Shalkiya Zinc: Pre-Privatisation Loan

Location:

Kazakhstan

Project number:

48347

Business sector:

Natural resources

Notice type:

Public

Environmental category:

A

Target board date:

07 Jun 2017

Status:

Signed

PSD disclosed:

15 Sep 2016

Translated version of this PSD: Russian

Project Description

A USD295 million pre-privatisation A/B senior loan to JSC ShalkiyaZinc LTD (the "Borrower"), a 100% subsidiary of JSC Tau-Ken Samruk ("the Sponsor"), National Mining Company of Kazakhstan, to finance expansion of the Shalkiya zinc-lead mining operation.

Project Objectives

The facility will support the borrower's pre-privatisation efforts in expanding operations of the existing Shalkiya zinc-lead mine located in the Kyzylorda region of Kazakhstan and the construction of a processing plant at the site with a capacity of 4 million tonnes per annum.

Transition Impact

Moderate Good

By financing the project the Bank will support efforts of the Government of Kazakhstan to privatise ShalkiyaZinc and Tau-Ken Samruk. The project will also have gender and inclusion components which among other things will strengthen equal opportunities for women to access employment and skills. This work will be supported through additional integrated policy dialogue to (i) ensure the development of a set of improved national occupational standards that reflect employer requirements and integration of these standards into the National Qualification Framework of Kazakhstan, and (ii) support the Government of Kazakhstan to reduce legal and regulatory barriers and increase awareness for women's equal access to the labour market.

Client Information

SHALKIYAZINC LTD JSC

The borrower is an ore mining company holding subsoil use contract for exploration and production of polymetallic ores at Shalkiya deposit in the Kyzylorda region of Kazakhstan. The sponsor is a national mining company established in 2009 in order to ensure effective operation of subsoil use in the fields of exploration, development, production, processing and marketing of solid minerals in Kazakhstan.

EBRD Finance Summary

USD 175,000,000.00

Total Project Cost

USD 563,000,000.00

Environmental and Social Summary

This project is a significant expansion of a mine and primary processing of ore and therefore considered as a Category A project in accordance with the EBRD Environmental and Social Policy, May 2014.  The appraisal of this project included a site visit by ESD and an Independent Environmental and Social Consultant was retained to conduct a site visit/review and to review project operations and documents relative the EBRD Environmental and Social Policy requirements.  The project consists of the Shalkiya underground mineral (lead and zinc) deposit and workings thereof, crushing and grinding, water supply systems, power distribution and ventilation, a new processing plant, a new tailings storage facility and various supporting infrastructure.  This project involves the development of an existing mine which commenced operations in 1982.  While mining operations ceased in 1994, the mine did reopen between the years 2004 and 2008.  During previous operations, the mined ore was transferred offsite for processing, so there was no processing or tailings onsite. Previous mining rates were about 2 million tonnes of ore per annum (mtpa) while new plans call for production of about 4 mtpa.  All ore is produced from underground mining.

Project documentation was disclosed for this project, with links on the EBRD website starting 13 July 2016.  Project documentation included the Environmental and Social Impact Assessment, Non-Technical Summary, Stakeholder Engagement Plan, Environmental and Social Management Plans and the Environmental and Social Action Plan.  All pertinent information utilised for the appraisal of this project, and for completion of the ESIA disclosure is presented in the documents or referenced therein.  All known sources of background data were utilized as part of this work, including regional data on hydrology, air quality, biodiversity, etc.  These sources were augmented by collection of primary data as well as development of plans for further data collection when required to inform site development decisions.  Independent ESDD has confirmed that the disclosure package meets EBRD’s ESP 2014.

In parallel to the ESIA mentioned above, EIA reports have been prepared for the mining activities on the site, including such documents in 2007 and 2012 in accordance with national requirements.  An updated EIA/OVOS report for the planned activities is being prepared based on current mine development plans.  This document will be presented to the regulatory authorities in 2017 and will require approval prior to beginning operations on site.  Regulatory requirements for national project approval are set forth in the Republic of Kazakhstan Environmental Code (2007).  This Code and the associated bylaws set forth the national requirements for land conservation and use, as well as environmental protection, while the Water Code of Kazakhstan regulates water use and protection and the main occupational health and safety requirements are set forth in People’s Health and Health System Code and Law On Civil Protection (2014).  It is a pre-condition of the EBRD project that all national requirements be met prior to the commencement of project activities.

The site is located in the Kyzylorda region of south-central Kazakhstan, an area of gentle topographic relief with general elevation between 250 and 300 m above sea level.  The lead and zinc mineral deposits are contained at depth within carbonate, dolomite and quartz rhythmites.   The area around the site is typical Kazakhstan steppe with continental climate and average precipitation of 151 mm.  The site is located within the drainage basin of the Syr Darya, which is over 2,200 km in length and has an average annual discharge of over 40 km3.   The project area has a homogeneous local landscape of ephemeral steppe, attributable to the arid climate, soil of low fertility and low-productive biota with low resilience to disturbance.  Kyzylorda region has limited habitat for rare or endangered species and there are no protected areas or unique landscapes near the project site.

Most settlements in the Kyzylorda region are adjacent to the Syr Darya River.  The Kyzylorda region is rich in mineral resources and mining is the core of regional economy.  The Shalkiya settlement has a population of over 2,000 with relatively low levels of employment (and therefore employment and spending associated with the project are welcome).  Buildings and infrastructure in Shalkiya are in a relatively poor state of repair, with much of the population relying upon open pit wells for water supply.

The ESIA for the project contains a comprehensive assessment of potential impacts associated with site development, and where needed, a description of the avoidance, management and mitigation measures to be implemented.  As with any mine, there will be impacts associated with land take, although given that this mine is underground, surface impacts will be minimised and mainly related to the administrative buildings, processing plant and the tailings storage facility (TSF).   Further, given the nature of the geological units (carbonates) acid rock drainage is not a significant issue on this project.  Exposure to lead (occupational exposure and community) is one of the main issues for this project, and this will be managed through comprehensive dust control measures, use of personal protective equipment (for onsite workers in certain areas) and extensive environmental and health monitoring.  Air dispersion modelling has shown that offsite exposure is not an issue.

While the development of the site is considered not to pose a threat to rare or endangered species or critical habitat, pre-construction surveys will be required to assess possible presence of a few nationally-listed plant species.  As mentioned above, the area at the project is not a unique habitat and if such species are present on the site, they are likely to be present widely at least locally.

There will be areas of ponding surface water at the site, and additional studies will be completed (assessing water quality) to ensure that the presence of such features do not pose a risk to birds that may utilise such bodies of water during migration through the area.

While the overall social impact of the site will be positive due to job creation and increased local spending, there are potential impacts related to labour migration, increased burden on social infrastructure, local conflicts, etc.  The project is aware of these risks and will utilise a strategy of pro-active community engagement and involvement, education, training, and close working relationship with local authorities to ensure that these issues are adequately managed.  In addition, the project has committed to entering into open and transparent stakeholder engagement and CSR  activities.

An Environmental and Social Action Plan (ESAP) has been prepared for this site to address the potential issues associated with this project.  This ESAP has been disclosed along with the ESIA, and includes tasks such as implementation of various management plans, development of various HR policies and procedures, application of Best Available Techniques for the mine and the processing plant, comprehensive air quality monitoring, use of liners for ore storage areas, pre-construction flora surveys and possible translocation of conservation worthy species,  ensure that the sanitary protection zone (when completing final project design ) does not include any agricultural production areas, implementation of comprehensive dust control measures, construct a biological treatment plant for sanitary wastewater, establish protection zones around any identified objects of cultural or historical heritage, determine social infrastructure needs (that can be met my the site) and work with the community to create a vision for 2030 to 2050, ongoing monitoring and review of geotechnical parameters of the tailings facility (including static and dynamic stability), comprehensive environmental and health monitoring and development and ongoing updating of a mine closure plan.

Implementation of the ESAP will promote responsible development of this project.  ESD will closely monitor project development and progress through the review of annual monitoring reports prepared by the project, and through regular site visits to observe development of the site and implementation of the ESAP.
The Gender Team will work with the client to identify additional potential project improvements which go beyond the needs of the specific investment from a compliance perspective, including strengthening equality of opportunity in project design, with a particular focus on supporting women in technical and engineering positions.

Creating economic opportunities for young people and populations and advancing the skills and employability of the local workforce is particularly relevant in Kazakhstan, where despite rising educational attainment and employment rates of youth over the past 10 years, the private sector’s concerns about skills gaps have continued to grow. Moreover challenges in relation to skills mismatch in Kazakhstan will likely affect mining sector disproportionately if necessary responses are not developed in a timely manner given that the mining sector is forecast to be one of the sectors with the highest employment growth rate in the period 2015-20. To this end, the inclusion team will work with the client in the development of a sectoral skills model to address some of the key operational challenges related to the skills-mismatch in mining sector in Kazakhstan. Within this scope, the specific focus will be put on the development of a clear inclusion methodology and bespoke action plan for the client to support the development of high quality training, development/improvement of national occupational skills standards, potential integration of these standards into Kazakhstan’s National Qualification Framework and establishing partnerships with local educational institutions.

Technical Cooperation

None.

Company Contact Information

Mira Akhmetova
+7 727 3 11 06 24
www.zinc.kz
7 Al-Farabi Ave, #Nurly Tau# business # center, Block 4A, 9th floor, office No. 38, 050040, Almaty,
Republic of Kazakhstan

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