South Africa Project Number: P-ZA-B00-001
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ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT SUMMARY Project Name: Kalagadi Industrial Beneficiation Project Country: South Africa Project Number: P-ZA-B00-001 1. Introduction The Bank has been invited to extend a senior loan of up to Euro 150 million to Kalagadi Manganese Pty Ltd, a joint-venture company. The Bankable Feasibility Study (BFS) of the project was prepared in September 2008, on the basis of which the sponsors conducted an Environmental and Social Impact Assessment (ESIA) study. The ESIA has been approved by the Department of Minerals and Energy (DME) and the Northern Cape Department of Tourism, Environment and Conservation (NCDTEC). This document – the ESIA Summary- aims to present a précis of the major finding of the assessment study. It provides information on the project description and justification, the environmental and social baseline conditions of the project area, the envisaged adverse and beneficial impacts of the project as well as mitigation measures and monitoring programs which would be implemented to ensure that the project is developed and operated in a sustainable manner. Kalagadi Manganese Pty Ltd (Kalagadi Manganese), a joint-venture company, which owns the mining rights, is the borrower and executing agency of the project. The shareholders of the joint-venture company are: ArcelorMittal (50%), Kalahari Resources (40%) and IDC (10%). ArcelorMittal is the world’s number one steel producing company, with industrial presence in 27 countries. It led the consolidation in the global steel industry and stands as the leading global steelmaker. It is the lead supplier of steel products into all major global markets, including automotive, construction, household appliances and packaging. The Group leads in R&D and technology, and holds sizeable captive supplies of raw materials and extensive distribution networks. The company reported combined revenues of US$124.9 billion in 2008 and produced 103.3 million tons of steel, 2 representing approximately 10% of world output. In August 2008, ArcellorMittal purchased 50% interest in the Kalagadi for R3.4bn. In South Africa, the company is focused on sustainability principles on three dimensions: Health and Safety, Environmental responsibility, Engagement with stakeholders. It is committed to continuous improvement of safety, health and environment (SHE) performance. In meeting this mandate, the company is guided by the Safety, Health and Environment (SHE) policy which is implemented across its activities. The company recognizes the challenges facing its commitments to world class sustainability performance and is committed to compliance with current environmental legislation in South Africa and cooperation with all relevant regulators and government departments. 1 The company has also developed a Corporate Social Investment (CSI) strategy is underpinned by the following principles: Addressing socio-economic imbalances. Contributing to meaningful transformation. Aligning objectives with government programmes such as ASGISA (Accelerated & Shared Growth Initiative for South Africa). Empowering historically disadvantaged communities to become self-sufficient. Promoting employee participation in social projects. Kalahari Resources Pty Ltd (Kalahari) was founded by black African women entrepreneurs in 2001 to pursue investments in the mining sector. The Mining and Petroleum Reserves Development Act 2001 opened up the mainstream mining industry to black people. In 2005, Kalahari was granted a new order prospecting license for manganese in the Kalahari Basin. The company initiated a pre-feasibility study which was completed in May 2007 and included the Mineral Resource Estimation, Environmental Impact Assessment and defined the technical scope of the Project. Kalahari has brought together women’s groups and entrepreneurs with broad-based participants and beneficiaries, creating a truly South African company, which is committed to transforming society and having a positive impact in the future. Industrial Development Corporation of South Africa (IDC) is a self-financing, national Development Finance Institution (DFI), which was established in 1940 to promote economic growth and industrial development. The company’s vision is to become the driving force behind commercially sustainable industrial development and innovation in South Africa and across the continent. In 2007, 1 ArcelorMittal South Africa Limited Sustainability Report 2009 3 IDC bought 20% of the company for a consideration R60 million, which partially funded the Bankable Feasibility Study. As a development finance institution, the IDC embraces sustainable development practices in the project financing process by integrating environmental management principles into decision-making. IDC has well developed Environmental and Social Management System which sets out IDC’s environmental and social policies as well the procedures for integrating these policies in investment decision making. IDC has also established a separate environmental health and safety function department in 20072. 2. Project Description and Justification Project Description Kalahari Resources (Pty) Ltd (KR) proposes to establish a new Manganese Mine located on three (3) contiguous farms namely, Umtu (2000 hectares), Olivepan and Gama (both 4500 hectares), constituting a total area of approximately 6300 hectares (ha), located within the Northern Cape Province of South Africa. The project area falls within the Kalagadi District Municipality, situated just outside the Gamagara Municipality. The mine would be designed to produce up to 3.0 million tons of ore per annum and would produce up to 1.5 million tones per annum at full production. The mine would have the capability to produce alternative materials depending on the market demand for these materials. Alternative materials in this case refer to Ferromanganese (HCFeMn) – the primary product or its alternative Silico-manganese (SiMn). These products of the mine are used in alloy-steel production. The mine will be an underground mine and the ore body would be accessed by means of a twin decline, one of which would accommodate the conveyor belt and the employees, material. The second decline would be mainly used as the return airway and serve as the statuary second outlet. The ore will be crushed underground following which, a conveyor belt system will transport the ore out of the mine via one of the twin declines to a surface stockpile. The mineral extraction plant will consist of a secondary crushing and screening circuit, followed by a Dense Media Separation plant (DMS). Thereafter, the ore will be sintered (the powdering ore is heated to form a solid mass) in a sinter plant. Finally, the ore will be transported, by rail, to a smelter, which will be developed in the Industrial Development Zone of Coega, Eastern Cape. 2 Industrial Development Corporation of South Africa Sustainable Development Report 2009 4 Project Justification The primary purpose of this project is towards the production of steel-manganese alloys (alloys refer to a mixture of two metal types, in this case iron and manganese). The project area is underlain by the 5 Kalahari Manganese Field (KMF), the world’s largest manganese deposit. Approximately 85 % of the manganese units mined from the ground is used in the production of mild and carbon steels. Based on manganese’s pre-dominant use in steel making, manganese market trends closely follow that of the steel market. At present, further increases in the efficiency of manganese application are limited and thus the market for manganese should closely follow that of Steel as there is no current or potential substitute for manganese in steelmaking. It is envisaged that the bulk of manganese produced from this mine would be exported. 3. Policy, Legal and Administrative Framework This section outlines the legal and regulatory framework, which is relevant to the proposed mine development. The legal and regulatory framework provides the various legal aspects that must be adhered to at project design, implementation and later when it is decommissioned and during operation. The following are the applicable policies and regulations. African Development Bank Policies and Procedures: Environmental Policy (2004), Policy on Poverty Reduction (2004), Policy on Population (2002), Gender Policy (2001), Policy on, Involuntary Resettlement (2003), Policy on Disclosure of information (2005), Policy on Good Governance, Policy on Public Consultation and Cooperation with Civil Society (2001), African Development Bank Environmental and Social Assessment Procedure (2001). The Bank has also endorsed the Extractive Industries Transparency Initiative (EITI) in 2006. South Africa's Environmental Policies and Regulations: Mineral and Petroleum Resources Development Act (MPRDA), 2002 (Act No. 28 of 2002), National Environmental Management Act, 1998 (Act No. 107 of 1998); National Environmental Management: Air Quality Act (AQA), 2004 (Act No. 39 of 2004);Air Pollution and Prevention Act, 1965 (Act No. 45 of 1965); National Environmental Management: Biodiversity Act, 2004 (Act No. 10 of 2004) and National Spatial Biodiversity Assessment; National Water Act, 1998 (Act No. 36 of 1998);National Heritage Resources Act, 1999 (Act No. 25 of 1999);National Forest Act, 1998 (Act No. 84 of 1998);Conservation of Agricultural Resources Act, 1983 (Act No. 43 of 1983); and Provincial ordinances of the Northern Cape Province. 4. Description of the Project Environment and Social Baseline Conditions Geology: The project