MAK Phase II

Location:

Mongolia

Project number:

41547

Business sector:

Natural resources

Notice type:

Private

Environmental category:

A

Target board date:

06 Dec 2011

Status:

Repaying

PSD disclosed:

06 Oct 2011

Translated version of this PSD: Mongolian

Project Description

The EBRD is considering debt financing to the Company for development of the copper mine of Tsagaan Suvarga (“TS”) in the south-eastern part of Mongolia (the “Project”).

Transition Impact

The project is part of a broad approach in support of the sustainable development of the Mongolian mining sector. Key transition objectives of the transaction include:

Support of Private Sector Development
Through the proposed financing, the Bank is supporting MAK in establishing itself as a successful domestically-grown company, able to compete successfully on international markets. The project will help MAK diversify its business, by developing a new product line.

Setting high standards of transparency, business and environmental conduct
The project will improve standards in various areas of corporate and industry life:

(a) it will improve corporate environmental and social management practices through the introduction of appropriate covenants in the financing documents including the preparation of a mine closure plan, and compliance with ESAP;

(b) it will support sustainable development of the mining sector by supporting linkages to the mine, and the provision of capacity building to local companies, through TAM/BAS technical assistance jointly financed by MAK and the Bank;

(c) it will have a signalling effect in respect to continued support as well as broadening of EITI roll-out in the country (please also see below Technical Cooperation project description).

The Client

Mongolyn Alt Corporation (‘MAK’ or the ‘Company’), a medium-sized Mongolian private mining company.

EBRD Finance

Corporate loan with tranches:

A Term Loan of US$ 350,000,000 to finance the construction of the Project, and a US$ 100,000,000 stand by facility.

Project Cost

US$ 869 million.

Environmental Impact

Environmental classification and rationale

The project is categorised A. A formalised and participatory assessment process, in the form of an Environmental and Social Impact Assessment (ESIA), was carried out by independent third party specialists in accordance with the Banks’ Performance Requirements.

Key environmental issues and mitigation

The ESIA was prepared by the Company’s advisers in a manner compliant with the Bank’s requirements. Consultation was carried out with key stakeholders as part of the scoping for the assessment and the findings of the ESIA are being fed into the developing Project design.

The key issues identified by the ESIA process focus on:

  • Water – both surface and groundwater. The mine will be constructed in south eastern Mongolia where water resources are scarce and vital to the sustainability of the local population and biodiversity. The mine shall abstract groundwater from one or two identified borefields located 16 and 50 km from the main mine site. The borefields are being designed in a way to mitigate potential impact to any herders wells.
  • Mine infrastructure such as the main pit, tailings storage facility and waste rock dump carry a potential to release hazardous substances which could impact soil and water quality. Diversion of water channels away from such facilities and appropriate containment of hazardous materials will provide mitigation;
  • Waste management – in particular the significant generation of waste rock and tailings which require to be stored near the mine site. Appropriate containment shall apply at the TSF and waste rock dump and a landfill constructed to EU standards will address the other waste disposal needs;
  • Biodiversity – the Gobi is home to certain endangered species of flora and fauna, such as the Khulan, the Goitered Gazelle and the Saker Falcon. The mine operations and ancillary items such as access roads and export routes are being selected and managed with mitigation impacts to fauna in mind. Any top-soil removed shall be stored in a manner that will permit revegetation and restoration, thereby minimising impacts to flora;
  • Social Impacts – the mine will provide local employment opportunities but will also cause people to move to the area requiring development of infrastructure. Similarly, the mine is being constructed in an area where semi-nomadic goat and camel herders raise their livestock.

Additional key issues were identified during the ESIA process in relation to top soil management; dust impacts, and the potential to impact the rich cultural heritage of Mongolia.

The Project is at the design stage and while effective baseline data on environmental and social issues is available, the ESIA has identified areas where further data gathering would be beneficial in guiding the final design and implementation of the Project.

The mitigation hierarchy has been applied to the issues identified during the assessment process. Where avoidance of impacts is not feasible, mitigation plans have been drafted and will continue to be developed as the Project is implemented to address the issues and ensure that residual impacts are acceptable. Similarly, detailed monitoring plans will be implemented to reassess impacts throughout the lifetime of the Project and beyond to test that the mitigations are maintaining impacts at a level which can be considered acceptable.

Summary of Environmental Action Plan

The Company has made a series of commitments and agreed to a number of measures that will mitigate environmental and social risks generated by the implementation of this Project.

With regards to water, ephemeral surface water channels that currently cross the location of the planed open-pit and other mine related facilities shall be diverted to prevent ingress to these mine features and redirected in a manner that minimises the risk of impacts to downstream users of surface water and any associated shallow groundwater.

The Company has committed to further hydrogeological studies for assessment of the mine and selection of the borefield, which when coupled with monitoring plans that are being drafted will minimise the risks of impacts to shallow groundwater and surface water resources that currently are of critical importance to local herders and wildlife.

The Company has drafted plans for Top Soil Management, Dust Management, Chance Finds Protocols, Pit and Quarry Selection Protocols, Stakeholder Engagement Plan and Resettlement Framework. A protocol for Management of Change has also been drafted as it is recognised that the Project is still in early stage development and changes to practices and procedures will occur.

With regards biodiversity, the Company has committed to further assessment works to complement and build on the database that has been put together to date. The Company will also seek to liaise with other mining and industrial firms operating in the Gobi to provide a more regional picture with regard to biodiversity in the Gobi.

Monitoring and reporting

The Company will monitor the environmental impact of its operations in accordance with national law and regulations. The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports prepared for the project. The Bank will also visit the operational site on an annual basis.

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

Technical Cooperation

Further support for the roll-out of the Mongolian Extractive Industries Transparency Initiative. This will include a EUR 500,000 to support ongoing activities.

Company Contact

MAK
Bayanzurk district
PO Box 237
Ulaanbaatar 210349
Mongolia

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.