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NGOs Challenge IFC to Prove Mining Reduces Poverty, Improves Lives

Mineweb.com

September 19, 2006

(Mineweb.com) --Environmental and human rights NGOs Monday challenged the International Finance Committee to "prove that its mining projects are reducing poverty and improving lives,' and to invest agency funds elsewhere if mines are found not to be actually benefiting the poor.

In their document, Tarnished Gold: mining and the unmet promise of development, the Bank Information Center, the Bretton Woods Project, the Campagna Per La Riforma Della Banca Mondiale (CRBM), EARTHWORKS, and Oxfam America claimed the IFC "continues to dress up money-making gold mining investment as development, yet it fails to demonstrate how these projects actually reduce poverty.'

The NGOs questioned why the IFC continues to invest in gold mining projects, citing "widespread evidence of negative economic, social and environmental impacts.' The IFC makes the case that mining produces government revenues, which in turn lead to economic growth and poverty reduction. The agency also cites employment generation, improvements in private sector practices, and corporate social investments in affected communities, as spillover development benefits from mining.

The report criticized the IFC for not reporting on its development results on a project-by-project basis. "This kind of reporting ignores the fact that, unlike profits and losses in a financial portfolio, poverty reduction, environmental damage, and, most importantly, impacts on individuals and communities, cannot be averaged across the IFCs portfolio,' the NGOs asserted. "A farmer who loses his land near a mine in Peru does not benefit when a small business owner in central Europe gets a catering contract with a mining company.'

The NGOs claimed that the agencys $45 million investment in Glamiss Marlin gold and silver mine in Guatemala "has spurred increased conflict in the project area.' They also criticized $125 million in IFC loans to Newmont Mining's Ahafo gold mine in Ghana. "The mine has physically and economically displaced nearly 10,000 people in the first phase alone, and is expected to cause impacts of similar magnitude when its operations expand to the North in the coming years,' the report asserted.

As a final example, the report refers to the Kumtor gold mine in Kyrgyzstan, which has received $40 million in loans and equity investment from the IFC; although the document claims "the mine has been riddled with problems.' In 2004, the NGOs charged that the IFC earned a $40 million profit when the agency sold its holdings in Kumtor "distancing itself from liability for the social and environmental harms experienced in the project area.'

The document contends that the IFC doesnt consistently assess host government capacity to manage revenues or monitor and mitigate impacts of the mining sector prior to making mining investments. The NGOs assert that "the low royalty and tax rates put in place in order to attract investors (often upon advice from the World Bank) may actually decrease overall earnings from mining.'

Modern mines are capital intensive and dont create many long-term job opportunities, according to the report. "At the IFC-financed Ahafo mine in Ghana, for example, the number of temporary workers peaked at 3,300 during construction, but IFC estimates that the mine will provide only 620 permanent jobs.'

The NGOs claim that mining "is an enclave industry with limited spillover effects into the surrounding local economy. There is no guarantee that local businesses will benefit from a mining project, particularly since many countries have removed legal requirements that investors hire or buy a certain portion of their supplies locally. Furthermore, the vast majority of the metal extracted in poor countries is exported as raw ore, depriving the countries of the economic value that is realized in the subsequent stages of mineral processing and manufacturing.'

The report asserts that the IFC refuses to publicly report in quantitative and project-specific terms, how well IFC-funded mining projects actually do or do not achieve their development outcomes. "Not only does this lack of reporting deprive the public of accurate information about how well IFC is fulfilling its mission, but it allows IFC to continue to support mining projects on the basis of good intentions and high hopes about their expected impacts, rather than evidence from the performance of past projects,' the NGOs declared.

RECOMMENDATIONS:

Before the IFC continues to finance gold operations, the NGOs recommended that the agency take the following actions:

1. Report on positive and negative impacts of its activities on a project-specific basis. The agency should report on how levels of poverty, education and health change in mining project-impacted communities.

2. Support the creation of a multi-stakeholder commission to evaluate actual poverty reduction and development benefits generated by IFC investment in large mining projects and recommend alternative uses of IFC funds to maximize poverty reduction.

3. Support an independent audit of the agencys technical capacity to adequately assess and manage social and environmental impacts associated with large mining projects.

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