01 road shortly to be reconstructed at a cost of £3.7 million funded by DFID. The road project has been made conditional on resolving the issue of sand-mining trucks currently using the road.

4 Montserrat Sustainable Development Plan 2008-2020, GoM 2010: p. 68.


3 Mining and quarrying in Montserrat

This section:

• provides a brief history of the mining and quarrying industry in Montserrat;

• describes the current mineral resources on the island;

• describes the main characteristics of the industry and the companies involved;

• assesses the current market, market prospects and competitors; and

• identifies opportunities for adding value to the product.

3.1 History of mining

Small-scale beach-sand mining for use in construction has a long history in Montserrat, formerly taking place from Plymouth to Carr’s Bay (Gunne-Jones and Christopher 1998). However, it is now limited to the sea end of the Belham Valley/Isles Bay.

Mining of volcanic sand began around 2002 and by 2008 was mostly located on the east of the island, at Trant’s Bay. However, the eruption of February 2010 resulted in pyroclastic flows reaching these mining sites, and whilst no miners were caught by the flows, some of the equipment owned by three of the companies was destroyed. All the mining companies previously operating at Trant’s and still operating have since moved to the Belham Valley, close to the edge of the exclusion zone.

The map below provides an overview of the different areas of mining activity.

Map 3.1: Overview of Montserrat’s mining activity in recent years

Old Towne

Salem

Isles Bay

Happy Hill

Belham Valley

Isles Bay

Fox’s Bay

Trant’s (pre-Jan 2010)

Current export and processing site

Extraction sites

Key affected communities

Possible export sites

Current transport route

Phoenix quarry

See Belham Valley map

See Little Bay map


3.2 Mineral resources

Belham Valley is currently and for the foreseeable future the most accessible resource for volcanic sand. The best sand deposits are located in areas where the volcanic ash has been washed down river valleys and naturally washed and partially graded. All other potential sites currently lie within the exclusion zone and are therefore not accessible. Following the pyroclastic flows into Trant’s in February 2010, deposits remain hot (c.200 C at 2m depth as at January 2011) and currently unworkable due to safety risks associated with current extraction methods. The MVO currently estimates that the cooling down of deposits could take up to 10 years. The rough seas on the eastern side of the island also make the cost of any export facility there significantly higher than on the west coast (see the Halcrow jetty pre-feasibility study in Annex E). In the future, once the volcano becomes dormant again, other extraction and export options may become available.

The sand in the Belham Valley is likely to remain the best quality and largest resource even if access to other areas becomes possible in the longer term. This is because of the millions of tonnes of material at the head of the valley that will continue to be washed down over several decades until the volcano subsides and the deposits stabilise. A major advantage of the sand is that it has good pozzolanic properties, meaning that less cement is needed in construction activities using the material (British Geological Survey 2001).

Extraction largely takes place from material deposited on the former golf course (i.e. the lower Belham Valley), which has two landowners (on either side of the course of the river prior to the volcanic activity). The deposits are at least 20ft in depth and continue to increase, particularly when significant rainfall washes more material down the valley. The two landowners jointly collect a ‘royalty’ on extracted material of EC$1.50 per tonne, which is split evenly between them.

3.3 Sand-mining companies

The two main centres of activity for sand mining are the Belham Valley and Little Bay, as illustrated in the diagrams below.

Figure 3.1: Mining activity in the Belham Valley

Old Towne villas

Happy Hill

Isles Bay villas

Selsi screening & stockpiles

Shamrock screening & stockpiles

Location of old bridge

Approximate extent of main extraction

activities

Some extraction of beach sand

Old Towne villas

Happy Hill

Isles Bay villas

Selsi screening & stockpiles

Shamrock screening & stockpiles

Location of old bridge

Approximate extent of main extraction

activities

Some extraction of beach sand

Image source: Google Maps. Imagery is from around 2009 and therefore the current extent of volcanic sand is greater than shown.


Figure 3.2: Mining and quarrying activity in Little Bay

Eddie’s Trucking screening & stockpiling

Wall’s screening & stockpiling

Phoenix crushing screening & stockpiling

Phoenix quarry

Montserrat Block Company (Wall’s)

Little Bay port

Little Bay development project

Junction stockpiling

Labworks block manufacturing

Eddie’s Trucking screening & stockpiling

Wall’s screening & stockpiling

Phoenix crushing screening & stockpiling

Phoenix quarry

Montserrat Block Company (Wall’s)

Little Bay port

Little Bay development project

Junction stockpiling

Labworks block manufacturing

Image source: Google Maps

There are currently seven volcanic sand-mining companies in Montserrat. Two of these (DMO Enterprises and KTEC) lost their equipment at Trant’s and are currently not operating. The other five are operating at very low levels of activity. The companies are small, with between two and ten employees, and the workforce is flexed according to demand. The two main centres of activity are the Belham Valley and Little Bay areas, as illustrated in the figures above. The main features of the companies currently operating are as follows:

• Selsi has been operating in the Belham Valley since 2007 and has screening and stacking machinery, as well as around 10,000 tonnes stockpiled, having recently been relocated from the valley bottom to Old Towne at the entrance to the Isles Bay Plantation property development. Production is currently suspended given low levels of demand. Selsi is one of the longest-established companies and exported from Plymouth before it became part of the exclusion zone.

• Shamrock Industries is the newest of the sand-mining companies, having commenced operations in September 2010. It has screening facilities, stackers and stockpiles of material on a site at Happy Hill. The company also has a conveyor belt to transport material from the valley floor. Shipments to date have been limited and employees were on an extended Christmas break during the time of this study (mid-January 2011). Operations were expected to recommence in February subject to there being sufficient demand.

• Eddies Trucking Ltd operates from a site in Little Bay where screening, stacking and stockpiling all take place. Only extraction takes place in the Belham Valley. The company is continuing to extract, screen and stockpile and is working hard to find customers, which would cover operating costs for its output at current prices.


• Wall Trading Ltd has several businesses, of which the main one is contracting and leasing of heavy vehicles to the construction industry. Sand is extracted from the Belham Valley and screened and stockpiled in Little Bay. The company owns the Montserrat Blockmaking Company located in Carr’s Bay, where the site is also used for parking heavy goods vehicles. The blockmaking plant operates on an intermittent basis to serve local demand.

• Junction Trucking also lost equipment at Trant’s, but has continued to operate in close cooperation with Wall Trading.

The two other companies located in Little Bay are Phoenix Quarries Ltd and Lab Works Ltd. The latter uses sand to make blocks for the local market. The quarry is currently dormant, as there is no local or export market. Operations will recommence when major projects in Montserrat (such as the Little Bay area development) move ahead or the export market picks up again. The volatility in the local market for quarry products is illustrated in Figure 3.3 below, with 2007 being the peak year for production and very little in the way of sales since then.

Figure 3.3: Domestic sales of Phoenix Quarry products

Year Products

1 1/2 3/4 1/2 1" Marl 3/8 Back Fill Boulders 3" Dust Grizzly

2005 829 7,763 181 144 - 855 1,920 45 - 2,170 5,898

2006 20 6,489 692 118 - 7 24 - - 2,511 8,258

2007 - 14,088 2,094 2,250 3,191 5,323 1,670 115 - 5,587 13,982

2008 - 2,323 - - - 25 - - - 190 2,319

2009 - 6,044 - - - 2,928 414 - 2,500 5,898 2,108

2010 - 3,950 555 - - 565 - - - 4,852 7,985

Source: Phoenix Quarry

Sand mining is a capital-intensive activity generating relatively low levels of employment. The relative simplicity of sand-mining operations means that there are also relatively few jobs created indirectly, e.g. through the use of contractors and service providers. Employment may currently add up to around 50 people directly and indirectly employed, many of who are not working full time. Most of these positions are semi-skilled (e.g. truck drivers, machine operators), with relatively few senior or unskilled positions. Extraction of sand from the beach at the bottom of the Belham Valley for local use is an activity carried out by local individuals rather than companies. The quantities extracted are generally small, but the practice is unregulated and has the potential to result in small-scale but significant negative environmental impacts.

In summary, the industry is currently at a very low ebb, operating at between 10% and 20% capacity. Companies have responded to weak domestic and export markets by cutting back or wholly or partially suspending activities. There is nevertheless a very significant volume of material and the capacity to scale up rapidly should there be an increase in demand.

3.4 Sand and aggregate export market

Montserrat’s sand-mining companies produce for domestic markets as well as for exports. Production by sand-mining companies constitutes Montserrat’s main export, as shown in Figure 3.4 below. Production peaked in 2007 at 170,000 tonnes, and dropped sharply in 2010 to 30,000 tonnes following the volcanic eruption in January-February 2010 that destroyed the equipment of several of the sand-mining companies at Trant’s.


Figure 3.4: Montserrat exports 2005-2010

(tonnes) 2005 2006 2007 2008 2009 2010

Sand and aggregate 13,400 83,169 169,550 142,250 125,943 30,500

Vehicles lift-on-lift-off 31 74 161 09 153 26

Heavy equipment 1,306 87 176 205 527 226

General cargo B/bulk 259 975 122 208 355 76

Steel - - - 222 - -

Containerised cargo 137 274 76 127 138 115

Ferry cargo - - - - -

Fuel - - - 43 - -

Total 15,133 84,579 170,085 143,064 127,116 30,943

Sand and aggregate as % of total 88.5% 98.3% 99.7% 99.4% 99.1% 98.6%

Average no. of barges per month n.a. n.a. 4.9 4.1 4.4 1.3

Source: Montserrat Port Authority

Export of quarry products made up a small proportion of the total in the years 2005 to 2007, since which time there have been no further exports, as shown in Figure 3.5 below:

Figure 3.5: Phoenix aggregate exports 2005-2010

Year Products

3/4 1/2 3/8 1" Dust

2005 555 - 1,120 - 1,065

2006 4,447 300 400 2,516 11,456

2007 10,624 - 2,600 - 10,300

2008 - - - - -

2009 - - - - -

2010 - - - - -

Source: Phoenix Quarry

Exports to the wider region are subject to the tariffs established by the Caricom Single Market and Economy (CSME). The CSME is intended to include ‘free movement of goods and services’ between member states, including Montserrat as well as Antigua/Barbuda. It is operated by the Caribbean Community (Caricom). The OECS, of which Montserrat is a member, supports this establishment of an ‘Economic Union as a single economic and financial space’ through the CSME.5

However, progress towards implementation has been mixed. This is supported by reports of Guyana and Jamaica breaching the Common External Tariff. Moreover, non-tariff barriers between member countries are common, including through ‘landing charges’ levied on imports by charging for landing/docking. Landing charges levied on Montserrat sand exports by the authorities in Antigua and Barbuda would constitute one such barrier/levy: such a landing charge can easily be applied, at the discretion of the country, as a ‘hidden tariff’ without breaking the rules of the CSME. Montserrat should pursue discussion at the level of the CSME on removing this type of intra-OECS trade barrier.

Sand and aggregate have mainly been exported to Anguilla, Nevis, Tortola, Barbuda and other Caribbean islands. In recent years, most of Montserrat’s exports of sand and aggregate have been to Anguilla and Nevis, together accounting for 83% of exports between 2007 and 2010 (see Figure 3.6).

5 See http://www.caricom.org/jsp/single_market/single_market_index.jsp?menu=csme


Figure 3.6: Destination of sand products by volume, 2007-2010

Nevis

35%

Tortola

5%Trinidad

3%St. Maarten

6%

St. Barthelemy

2%

Barbuda

1%Guadeloupe

1%

Anguilla

47%

Source: Montserrat Customs Office

The destinations to which Montserratian sand-mining companies export have remained fairly constant from year to year, with Anguilla and Nevis capturing over half of the exports in each period (as shown in Figure 3.7). This figure also shows that, over time, the industry has been more successful in diversifying its exports into new markets. However, the companies are very focused on individual markets. One company is responsible for over 98% of all exports to Nevis and over 95% of all exports to Anguilla are done by three companies.

Figure 3.7: Exports by volume and destination, 2007-2010

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2007 2008 2009 2010

Trinidad

Tortola

St. Maarten

St. Barthelemy

Nevis

Guadeloupe

Barbuda

Anguilla

Sum of Quan. (Metric Tonne)

Country Exported to


The main products are sand (screened and unscreened), aggregate and crusher dust. Figure 3.8 below illustrates trends in exported products over time. It shows that there were virtually no aggregate exports in 2009 and 2010.


Figure 3.8: Total volume of exports by commodity, 2007-2010

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2007 2008 2009 2010

Screened Sand

Sand

Crusher Dust

Aggregate

Sum of Quan. (Metric Tonne)

Commodity


Export prices for these products have been affected by the downturn in economic activity following the recent financial crisis. Figure 3.9 shows that the prices obtained for sand fell by 34% in 2009, although a large part of this price was recovered through year-on-year growth of 25% in 2010. Prices for crusher dust and aggregate, however, remained fairly constant around the EC$22/tonne average for the period.

Figure 3.9: Average prices received for sand and aggregate products 2007-2010

EC$0.00

EC$10.00

EC$20.00

EC$30.00

EC$40.00

EC$50.00

2007 2008 2009 2010

Aggregate

Crusher Dust

Sand

Screened Sand

Average of Price per tonne

Commodity


The average prices obtained by different companies varied significantly. Some of this variation may be due to different export destinations or different product qualities. However, price also seems to vary by company as well as destination; customs data show that the


prices obtained by the three companies that capture over 95% of exports to Anguilla vary between EC$26/tonne to EC$59/tonne.

The survey of mining companies indicates that there is a large potential market for Montserrat’s sand. The companies stated that tests confirm it is a high-quality product, but detailed test results were not made available to us. Demand for sand exports is also likely to benefit from the increasing trend for other Caribbean islands to restrict beach-sand mining. Finally, the strategic location of Montserrat in the centre of the East Caribbean positions it well for serving regional markets.

3.5 Competitor analysis

Montserrat faces competition locally and from the wider sub-region. Data from the US Geological Survey show the main regional competitors in 2009 as Dominican Republic (20,000,000 tonnes), Barbados (500,000 tonnes) and St Kitts and Nevis (223,000 tonnes).6 This excludes more recent entrants into the market rapidly establishing a presence, such as Guyana and Dominica.

6 Data from United States Geological Survey, see www.usgs.gov.


Figure 3.10: Map of key competitors in sand mining and aggregate

Source: Google Maps

3.6 Value-addition

A limited amount of on-island value-addition is carried out using the volcanic deposits, in addition to its use in concrete for construction. Two companies (Montserrat Blockmaking Company and Labworks) manufacture concrete blocks to supply the domestic construction industry, although current production levels are low and there is no export. Some sand and pumice is packaged and sold primarily as tourist souvenirs in various retail outlets on the island, although this is very small scale.

Several suggestions have been made for value-added uses of the material, including selling pumice for use as a beauty product, crushing pumice to provide a lightweight foundation for green roofs and tile or block making for export. However, so far none have been developed on a commercial scale.

The production of pumice may be worth investigating further, as it requires relatively simple processing and involves significant value-addition. These products may have a competitive advantage if the branding association with Montserrat’s volcano, tranquil environment and contribution to economic development (e.g. ethical trading) is promoted.

Issues that would need to be addressed in any strategy to attract commercial developers include the limited commercial capacity on-island, the insecurity created by the still active volcano and the limited competitive advantage of Montserrat compared to other locations (e.g. regarding access). Together, these are likely to limit the commercial feasibility of development of any value-addition in the near future.

A concerted branding strategy for the sand itself should also be considered if large-scale export commercialisation is pursued. An initiative to export in bulk and then rebag into Montserrat-branded sacks would provide a cost-effective way of adding value by promoting the brand whilst reaching consumers in both the bulk construction as well as retail markets.



The concentration of sand mining in the Belham Valley is a relatively recent phenomenon resulting from the pyroclastic flows that ended sand mining at Trant’s on the eastern side of the island in January 2010. At the time of writing, the Belham Valley is now the only accessible location for sand mining. There are estimated to be around six million tonnes of good grade resources, and this is likely to increase over time as material continues to be washed down from the slopes of the volcano. In the future, other options (including Trant’s and Plymouth) may become available.

The mining in Belham Valley is taking place on land that is owned by two landowners in an area that formerly included Montserrat’s only golf course. The valley is flanked on either side by residential villas (approximately 100 of which overlook the valley) owned by expatriates and some houses owned by locals. Most of these villas are occupied for part of the year by the owners and visitors. A few are permanently unoccupied, with minimum to no maintenance, including a former hotel and a large property development. The valley is in a zone at risk from volcanic activity and residents may therefore be evacuated if activity increases.

One company had been mining sand in the Belham Valley prior to this volcanic event and a new operation commenced in September 2010. Of the five companies previously mining at Trant’s, two are currently dormant and three are operating at low levels of activity, extracting material from the valley and screening and stockpiling the sand in the Carr’s Bay/Little Bay area. The island’s only quarry, Phoenix, is also located in Little Bay and produces aggregate, which is mainly for use in the local construction industry. The quarry is currently dormant because of the low level of construction activity on and off the island.

The industry is currently operating at a very low level, estimated at between 10% and 20% of total capacity, and employing around 50 people, many of who are part time or employed on a temporary basis. The low level of activity is partly due to the regional market being depressed by the economic downturn, as well as the additional costs arising from transporting the material to Little Bay. It is estimated that this adds up to one-third of total operating costs and hence reduces the industry’s competitiveness. The jetty at Little Bay is also limiting, as it is unable to handle larger barges, requires shared use with other vessels (such as the ferry service) and there are periods when barges are unable to dock due to the rough sea conditions.

The main local competitor is Dominica, which has a beach-front export facility located in close proximity to the resource. Further afield, Guyana and the Dominican Republic have been undertaking significant sand-mining and export activities. Montserrat’s location does give it a competitive advantage with regard to its closest neighbours, as illustrated by the fact that Anguilla and Nevis accounted for 80% of Montserrat’s exports between 2007 and 2010.

Although several suggestions have been made for adding value locally to the product, none have so far been developed on a commercial scale.


4 The policy environment

4.1 The GoM and the reform programme

Montserrat is governed through a structure whereby the UK appoints a Governor, who is the representative of the British Government. The Governor sits on an Executive Council with seven additional members: four elected ministers, and three unelected ‘ex-officios’ (including the Deputy Governor). The Executive Council decides on policy proposals and bills brought by the ministers, as well as applications for exemptions from taxes, duties etc. brought by companies (including sand mining). Montserrat is currently in the process of adopting a new constitution, including various reform initiatives.

Based on the Sustainable Development Plan, the GoM is developing an MTEF approach to government planning, which aims to move the country towards long-term budget self-sufficiency through a focus on long-term development priorities and effective planning and administration. The MTEF recognises the need for building human resource capacity and improving the transparency and accountability of government. Several stakeholders also highlighted human resource constraints as a limit on the capacity of the GoM to absorb funds received from donors.

There is widespread recognition that many parts of the legal framework are outdated and/or inappropriate for regulating economic activities, including with respect to sand mining, road management and tourism. As a result, there are currently around 80 pieces of legislation that are being reviewed and revised by the Attorney General, of which the new constitution is the most important.

Many of the Governor’s responsibilities are shared with or delegated to the GoM. However, volcanic hazards (including demarcation of exclusion zones) are ultimately the responsibility of the Governor, whereas the health and safety of workers is largely the responsibility of the GoM and the Executive Council.

4.2 Governance and institutional capacity

The regulatory framework for the mining sector, including beach-sand mining, is unclear and weakly enforced. Challenges in regulating the mining and quarrying sector arise due to limitations in institutional capacity, technical capability and experience in mining policy legislation, all of which reflect wider governance issues in Montserrat. There was recognition among government officials of the urgency of alleviating these capacity constraints in order to enable effective implementation of Montserrat’s current and future regulatory framework. However, there is also pressure for budgetary restraint with no overall increase in spending on current account.

Whilst the DoE is formally charged with regulating the environmental impacts of the industry, it suffers from several weaknesses. First, it is a relatively new institution, formed as part of a recent government reorganisation. Some stakeholders argue this has resulted in a lack of clarity around regulatory responsibilities and how these are to be discharged following reorganisation.

Second, the DoE is inadequately staffed to take on the role of monitoring and enforcing environmental standards. At the start of 2011, the DoE had 11 staff, of which seven worked in forestry. None of the staff had training in industrial environmental impact assessment (EIA) and management. The DoE recognised that at a bare minimum it would require technical assistance to train some of its staff to take on monitoring of the sand-mining sector. Ideally,


the DoE would like to see recruitment of additional staff to meet its sand-mining and other responsibilities.

The limitations in terms of expertise available on the island are illustrated by the fact that the Head of the DoE was previously the main local consultant producing EIAs for the Phoenix quarry and Shamrock Industries.

Initiatives to strengthen regulations governing the mining sector are also subject to the risk of regulatory capture. Several stakeholders highlighted the close links between politicians and sand-mining companies as a limitation on the commitment to enforce charges that would increase costs for the firms. Mining companies have been able to get company-specific financial incentives approved by the Executive Council, including 10-12-year tax holidays that have been awarded to at least two of the mining companies.

There is a concern that, even where revenue from sand-mining companies is effectively collected, governance issues will limit the ability of government to effectively use this revenue to bring about improved development outcomes.

4.3 Legislation governing the mining sector

The main legislation that covers the mining sector is the PPA 2002, the MVA 2002 and the regulation of Mining Licenses (2008). Other pieces of legislation (e.g. the Road Transport Act) affect the industry indirectly, by virtue of the activities involved in sand mining.

A legislative review highlighted several issues that impede the effective oversight and control of mining activities in Montserrat (see Annex C for more detail):

• There is an inconsistent definition of ‘minerals’ under different pieces of legislation. Whereas the PPA of 2002 defines minerals broadly, the MVA from the same year defines minerals to exclude volcanic sand.

• The Mining License Template (2008) only requires a license for mining activities that take place on ‘Crown lands’, rendering it ineffective for mining activities that take place on private property, such as that in the Belham Valley.

• Although the PPA (2002) establishes requirements for EIAs to be undertaken as part of granting a planning permit, resulting in a set of mitigating conditions attached to the planning permit, there is a lack of clarity with regard to how this will be enforced. Responsibility formally resides with the DoE but it does not have the resources to fulfil this role (with the result that EIA consultations with residents have not been enforced).

• The current Road Traffic Act (2008) is orientated mainly towards passenger vehicles and light trucks, given the historical absence in Montserrat of high-volume heavy vehicle transport. It makes no reference to maximum axle-load limits on vehicles using the roads and lacks any specific provisions for damage done to roads through usage. (There is a ‘statutory order’ regulation relating to the area of Happy Hill at the north side of the Belham Valley that specifies a seven-tonne limit, but this is not being enforced.)

4.4 Draft legislation and mining

Two key pieces of legislation currently in draft form are the Conservation and Environmental Management Bill and the Road Transport Bill to replace the current Road Traffic Act.


The proposed Conservation and Environmental Management Bill proposes that operators will be required to have a ‘certificate of environmental approval’, along with a number of environmental permits. This draft legislation provides for monitoring and reporting arrangements for environmental impacts to be set on a case-by-case basis, as conditions of environmental approvals. The danger is that this creates duplication of regulatory effort (e.g. where licensees provide multiple reports in line with different permits). Moreover, there are also some inconsistencies between the legislation on when an EIA should be conducted, thereby being open to interpretation or inconsistent application.

The Road Traffic Bill is currently being developed to amend the Road Traffic Act. It strengthens the existing act by increasing the fines and charges associated with non-compliance. However, it does not address the issue of lacking specification of axle-load limits. Nor does it provide clear mechanisms for getting vehicles that are not roadworthy off the road. It deals with safety issues arising from careless driving but is silent on the safety issues associated with worn-out tyres and breaks etc., which apply to some of the vehicles currently used by the sand-mining industry.


The aim of the MTEF is to move towards long-term budget self-sufficiency. With DFID currently contributing 60% of GoM revenues and the volcano showing no signs of ceasing activity, this target is highly aspirational and the road to getting there could prove to be long and difficult. Many parts of the legal framework are outdated and both institutional capacity and technical capability are weak, particularly in relation to the mining and quarrying industry. There are inconsistent definitions of minerals in the PPA and the MVA and different licensing requirements for mining activity on public and private land. These legal issues will need to be resolved for the industry to move forward and achieve its full potential. Similarly, the requirements in the forthcoming Road Transport Bill and the Conservation and Environmental Management Bill will need to provide physical transport and environmental frameworks within which the industry is able to operate effectively. Ensuring this is achieved will require some additional resources, notably strengthening technical and enforcement capacity, particularly in the DoE.


5 Stakeholder analysis

5.1 Introduction

This section begins by identifying the main stakeholders’ roles, interests and degree of influence over the future of the industry. This is followed by an assessment of the impacts that different stages in the mining value chain have on people, the economy and tourism and the environment in three main areas:

• infrastructure impacts and notably road deterioration;

• health and safety impacts, including noise, road safety and health and safety at work; and

• other environmental impacts.

5.2 Identification of stakeholders’ roles, interests, and influences

A wide variety of stakeholders are affected by and/or have an influence on the mining sector in Montserrat. Figure 5.1 illustrates many of the stakeholders and their relative levels of impact and influence in the mining sector. Annex B lists the various stakeholders consulted as part of this study.

Figure 5.1: Impact and influence of key stakeholders

Landowners

Mining company owners

Truck route residents

Local home owners

Expat villa owners

Mining company employees

Impact / interest

Infl

ue

nce

Physical Planning Unit

Department of Environment

Police

Ministry of Finance

Customs & Revenue

Governor

Office of Chief Minister

Port Authority

MCW

MHCS

Media

MAHLE

MEDT

Shop & restaurant owners

Property managers

FishermenDay visitors

MVODMCA

MDC

Montserrat Tourism Board

BEPG

Montserrat National Trust

DFID

Customers

Key players

Directly

affected

residents

Other

government

agencies &

customers

Other

stakeholders

NB: Positions on chart are only indicative

Largely positively impacted by miningLargely positively impacted by mining

Varied / undetermined impactsVaried / undetermined impacts

Largely negatively impacted by miningLargely negatively impacted by mining

High

Hig

h

Low

Low

Other affected residents

The figure shows that stakeholders can be broadly categorised into five groups:

1. Key players: Stakeholders who are highly affected by the mining sector and have a very high level of influence on how the mining sector operates. This influence is leveraged through policy, regulation and political and economic power. These groups


include senior-level government authorities, such as the Governor, Chief Minister, Attorney General, Ministry of Finance and the Physical Planning Unit. The group also includes two influential private sector stakeholders that benefit from the mining sector; mining company owners and landowners on whose property mining extraction takes place. These two private sector groups also have close linkages to some of the other government stakeholders in this group.

2. Directly affected groups: Another important group of stakeholders are those whose livelihoods, well-being and/or property are highly affected by mining. Expatriate villa property owners are negatively affected by the noise, dust and visual impacts of mining activities, affecting their well-being, properties and ability to rent their properties out. Some of these owners have been able to gain influence by joining together in organisations (e.g. Montserrat Property Owners Association) and lobbying government and donors. Some have gone further by taking legal action, notably the Belham Environment Protection Group (BEPG). Local residents along the truck route are similarly affected but have less influence, particularly as they have few avenues for representation of their views.

3. Other government agencies: There are a wide variety of government agencies with various interests in specific aspects of the mining sector, but with generally lower influence in the mining sector than the stakeholders in Group 1. The DoE is included in this group because, although it has important interests in the mining sector, it has low influence due to its lack of capacity and limited support in the legal framework. Also included in this group are customers for exported sand, which have relatively low interest in the Montserrat mining sector per se but a high level of influence.

4. Other affected residents: This group includes Montserrat residents whose livelihoods are less directly affected by mining operations, such as shop owners, service providers to tourist villas and fishermen. Similar to local residents in the Belham Valley, these stakeholders have less influence and few ways to have their views represented.

5. Other groups: There are a variety of other groups, such as some government agencies, the media, environmental NGOs (such as the Montserrat National Trust) and day visitors who have a low level of interest in the mining sector, as well as low influence. However, it is important that these stakeholders continue to be considered and engaged as the mining sector develops.

Stakeholders were highly consistent in their priority issues, and these were in line with the impacts identified. They included:

• Increased deterioration to road surfaces from trucks;

• Disturbance to communities from noise and dust from operations and trucks;

• Safety risks to other road users and residents adjacent to road;

• Health and safety risks to employees, particularly volcanic risks;

• Incompatibility with neighbouring land uses, particularly villa tourism;

• Level and distribution of economic benefits to Montserrat through jobs, royalties, taxes, etc. from the mining sector;


• High operating costs (including trucking costs, taxes, royalties and wharfage rates) reducing competitiveness and returns on investments; and

• Effectiveness of the policy and legal framework, planning processes and enforcement in managing the mining sector, and limited enforcement of road traffic offences.

Nearly all stakeholders were supportive of a vibrant, dynamic, and environmentally sustainable mining and quarrying sector and most of those interviewed supported strengthened governance of the mining sector, as well as the importance of developing an alternative location for an export jetty.

Key differences in views were around the level of perceived impacts of mining on residents and the tourism sector, the importance of reduced operating costs, and the value of potential trade-offs between negative impacts on residents and the tourism sector and positive impacts through economic growth and revenues to the GoM.

Residents near the Belham Valley operations were particularly concerned about noise disturbance, the incompatibility of mining with tourism, concerns about the potential development of a port at Isles Bay and governance/process issues.

Companies were particularly concerned about the transport costs to Little Bay and payments to government (taxes, royalties and wharfage charges) making the industry uncompetitive.

5.3 Economic contribution

The contribution of the industry to the economy of Montserrat may be measured in terms of inputs, output and impacts of the industry, including exports, employment and contribution to government revenues. The key inputs, outputs and impacts across the sand-mining value chain are illustrated in Figure 5.2 below.


Figure 5.2: Sand-mining value chain and economic impacts

Valu

e c

hain

Valu

e c

hain

Inp

uts

Inp

uts

Noise, dust & waste

RevenuesEmployment

Ou

tpu

ts

Noise, dust & waste

RevenuesEmployment

Noise, dust & wasteNoise, dust & waste

RevenuesRevenuesEmploymentEmployment

Ou

tpu

ts

Increased deterioration to road surface from trucks

Safety risks to other road users & residents adjacent to road

Incompatibility with neighbouring land uses, particularly villa tourism

Benefits to Montserrat through jobs, royalties, taxes, etc

Disturbance to communities from noise of operations & trucks

Ke

y i

mp

ac

ts Increased deterioration to road surface from trucks





Ke

y i

mp

ac

ts Increased deterioration to road surface from trucks





Ke

y i

mp

ac

ts Trucking costs reduce competitiveness of industry

Low returns on investments

Whilst the current low level of activity means that the industry is making only a limited contribution to Montserrat, it is the most significant exporting industry and has the potential to expand rapidly and enormously under the right conditions.

With respect to government revenues, the GoM charges EC$2 per tonne for royalties on the exported product, of which the port retains EC$0.50 to cover administrative costs (the remaining EC$1.50 is transferred to the Consolidated Account of the Treasury). The Port Authority levies an additional wharfage charge of EC$2 per tonne on materials exported, which is retained by the Port Authority. In addition, the exporter incurs additional charges when the barge is being loaded out of regular office hours. The additional charge could be anything up to EC$0.85 per tonne.

Corporate income taxes and PAYE contributions from the mining sector have thus far been limited, averaging c.EC$250,000 over the past five years (Customs and Revenue data). Licensing fees associated with mining are small, at EC$1,000 p.a. and licensing is in any case not required in the Belham Valley under the current legislation, which as stated earlier covers mining on public but not private land.

The governance weaknesses in Montserrat also limit the scope for these contributions to government to be effectively converted into development impacts and outcomes in the form of long-term sustainable benefits to Montserrat and its citizens.

5.4 Tourism impacts

Mining in the Belham Valley has an impact on tourism activities. There are approximately 100 villas in the Belham Valley susceptible to noise, dust, visual and traffic impacts from the mining operations, and various plots of land suitable for future property development. It is important to note that the affected properties are all in Zone B and are therefore at risk from volcanic activities. As such, these properties have already been affected by depressed property prices, higher maintenance, and lower occupancy levels than comparable properties in the rest of the island, which are also impacted by the current low levels of tourism in Montserrat in general. It is therefore difficult to provide an accurate assessment of


the extent to which mining activities exacerbate these factors, although many residents indicated that increased mining activities may be the ‘tipping point’ for them to decide to sell their properties. It is also difficult to accurately determine the extent to which mining activities could be an accepted component of activities in the Belham Valley, particularly if noise impacts are adequately managed.

These properties provide an important economic contribution for Montserrat in terms of employing service providers (cleaners, gardeners, pool maintenance, etc.), payments to government agencies for water, electricity, taxes, etc., as well as rental fees to property management agencies. Villa residents also provide wider economic benefits to other businesses such as shops and restaurants. When the tourist villas were developed in Montserrat during the 1960s, the land titles included covenants to ensure that the area remained suitable for residential tourism, such as including restrictions on conducting business activities, keeping livestock, further development of properties, etc. Several current owners interviewed for this study raised concerns that the current and potential future impacts from mining in the Belham Valley contravene these covenants. Concerns were also raised that this could be perceived by villa owners elsewhere on the island as well as external investors as an indication that the GoM may not be able to comply with and enforce legal commitments and thereby provide a stable investment environment.

It should also be noted that the Belham Valley is a tourist destination for other visitors to the island, as well as villa residents (for instance it is a destination in the official Guide to Montserrat, p. 40). The valley is the only site where visitors can walk in an area directly affected by the volcano. Its proximity to the Volcano Observatory also makes it likely to be visited on a ‘volcano tour’. The Isles Bay beach is also used for recreational purposes and is now one of the largest stretches of accessible beach on the island. Continued and expanded mining in the Belham Valley would therefore reduce the attractiveness of the location as a tourist destination, unless carefully planned and restricted to upper parts of the valley.

The Isles Bay beach is regularly used by fisherman, particularly targeting fish species that feed in the freshwater flows coming from the Belham River. There is a possibility that mining activities may affect these fishermen. It is assumed that impacts from extraction on fishing will be limited, particularly if they are conducted at some distance from the beach. However, there is likely to be some impact on fishing activities if a jetty is constructed in Isles Bay. A detailed assessment of current fishing levels, importance to livelihoods and potential impacts of mining will therefore need to be conducted as part of wider planning for the Belham Valley and in the impact assessment process for any specific developments.

The abovementioned impacts mean that there is a risk that mining activities in the Belham Valley and associated screening, transport and export activities may result in involuntary economic displacement (loss of assets or access to assets that leads to loss of income sources or means of livelihood). IFC Performance Standard 5: Land Acquisition and Involuntary Resettlement is generally accepted to provide an international benchmark standard for managing involuntary economic displacement. It provides clear requirements in order to avoid or minimise involuntary economic displacement wherever possible by exploring alternative project designs, and to mitigate adverse social and economic impacts from restricting a persons’ use of land by providing compensation for loss of assets (and other incentives or benefits) in order to restore livelihoods and with appropriate disclosure of information, consultation, and the informed participation of those affected. It is therefore recommended that an assessment of the level of economic displacement involved is conducted as part of the development planning for the Belham Valley, and compensation processes implemented in line with IFC Performance Standard 5 if appropriate.


5.5 Road deterioration

When sand mining was taking place at Trant’s on the east coast, transport of the material resulted in rapid degradation of the road from Little Bay to Trant’s, in particular on the eastern side of the island on Jack Boy Hill road. This now discourages some tourists from visiting the lookout point in this area. This experience has also heightened concerns among stakeholders that the A01 road will be similarly degraded.

There is a concern among nearly all the stakeholders interviewed that with sand-mining activities now moved to the Belham Valley, the roads now used are also at risk of rapidly deteriorating. Residents near the Belham Valley have noted that several of the residential roads between the Belham Valley and Salem have already started to deteriorate. Trucks taking sand from the beach at Isles Bay have also damaged the road there. The A01 road is of a higher standard than the one between Trant’s and Little Bay, making it more resistant to deterioration from trucking of sand, but the road is not designed for the number and loads currently involved in sand mining.

Road deterioration affects a large number of people, as most people use the A01 at some point in time for some purpose or another. If road deterioration is extreme then it will have a significant effect on people’s ability to use the roads, as well as increased maintenance costs for the vehicles using these roads.

Even if an alternative export jetty is developed, reducing the number of trucks on the A01, there will continue to be some truck traffic on this route serving local markets, particularly to supply any large-scale construction such as at Little Bay. In addition, if volcanic activity were to reduce, there is a possibility that mining in the Trant’s area may resume and this would likely involve resumption of trucking along Jack Boy Hill road to Little Bay. Measures to manage road deterioration beyond only an alternative jetty will therefore be required, such as axle-load limits or limits on the total number of trips.

The deterioration of the road is exacerbated by trucks being overloaded beyond the axle loads that the road can support, and above the design specifications of the vehicles. Improved enforcement of axle-load limits will help reduce this deterioration, although it may also be accompanied by an increase in the number of truck trips required due to the reduced loads (thereby having limited overall impact on road deterioration). Another option is to redesign the A01 road refurbishment to cater for higher axle loads than originally envisaged. This would result in delays to the project, and in higher initial capital costs, but reduced ongoing maintenance costs. This option might reduce, but would not resolve the environmental, health and safety issues identified by stakeholders along the route.

5.6 Noise

The principal issue raised by residents in the Belham Valley (Old Towne, Isles Bay and Happy Hill), as well as some residents along the A01, was the noise generated by sand-mining activities.

Noise is generated from a number of sources, including vehicle movements (particularly loaded trucks travelling uphill), truck horns, screening activities, and movement of sand (loading and unloading).

The Belham Valley is in a rural location, with very little background noise except when there is wind blowing. The valley landscape also serves to contain noises, with residents stating they were able to easily hear raised voices from the other side of the valley. In addition, part of the reason villa owners and visitors have paid to stay in the area is due to its tranquillity.


The lack of consultation and poor relations between many villa owners and both companies and government appears to exacerbate the perceived acceptability of noise levels.

As a result, residents are particularly sensitive to additional noise. Whilst the level of noise generated by mining activities may not be significant or noticeable in an urban environment (such as the screening and stockpiling activities in the Little Bay area), and may be dependent on wind conditions, this noise may be perceived to be intolerable in quieter areas. Effects of the noise stated by residents included inability to take rests for medical reasons whilst mining activities were occurring, a mother having to take her children to the home of other family members in order for them to be able to sleep during the day, inability to enjoy outdoor activities, and heightened stress levels.

Limited mitigation measures have been put in place to reduce noise impacts. Some companies stated that they had agreed not to use truck horns whilst operating in the Belham Valley, although it appears that all companies do not consistently adhere this to. Residents frequently complained of trucks blowing their horns on the bends whilst moving along the A01 road. The screening plants of both Shamrock and Selsi are located in elevated positions in the valley, with no physical barriers to reduce noise emissions. There was no information available on whether reasonable efforts had been made to avoid the noise impacts. Relocation of these activities to a more sheltered location may significantly decrease the noise impacts. A noise assessment, including noise modelling, may help identify more suitable siting and mitigation measures for mining activities.

5.7 Road safety

Many stakeholders interviewed identified road safety as an issue. Their concerns related to trucks often being overloaded and not adequately maintained (notably heavily worn tyres) travelling along roads that are narrow, steep, have sharp corners and with many houses very close to the road side. Trucks often have to make three-point turns, thereby slowing the flow of traffic along the narrow A01 road. Several cases of accidents involving trucks were cited and concerns raised that a serious accident would be likely to occur if trucking continued or increased.

This impact affects all road users and truck drivers, as well as posing particular risks to some residents in houses immediately adjacent to more dangerous sections of the road. Risks could be reduced by improving truck maintenance, driver safety training, enforcing axle-load limits and imposing restrictions on the timing of truck movements to avoid peak traffic times at the beginning and end of the day during the week.

5.8 Volcanic activity

The most serious health and safety risks facing employees of the mining companies relate to volcanic risks. Although mining operations are allowed in the Belham Valley, the area is classified as Zone B, where people may be evacuated if risk levels increase. Pyroclastic flows in recent years have reached as close as a few hundred metres above current mining operations. In addition, there are risks associated with lahars after heavy rainfall events.

The most recent risk assessments indicate that the risks are high for workers in Belham Valley and potential export sites at Fox’s Bay and Isles Bay. The Scientific Advisory Council’s (SAC) 14th report, from May 2010, estimated the risk exposure to workers at Fox’s Bay as 1-in-850 per annum and 1-in-1,300 at Isles Bay (SAC 2010).

More recent modelling of volcanic risks as used in the SAC 15 report (released February 2011) has reduced these risk levels somewhat. It indicates that a worker’s risk exposure in


Fox’s Bay is now 1-in-2,800 per annum equivalent, or about 8x the corresponding UK occupational risk. It attaches a risk to workers in the Belham River crossing of 1-in-4,000, or about 6x the corresponding UK occupational risk. The report attaches a 1-in-10 probability of a large dome collapse to the west, toward Plymouth, over the next 12 months (SAC 2011a).

In addition to the direct risks from volcanic activity, studies by Peter Baxter and associates from the University of Cambridge have identified a long-term risk of silicosis arising from exposure to a form of crystalline silica called cristobalite found in the volcanic ash. Whether there is a material increase in this risk arising from any increase in activity south of the Belham Valley would need to be considered as part of the overall volcanic risk assessment.

The DMCA has a formal process that allows temporary access to Belham after certain conditions are met:

• Financial and social benefits to Montserrat justify the activity;

• The Executive Council gives authority for access;

• Compliance with terms and conditions of licence;

• A risk assessment is conducted; and

• Acceptable mitigation of risks is agreed through a health and safety plan.

An important next step will therefore be to conduct an up-to-date risk assessment of potential mining and export options in order to feed into the decision-making process for selection of jetty options, etc.

The key approach to reducing risk levels is to avoid or reduce exposure, i.e. to reduce the amount of time workers are located in high-risk areas. This may mean restricting periods of work and putting in place measures to limit the number and amount of time staff are in high-risk areas. Where exposure has been reduced to as low as reasonably possible, additional mitigation measures will be required, principally mechanisms to allow rapid warning and evacuation in the case of a potential incident being identified.

5.9 Other environmental impacts

5.9.1 Dust

The Shamrock EIA from September 2010 identified dust particle emissions as ‘likely to be significant for both the construction and operational phases’ (Shamrock 2010). Information available to date appears to indicate that the dust generated by sand mining does not pose significant health risks, as the alluvial nature of the material means that it does not contain high levels of the fine fibres that can cause silicosis. However, this may need to be confirmed by more detailed studies on the material.

As much of the smaller particles have been washed from the sand through natural processes, and the material is often damp when excavated and processed, there are relatively low levels of dust generated directly by these activities. However, dust levels will increase when the material is drier.

Belham Valley residents stated that mining activity exacerbates levels of dust, particularly as excavation and vehicle movements break up the compacted layer formed on the surface of


the deposits. However, dust generation in the valley would still be high even without mining activities, and it has not been possible to determine the extent to which mining exacerbates this issue. Despite this, the perceived impact of mining on dust levels by residents is an issue in itself, as it further decreases community support for mining activities in the valley.

Avoidance of these impacts should be the first option, and the simplest approach is to locate activities at a reasonable distance from residential housing. There are a variety of standard mitigation measures that could be applied if dust generation cannot be avoided and levels are problematic.

5.9.2 Spillage on roads

Several stakeholders interviewed stated that trucks would occasionally spill sand on the road between Belham Valley and Little Bay, causing a hazard to other road users. Whilst there are no quantitative figures on this impact, the number of stakeholders raising it as an issue and the number of trucks frequently sighted during this study which were loaded to full capacity indicates that this is likely to be a regular occurrence.

This impact could effectively be managed by implementing and enforcing restrictions on loading of trucks, as well as by instigating penalties for non-compliance and not clearing up spillages.

5.9.3 Water management

Some residents indicated that mining activities had changed the natural course of water flows in the Belham Valley and made it more unpredictable. With the high levels of water flow during peak rainfall events, along with the large amount of material being washed down the river, it can be expected that water flow in the Belham Valley will naturally be highly variable and unpredictable, and it will be difficult to determine the extent to which mining activities exacerbate this. However, this situation does create safety risks to people travelling across the Belham Valley, particularly residents of Isles Bay. That said, it is also possible that careful planning and cooperation between mining companies and residents may actually be able to manage water flow through the valley to some extent in order to reduce these impacts.

Sand-mining activities can create pits that fill with water, which may become breeding grounds for mosquitoes or dumping grounds (Ramsey et al. 2002). This is a particular issue with beach-sand mining in close proximity to coastlines, as well as mining activities close to residential housing. Careful mine planning and environmental monitoring may be required in order to reduce the creation of stagnant water bodies.

5.9.4 Siltation

Waste management and earth-moving activities in relation to mining and quarrying can result in erosion and siltation of waterways. There is also a concern that the Phoenix quarry will have impacts on the Little Bay port development, causing siltation. This presents a potential need for dredging and silt traps. However, the landform surrounding the quarry may itself be unstable.

The loose material on the quarry site must therefore be closely monitored and managed, to avoid excessive run-off down the mountainside during heavy rains. Although the Phoenix quarry has operated at very low capacity during recent years, an operational quarry could play an important part in supporting the management of these environmental issues.


5.9.5 Biodiversity degradation

Montserrat has several species of biodiversity of conservation importance, although the Belham Valley is not an area of particular conservation importance for most of these species. Of particular note is the beach nesting of turtles (in particular green and hawksbill turtles), including in the areas where sand-mining export activities may take place. These turtles provide direct and indirect benefits to the local population: direct benefits include fishing for turtles and indirect benefits include snorkelling and turtle-watching from the beach. In 2003, the last year for which data was available, Fox’s Bay accounted for 14% of the turtle-nesting sightings in Montserrat (Godley et al. 2004). Isles Bay is also reported to be an important nesting site for turtles. Up-to-date information was not available to determine the extent to which turtles are still using the beach for nesting following the recent lahars and pyroclastic flows in the Belham Valley.

Mining activities may also affect the process of natural revegetation in the Belham Valley. However, it is assumed that with the large quantities of material expected to continue to wash down from the slopes of the volcano over several decades, it will be a long time before the valley bottom starts to permanently stabilise. That said, as noted above in Section 5.9.3, careful management of water flows in the valley by mining activities may actually help support revegetation in some areas.


The most significant positive impact from mining is primarily through revenue payments to government through royalties, taxes, etc. Although these revenues are currently low due to the low level of mining activity, there is significant potential for mining to be an important contributor to government revenues. Therefore, in order to enhance this positive impact, it is important that careful consideration be given to the basis for generating these revenues (e.g. royalty rates, tax regimes, efficient collection, etc.) and the effective and accountable use of these revenues in order to ensure they benefit Montserrat citizens in the long term.

Sand mining in Montserrat currently has a number of negative impacts and these are likely to continue. These are principally due to two factors. First, the use of a major road route to transport the sand results in deterioration of the road surface and road-safety risks, exacerbated by the road not being suitable for such transport and poor management of truck movement and safety. Second, the immediate proximity of extraction and some processing of the sand to residential properties and a tourist destination results in disturbances to residents and impacts on the tourism sector and other economic activities. Both these factors are also exacerbated by gaps in the planning and enforcement process and lack of community consultation and engagement. The most significant negative impacts could therefore be substantially mitigated through first reducing transport on the main road and improving road safety, and second by reducing the conflicts arising from the close proximity of mining to residential properties.

In addition, it is worth noting that the relatively simple value chain of sand mining means that many negative impacts typically associated with the mining sector are not as significant in this case. For instance, processing is relatively simple and does not require significant use of water or power, and there is little waste generated by the activities. However, this also means that there are few opportunities to leverage wider benefits from mining (beyond revenue payments to government) often associated with mining activities, such as significant employment creation, local procurement of goods and services, or investments in infrastructure, all of which could have wider community benefits.


6 Options analysis and impact assessment

6.1 Introduction

This section begins by setting out the criteria for assessment and then describes the options to be assessed, before finally summarising the current situation, the ‘do nothing’ scenario, and the likely impact of the different options for developing a sustainable mining and quarrying industry in Montserrat.

The main options relate to:

• different approaches to incentivising the industry;

• legislation, regulation, enforcement and governance structures; and

• resource availability and alternative export facilities.

6.2 Criteria for assessment

The criteria for assessment are based on good practice in sustainable mining sector development and the policies and particular circumstances in Montserrat, including:

• the economic and physical context (including volcanic risk);

• policy priorities (as reflected in the Montserrat Sustainable Development Plan 2010);

• stakeholder views (including those most directly affected by mining and quarrying activities); and

• practical considerations (including cost, ease of implementation and complementarity with other projects and initiatives).

Following on from these considerations, the assessment criteria used are as follows:

1. development of a secure, vibrant, dynamic and environmentally sustainable mining and quarrying sector;

2. economic growth of Montserrat, including employment creation and contribution to government revenues;

3. complementarity with other projects and sectors, including Little Bay port and new town development and A01 road renewal;

4. resilience to volcanic risk and any additional arrangements required to manage that risk;

5. health and safety risks, in relation to mining and quarrying operations and transport of materials;

6. minimising adverse environmental impacts, such as air quality, noise and amenity value;


7. ease of implementation from government, industry and property-owner perspectives, taking full account of stakeholder views and interests; and

8. financial and economic factors, including cost savings, economic benefits and financial returns.

6.3 Assessment of the current situation

The current impacts and issues relating to mining in Montserrat are assessed below in relation to the criteria outlined above.

Montserrat’s mining and quarrying industry is currently neither vibrant nor environmentally sustainable. Rather, it is a fragmented industry with significant over-capacity that is struggling to survive. The lack of a consistent and enforced regulatory framework means that companies’ negative environmental and health and safety impacts are not being addressed.

The mining and quarrying industry contributes to overall economic development through government revenues as well as direct and indirect employment and supply chains. This contribution is currently limited because the industry is small and fragile, but it is the major exporting activity, with significant potential to grow at least in terms of the available resources. In addition, the current governance weaknesses in Montserrat limit the ability for these revenues to be effectively converted into development outcomes (i.e. contribute to long-term sustainable benefits for Montserrat citizens).

There is a major issue with regard to transporting material along the A01 road and this will become increasingly significant as stretches of the old road are progressively improved and replaced. In the medium to longer term, there are also issues regarding whether transporting large quantities of sand to the port at Little Bay is compatible with other major projects, such as the port redevelopment and the new town project.

The industry is vulnerable to volcanic activity; Belham Valley is the only currently available accessible resource deposit and is likely to remain so for several years to come. At the current level of risk, access to the Belham Valley is unrestricted. However, if the risk level was moved to Level 4 then access would be restricted. Worse still, if there was a pyroclastic flow down the valley then employees are at risk and sand mining would be brought to an end, at least until the material cooled and further deposits were washed down the valley. Equipment and jetty infrastructure may also be at risk, dependent on where they are located. Volcanic activity could interrupt or end production at any time and this presents a serious problem in meeting customer needs for consistent supply. Stockpiling provides a temporary solution to interruptions in supply but does not address the impacts of long-term loss of access to the deposits. Volcanic risk would also increase difficulties in raising financing for any investments needed for growth of the industry (such as equipment or jetty construction).

Health and safety considerations are major disadvantages with the current situation, although somewhat mitigated by current low levels of activity. Health and safety risks exist with respect to operations in the valley, as well as in the transport of the materials to the port in Little Bay. With respect to the transporting of materials between the Belham Valley and the port, the lorries used vary in their roadworthiness and there are many sections of the road with tight bends and steep hills that pose a risk to other road users, truck drivers and people that live and work along the route.

The activity in the valley creates negative social and environmental impacts in relation to noise, dust and reduced amenity value, although this also needs to be considered in the overall context of the impact that volcanic activity has had. Some steps could be taken to


further mitigate these impacts and there is scope to better manage the land use and environment in the valley to maintain and improve its amenity value.

Finally, consideration needs to be given to financial and economic costs in the current situation. Transporting material from the Belham Valley to Little Bay adds up to a third of the financial costs of sand mining, making it uncompetitive to export to many parts of the East Caribbean. There is also little doubt that truck movements are damaging to the road and will reduce its life and increase maintenance costs when the road is refurbished. This understanding underlies the DFID conditionality for approval of the road improvement project that a solution is found on the movement of heavy trucks.

In conclusion, the current situation is unsatisfactory from most standpoints and for nearly all stakeholders. It is only made tolerable by the low level of activity at which the industry currently operates.

6.4 Assessment of the ‘do nothing’ scenario

Before assessing the impacts of different options for developing a sustainable mining and quarrying industry in Montserrat, it is important to consider what would happen if no action is taken. This analysis is based on the following assumptions:

• no change to the hazard level in the foreseeable future due to volcanic activity. There will continue to be significant risk of a major volcanic event (dome collapse and/or pyroclastic flow), perhaps with little warning;

• some road improvements are already under way and will continue throughout 2011 and into 2012;

• development in Little Bay will continue and increased construction activity will provide a stronger local market;

• the improved regional economic climate will increase demand in export markets and improve the tourism sector; and

• currently envisaged legal reforms will address some of the issues identified, but take time to implement given limited capacity in government, particularly with respect to environmental regulation.

The most probable impacts are described below, in line with the assessment criteria set out above.

Sustainable development of the sector: if nothing is done to support the industry then it is likely that it would continue to struggle along at low levels of capacity and some of the companies would exit on either a temporary or permanent basis. Some benefit would be felt from an increase in demand as the recession recedes and the economy in the East Caribbean picks up, but the current cost constraints would continue to limit the industry’s growth and development.

Montserrat would see little overall economic benefit, as the industry would remain relatively small and the negative impacts on villa owners and tourism would continue. There would be some benefit in supplying the domestic market and in particular the port and road improvement projects and the second phase of development in Little Bay. This local supply would avoid the need for imports and thereby keep money largely within the local economy.


The industry would remain vulnerable to volcanic risks in the Belham Valley and could suffer further damaging interruptions to supply or indeed be closed down altogether in the worst case scenario.

The health and safety risks and problems associated with extracting in the Belham Valley and transporting the material to Little Bay would remain and worsen if the level of output increased, albeit on a relatively modest basis.

The ‘do nothing’ scenario is by its very nature relatively easy to implement, but there are consequences in the form of continued opposition from residents in the valley. There are also important implications in that the road between Belham Valley and Little Bay would begin to deteriorate within two to three years and require higher levels of maintenance expenditures in subsequent years.

The ‘do nothing’ scenario is somewhat inevitable, at least in the short term, as any measures will take time to introduce. However, the longer nothing is done, the higher the level of detriment; the industry will not grow and contribute to the overall development of Montserrat, governance of the sector will remain weak and negative environmental and health and safety issues will get worse. There are additional costs in terms of higher levels of road maintenance and the conflict with tourist development continues and becomes a larger issue once the new port at Little Bay is completed. Overall, the ‘do nothing’ scenario is an increasingly less attractive option as time moves forward and hence there is a definite need to make decisions sooner rather than later.

6.5 Incentivising the industry

The main current incentive for the industry is an exemption from duty on the import of heavy capital equipment. Companies have requested additional exemptions (e.g. on spares, parts and consumables), but to date these have not been introduced due to the difficulties in targeting the incentive at the mining industry specifically. The ordinance granting the duty exemption is due to expire in the near future and it is recommended that duty exemptions on heavy capital equipment should be continued, as they provide a valuable incentive, particularly when the industry resumes its growth. However, such incentives must be time limited and restricted to supporting the industry in its growth phase.

Other potential ways of incentivising the industry include reducing royalties and providing direct financial support. Companies are concerned that the royalty of EC$2/tonne and wharfage of EC$2/tonne are higher than for their competitors. However, any argument for change must also depend on other factors, particularly whether a new dedicated export facility should be constructed. Revenues to government contribute to the development of Montserrat, and therefore it is important that royalty and other revenue rates are set at a level to maximise these benefits in the long term. Wharfage should be used to cover the operating costs (including capital costs) of using the export facility that is eventually decided on. It is recommended, therefore, that no change should be made to royalties and wharfage until future export arrangements have been decided.

Providing companies with direct financial support is always problematic in terms of its impact on competition. A review of the taxes paid by the companies suggests that there are some benefits to the companies in terms of tax exemptions but their basis is unclear, and government have confirmed that such incentives are decided case by case. Going forward, any tax exemptions need to be carefully targeted and existing incentives should be subject to a transparent review. No individual or selective company incentives are recommended.


There is a strong case for exploring opportunities to support the regional marketing of the product. Companies have shown in the past that they are able to act on a concerted basis where there is common interest. This would also provide an opportunity to promote the competitive advantages of Montserrat sand in general, such as its pozzolanic properties, the geographical advantages of Montserrat for regional shipping, and that it provides an environmentally sustainable alternative to mining beach sand.7 Such an initiative would fit well with the remit of the soon-to-be-created Trade and Investment Promotion Agency, which will replace the increasingly moribund Montserrat Development Corporation. Companies will be expected to contribute towards the cost of such a study.

6.6 Legislation, regulation, enforcement and governance

The overall choice in terms of legislative and regulatory regimes is between creating a highly regulated environment with strict enforcement and a lighter regulated regime with the emphasis on self-regulation supported by regulation and enforcement when necessary. A highly regulated, command-and-control system would not be effective in the Montserratian context due to limited capacity to develop and enforce legislation. Rather, a combination of measures would seem to be more appropriate. This should focus on improving legislation in a few critical areas, improving the ability to monitor and enforce requirements, and developing a multi-stakeholder agreement to cover areas of management of the mining sector within the control and influence of those stakeholders. The threat of tighter regulation if voluntary measures fail to show the desired results would remain, although this threat is clearly reduced by historically weak enforcement in Montserrat.

There is strong evidence of a broad consensus around many key issues amongst mining companies and affected communities. This suggests that a voluntary Sand Mining Code of Conduct – jointly agreed between industry, government and community representatives – could lead to improvement in many of the current problems. The government should therefore work towards establishing standards and norms for regulating the environmental and health and safety impacts, in conjunction with affected stakeholders. Such a multi-stakeholder approach to managing sustainable mining reflects trends in good practice internationally.

A Code of Conduct should take the principle of avoidance of impacts as a primary mitigation measure, and could cover commitments in relation to, inter alia:

• The planning and impact assessment process, including limiting the timing of mining activities;

• Community consultation, including public communication and awareness of agreed measures contained in the Code of Conduct;

• Transport, including clear limits on time and numbers of truck movements on public roads, vehicle conditions (tyres, breaks etc.);

• Noise management, including appropriate location of screening activities, limiting use of horns, monitoring of noise levels;

• Environmental management;

7 The sand-exporting facilities in Guyana are marketing themselves in this way, see

www.guyanasand.com.


• Rehabilitation and closure requirements;

• Revenue payments; and

• Training and education, including requirements for safety training.

The MSC, established to advise on the terms of reference for this study and to advise on the study process, could be an appropriate group to develop the voluntary multi-stakeholder Code of Conduct. This would require it to become more formalised as a multi-stakeholder group for consultation and coordination, with development of a clear governance structure and procedures. The MSC could also oversee the establishment of Belham Valley stakeholders meetings, which may require a trusted third party to facilitate community/company dialogue.

Improved monitoring and public reporting is required to promote transparency and trust, including annual reporting of government revenues from mining in line with the EITI. A clear complaints mechanism should also be established for handling stakeholder complaints, in line with international good practice on grievance mechanisms in the extractive industries. One option would be for a small sub-group of the MSC to perform this role.

There is an important role for government in promoting public and company education on a sustainable mining industry and its impacts, benefits and safety issues. There is also an urgent need for increased capacity for monitoring and enforcement, for instance through a dedicated mining specialist located within an appropriate government department. It is important that education and sharing of information are seen as essential aspects of compliance and enforcement.

The formal legal and regulatory framework must be harmonised with respect to the definition of minerals, ensuring that licensing requirements are applied to both private and public land. More formal control and enforcement must also be sought on several high-risk issues, including specific requirements for company reporting on environmental and health and safety issues. To ensure that sand-mining activities operate within a framework that ensures cost-effective operation whilst minimising negative impacts, an MDP should be developed for the Belham Valley. This would include:

• a strategic environmental and social impact assessment for mining activity in the Belham Valley;

• a mineral resource assessment to determine the feasibility of restricting/zoning extraction;

• noise modelling and assessment;

• zoning based on the strategic environmental and social impact assessment, resource modelling and noise assessment; and

• permitting and operating conditions for all firms extracting resources and operating in the valley.

Finally, there is the critical issue of ensuring that movement of sand along the A01 does not result in the rapid deterioration of the road and that DFID’s conditionality requirement is met. The option of increasing the road specification to better cope with heavy vehicle movement should be considered, but the cost is likely to prove disproportionate to the benefits gained, particularly at low levels of usage. Irrespective of whether the specification is increased or


not, it is recommended that an eight-tonne axle-load limit should be introduced as part of the new Road Transport Act and certificates of roadworthiness are introduced and rigorously applied to all heavy goods vehicles using the road. Any vehicles suspected of being overloaded or not meeting roadworthiness standards should be escorted to the site of the weighbridge, where loads would be reduced to legal limits or transferred to vehicles meeting roadworthiness standards. Any surplus sand impounded at the site could be mixed with bitumen and used in resurfacing the roads.

In addition to legislative and regulatory change, there is also a need to formalise supporting organisational structures as follows:

• The Ministerial–level Mining Steering Group (MSG) should take lead responsibility for policy development, legislation and implementation. Ministries represented should include MAHLE, Finance, Economic Development, Communication and Works, and MEHCS.

• The MSC as the multi-stakeholder group should review and coordinate action to ensure that mining is sustainable as an industry and in the overall sustainability of Montserrat. The MSC would be responsible for developing the Code of Conduct and providing views and advice to government.

• Increased resources are needed within government for monitoring and enforcement, as well as providing a secretariat function for the MSG and MSC.

6.7 Resources and export facilities

Even if volcanic activity subsides, the Belham Valley will remain by far the best source of material in terms of both quality and volume. There are some options with regard to where mining activity takes place within the valley, with residents preferring that it takes place higher up the valley out of line-of-sight from most houses. This needs to be considered in relation to reduction in noise and other disturbance impacts on residents, the relative quality and quantity of the deposits, its implications for the cost of material extraction and efficiency of mining operations, as well as implications in terms of any increase in volcanic or other risks. The main options in terms of export facilities are Little Bay, Isles Bay at the southern end of the Belham Valley, and Fox’s Bay. The Old Towne northern end of the Belham Valley, where a jetty used to be located, has been excluded because of the high levels of inundation and the jetty in Plymouth has been excluded because of its location in the exclusion zone. It could, however, become an option if the volcano was to become dormant. Possible locations on the eastern side of the island have been eliminated because of the more difficult sea conditions and because the industry would still be incurring high transport costs whilst the only available resource remained in the Belham Valley. In addition, an east coast location would also see a continuation of the health, safety and environmental issues arising from transporting sand across the island until resources on the east side of the island (notably in the Trant’s area) become accessible. This could only happen when temperatures of the deposits cool down, estimated by the MVO to take up to 10 years.

Table 6.1 summarises the advantages and disadvantages of the three main options, which are described and assessed in more detail below.


Table 6.1 Assessment of options for export facilitation

Key Largely meets criterion Partially meets criterion/variety of impacts Largely does not meet criterion

Criteria for assessment

Little Bay Fox’s Bay Isles Bay

1. Development of mining and quarrying

• Extraction and export in different locations

• Slow/no growth potential

• Industry still incurs some transport and handling costs

• Medium to high growth potential

• Transport costs reduced to almost nothing

• High growth potential


• Detrimental to long-term tourism development

• Reduces activity in Belham Valley

• Makes Fox’s Bay unsuitable for future tourism development

• Industry could expand enormously

• Potential loss of beach facilities and tourism

3. Complementarity with other projects and initiatives

• Damage to A01 road • Difficulties in

combining with Little Bay port and town activities once built

• Reduced damage to A01 road

• No conflict with other developments in Little Bay

• Strong compatibility with geothermal project (use jetty for access/evacuation)

• Damage to A01 road eliminated

• No conflict with other developments in Little Bay


• Low volcanic risk to transport and export facility

• Volcanic risk to extraction of deposits

• Volcanic risk to extraction, transport and export facility

• Occupational risks for workers of c.8x corresponding UK occupational risk (SAC15)

• Volcanic risk to extraction, transport and export facility

• Occupational risks for workers of c.6x corresponding UK occupational risk (SAC15)

5. Health and safety issues

• Risks to people living, working and using A01 road

Health and safety risk of A01 reduced

Health and safety risk of A01 significantly reduced

6. Minimising adverse environmental impacts

• Not all activity takes place in Belham Valley

• Adverse environmental impacts in Fox’s Bay

• Better management of landform in the valley

• Increased environmental risks in Isles Bay

• Better management of landform in the valley

7. Implementation considerations, including stakeholder views

• Communities along road accept current levels of use have to continue

• Residents in Belham Valley want activities better managed

• Preferred option for stakeholders in the Belham Valley and along A01

• More costly for mining companies

• Requires significant investment in infrastructure

• Impacts on Belham Valley residents and tourism sector may exacerbate opposition to the plan

• Requires significant investment in infrastructure

8. Financial and economic considerations

• High financial cost to industry

• Economic cost of A01 road degradation

• No new facility cost

• Costs in building road and jetty

• Some loss of tourism in the Belham Valley

• Costs in building jetty • Loss of tourism in the

Belham Valley


Note: some environmental and health and safety issues will continue through the industry serving domestic markets.

There are few advantages in continuing to use Little Bay other than the low level of volcanic risk to the export facility. However, if the Belham Valley is affected by volcanic activity there may be no material to export, or at least an interruption of exports. There is a cost saving in that no new facility is created, but there would continue to be a high financial cost to the industry and financial and economic costs incurred by the government and affected communities.

Continued use of Little Bay does not fit with the proposed developments there and the negative impacts on the A01 road would reduce the value of investment in road improvement. Overall, continued use of Little Bay does not resolve any of the current issues and the currently experienced disadvantages would increase if the level of mining activity increased. Little Bay nevertheless remains the only export option under current levels of volcanic activity and risk until an alternative is developed.

The options for locating a jetty in either Isles Bay or Fox’s Bay have broadly similar impacts in terms of assessment criteria. The most significant differences are that the mining industry would still incur some level of costs in transporting material to Fox’s Bay, whilst social and environmental impacts in the Belham Valley (and hence opposition from residents) would be less than under the Isles Bay option. Both options are susceptible to volcanic risk and both eliminate the transportation costs as well as the environmental and health and safety issues arising from sand-mining trucks using the A01 road. Both options are also more compatible with future development plans for Little Bay than the option of continued sand exports from the port at Little Bay.

6.8 Export facilities cost analysis

Costs are clearly a major consideration in comparing the various options for export facilities. They are also quite difficult to estimate and compare, partly because they occur at different times, depend on different levels of mining activity, and are incurred by different stakeholders.

Production forecasts were estimated for the three export options. The Little Bay forecasts are based on historical production and current operating costs obtained from the industry. Transport and loading costs associated with export from Little Bay (11km from the Belham Valley) are estimated at EC$10/tonne, based on interviews with mining companies. Given that several companies interviewed do not find it profitable to export sand at current prices it is assumed that the industry remains marginal and only exports 100,000 tonnes per annum in the period to 2021.

For the Isles Bay option, transport and loading costs are assumed to fall to EC$2/tonne (average distance of 1km).8 At this level, the industry becomes significantly more competitive and long-term exports are only constrained by the market and the capacity of the export jetty. It is assumed that a dedicated jetty could accommodate barges with an average capacity of 4,000 tonnes and serve seven barges per week for 160 days of the year. Under these assumptions, production reaches close to 900,000 tonnes in 2016 and remains at that level.

8 Isles Bay transport and handling costs are 20% of equivalent costs at Little Bay despite the very

short distance to the jetty in Isles Bay, because these costs include loading and handling of sand (i.e. the material is first transported from Belham Valley to a screening plant and then transported again from stockpiles to the jetty).


For production forecasts in Fox’s Bay, higher transportation costs vis-à-vis Isles Bay directly translate into higher production costs and lower competitiveness and output. We assume that transport and loading costs are EC$4/tonne (distance of 4km). Under these assumptions, production reaches c.570,000 in 2016 and remains at that level. This production figure is derived by taking a relative mid-point between production at Little Bay and Isles Bay.

The other assumptions used for base case analysis are set out below:

• Core assumptions

- mining, excavation and screening continue to take place in lower Belham Valley, in close proximity to villa owners and residents;

- constant 2010 prices (no inflation), including tourism spending levels;

- a discount rate of 3.5% is used in line with guidance from HM Treasury; and

- the volcanic hazard level remains at Level 3, whereby access to Fox’s Bay remains permitted during daytime only and there is no relocation of residents to this area.

• Jetty assumptions

- the estimated cost of building a jetty at Isles Bay or Fox’s Bay has been estimated by Halcrow to be c.US$4m (EC$11m); and

- the jetty is public-sector financed with investment recovered partly or wholly through user fees charged to the mining companies.

• Sand-mining salaries spent locally assumptions

- 30 employees accounted for 2010 production of 30,000 and these employees were part time (as per interviews), implying 15 full-time equivalent (FTE) employees.

- at present, half of these employees are assumed to be involved in ‘transport and loading’ and half are involved in ‘digging and screening’. This implies that – under the Little Bay option – one ‘transport and loading’ FTE employee as well as one ‘digging and screening’ FTE employee is required for every 4,000 tonnes of production.

- economies of scale are assumed if the export location is shifted to either Fox’s Bay or Isles Bay. Based on interview data regarding transportation and handling costs, it is assumed that one FTE ‘transport and loading’ employee is required for every 20,000 tonnes of production under the Isles Bay option. Under the Fox’s Bay option, one FTE ‘transport and loading’ employee is required for every 12,000 tonnes of production.

- it is assumed that shifting to Fox’s Bay or Isles Bay also requires fewer employees working in ‘digging and screening’, but that the effect of economies of scale is only half of the impact on ‘transport and handling’ activities. It is thereby assumed that one FTE ‘digging and screening’ employee is required for every 10,000 tonnes of production under the Isles Bay option. Under the


Fox’s Bay option, one FTE ‘digging and screening’ employee is required for every 6,000 tonnes of production.

- 50% of total salaries is assumed to be retained on the island.

- based on interviews, it is assumed that the amount of profit that is retained on Montserrat is negligible.

• Tourism spend assumptions

- 100 directly impacted villas (of which 5% delinquent), at 50% occupancy rate in Jan 2011 (Source: stakeholder interviews/surveys); and

- average total spending (maintenance and discretionary) per impacted villa is EC$200,000 per full-year equivalent. 50% of this spending is assumed to be retained on the island.

Although this analysis does not attempt to directly quantify the environmental costs of noise, dust and environmental degradation, these impacts are indirectly accounted for in the assumption on reductions of occupancy rates and tourism spend.

• Government revenue assumptions

- the combined wharfage and royalty remains at EC$4/tonne throughout the period; and

- corporate taxes and PAYE paid per tonne are assumed to equal EC$3/tonne, the average taxes collected for sand-mining companies over 2007-2010 (Source: Montserrat Inland Revenue).

Although government revenues are usually considered a transfer and excluded from economic appraisals, we have included them here due to the importance to Montserrat of generating additional fiscal revenues.

6.8.1 Base case

The table below sets out orders of magnitude in the form of net present values (NPVs) for the main economic and financial costs/benefits over a 10-year horizon for the three export facility options, where Little Bay represents the ‘do nothing’ scenario (base case).


Table 6.2: Cost/Benefit NPV analysis (EC$ million)

Cost categories 1. Little Bay

2. Fox’s Bay

3. Isles Bay

Assumptions

Impact on road costs

-7.8 -0.1 0.0 • Continued use of A01 for sand transport (under Little Bay option) leads to EC$1m increase in maintenance costs from 2014 onwards (Source: DFID and GoM 2010 and interviews with Ministry of Construction and Works).

Impact from construction of jetty

0.0 -10.4 -10.4 • See detailed assumptions above.

Sand-mining salaries spent locally

2.7 7.8 7.3 • See detailed assumptions above.

Impact on tourism expenditure

-5.5 -5.5 -11.0 • Drop in occupancy rate to 40% under Little Bay and Fox’s Bay options due to unrestricted activity in Belham Valley in close proximity to residents.

• Drop in occupancy rate to 30% under Isles Bay option due to ongoing activities of loading barges for export.

Government revenue through royalties and taxes

2.9 16.6 25.8 • See detailed assumptions above.

All three options are associated with economic costs as well as benefits. Under the Little Bay option, a significant proportion of these costs are due to the increased maintenance costs for the A01 road.

If a jetty were constructed in Fox’s Bay or Isles Bay, the majority of the cost (NPV of EC$10.4m) would be offset by savings on maintenance of the A01 road (NPV of EC$7.8) that would be incurred in the Little Bay option. However, it should be noted that these costs that are associated with continued use of the A01 road only include additional maintenance costs, and exclude the social and environmental costs that are also likely to be significant and would also be avoided if a jetty was constructed in Isles Bay or Fox’s Bay.

Government revenues increase significantly under Fox’s Bay relative to Little Bay (in NPV terms increasing from EC$2.9m to EC$16.6m), and increase even further under the option of Isles Bay (EC$25.8m). Salaries captured and spent on-island – at EC$2.7m in the Little Bay option – are significantly higher in the Fox’s Bay and Isles Bay options. However, due to economies of scale, the salaries captured from employees under the Isles Bay option (EC$7.3m) are broadly similar to those in Fox’s Bay (EC$7.8m) – this is due to the greater number of truck drivers needed in the latter case (driving four times the distance in Fox’s Bay compared to Isles Bay).

Costs associated with reduced expenditure in the residential tourism sector are incurred under each of the options. Excavation and screening continue to take place in the lower Belham Valley even when the jetty is located elsewhere, leading to a fall in residential occupancy rates. In the Isles Bay option, the negative impact on tourism is highest, due to


the combined effect of excavation, screening and trucking to and from the jetty, activities all taking place in the valley in close proximity to residential areas.

6.9 Risk and sensitivity analysis

A series of sensitivity analyses were conducted to test how robust the overall cost assessment is and how sensitive it is to assumptions made. This analysis is based on the base case. The main risks assessed are:

1. Failure to implement the legislative and regulatory recommendations;

2. Access to Belham Valley deposits restricted to upper part of the valley;

3. Production forecasts fail to materialise;

4. Volcanic activity ends production after five years;

5. Increased tourism spend as a result of moving some activities away from the Belham Valley; and

6. Discount rate of 15% better reflecting the risks associated with investment in Montserrat.

Risk 1: Failure to implement legislative and regulatory recommendations

If the reforms recommended in this report are not effectively implemented, there are risks to several aspects of the above cost analysis. However, these risks are difficult to quantify due to the varying nature of the suggested reforms and are discussed qualitatively with reference to recommendations on fiscal transparency, an MDP for the Belham Valley and road damage and road safety:

• failure to improve fiscal transparency may lead to reduced collection of corporate and personal income taxes. Failure to curtail the culture of awarding tax and other concessions on a case-by-case basis similarly risks reducing the tax take significantly. In addition, governance weaknesses may prevent revenues from being channelled effectively towards development outcomes.

• failure to put in place an MDP for the Belham Valley, including an Environmental Management Plan, will result in continued disturbance of residents and environmental degradation. Failure to move ahead with a Mining Code of Conduct runs a similar risk, since failure to limit mining activities to working hours and weekdays and to reduce the noise impacts of horns will have negative impacts on occupancy rates and tourism expenditure.

• failure to proceed with much-needed road management and safety reform will have an impact in terms of increased risk of serious accidents and disruption to the industry. Similarly, failure to strengthen control of loading weights will lead to continued deterioration and higher maintenance costs as the road continues to be used to serve the local market, including major infrastructure projects in Little Bay.

• failure to address the grievances of residents around the Belham Valley increases the risk of legal action being pursued by resident groups against the GoM for failing to adhere to covenants designating the area as residential and commercial (but not industrial).


There are, therefore, significant risks from not implementing the legislative and regulatory recommendations and hence it is assumed these are implemented in the risk and sensitivity analysis which follows.

Risk and Sensitivity 2: Restricted access to Belham Valley

To assess whether restricting mining activity to the upper part of the Belham Valley (above a line where the old bridge for accessing Isles Bay was located), it was assumed that such a restriction would primarily reduce the negative impact on residential tourism. For options 1 and 2, this implies that all mining activities (excavation, screening, trucking) take place away from the main residential areas. For Option 3, this implies that excavation and screening have more limited impacts on residents, although trucking materials to the jetty 160 days of the year would still have a negative impact. In this option, we assume that transportation and handling costs are not significantly affected. This is because even under the ‘unrestricted’ base case some companies will extract from upper Belham Valley given the proximity to screening and stockpiling locations.

These assumptions result in a positive impact on tourism expenditures under all options. In Option 1 (Little Bay), we assume an uplift in annual average occupancy rates from 40% (in the base case) to 55%, associated with an NPV uplift of EC$8.3m compared to the ‘unrestricted’ base case. The same assumptions and NPV uplift apply to Option 2 (Fox’s Bay).

For Option 3 (Isles Bay), restrictions of excavation/screening activity to upper Belham mean we assume an increase in annual average occupancy rates of impacted villas from 30% (base case) to 40%, which has a positive NPV impact of EC$5.5m relative to the ‘unrestricted’ base case.

Comparison of the restricted and unrestricted scenarios shows that effectively restricting mining to the upper part of the Belham Valley could lead to significant economic benefits through increases in tourism spend, across the three options.

On the basis of this ‘restricted’ case, the drop in government revenue of moving from Isles Bay to Fox’s Bay (NPV of EC$9.2m) is largely offset by the uplift in tourism expenditure (NPV of EC$8.3m).

Risk and Sensitivity 3: Production shortfall relative to forecasts

To assess the sensitivity of our findings to our production forecasts, we ran the analysis based on a 50% drop in production in each year.

With half as much trucking of sand to Little Bay under Option 1, the A01 road-maintenance costs fall by 50%. As we base this sensitivity analysis on the ‘restricted access’ case, we do not assume there is any impact on tourism spending in the Fox’s Bay option (since all mining activity is restricted to an area away from the majority of residents).

Under the Isles Bay option, however, half as much production means half as much trucking back-and-forth to the jetty, which will have a positive impact on occupancy rates and tourism spend. We have assumed in this sensitivity that the fall in occupancy rates is half of what it is under the base case, i.e. there is a drop of 5% in Little Bay and Fox’s Bay and a drop of 7.5% in Isles Bay. The results are shown in Table 6.3 below.


Table 6.3: Cost/Benefit NPV analysis (base case/unrestricted access with 50% fall in production)


2. Fox’s Bay

3. Isles Bay

Assumptions


-3.9 -0.1 0.0 • 50% less use of A01 for sand transport (under Little Bay option) leads to EC$0.5m increase in maintenance costs from 2014 onwards.


0.0 -10.8 -10.8 • Base case assumptions (see above).


1.4 3.9 3.6 • Base case assumptions (see above).


-2.8 -2.8 -4.1 • Drop in occupancy rate to 45% under Little Bay and Fox’s Bay options due to unrestricted activity in Belham Valley in close proximity to residents.

• Drop in occupancy rate to 40% under Isles Bay option due to ongoing activities of loading barges for export.



The result of this sensitivity analysis shows that the main impact of a significant shortfall in production is on government revenue and salaries spent locally by workers in the industry (both of which correlate directly with production). Under this sensitivity analysis, the NPV increase in government revenue from a jetty in Isles Bay (positive EC$4.6m) is greater than the reduction in tourism expenditure (negative EC$1.4m). This means that at lower levels of production, when access is unrestricted, Isles Bay compares more favourably with Fox’s Bay when comparing government revenues and tourism expenditure. However, this analysis does not quantify the risks of resident unrest and possible legal action of continuing with unrestricted mining in the lower Belham Valley.

Risk and Sensitivity 4: Volcanic activity wipes out industry in year 2016

There have been four pyroclastic flows into the Belham Valley since 1995. The longest one, which reached 6km (within 2km of reaching the sea), occurred on 8 January 2010. The volcanic risk remains significant. The SAC main report from February 2011 estimates that there is a 2% probability of a large dome collapse to the north-west over the next 12 months toward the Belham Valley (SAC 2011a). The probability of this flow reaching all the way to the bottom of the Belham Valley is not quantified.

To test what volcanic activity would mean for our export option cost analysis, we assumed that volcanic activity results in pyroclastic flows that reach the bottom of the valley in 2016 (halfway through our forecast period). The first implication is that this would essentially wipe out the industry, even if there is sufficient warning for sand-mining companies to remove their


equipment, since it would be many years before the material would cool down enough to be workable again.

A second implication is that the volcanic activity either destroys the jetty or renders it useless for a number of years as volcanic materials cool down. Under the assumption that funding is obtained for initial construction and paid off through user fees over time, the destruction of the jetty renders the outstanding amount a non-recoverable cost for the funding agency.

In this sensitivity, there is less damage to the A01 road under the Little Bay option, less revenues from mining, and a sharp fall in tourism expenditure from the year of volcanic activity (we assume activity renders Isles Bay – representing 30% of directly affected villas – inaccessible after the volcanic event).

Table 6.4: Cost/Benefit NPV analysis (base case/unrestricted access with large volcanic event in 2016)


2. Fox’s Bay

3. Isles Bay

Assumptions


-2.6 -0.1 0.0 • Some damage done to A01 road in Little Bay option, but only in years preceding volcanic event.






-2.6 -2.6 -5.2 • Pre-volcanic event: Drop in occupancy rate to 40% under Little Bay and Fox’s Bay options due to unrestricted activity in Belham Valley. Drop in occupancy rate to 30% under Isles Bay option.

• Post-volcanic event: No spending on Isles Bay villas after volcanic event (Isles Bay rendered inaccessible).



Under this sensitivity, the road-maintenance costs in the Little Bay option fall by almost half. Government revenues also fall sharply due to the removal of high production volumes in later years. Based on this analysis, continued export from Little Bay looks like an attractive option, given the costs of constructing a jetty. However, as noted above, this analysis understates the true costs of continued use of the A01 road (in particular given safety and environmental impacts), as well as the complementary benefits of a jetty in Fox’s Bay (for use by a potential geothermal project). In this sensitivity, the choice between Isles Bay and Fox’s Bay comes down to preference of which sector to promote, rather than absolute economic advantage: higher government revenues under Isles Bay (+NPV EC$2.6m) are offset by lower tourism expenditure (-NPV EC$2.6).


Risk and Sensitivity 5: Changes in the level of tourism expenditure

It proved difficult to establish with any precision the expenditures of residents impacted by mining. Figures reported during our stakeholder consultations varied widely, and are not captured in national statistics.

As shown in the findings above, the choice between Isles Bay and Fox’s Bay is a close one, in particular under assumptions of restricted access to Belham Valley (where most mining activities are away from the ‘doorstep’ of residents), where the drop in government revenue of moving from Isles Bay to Fox’s Bay (EC$9.2m) was largely offset by the uplift in tourism expenditure (EC$8.3m). To understand how sensitive this finding is to our assumptions on tourism spend, two tests were applied.

For the first test, we noted that changing the assumptions on average occupancy rate does not alter the relative choice between Fox’s Bay and Isles Bay, as long as we assume that occupancy rates differ by a constant amount between Fox’s Bay and Isles Bay. We therefore tested what the impact would be if the difference in occupancy rates between Fox’s Bay and Isles Bay differed by 5, 10, and 15 percentage points. For the second test, we assessed what the impact would be if average residential tourism spend was 50% higher or lower than assumed in our base case/‘unrestricted access’ case. The results for both tests are summarised in Table 6.5.

Table 6.5: Sensitivity analysis of tourism expenditure (EC$ million)

NPV uplift of Fox’s Bay vs.

Isles Bay TEST 1

5% difference in occupancy rates 2.8

10% difference in occupancy rates (base case) 5.5

20% difference in occupancy rates 11.0

TEST 2

EC$200,000 per year avg. spend (base case assumption) 5.5 50% higher than basic assumption 8.3 50% lower than basic assumption 2.8

The base case analysis above shows that an export jetty at Isles Bay could result in an NPV uplift of EC$9.2m in government revenues relative to a jetty in Fox’s Bay, and this outweighs the fall in NPV of tourism expenditure of EC$5.5, thus pointing to the choice of Isles Bay on purely economic grounds.

The table above shows that this analysis is highly sensitive to assumptions regarding occupancy rates: if a jetty in Isles Bay reduces the occupancy rates by 20% relative to Fox’s Bay (rather than the 10% base case assumption), then the latter option becomes the preferable option. Similarly, if the real average annual spend (discretionary and maintenance) per impacted villa was 50% higher than the EC$200,000 assumed in the base case, this would also make the choice closely contested on purely economic grounds.

In particular, the table above shows that, if it is conceivable that the average occupancy rate differential between Isles Bay and Fox’s Bay could be around 20%, then the choice of


export facility location comes down to a question of the relative weights the GoM attaches to developing the mining and tourism sectors.

Risk and Sensitivity 6: Change in discount rate

The table below shows the impact of a 15% discount rate to reflect the high level of risks associated with these future revenue and cost streams emanating from activity in the Belham Valley (based on the ‘restricted access’ case).

Table 6.6: Sensitivity analysis based on a 15% discount rate (base case/unrestricted access, NPV relative to current levels)


2. Fox’s Bay

3. Isles Bay

Assumptions


-3.8 -0.1 0.0 • Continued use of A01 for sand transport (under the Little Bay option) leads to EC$1m increase in maintenance costs from 2014 onwards (DFID and GoM 2010 and interviews with Ministry of Construction and Works).






-3.1 -3.1 -6.2 • Base case assumptions (see above).



The table above shows that a relatively high discount rate of 15% changes the picture only marginally. Under this sensitivity, the savings on road maintenance are not sufficient to offset the entire cost of the jetty, but the significantly higher government revenues under both the Fox’s Bay and Isles Bay options still make the Little Bay option unattractive. Table 6.6 also shows that the finding that Fox’s Bay and Isles Bay are close contenders is not sensitive to changes in the discount rate. After increasing the discount rate from 3.5% to 15%, the net effect of government revenues and tourism expenditure remains broadly similar in the two options (EC$5.0m in Fox’s Bay and EC$6.2m in Isles Bay).

The main conclusions from the sensitivity analyses are that:

• Restricting access to the upper Belham Valley reduces the negative impact on villa tourism by EC$1m p.a. for the Fox’s Bay option and EC$0.5m p.a. for the Isles Bay option;


• If output is below 50% of that forecast, then the reduction in tourism revenues is greater than the increase in government revenues (the collection of which is subject to several uncertainties, as argued elsewhere in the report);

• The benefit of a jetty in either Isles Bay or Fox’s Bay is eliminated if volcanic activity puts an end to mining in the valley before 2016;

• Tourism spend is highly sensitive to the assumptions made on occupancy. For example:

– a 20% difference in occupancy rates between Isles Bay and Fox’s Bay would make the latter the more attractive option; but

– a difference of 5% or less makes Isles Bay more attractive.


This section has explored various scenarios and assessed different options against a wide range of criteria. These include sustainable development of the industry, contribution to Montserrat’s overall development, volcanic risk and all other health, safety and environmental impacts, as well as ease of implementation and last but not least financial and economic costs and benefits.

Against nearly all criteria, the current situation is not one which anyone would want to continue and under the ‘do nothing’ scenario the industry remains fragile and fragmented and the economic development of Montserrat is impeded. Environmental and community health and safety impacts continue and may get worse, given that several aspects of the legal framework are unclear, and enforcement is limited. The benefits of other major development projects will be reduced, and there will be additional damage costs to the A01. The amenity value of Belham residents will continue to be impaired, with consequent unrest amongst some community stakeholders.

The first option with regard to the policy framework is that of financial incentives and it is recommended that Montserrat maintain current incentives, duties and royalties and also work with the industry to develop a regional marketing initiative.

It is recommended that a lighter rather than heavier regulatory regime is used to support the sustainable development of the industry. The various elements include:

• A Code of Conduct jointly agreed between the industry, government and community representatives. It is suggested that developing such a code should be the responsibility of the MSC, which was formed to guide this study;

• An MDP is put in place for the Belham Valley, including a strategic environmental and social impact assessment to help in setting permitting and operating conditions;

• Improved monitoring and reporting of tax and government revenues collected from the industry;

• Increased capacity in the DoE to ensure that there is effective education and enforcement; and


• Introduction of an eight-tonne axle limit in the forthcoming Road Transport Bill and a mechanism to ensure that trucks transporting sand meet roadworthiness requirements.

The assessment of export options shows that the Little Bay option does not benefit any stakeholder group. The two main alternative options are Fox’s Bay and Isles Bay, for which costs and technical issues have been explored in more detail. They are generally similar, but with two major differences. Costs of production are higher in the Fox’s Bay option, leading to lower levels of exports. Community impacts are significantly higher under the Isles Bay scenario, with likely decreases in tourist activity and continued stakeholder unrest in the Belham Valley. Based on a pure economic assessment, however, the net impact is broadly similar under these two options, as the above calculations of NPVs of economic and financial impacts demonstrate. However, Fox’s Bay does have one important advantage, in that it provides strong compatibility with the development of the geothermal power project: a jetty in Fox’s Bay could be used for delivering supplies as well as for possible evacuation of people working on this project.

There may be ways in which negative impacts could be mitigated by restricting most sand-mining activities to taking place higher up the valley. This would fit well with the Fox’s Bay export facility option. However, it also raises several technical issues requiring further investigation, including the operational effectiveness of limiting supply from an industry perspective and managing the additional risks inherent in transporting the material to Fox’s Bay.


7 Conclusions, recommendations and next steps

7.1 Conclusions and recommendations

The concentration of sand mining in the Belham Valley is a relatively recent phenomenon following from the pyroclastic flows that ended sand mining at Trant’s on the eastern side of the island in January 2010 (where deposits will remain inaccessible until they cool down). Whilst it is widely acknowledged that growth in this industry is crucial for Montserrat’s economic development, experience to date shows that the negative social and environmental externalities and concerns have not been adequately addressed.

The industry is currently at a very low ebb, operating at between 10% and 20% of capacity and employing around 50 people, many of whom are employed on a part time, temporary or casual basis. It also faces strong competition from companies operating in other countries with a lower cost base. A sustainable future for the industry depends on resolving the tensions between the economic benefits the industry could bring and the social and environmental consequences, as well as addressing the competitive disadvantages of the current extraction, screening transport and export arrangements.

Many parts of the legal framework are outdated and both institutional capacity and technical capability are weak, particularly in relation to the mining and quarrying industry. There are inconsistent definitions of minerals in the PPA and the MVA and different licensing requirements for mining activity on public and private land. These legal problems need to be resolved for the industry to move forward and achieve its full potential.

Options were assessed against a wide range of criteria. These included sustainable development of the industry, contribution to Montserrat’s overall development, volcanic risk and all other health, safety and environmental impacts, as well as ease of implementation and financial and economic costs and benefits.

The figure below summarises the main recommendations with regard to financial incentives, legislation, regulation and enforcement, planning and licensing and voluntary arrangements. Recommendations with regard to industry incentives, duties and obligations and legislation, licensing and voluntary agreements apply under all three options for export facilities.


Figure 7.1: Overview of policy recommendations

Mechanism Recommended approach

Legal framework • Consistent definition of minerals throughout legislation• Clearer legal requirements for operating licences,

management standards, and reporting• Requirements for community consultation• 8-tonne axle limit and enforce vehicle roadworthiness

Stakeholder engagement • Mining sector Code of Conduct• Programme of stakeholder engagement and communication

Minerals Development Plan

• Develop Belham Valley Minerals Development Plan• Resource assessment• Noise modelling and assessment• Consultation

Financial incentives • Maintain current incentives• Support regional marketing

Export options • Jetty technical assessment• Volcanic risk assessment

Formalising organisational structures

• Ministerial–level Mining Steering group (MSG)• Multi-stakeholder Mining Steering Committee (MSC)• Increase capacity of Department of Environment

Mechanism Recommended approach

Legal framework • Consistent definition of minerals throughout legislation• Clearer legal requirements for operating licences,

management standards, and reporting• Requirements for community consultation• 8-tonne axle limit and enforce vehicle roadworthiness

Stakeholder engagement • Mining sector Code of Conduct• Programme of stakeholder engagement and communication


• Develop Belham Valley Minerals Development Plan• Resource assessment• Noise modelling and assessment• Consultation

Financial incentives • Maintain current incentives• Support regional marketing

Export options • Jetty technical assessment• Volcanic risk assessment


• Ministerial–level Mining Steering group (MSG)• Multi-stakeholder Mining Steering Committee (MSC)• Increase capacity of Department of Environment

The main conclusions from the assessment of each of the options for the location of a jetty facility are that Little Bay performs badly on nearly all criteria and there is little to choose between Fox’s Bay and Isles Bay. Little Bay is the worst of the three options with regard to all criteria except volcanic risk and even on this criteria it is doubtful whether the industry would be able to continue if there was a major pyroclastic flow down the Belham Valley. The choice between Fox’s Bay and Isles Bay is a close call on most criteria and really boils down to the weighting the GoM places on the importance of the industry and the detriment mining causes to the residents and visitors to the valley. There are several ways in which this could be better managed. Restricting activity to higher up the valley would certainly help, but has to be balanced against material quality and ease of extraction considerations. Having the export facility in Fox’s Bay would be better for residents and visitors but means an increased cost to the industry and raises additional concerns with regard to volcanic risk and management of activities in the exclusion zone. However, Fox’s Bay does have an important advantage in that a jetty there could be used for supplying the geothermal project in the area, as well as provide an evacuation route for people working on this project.

The economic cost and benefit analysis above indicates that there is no clear recommendation with regard to whether an export facility should be located in Isles Bay or Fox’s Bay – the increase in government revenue from higher production levels in Isles Bay is largely offset by the reduction in expenditure in the residential tourism sector. Based on this analysis, the choice of export facility would boil down to a call by the GoM on whether it continues to see a role for residential tourism in the country’s future.

To assess the technical feasibility of constructing a jetty, Halcrow was commissioned (through an OPM sub-contract) to do a pre-feasibility study on constructing an export jetty at Fox’s Bay, Isles Bay, and on the east coast. The report (included as Annex E to this report) assessed the suitability and indicative costs of building a jetty in these different locations, taking into account transportation, maritime and coastal perspectives. On this basis, it concluded that Fox’s Bay was the preferred option. Whilst a jetty in Isles Bay benefits from being closer to the resource, a jetty in Fox’s Bay benefits from lower downtime due to


sedimentation, as well as reduced maintenance costs. A full technical feasibility study will be required prior to construction of an alternative export facility.

Finance for the construction of a jetty could be raised in several ways. The industry could pay for construction and maintenance either up front or through a wharfage charge. Such an approach would, however, raise the risk of preferential access and charging arrangements could be perceived to be unfair. An independent operator could be offered a design, build and operate contract under which costs are recouped by charges. In this case, it is likely that some form of insurance against volcanic risk would be required. The facility could also be financed by the GoM, again recouping costs through charging arrangements. The significant reductions in transportation costs associated with the Fox’s Bay and Isles Bay options (reductions by 60% and by 80%, respectively) indicate scope for user fees to be levied for using the jetty facility. In all cases, it is likely that the facility would fall within the jurisdiction of the Port of Montserrat. Rather than predetermining the solution, the best way forward might be to arrange a design, build and operate tender to encourage different parties to come forward with the optimum solution.

7.2 Next steps

This study has established a framework and identified processes that will help to ensure sustainable and sound decision making with regard to the future of volcanic sand mining in Montserrat. The table below sets out timescales for actions and recommendations. The most immediate is an assessment of the relative volcanic risks of transporting and exporting from facilities in Isles Bay and Fox’s Bay, following the publication of the final version of the latest (15th) report of the Scientific Advisory Committee on Montserrat Volcanic Activity (SAC-15).

Figure 7.2: Next steps

Action Month 1 2 3 4 5 6 7 8 9 10 11 12

Legal framework

• Consistent definition of minerals

• Clarify requirements for operating licences

• Clarify requirements for standards, reporting, etc

• Clarify requirements for community consultation

• 8-tonne axle limit & vehicle road worthiness

Stakeholder engagement

• Mining sector code of conduct

• Stakeholder engagement programme


• Mineral resource assessment

• Noise modeling & assessment

• Community consultation

Financial incentives

• Review royalty & wharfage rates

• Support regional marketing strategy

Export options

•Jetty technical study

•Volcanic risk assessment


•Ministerial-level mining steering group (MSG) � � �

•Mining Steering Committee (MSC) � � �

•Increase capacity of DoE


References

British Geological Survey (2001), Volcanics for Construction (VOLCON) Summary Report.

DFID (2010a), Mid-year economic and budget review, 27-30 September 2010.

DFID and GoM (2010), Road Reinstatement Project (Project Memorandum). Draft 8 May 2010.

Godley BJ, Broderick AC, Campbell LM, Ranger S, Richardson PB (2004), “An Assessment of the Status and Exploitation of Marine Turtles in Montserrat”, in ‘An Assessment of the Status and Exploitation of Marine Turtles in the UK Overseas Territories in the Wider Caribbean’. pp. 155-179. Final Project Report for the Department of Environment, Food and Rural Affairs and the Foreign and Commonwealth Office.

Government of Montserrat (2008), Sustainable Development Plan 2008-2020.

Gunne-Jones, A. and W. Christopher (1998), ‘Sand Mining: A Position Paper from Montserrat’, in Ed. G. Cambers. Workshop papers. Coastal region and small island papers 1, UPR/SGCP-UNESCO

Phoenix Quarry (200x), Environmental Impact Assessment.

Ramsey, D. et al. (2002), ‘Reducing the impact of sand mining of Kosrae and the provision of a long-term supply of sand aggregate for construction: A way forward’. Draft for Consultation.

Shamrock Industries (2010), Environmental Impact Assessment.

Scientific Advisory Council (2011), SAC Report 15. Available online at www.mvo.ms.

Scientific Advisory Council (2010), SAC Report 14. Available online at www.mvo.ms.


ANNEX A Documentation reviewed

Legislation and regulatory instruments

Conservation and Environmental Management Bill (2010)

Minerals (vesting) Act (2002)

Mining License Template (2006)


Physical Planning Act (2002)

Radio-active Minerals Act (2002)

Registered Land Act (2008)

Roads Act (2002) and subsidiary legislation

Road Traffic (Amendment) Bill (2010)

Road Traffic Act (2008)

Government strategy and statistics

DFID Mid-year economic and budget discussions - Jan 2010 - Aide Memoire

DFID Mid-year economic and budget discussions - Sep 2010 - Aide Memoire

DFID Mid-year economic and budget review - Sep 2010

Employment and population statistics for 2001 and 2006

Exports and customs data 2005-2010

Government of Montserrat Estimates of Revenue and Expenditures 2010

Montserrat Sustainable Development Plan 2008-2020

Tourism data 2001-2010

Development planning

EIA for Phoenix Inc. Quarry Development Project 2003

EIA for port development at Little Bay

EIA for Shamrock Industries 2010

Feasibility study for quarry development 1989

Physical development plan 2000-2009

Road reinstatement project – Project memorandum

Terms of reference for design of port at Little Bay

Miscellaneous

Compete Caribbean: Private Sector Development and Competitiveness in the Caribbean 2009

Compete Caribbean: Programme Memorandum July 2009

Coventry University Project outlines 2001

Exploration, evaluation and testing of volcanic raw materials for use in construction

Report on Examination of Volcanic Ash 1997

Scientific and Hazard assessment 1999

Study to support a regional infrastructure fund in the Caribbean 2010


ANNEX B Consultations with interested parties

• Government agencies

Governance

– Governor & FCO

– EXCO

– Office of Chief Minister

Regulation, planning & enforcement

– Physical Planning Unit

– Attorney General

– Police

Finance & economic development

– Ministry of Finance

• Customs & Revenue

– Ministry of Economic Development & Trade

– MAHLE

• Department of Environment

– Ministry of Health & Community Services

Transport infrastructure

– Ministry of Communication & Works

– Port Authority

Tourism development

– Montserrat Tourism Board

– MDC

Volcanic risk

– DMCA

– MVO

• Communities

– Belham Valley home owners / residents

– Resident groups (MPOA)

– Truck route residents

– Belham Valley stayover visitors

– Belham valley day-visitors

– Fishermen

• Mining companies

– Owners

– Employees

• Other businesses

– Property managers

– Villa service providers

– Shop & restaurant owners

– Small Business Association

• Civil society

– Montserrat National Trust

– BEPG

• Landowners

• DFID & other development partners

• Sand customers

– Local construction firms

– Regional / international customers


ANNEX C Legislative review

This annex identifies key issues and recommendations for how the mining regulatory framework could be harmonised and developed. This is based on a summary of the key clauses in the legislation, best practice in mining regulation and applicability to current sand-mining and quarrying activities in Montserrat.

ISSUES AND POSSIBLE RECCOMENDATIONS

ISSUE 1: Inconsistent definition of ‘minerals’ under different pieces of legislation

Whereas PPA 2002 defines minerals broadly, the MVA defines minerals to exclude volcanic sand. Given Cl. 11 in MVA (2002),

RECOMMENDATION: Amend the definition of ‘minerals’ in MVA (2002) and all other relevant legislation to be consistent with that in the PPA.

ISSUE 2: Focus in licensing legislation is on ‘Crown lands’ although resource deposits exist on private property. Licensing should cover all operations irrespective of land ownership.

The Mining License Template (2008) only requires a license in cases where volcanic deposits are being extracted from Crown lands.

RECOMMENDATION: Address this gap in the legislation to cover licensing of mining activities on private land by changing wording (in preamble) from ‘lands owned by the Government of Montserrat’ to ‘lands governed by the Government of Montserrat’ or all mining and quarrying activities.

ISSUE 3: Overlap of Conservation and Environmental Management Bill with Physical Planning Regulation and Licensing arrangements, particularly in relation to monitoring and reporting arrangements.

The draft legislation proposes that a certificate of environmental approval will be required, along with a number of environmental permits. The draft legislation also sets out monitoring and reporting arrangements for environmental impacts to be determined on a case-by-case basis. This could create duplication of regulatory effort (e.g. where licensees provide multiple reports in line with different permits). There are also some inconsistencies between the legislation on when an EIA should be conducted, thereby being open to interpretation or inconsistent application.

RECOMMENDATION: Make guidelines regarding requirements for EIAs, action plans, monitoring and reporting consistent across different pieces of legislation.


ISSUE 4: Lack of provisions regarding road safety and axle-load limits in the proposed Road Traffic (Amendment) Bill.

Cl. 14 and Cl. 15 of the Road Traffic Act (2008) set out the requirements for examination of vehicles, and in doing so provide for ways in which ‘public service vehicles’ considered to not be roadworthy can be taken off the road. However, the legislation is unclear as to what applies for private vehicles. The draft Road Traffic (Amendment) Bill does not provide more detailed measures for how unsafe vehicles can be taken off the road. Nor does it address the issue of axle-load limits lacking specification.

RECOMMENDATION: Incorporate into the Road Traffic (Amendment) Bill clear mechanisms for removing unsafe vehicles from the roads as well as formal requirements to limit axle loads, e.g. to eight tonnes per axle.

LEGISLATION OF DIRECT RELEVANCE TO MINING ACTIVITIES

Physical Planning Act (2002)

• Definitions

o Defines ‘minerals’ broadly, as ‘a substance in liquid, solid or gaseous form occurring naturally in or on the earth or on, in or under the seabed and formed by or subject to a geological process, but does not include water’ (Cl. 2)

o Defines ‘mining’ as activity of prospecting or extracting ‘minerals’ i.e. ‘to carry out in relation to a mineral, an activity, with a view to working, carrying away, treating or converting that mineral’ (Cl. 2)

o Defines ‘development’ to include ‘mining’, i.e. ‘“development” means, subject to subsection (2), the carrying out of building, engineering, mining or other operations in, on, over or under land, the making of a material change in the use of any building or land, the sub-division of land and the display of advertisements.’ (Cl. 2 and Cl. 15)

• Broad coverage: Cl. 12 states that ‘Subject to the provisions of this Act no development shall be commenced on land except with a permission issued in accordance with the provisions of this Act.’

• Cl. 18 states that any application for ‘development permission’ requires a license and an EIA (the contents of which are specified in Schedule 4), i.e. that ‘unless otherwise directed by the Authority, an application for development permission in respect of a development specified in the Third Schedule [which includes ‘quarrying and mining’] shall be accompanied by an environmental impact assessment of the proposed development.’ However, it does not state any conditions for monitoring and enforcement of EIA. It is focused on ‘development’ of mining activities, not on subsequent operations.

• Cl. 12 defines ‘land’ broadly as ‘any corporeal hereditament including a building as defined in this section and other things permanently affixed to land and includes the foreshore, seabed and land covered by water within the boundaries of the territorial jurisdiction and control of Montserrat.’


• Cl. 19 defines the conditions underlying the granting of development permission, including ‘regard to the provisions of the Approved Development Plan or the Draft Development Plan’, adherence to construction standards, consideration of EIA, and the sustainability of the proposed project.

• Cl. 26 provides for a ‘notice of compliance’ to be served (by the ‘Planning Authority’) on developers:

o ‘Where development is carried out without development permission’; or

o ‘without complying with the terms of a development permission.’

o This suggests that the Planning Authority carries some responsibility in enforcement of the terms and conditions attached to the planning permits it awards.

Minerals Vesting Act (2002) revised edition (MVA 2002)

• ‘Minerals’ is defined (Cl. 2)

o to exclude ‘any material such as clay, sand, limestone, sandstone, or other stones, commonly used for the purpose of road making or for building or for the manufacture of any article used in the construction of buildings where such material does not contain any valuable metal or precious stone in economically workable quantities’.

o to include various ‘metalliferous minerals’, ‘combustible carbonaceous minerals’, and various ‘precious minerals’.

• Under Cl. 3, ‘all minerals being in, on or under any land of whatsoever ownership or tenure are vested in and are subject to the control of the Crown.’

• Cl. 4 sets out licensing requirements, including that:

o ‘No person shall prospect for or mine any minerals except by authority of a licence granted by the Governor and in accordance with the terms and conditions specified in such licence’; and

o ‘Any person who contravenes the provisions of subsection (1) of this section shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding $1,000 and to a further fine not exceeding $50 for each day during which the contravention continues.’

• Under Cl.11, ‘The Governor may make regulations with respect to any matter which may be prescribed under this Act, including the form of licenses to prospect for minerals or to mine minerals and the fees to be paid therefore.’


• Sets out requirements for license when mining ‘Volcanic Materials’, defined as ‘sand, gravel, aggregate expelled from the Volcano and lying in or on property in the restricted areas on Montserrat’ (Cl.1g).


• Does not clearly define land in a clause, but states in the preamble that ‘Whereas, as a result of the Volcanic Activity Volcanic Materials have been expelled from the volcano and there are large deposits of Volcanic Materials lying on lands owned by the Government of Montserrat’ (italics added).

• Annual license fee of EC$1,000, ‘payable to the Ministry of Agriculture, Land, Housing and the Environment on the commencement of this Licence Agreement.’

• Royalty of EC$2 per metric tonne collected by Port Authority on behalf of GoM at the time of export (Cl. 5).

o If royalties are not paid within 30 days of the due date (the time of export), ‘the GoM may forthwith suspend this Licence and such suspension shall be without prejudice to any other rights the GoM may have to collect royalties that shall be due’

• Cl. 8 sets out obligations relating to environmental management, employment and safety (requirement for ‘Health and Safety Plan’ to be submitted to GoM within two months of the execution of the license).

Mining License – Volcanic Materials and Associated Materials (2006)

This piece of legislation appears to have been superseded by the Mining License Template (2008). Like its successor, it makes reference to Crown land (e.g. ‘The GofM owns Land in the island of Montserrat WI where there are deposits of Volcanic Materials’ as stated in ‘Recital of background’). However, in other respects it differs by placing more stringent conditions on licensees:

• Cl. 2.3 refers to semi-annual self-reporting of quantities mined: ‘The Licensee shall submit to the GofM a semi-annual financial statement showing the materials and tonnage mined so that the amount payable to the GofM can be accurately audited. The GofM will then issue a statement to the Licensee showing the value of Royalty due … All amounts due to the GofM shall be paid by the Licensee on a semi-annual basis within thirty (30) days of the issuance of the abovementioned statement.’

• Cl. 15.1 refers to restoration of areas impacted by mining, including roads: ‘The Licensee undertakes and agrees to restore any deterioration or damage to roads, drains, culverts, bridges and similar conveniences caused by the weight and frequency of its loaded transport vehicles carrying the Volcanic Materials, and by any act or default of the Licensee.’

The Mining License 2006 provides for mining companies to self-report quantities mined, but this has been removed in the Mining License 2008. To facilitate monitoring of mining activities, it might be feasible to reintroduce some of the requirements on licensees that were contained in the Mining License 2006.

Conservation and Environmental Management Bill

This proposed act and ancillary regulations have been reviewed by the Attorney General and sent back in June 2010 to the DoE for review.


• Certificate of Environmental Approval. Cl. 17 requires that any persons engaging in ‘Quarrying and other mining activities’ are to obtain a Certificate of Environmental Approval.

• EIA. In considering an application for a certificate, the DoE ‘may ask for further information including, if required, an environmental impact assessment, in accordance with regulations prescribed under this Act’ (Cl.17).

• Environmental Management Plan. Under Cl. 64, and ‘Notwithstanding the requirement to apply for and obtain a Certificate … the Department may require any person to submit for approval an environmental management plan to manage the environmental impacts of a new or existing activity.’

• Monitoring and reporting. With respect to monitoring, Cl.19 charges the DoE with ‘monitor[ing] the performance of an activity to ensure compliance with the conditions in the Certificate’. In the proposed Conservation and Environmental Management Bill, there is no further specification of how this monitoring will take place (regularity etc.).

o Taking waste management regulations as an example, subsidiary legislation does not contain specifics on monitoring. Rather, these are to be specified in the permit itself. Cl. 10 states that ‘the permittee conduct monitoring of the conditions of the Noise Permit in accordance with the methods specified in the Noise Permit; monitoring is to be undertaken’

o In terms of reporting, Cl. 10 also states that ‘measuring methods and reporting requirement[s]’ are to be specified in the permits themselves.

Road Traffic Act (2008) and Road Traffic (Amendment) Bill (2010)

• Cl.14 and Cl. 15 of the existing Road Traffic Act cover road safety and state that ‘[t]he Examining Officer shall examine every public service vehicle at least once every six months’. However, it does not make any reference to what applies for private vehicles, leaving it open to interpretation.

• The Road Traffic (Amendment) Bill (2010) strengthens the act by increasing the fines and charges associated with non-compliance.

• It also updates the regulation with respect to safety issues arising from careless driving but is silent on the safety issues associated with worn-out tires, breaks etc., and how to take unsafe vehicles off the road with immediate effect.

• It does not address the issue of lacking specification of axle-load weight limits for vehicles using the roads.


ANNEX D Minutes of final stakeholder consultation

Minutes of stakeholder workshop held at Montserrat Cultural Centre, 10 February 2011.

1. Attendance and distribution

Andy Burr BEPG Cathy Buffonge Eddie’s Trucking Chris Woodward BEPG Christine Roehrer DFID David Osborne DMO Eric Tomme BEPG Ernestine Corbett DoE Karen McShea Montserrat Development Corporation/Colliers Kato Kimbugwe DFID Nigel Osborne Shamrock Ron Beardsley Ministry of Construction and Works Shauna Harley DMO David Elliott (Facilitator) OPM Ed O’Keefe (Facilitator) OPM/Synergy 2. Purpose of the workshop

To determine the potential for developing a multi-stakeholder group (the group provisionally referred to as the MSC) and a documented agreement (provisionally referred to as a Code of Conduct) for the mining and quarrying industry in Montserrat. The mining study had identified that:

• There was broad agreement amongst stakeholders on many basic principles and a

wide range of specific issues.

• Some solutions to current issues could only be achieved by different stakeholders

working together to reach agreement.

• There were not many existing opportunities for different stakeholders to engage with

each other in order to understand each other’s views, reach agreement and influence

how the mining sector is developed. As a result, this had sometimes led to

misunderstandings, lack of action, and even legal action.

• The effectiveness of implementing other recommendations in the mining study (such

as improved legislation, financial incentives, etc.) would likely be enhanced with the

involvement of different stakeholders.

It was noted that this workshop was an exploratory consultation to gauge interest in the concept of a multi-stakeholder group and discuss whether and how it could be a useful mechanism. 3. Participants’ objectives for the workshop

Participants’ objectives included: • Better understanding of each other’s views and mutual respect;

• How environmental ground rules could be set and enforced effectively;


• Exploring the inter-relationship between the legal framework, the multi-stakeholder

committee and the Code of Conduct;

• Identifying ways in which mining, tourism and residents could co-exist;

• Amenability and accountability in voluntary frameworks; and

• Benchmarks and examples from elsewhere and their applicability to Montserrat.

4. Context for MSC and Code of Conduct

There was a general discussion about the context in which the multi-stakeholder MSC was operating. Points made included:

• There was already a multi-stakeholder MSC, which was formed to guide the mining

and quarrying industry study and which could evolve and help take the study

recommendations forward;

• Recognition of the potentially important contribution of mining to development in

Montserrat;

• Recognition of the negative impacts of mining in Montserrat, and the role and

responsibilities of both companies and government in managing these;

• Scepticism amongst both the property owners and mining industry representatives

about whether they could work together;

• Scepticism about whether a multi-stakeholder group could be effective;

• All options should be considered for mining activity and export sites, including the

east of the island in the longer term;

• Importance of getting the legal framework sorted out; and

• The critical issue to be resolved is where and when an export jetty would be

constructed. Once this decision is made, it should be easier to move forward.

5. Issues the MSC could work on

Two mixed break-out groups engaged in constructive discussions and drew up an initial list of some issues that the MSC could work on. These included:

• Hours of operation, which to some extent depend on the distance the sand is

transported (shorter distance would allow shorter hours of operation);

• The location of stockpiling and storage of equipment, including opportunities for

cooperation between operators in order to increase efficiencies and reduce impacts,

for example co-location and/or sharing of equipment;

• Extraction practices and safety considerations;

• Preparation of a public annual operating plan for the mining industry;

• Agreement of zones/boundaries for extraction, operating and buffer zones;

• Arrangements for safety training for operators and regular inspections of operations;

• Dust and noise-control measures;

• Remediation and proper disposal of unused material;

• Public awareness, education and training in health and safety and environmental

protection; and

• Extending duty exemptions to support improved practices, for example safety

equipment such as face masks.


6. Ways in which the MSC could work

Several suggestions and points were made about the way in which an MSC might work, including:

• Balanced representation from the main stakeholders, including industry, affected

residents and government;

• Having access to, reviewing and providing comments on relevant reports and

technical studies;

• Having access to expert technical advice, such as on volcanic risk;

• MSC should be a legally mandated organisation with a clear structure, roles, powers,

etc.;

• Desirability of an independent chair;

• Support for the MSC to be provided by a person/organisation independent of the

GoM. Possibilities suggested include:

o The Montserrat Development Corporation;

o A one-year renewable contract to help the MSC function effectively;

• The MSC should have involvement in the permitting process, and setting and

monitoring operating conditions for mining activities. The powers of the MSC should

be clearly defined; suggestions ranged from a direct contractual arrangement

between the MSC and companies, to having an approval/veto role in the government

permitting process, to having an advisory role in the permitting process;

• Conflicts of interest should be carefully managed, e.g. any company representatives

on the MSC not abusing their position to the detriment of other companies;

• Mechanisms would be required for the selection of effective representatives of the

different stakeholders;

• Mechanisms would be required for dispute resolution; and

• Potential for members’ contributions to running costs, and other sources of financing

for running costs of MSC.

7. Next steps

The stakeholders agreed to meet again when the mining and quarrying study was finalised (towards the end of April) with an agenda including:

• Review the recommendations of the final report of the mining study and agree an

implementation action plan and timetable; and

• Review output from this workshop and further develop the framework for the MSC,

including drawing on best practices and examples from elsewhere and applicability to

Montserrat.

The facilitators agreed to write up notes from the workshop; to discuss with DFID resourcing of the development, formalisation and support to the MSC; and to provide examples of similar multi-stakeholder arrangements that could help guide Montserrat.


ANNEX E Halcrow report: Export Facilities in Montserrat (pre-feasibility study)

Montserrat Mining and Quarrying Report - FINAL mining and quarrying industry study final report 16...

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