DPM Term Loan

Location:

Bulgaria

Project number:

36793

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Approval date:

14 Sep 2010

Status:

Complete

PSD disclosed:

13 Aug 2010

Translated version of this PSD: Croatian

Project Description

The EBRD is considering shifting the existing term loan, provided to Chelopech Mining E.A.D (“Chelopech”) in December 2010 (same project number 36793), from Chelopech to its ultimate parent company, Dundee Precious Metals Inc. (“DPM” or “Dundee”). Use of proceeds will remain unchanged for the Chelopech mine capacity expansion project.

Transition Impact

Incremental transition impact of this project signed in 2010 was expected to derive from: (i) the demonstration effect of successful restructuring (energy efficiency improvements at the mine and mill); and (ii) setting higher standards of environmental and business conduct by targeting compliance with EU standards and increased transparency at the sector level. Moreover,the project catalyses further external commercial bank finance in a sector in which it has hitherto been absent.

The Client

Dundee Precious Metals is a mineral resource exploration, development and mining company listed on the main board of Toronto Stock Exchange with operations and development projects in Bulgaria, Armenia, Serbia, Namibia and Canada.

EBRD Finance

USD 48.75 million term loan.

Project Cost

USD 146.3 million

Environmental Impact

The original project was assigned as category B as it is not a green field development and the environmental and socials risks associated with expansion of the ongoing activities can readily be identified, assessed and mitigated. Independent environmental and social consultants were retained to complete the due diligence, including an audit of the existing operations, and an analysis of the proposed expansion project. In addition, as part of the due diligence, ESD made a site visit to review operations and management systems first hand. This visit also included a review of the activities to support the ongoing loan. Lastly, as an offsite smelter is used for processing the ore concentrate, the environmental performance of this facility was reviewed through the use of a questionnaire and review of background data provided by the owner/operator of the smelter.

Chelopech Mining EAD has established a good working relationship with the Bank as part of the existing loan. This includes the provision of annual environmental reports and other information as requested. There have been some circumstances that caused delays in approving mine plans and implementing actions on site and therefore new time lines have been agreed with the company for various actions.
While the expansion plans call for an increase in the production rates of the mine, there are several elements of the expansion plans that mitigate or offset the increased production. These include the fact that primary crushing will now be completed underground, thereby minimizing possible dust releases from the plant. Another mitigating factor is the fact that a large portion of the tailings will be processed into a paste and used for progressive backfilling in the mine. This (along with careful procedures for stoping) will prevent future subsidence at the mine which has previously been an issue, and will minimise future groundwater contamination. Another aspect of the mine expansion will be the upgrade and use of the onsite rail loading facility which will avoid the current road transportation of concentrate from the site to the rail loading facility located approximately 7 km from the site. There have been some complaints about dust generated from this practice, although this was not the case when observed by ESD.

As with most mines, two of the key environmental issues on this site relate to water use/recycling and waste handling. The Company is constantly reviewing the water use and recycling options, especially as water requirements for the processing/flotation will increase to allow the increased capacity. The use of paste technology will allow increased water recycling while also reducing the amounts of tails to be deposited at the tailings management facility (TMF). In terms of waste management, the aforementioned paste technology significantly reduces the tailings deposited in the TMF and over the last few years the site has implemented measures to reduce waste rock piles through use for infilling subsidence scars from previous activities. The site is in compliance with the EU directive on mining waste.

The Company is an employer of choice, hiring approximately 90% of its employees locally, and providing superior benefits, good training opportunities as well as exemplary health and safety protection to its workforce. It has also developed a proactive approach to stakeholder engagement and a community investment program that were positively evaluated by an external auditor in 2009.


An Environmental and Social Action Plan (ESAP) was developed for the original project. Progress relative to this plan has been monitored over the past several years, and this monitoring indicates that the Company is making good progress on the agreed items. As part of considering the shift of this loan to DPM the Bank commissioned an EHS audit of the Chelopech mine. The results of this audit confirm that the site is pro-actively addressing EHS issues and is compliant with the ESAP. The Bank will continue to monitor this situation and the Company will be required to continue reporting on the ESAP as they have been to date.

A Non-Technical Summary was prepared for this project.

Technical Cooperation

None

Company Contact

Dundee Precious Metals Inc.
1 Adelaide Street East
Suite 500, P.O. Box 195
Toronto, Ontario
M5C 2V9
Canada

 

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