Kyzyl Project

Location:

Kazakhstan

Project number:

48218

Business sector:

Natural resources

Notice type:

Private

Environmental category:

A

Target board date:

04 May 2017

Status:

Disbursing

PSD disclosed:

17 Feb 2017

Translated version of this PSD: Russian

Project Description

In 2017, the Bank provided a USD140 million loan to Bakyrchik Mining Venture LLP (the "Borrower", "Company"), an entity 100% controlled by Polymetal International Plc (the "Sponsor"), to finance development of the Kyzyl (Bakyrchik) gold deposit (the "Project"). The loan is fully guaranteed by the Sponsor.

The provision of an additional USD60 million financing to the Borrower to ensure achievement of the original Project objectives.

Project Objectives

The facility supports the Borrower's efforts in developing the Kyzyl gold deposit located in the northeastern Kazakhstan. Kyzyl is a world class deposit with estimated JORC reserves of 7.3 Moz of gold at an average grade of 7.7 g/t. The Project is expected to produce up to 1.8 mtpa of ore by open pit mining during the first 10 years. The ore will be processed by sulphide flotation followed by concentrate offtake and/or pressure oxidation (POX).

Transition Impact

The proposed financing has the potential to generate a positive transition impact by promoting youth and gender inclusion, as well as demonstrating the use of efficient mining technologies. The Project is expected to improve the linkages between the industry and training/educational institutions, and address skill mismatches through developments of standardised training for youth and increased workforce diversity.

Client Information

BAKYRCHIK MINING VENTURE LLP

The Borrower is a Kazakh company that is indirectly 100% controlled by the Sponsor. The Borrower's key asset is the Kyzyl gold deposit located in the north-eastern Kazakhstan. The Sponsor is the world's 15th largest gold producer and 3rd largest silver producer. The Sponsor has a public listing on the premium segment of the London Stock Exchange and the Moscow Exchange.

EBRD Finance Summary

USD 200,000,000.00

Environmental and Social Summary

Categorised A (ESP 2014): Mining projects may be associated with various, potentially significant, environmental and social (E&S) impacts, which at the time of categorisation, cannot readily be identified or assessed, and which, therefore, require a formalised and participatory environmental and social impact assessment (ESIA) process. The Project will be developed in two phases in an area already partly disturbed by historic mining activities. Phase 1 is an open pit mine for a period of 10 years followed by an underground development phase for a further 13 years.  The EBRD's financing relates to Phase 1 but an ESIA has been undertaken that considers both phases.  The ESIA, and associated Environmental and Social Action Plan (ESAP), are available in English, Russian and Kazakh and are now disclosed for a minimum of 60 days before consideration by the EBRD's Board of Directors.

An initial ESIA, building upon an already approved local EIA/OVOS, was developed for the Project and was disclosed in the Project area in late 2015. This ESIA has been supplemented with various studies and documentation to align it with the EBRD's E&S requirements.  Key impacts and risks considered in the ESIA include impacts to biodiversity and surface and groundwater; water use; emissions including dust; land acquisition and impacts on land users and livelihoods; noise; worker and community health and safety risks; and site closure and rehabilitation planning. 

Development of the mine will directly impact a large area through mine infrastructure such as the open pit, waste rock dump, tailings and production facilities.  Biodiversity studies have confirmed that impacts are limited primarily due to the already disturbed nature of the site. No critical habitat or priority biodiversity features are present. The open pit necessitates directing an existing stream away from the Project area but not outside the wider catchment area.  This is expected to result in a local impact on water availability downstream of the open pit but will not impact the catchment area.  The Project will be supplied with water dewatered from the open pit with excess water treated and discharged into existing streams.  Process water will be recycled. Dewatering of the open pit will lower groundwater levels around the site as shown by a geo-hydrological study. This, however, is not expected to significantly impact local stream flow or affect local groundwater supplies.  Prior to phase two, the Company will undertake a study on the effects of underground mine dewatering.  An Acid Rock Drainage (ARD) potential has been identified but measures implemented as part of the mine design are expected to avoid and reduce this risk.  These measures and ongoing management will be informed by monitoring. The Project will produce a concentrate with elevated levels of arsenic due to the characteristics of the deposit.  Concentrate will be exported by train to the Company's POX plant in Russia and to other third party smelting facilities.  The Company will review off-takers to ensure that E&S risks are appropriately managed. A conceptual mine closure plan has been developed and will be maintained and updated during the life of mine.

The Project will involve the replacement of existing coal boilers to supply heating to the town and to the Project.  These boilers are small (l15MW) and have been considered in the air quality impact assessment.  The use of coal has been subject to an alternatives analysis and considering the location of the Project and available energy sources, is the preferred fuel type.  The ESIA has not identified an impact to local air quality as a result of boiler operation.  Dust is more of an issue and measures will be put in place to control and monitor dust levels.  A bypass road will be constructed to redirect traffic around the town significantly reduce noise and dust related impacts.  A GHG assessment considering both direct and indirect (from electricity) emissions indicates CO2 equivalent emissions of 208,160t and 185,183t per year during Phase 1 and 2 respectively.

The Project has resulted in some voluntary resettlement of people from the adjacent town of Auezov.  This resettlement was as a result of the expansion of the existing sanitary protection zone (SPZ) around mine to accommodate a larger open pit.  This resettlement was undertaken in line with the Bank's requirements and will be monitored by the Company. Some land users may be affected through the location of project infrastructure on pasture land but measures have been put in place to reduce this impact and maintain access to alternative pasture land.  The Project will employ approximately 600 people during Phase 1 and over 1000 during Phase 2. Local recruitment from the adjacent town will be a priority but it is also expected that many people who left the area after the previous mining activities ceased will return.  Local procurement of services and goods is also a priority. Existing facilities and services are generally under-used due to previous out migration but nonetheless an influx of people and salaried workers may result in some local challenges.

Key impacts to people are associated with dust generation, noise and traffic issues.  Traffic risks will be minimised through a bypass road and implementation of a traffic management plan.  Dust generation will be addressed through standard measures.  Previous mining activities resulted in an increase in background levels of arsenic in soils and dust from a previous, and now decommissioned, roasting facility.  Ongoing air quality and dust monitoring will determine whether a risk exists and if further mitigation is required.  Noise levels will be highest during construction and in the first few years of mining.  Standards have been projected to be exceeded in some areas and provision has been made for further monitoring and mitigation measures. The Company has in place a robust community development and support programme which will continue during the life of mine. Company HR policies and practices are in line with PR2 and together with the Company's robust approach of environment and health and safety, will also apply to contractors. In order to meet the Bank's stakeholder engagement and disclosure requirements the Company has developed a Stakeholder Engagement Plan (SEP), complaint procedure as well as a Non-Technical Summary of the ESIA.  ESIA disclosure will include a series of meetings with stakeholders and the public.

An ESAP has been developed to structure the Project in line with the Bank's requirements and is disclosed with the ESIA.  Key actions in the ESAP are described above and also includes the need to develop the existing E&S framework management plans into detailed management plans prior to construction; audits of worker accommodation, ongoing geochemical test work,  developing a final closure plan two years prior to closure and managing contractor E&S performance.

There is an Environmental and Social Impact Assessment available for this project.

2018 update

The Kyzyl project entered the operations phase in late Q2 2018 and in Q3 2018 reached nameplate capacity of 150 kt per month and recoveries of 86%. The deposit is being developed by open pit mining methods and after 10 years will move to underground mining. Mine ore is being processed by conventional floatation to produce a concentrate. Concentrate is sold to third party off takers or is processed further by Polymetal's POX facility in Amursk in Russia. E&S reporting by Polymetal has shown a high level of E&S performance and good progress against the E&S action plan in line with the defined timelines. This includes alignment with PR2 requirements, maintenance of a GHG inventory, ongoing geochemical test work on waste rock and a review of overburden and waste rock stability. The project has also achieved OHSAS 18001 certification and is in the process achieving ISO 14001 certification. An EBRD consultant conducted a monitoring visit in July 2018. The visit showed that Polymetal and the local management team is fully committed to the success of the project and ensuring that the local community is integral to this. Polymetal routinely engages with the local community and maintains and effective grievance mechanism. A strong commitment to achieving high E&S performance was evident as was a commitment to complying with EBRD's E&S requirements. The visit also confirmed the E&S reporting by Polymetal. Some minor recommendations were made and these are being addressed by the project. Polymetal has published its 2017 Sustainability Report.

Technical Cooperation

None.

Company Contact Information

Galina Chudina
galinach@bgp.polymetal.ru
+7 (723) 249 26 00
Auezov village, Zharma area, East Kazakhstan region, 070605, Republic of Kazakhstan

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