MAC: Mines and Communities

World Bank aids Newmont in Ghana

Published by MAC on 2006-02-01

World Bank aids Newmont in Ghana

1st February 2006

IFC Loan for Foreign Mining in Ghana Approved

by Celia W. Dugger / New York Times

The board of the International Finance Corporation, the World Bank's investment agency, yesterday approved a $75 million loan to a subsidiary of Newmont Mining, the world's largest gold producer, for a project in Ghana that the investment agency's managers say they hope will be a model for the developing world.

An alliance of advocacy and environmental groups urged the I.F.C. to postpone approval until it won additional safeguards to protect the thousands of people who are losing land and livelihoods to the gold mine's development, and to prevent contamination of drinking water from mine waste.

But a senior official at the agency said the loan had been approved on the condition that the company meet stringent social and environmental standards. The more than 9,000 people, many of them subsistence farmers, whose homes or land are being displaced by the project, are being resettled in new villages or compensated for their losses.

"The company is really committed, and the fact that they have deep pockets will help address many of these issues as they come up," said Rashad Kaldany, who heads the oil, gas, mining and chemicals department for the World Bank and its investment agency.

The $470 million project, already three-quarters built, will create 620 permanent jobs, I.F.C. officials said, and, depending on the price of gold, generate $300 million to $700 million for Ghana over the next 20 years.

Newmont could have finished the project without the loan, Mr. Kaldany said, but wanted the agency's stamp of approval for meeting social and environmental standards. A spokeswoman for Newmont did not return several phone calls yesterday.

In a report to the I.F.C., the mining company's Ghana subsidiary said it aspired to be "a model corporate citizen." The company's huge operation in Peru has generated fierce protests among peasants there. And in Indonesia, the government brought criminal charges of polluting against the Denver-based mining giant, charges the company has denied.

In its summary of the Ghana project, I.F.C. managers describe it as one "expected to become a demonstration for how to handle environmental, social and community development issues in Ghana."

Another project that was supposed to be a model for developing a poor African country's natural resources, the construction of a $4.2 billion oil pipeline through Chad and Cameroon, suffered a major setback less than a month ago. The World Bank suspended all loans to Chad after determining that its government had broken an agreement to dedicate most of the oil revenue to alleviating poverty.

Years ago, nonprofit groups advocated that the bank delay its loan to Chad until the country strengthened the institutions that could ensure that oil revenues were spent honestly and well. The groups counseled delay in the Ghana case and considered the I.F.C.'s decision to go forward with the loan a disappointment.

"The project poses a serious threat to the livelihoods and long-term well-being of the people in the area," said Keith Slack, a senior policy adviser for the international aid group Oxfam. "The I.F.C. has taken a very significant risk by approving this project."

A World Bank evaluation in 2003 of its own earlier investments in Ghana's mining industry raised questions about the benefits of large-scale mining by foreign companies. It noted that creation of jobs had been modest, local communities had seen little benefit and corporate tax payments had been low.

But Mr. Kaldany said the gold project approved yesterday would improve conditions for local residents and generate substantial revenue, enabling the government of Ghana to spend more on health, education, roads and other public works that would reduce poverty.

"Our goal and the company's goal is that people be better off after this," he said.

World Bank Urged to Postpone Loan for Controversial Gold Mine in Ghana


31st January 2006

A group of Ghanaian and international organizations is urging the World Bank to postpone funding for a new gold mining project in Ghana until the Bank addresses the project's human rights and environmental problems. Tomorrow, the Bank's Board of Directors is to consider loans of $125 million by the International Finance Corporation (the Bank's private sector arm) to Newmont Mining Corporation, one of the world's largest mining companies, for the development of the Ahafo gold mine project in western Ghana.

The project comes to the Board just weeks after World Bank President Paul Wolfowitz suspended the institution's support for a high-profile oil pipeline project in Chad over the government's decision to use oil revenues to fund the military. The Bank's support for large oil and mining projects in Chad, Guatemala, Peru and elsewhere has been the source of significant controversy in recent years. At the same time, Denver-based Newmont's operations in Peru and Indonesia have been rocked in the last two years by community protests over environmental contamination and health concerns.

"The living conditions of the communities affected by the Ahafo mine are already worsening even at this construction phase of the project," said Daniel Owusu-Koranteng, executive director of the Wassa Association of Communities Affected by Mining, in Ghana.

The mine will displace more than 9,000 people, at least 95 percent of whom are subsistence farmers. Land replacement measures critical to restoring the livelihoods of the displaced farmers remain incomplete or uncertain, according to the company's own assessment. Communities are concerned that the mine, which will use cyanide to extract gold, may also pose a serious risk to human health and the environment. An independent technical review revealed that Newmont did not provide sufficient information to assess risks of serious water contamination. The review calls for the company to implement more stringent environmental provisions. Weak laws governing the mining sector in Ghana make it nearly impossible to hold companies accountable in the event of environmental catastrophes such as cyanide spills.

"Given the problems we have already seen with this project, and the Bank's poor track record in managing mining projects in general, we don't think the Bank should support this project at this time," said Keith Slack, senior policy advisor for aid group Oxfam America. "The Bank needs to demonstrate to the world that it has learned the lessons from its past mistakes with these kinds of projects."

The Ahafo project will generate a relatively paltry $300 million over 20 years for the government of Ghana and create just 620 long-term jobs, while resulting in the economic displacement of nearly 20,000 people when the project's two phases are completed. Non-governmental groups argue that the development benefits of the project hinge upon the restoration of sustainable livelihoods and the protection of clean water for the rural communities affected by the project.

"The rural communities of Ahafo depend on land and natural water sources to sustain their livelihoods. The World Bank needs to ensure these resources are protected, not damaged, if it expects to alleviate poverty and promote sustainable development," said Mike Anane of the human rights group FIAN-Ghana.

Ensuring the project respects human rights and environmental standards is a key test for new World Bank president Paul Wolfowitz, who has become personally involved in efforts to clean up controversial Bank-funded mining projects in Guatemala and the Democratic Republic of Congo, in addition to freezing the oil-focused program with Chad.

"Newmont wants to obtain a 'social license' for its project via World Bank support. We call on President Wolfowitz to take strong action to ensure that the company complies with the highest human rights and environmental criteria," said Radhika Sarin, international program coordinator at EARTHWORKS, an environmental group that promotes mining reform.

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