Dundee Precious Metals Equity

Location:

Bulgaria

Project number:

48164

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

14 Dec 2016

Status:

Disbursing

PSD disclosed:

23 Dec 2016

Translated version of this PSD: Bulgarian

Project Description

Equity investment to support the development of the Krumovgrad gold-silver project in south-easternBulgaria that involves construction of an open-pit mining and processing operation at the total project cost of USD 184 million (the "Project"). The Project is developed by Dundee Precious Metals, a Canadian publicly listed (TSX) gold and copper mining and processing company with operations and exploration prospects in Bulgaria, Serbia, Armenia and Namibia.

Project Objectives

Proceeds from the Bank's investment will be used to support the development of Krumovgrad gold-silver project. The Project will include a number of innovations that the Bank will contribute to finance, notably: (i) stage flotation reactors ("SFR") that will contribute to achieve high metal recoveries; (ii) an integrated mine waste facility ("IMWF"), that will economise the footprint of the project through co-disposal of mine waste and process tailings and yield considerable savings from dewatering and (iii) advanced telecommunications systems based on the "Internet of Things" and organisational practices that will enhance the operational efficiency and safety at the mine from the onset. Moreover, the mine will produce gold-silver concentrate thereby avoiding the use and disposal of cyanide on site.

Transition Impact

The proposed financing has the potential to generate positive transition impact through setting standards of business conduct - Economic Inclusion and Equal Opportunities ("EO"). The Project is expected to enhance economic inclusion of youth, gender and regions in Bulgaria. DPM will promote the development of skills through: a) local work-based learning and training opportunities and 2) its participation in a national industry working group to support the National Authority for Vocational Education and Training. It will also incorporate EO elements to its HR and social management policies, lessons learned to be replicated in other DPM operations. The EO component of the project is expected to enhance the opportunities for women accessing jobs.

Client Information

DUNDEE PRECIOUS METALS INC

Dundee Precious Metals is a publicly-held Canadian company listed on the main board of Toronto Stock Exchange. The Company's has operating assets in Bulgaria and Namibia, and holds interests in a number of developing gold and exploration properties located in Bulgaria, Serbia and northern Canada.

EBRD Finance Summary

Equity investment in the amount of CAD 43.7 million (circa USD 32.7 million equivalent) subscription to 9.99% of the Company's shares.

Total Project Cost

USD 184,000,000.00

Development cost of the Krumovgrad gold-silver project in south-eastern Bulgaria.

Environmental and Social Summary

Categorised B (2014 ESP). Through the proposed corporate equity investment, DPM is required to bring all of its operations and future projects in line with the EBRD's Performance Requirements (PRs), including those operations outside of the EBRD's countries of operation ("CoO"). Future category A projects, if any, will be subject to carrying out and disclosing an Environmental and Social Impact Assessment ("ESIA"). The proceeds of the investment will be used primarily to finance the planned Krumovgrad mine in Bulgaria, an EBRD project, which was subject to an ESIA, disclosure and consultation, and EBRD Board approval (21 April 2015). DPM has initiated earthworks activities and demonstrated satisfactory progress in implementing the Environmental and Social Action Plan ("ESAP") developed for the project. The Bank also provides debt financing to DPM through a revolving credit facility and term debt facility, the proceeds from which were primarily used to fund capital expenditures at DPM's Chelopech mine in Bulgaria. Regular monitoring has confirmed that DPM is satisfactorily implementing the Bank's requirements at Chelopech. EBRD will continue to monitor these projects. Through the equity investment the Bank is exposed to risks associated with all DPM operations and therefore the Bank focussed its due diligence ("ESDD") on DPM's third asset, its smelting facility in Tsumeb, Namibia. Namibia is not a CoO and the Bank's financing cannot be used in Namibia. The smelter is however a DPM operating asset and processes Chelopech and third party concentrate.  Therefore the associated environmental and social ("E&S") performance and risks needed to be assessed. DPM plans to expand the capacity of the smelter and is currently undertaking an ESIA to support this initiative.

The Tsumeb smelter is one of only a few smelters in the world able to treat complex copper concentrates that contain arsenic. Concentrates from Chelopech, as well as third party mines, are shipped to Tsumeb for processing. ESDD of the smelter was undertaken by an independent consultant, and the EBRD, and included a site visit in August 2016. The smelter was commissioned in 1963 and has had various owners prior to DPM acquiring it in 2010. Since 2010, DPM has made significant investments to address occupational health and safety ("OHS"), including industrial hygiene, and environmental legacy issues associated with historic and current operations. Key investments include a sulphuric acid plant, which has significantly reduced SO2 emissions to the atmosphere and improved local air quality; engineering improvements to reduce fugitive emissions, including the installation of new bag houses to capture process dust; construction of a secure hazardous waste disposal facility for arsenic containing waste disposal; as well as improved monitoring and medical surveillance. The ESDD has, however, shown that despite these investments, additional improvements are required to bring the facility in line with the PRs. These required improvements are generally aligned with DPM's long term investment plan for Tsumeb.

A risk associated with the smelting of concentrate containing arsenic is how the arsenic, a by-product of the smelting process, is handled.  Arsenic is released during the smelting process and is captured by bag filters. Thereafter it is deposited in a hazardous waste disposal facility or it is directed to an onsite arsenic plant where it is converted into diarsenic trioxide (As2O3) and sold to producers of wood preservatives and pesticides. Since acquiring the smelter, DPM has implemented various engineering and administrative controls, a biomonitoring programme, and the use of Personal Protective Equipment ("PPE") to manage and monitor arsenic exposure levels. Through these measures, worker arsenic exposure, as indicated by arsenic in urine monitoring, has decreased on average across the facility but has not achieved the levels targeted by DPM. 

DPM recently announced that it would discontinue production of diarsenic trioxide and intends to close the plant on or about December 31st 2016, while continuing to take measures to reduce worker exposure and health risks in the interim. This, together with improvements in the industrial hygiene programme, will contribute to bringing conditions on site in line with international standards and also enable DPM to focus its management resources on continuing to optimise the smelter operation. Following closure of the arsenic plant, all arsenic containing materials will be disposed of to the onsite hazardous waste facility with offsite disposal options to be considered to address the longer term requirements of the facility. DPM is also evaluating alternative options to handle the arsenic containing materials in consultation with its stakeholders. These measures are also expected to reduce potential negative impacts from the smelter beyond the fence line. Biomonitoring and air quality monitoring activities will be enhanced to monitor the positive impacts of such measures.

The area has been actively mined for many decades and the smelter has been operating since the 1960's resulting in significant legacy impacts. Despite agreement from the authorities that DPM will not be responsible for legacy issues prior to DPM's acquisition in 2010, these legacy impacts present current and future risks to air quality, groundwater, land use and human health, which could be perceived to be associated with DPM as the current operator of the smelter. DPM intends to continue to monitor these legacy issues, and to the extent it is able, will assist the authorities with the implementation of measures to avoid or reduce potential impacts on the community and surrounding land users. This will include maintaining community air quality monitoring and community health initiatives. DPM is currently undertaking a community health assessment as part of its facility expansion ESIA. The results of this assessment will form part of the expansion ESIA and will be disclosed for consultation locally by DPM.

The ESDD included a review of the Tsumeb facility against EU Best Available Techniques ("BAT") for the sector. While improvements have been made, further measures are required to bring operations in line with EU BAT over time including the need for enhanced emission control and monitoring. OHS provisions are also to be improved including rigorous implementation of safe working procedures and contractor OHS performance and monitoring. DPM will review the facility against the EU Seveso III Directive to ensure that the necessary emergency scenarios have been considered, mitigation is implemented and that emergency response provisions are in place.

DPM is the main employer in Tsumeb and its human resources management is generally in line with PR 2. In the Tsumeb community, DPM maintains an information centre and regularly engages with stakeholders, discloses E&S information and maintains a grievance mechanism. DPM also delivers a community investment programme supporting local infrastructure and initiatives. DPM will also undertake to enhance its approach to information disclosure, including online disclosure of ESIAs and other relevant E&S information.

An ESAP has been agreed with DPM to bring the smelter in line with the PRs. Key actions are described above. The EBRD will monitor E&S performance and ESAP implementation at Tsumeb and undertake site visits as necessary.

Technical Cooperation

None.

Company Contact Information

Dundee Precious Metals Inc.
info@dundeeprecious.com
(416) 365 5191
(416) 365 9080
http://www.dundeeprecious.com/English/Home/default.aspx
1 Adelaide Street East Suite 500, P.O. Box 195 Toronto, Ontario M5C 2V9 Canada

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