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.

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