World Bank, NGOs Spar over Indonesian Mine Project

  • by Matthew O. Berger (washington)
  • Wednesday, July 14, 2010
  • Inter Press Service

The approval, they say, speaks to deeper problems with the standards against which the Bank evaluates extractive projects and its policy towards supporting new mining operations generally.

Japan's Mitsubishi Corporation and France's Eramet, backers of the mine project, had asked the Multilateral Investment Guarantee Agency (MIGA) for a guarantee of 207 million dollars against the risks of expropriation, breach of contract and civil disturbance while they conduct exploration and feasibility studies for the Weda Bay Nickel mine on Indonesia's Halmahera Island.

NGOs had said that support for the guarantee would amount to support for a project that would displace indigenous peoples, destroy vast areas tropical forest and threaten rivers and the ocean with sediment and toxic chemicals.

Tuesday, the Board of Directors signed off on guaranteeing the corporations' investments in the studies. Only the U.S. delegate to the board abstained from the vote. Though MIGA notes the contract has not yet been signed, it says it plans to support the guarantee now that the board has given its approval.

The NGOs are looking ahead. Signing the contract is now 'just a procedural question', said Scott Cardiff of Earthworks, a Washington-based organisation that targets destructive mineral development practices.

But the Bank sees a more complicated picture going forward. Approving the guarantee would allow it to be a part of the study process and thus more able to influence the way in which this and other mining operations are designed.

'MIGA sees this project as an opportunity to influence the way such complex projects are done - with the best environmental and social safeguards in place and company compliance,' MIGA Executive Vice President Izumi Kobayashi said in a statement. 'This stage is precisely to assess what the potential environmental and social impacts might be and to identify appropriate mitigants to address them.'

Earthworks and the Bank Information Center feel they already have a good sense of what those impacts might be. They requested a review of the Weda Bay Nickel project by Robert Moran, an independent water quality, geochemical and hydrogeological scientist.

His review, released Monday, examined the publicly available information regarding the project's plans and found that MIGA's endorsement is based on optimism and predictions, which themselves are based on inadequate data. Moran also highlighted the potential for water pollution risks as torrential rains or earthquakes could allow mine waste to contaminate drinking water.

He was also critical of the plan to dump the mine's liquid processing waste into shallow ocean waters, which would 'cause significant negative impacts to the marine life and collective ecosystem in Weda Bay over the 30 to 50 year life of the operation.'

The Bank addressed this dumping fear as well as other fears raised by Indonesian groups in a Jun. 16 letter. 'No tailings [sic] dumped into Weda Bay or any other body of water,' wrote the director of MIGA's economics and policy group, Frank J. Lysy. 'All residues will be dried and then stored on land, to be progressively covered and revegetated.'

Lysy goes on to note that while a project of Weda Bay's size may have negative potential impacts, it may also be beneficial. Referring to discussions with local villagers, he says the local population is 'highly supportive of the project, as they look forward to the availability of well- paying jobs and other economic opportunities.'

In its statement Tuesday, MIGA noted the potential impacts of the project could include 'biodiversity loss, pollution, erosion, population influx, and potential impacts on indigenous groups and cultural heritage.'

Lysy notes that 'no decision is being sought at this time on the construction and operation of the mine itself' since both the local population and the bank and investors recognise the need to assess the potential for these impacts.

In an email, MIGA spokesperson Mallory Saleson also underlined the point — in boldface and caps — that the proposed project consists of 'an exploration and feasibility study ONLY at this stage'.

But Cardiff says the studies 'generally lead to some form of mining'.

Moreover, in a study he did of the biodiversity impacts of the Weda Bay project, Cardiff says that impacts from forest clearing 'will occur during the exploration phase, not just during construction and operation'.

This and other impacts, he says, will lead to long-term habitat loss for a number of species, some of which are listed as endangered or vulnerable.

Deeper problems with mining

The Jun. 16 letter not only challenges NGOs' accusations of dumping in ocean water but says the Weda Bay project would supply its own major energy needs from the excess heat it generates and 'not be a large net user of energy'. It would also aim to revegetate the same amount of land it mines each year.

But the NGOs contend that the problems go far deeper than this one mine.

'The World Bank has supported destructive mining projects all over the world; it is time for that to change,' says Cardiff.

He cites the Bank's International Finance Corporation's financing of Ghana's Ahafo mine, Peru's Yanacocha mine and the Marlin mine in Guatemala which was recently ordered to suspend its operations due to pressure by the U.N. Special Rapporteur on Indigenous Rights, the Inter-American Commission on Human Rights and other groups.

Earthworks also accuses MIGA of not abiding by its own Performance Standards, specifically standards number one - on social and environmental assessments — and number six — on conserving biodiversity and ensuring sustainable resource management.

'The Bank is not only not following its own procedures, apparently, but those policies are inadequate. The Performance Standards do not represent responsible mining and are in need of reform,' Cardiff said. He notes, however, that the IFC's standards are currently under review and that he hopes stronger ones will emerge.

Once the Weda Bay Nickel studies are complete, the companies will decide whether to invest and continue to develop the mine and build a processing plant. This final investment decision should be made before the end of 2012, according to MIGA.

© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service

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