Project summary document

Project description
and objectives:

The EBRD is considering a USD 15 million increase to the original USD 10 million loan provided to Chelopech Mining EAD, a joint stock company incorporated in Bulgaria, in April 2005. The proposed project (Phase 1) consists of: The environmental remediation, resource definition, refurbishment, modernisation and expansion of the Chelopech Mine and processing plant (the "Facilities"). The Facilities are located in Chelopech, Bulgaria. The Facilities have been expanded and the output increased from a mining and processing rate of 500,000 tonnes of ore per annum (tpa) at the time of Dundee’s acquisition to approximately 906,000 tpa of ore in 2007 into gold/copper concentrates. This was part-financed with the Bank’s original loan of US$10 million signed in April 2005 (Original Loan). To support continued mine upgrade and development program through the exploration and expansion of ore mining and concentrate production capacity to approximately 1,500,000 tpa of ore into gold/copper concentrates, the Bank will increase the original loan by US$15million (Increase to the Original Loan).

Transition impact:

The mining sector in Bulgaria deteriorated markedly from the early 1990’s. A large number of mines, including, for a short time, Chelopech mine, were closed during this period due to environmental problems, poor operational and financial performance and decreased domestic demand. The lack until recently of a modern regulatory framework has deterred strategic investors.

This has been the Bank's first mining project in Bulgaria and the Original Loan was signed before the country joined the EU. The continued involvement of the Bank has contributed to increase mining investors’ interest in Bulgaria and the Balkans as a whole.

The Project has benefited from the introduction of modern mining/extraction technologies , thus contributing to technical and marketing know-how transfers. The Project also promotes the industry’s restructuring by introduction of the highest efficiency and environmental standards currently available through the upgrading of the existing mine, mill and tailings management facilities. Chelopech is situated in an established mining region and the ongoing improvements will help set new technological, environmental and health & safety standards that would be immediately relevant to other nearby operations. Since the inception of Phase I, a more efficient underground mining method has been introduced, the mining fleet upgraded and a new surface decline for access to the underground mine was constructed. Implementation of a mining strategy has involved promoting safer work environment and ongoing training program. Chelopech Mining was awarded the International Green Apple Environmental Gold Award presented by The Green Organization in recognition of its ongoing mining rehabilitation program.

The client:

Chelopech Mining EAD, a joint stock company incorporated in Bulgaria (“Chelopech” or the “Company”) formerly “Navan Chelopech AD”. Chelopech holds the mining rights and operates the Chelopech copper/gold mine in Bulgaria. Dundee Precious Metals Inc (“Dundee”) owns, via its subsidiaries, 100 percent of the share capital of Chelopech.

EBRD finance:

1) Original USD 10 million loan signed in April 2005.
2) Proposed USD 15 million increase to the Original Loan.

Total project cost:

Phase 1 – approximately USD 140 million (over 2004-2009).

Environmental impact:

The Project was screened B/1. A range of environmental investigations have been undertaken at Chelopech which confirm that historic mining operations have significantly impacted the surrounding environment since start up in 1954. Prior to 2004 waste products from mining and tailings, generated in large quantities, represented the most significant potential environmental liability. However DPM has made significant progress in addressing this liability and further progress is planned in the next few years to bring mine waste management at Chelopech up to an international standard of good practice. Other issues include outstanding environmental permits, responsibility for Past Environmental Damages (PEDs) and mine closure planning. The operation, since signing the Original Loan, has addressed many of these issues.

The independent reviews, available data and all recent monitoring and appraisal studies have confirmed that the existing mine is operating properly, is managed appropriately and has improved significantly since the involvement of the Project's Sponsor (Dundee Precious Metals). Operations at Chelopech have already benefited from the introduction of the highest environmental standards currently available in the industry through planned rehabilitation of previous surface caving and waste rock stockpiles, and the upgrading of the existing mine, mill and tailings dam facilities. The underground mine has no significant problems with regard to environmental liabilities and no significant contamination or liabilities have been noted by the Past Environmental Damage study or other recent environmental audits. (Current Processing at Chelopech does not involve the use of cyanide or release of arsenic). The closure plans are well documented and meet internationally accepted standards and the operation is fully permitted to operate under the current (2001) Environmental Impact Assessment (EIA) conditions. The Phase 2 operation however, requires a full EIA under Bulgarian, and EU legal requirements in respect of the possible production of copper metal, gold doré and sulphuric acid through the possible installation of a Pressure Oxidation facility (“POX”) and related processing capacity. An EIA, which meets international and Bulgarian standards has been lodged and has been through the regulatory approval process and awaits ministerial signature. EBRD will monitor ongoing compliance with EU environmental, health and safety standards, and good international mining practices during the lifetime of the project by evaluating reports submitted annually to EBRD by the Company and by conducting periodic supervision.

Technical
cooperation:

None.

For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants.

Company contact:

Chelopach Mining EAD,
Village of Chelopech, Sofia District

For the attention of:
Laurence Marsland
Executive Director
Telephone: (+359 2)0728 2266
Fax: (+359 2)0728 3045

EBRD contact:

Michael Green, Operation Leader: greenm@ebrd.com

Business opportunities:

For business opportunities or procurement, contact the client company.

General enquiries:

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168; Fax: +44 20 7338 7380
Email: projectenquiries@ebrd.com