Bankwatch reports examine EBRD funding of mining in Kyrgyzstan and Mongolia « Mining Blog

Bankwatch reports examine EBRD funding of mining in Kyrgyzstan and Mongolia

31. January 2012,

NB: The From Money to Metal wiki does not normally include information on multilateral development bank financing of the mining sector.

However, a report from Bankwatch on European Development Bank-backed projects in Kyrgyzstan and Mongolia is worthy of note.

http://bankwatch.org/news-media/blog/rushing-gold-can-leave-people-behind-ebrd

Declaring that “Rushing into gold can leave people behind, Bankwatch’s
Central Asia officer, Vladlena Martsynkevych, says:

“A look at mining projects in Kyrgyzstan and Mongolia reveal a need to carefully revise the European Bank for Reconstruction and Development [EBRD]’s involvement in the exploitation of natural resources.

“[A] clear strategy for the EBRD’s engagement in the mining sector indeed bears no small meaning if they decide over whether or not to support investments that may end up hurting people and their livelihoods, damaging local environments and/or adding to climate change.

“To the shame of the bank, it hasn’t updated its guidelines for metals mining since 1999! ”

Although Bankwatch welcomes the fact that the EBRD is finally working on a new Mining Operations Policy,it says:

“Surely, the bank has made mistakes in the past and, looking ahead, the stumbling blocks for mining projects that contribute to a development beyond GDP growth won’t just disappear”.

Bankwatch has just published two reports, offering in-depth examinations of the impacts of EBRD-supported mining developments in Kyrgyzstan * and Mongolia **.

Kyrgyzstan’s Kumtor gold mine is described as ” an enormous – and enormously profitable – mine in the Kyrgyz Tian-Shan mountain range, an environmentally extremely fragile area with two glaciers, nearby national parks and a transboundary river.

“Being supported by the EBRD since 1995, the operator of the mine Centerra Gold has neglected worrying environmental impacts, among others on the glaciers. It has also not been taking full responsibility for the damages that several accidents at the mine have done to the local population. Moreover, revenues for local authorities have been avoided, leaving only limited opportunity for jobs for people in the communities nearby.

“In its communication with civil society, Centerra Gold has been nontransparent and unresponsive and the EBRD has not done enough to improve that. On the contrary, the bank has more than once been too uncritical about persisting problems and too trusting in Centerra’s “self-monitoring” “.

So far as Mongolia is concerned, Bankwatch points out that:

“In terms of local impacts, water scarcity is the biggest issue: Mining companies like to point out that aquifers are abundant and unrelated to shallow water sources. The fact is, though, that there is just no clear evidence whatsoever – neither for nor against a danger of impacts on water sources. The current practice of first come-first served may well result in an unpleasant awakening in a few years (for the local population more so than for the mining companies).

” The [EBRD]…finances the Ukhaa Khudag coal mine that’s within the Tavan Tolgoi coal deposit and [is] examin[ing] a potential investment in the Oyu Tolgoi gold and copper mine project. Both are located in the South Gobi region and near the Mongolian-Chinese border.

“Additionally, in December the Bank approved a USD 350 million loan for the Tsagaan Suvarga copper mine and is about to decide next week on a 55 million loan and equity investment in the Tayan Nuur iron ore mine.

Bankwatch urges EBRD to be “very careful not to contribute to Mongolia’s potential overdependence on commodity exports. To illustrate the bias towards natural resources: Total EBRD investments in Mongolia were EUR 338 million by the end of 2010. The loan to Tsagaan Suvarga from 2011 alone will double that figure. With an equally sized investment in Oyu Tolgoi [owned by Ivanhoe Mines and Rio Tinto] in the 2012 project pipeline it will be hard to strike a balance in the EBRD portfolio with minimal investments in other sectors of the Mongolian economy.

“Rather than following the trend that’s anyway happening, the EBRD could help Mongolia diversify by diversifying its own portfolio in the country. There are lots of other important areas that need investments in Mongolia and that don’t profit from an international business hype: agriculture, infrastructure, municipal and environmental services”.

* http://bankwatch.org/publications/kumtor-gold-facilities-kyrgyzstan-comments-water-environmental-and-related-issues

** http://bankwatch.org/publications/kumtor-gold-mine-kyrgyzstan-bringing-risks-regional-water-systems

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1 Comment

  1. Thank you for sharing this with your readers!

    While public lending institutions might sometimes pay more attention to social and environmental standards than private funders, the investments still may be very detrimental to local communities.

    If I may add one correction to the article: the study on Mongolia’s mining boom is available at
    http://bankwatch.org/sites/default/files/spirited-away-mongolia-mining.pdf

    A short summary of the published materials can be found in another blog post on our website:
    http://bankwatch.org/news-media/blog/earths-riches-peoples-troubles-mining-central-asia

    All the best,
    Sven

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