Land Acquisition and Resettlement Framework (Larf) Table of Contents

ČUKARU PEKI PROJECT

LAND ACQUISITION AND RESETTLEMENT FRAMEWORK (LARF) TABLE OF CONTENTS

1 Introduction 5 1.1 Summary Project Description 5 1.2 Project Owner 5 1.3 Project Location and Key Components 6 1.4 Principles for Land Acquisition and Access 7 1.5 Rationale for Resettlement Framework 8 2 Legal and Institutional Framework 9 2.1 Key Relevant Laws of the Republic of Serbia 9 3 Overview of Socio-Economic Conditions in the Project Area 12 3.1 City of Bor 12 3.2 Communities in the Project Area 13 3.3 Key Demographic Trends 13 3.4 Livelihoods 13 3.5 Access to Public Services 14 3.6 Survey and Data Collection for the LARF and RAP 14 4 Overview of Potential Land Impacts 15 4.1 Project Footprint and Land Requirements 15 4.2 Estimated Land Impacts 15 4.3 Analysis of Alternatives 17 4.4 Temporary Land Access 18 5 Eligibility and Entitlements 18 5.1 Land Acquisition Process 18 5.2 Eligibility 19 5.3 Replacement Value 20 5.4 Compensation Methods 21 5.5 Entitlements 22 6 Land Acquisition Process 27 6.1 Surveying 27 6.2 Preparing Purchase Oﬀers 27 7 Engagement and Grievance Management 30 7.1 Engagement Strategy 30 7.2 Engagement Plan 31 7.3 Grievance Management 33 8 Assistance to Vulnerable People 35 8.1 Denitions 35 8.2 Identication Process 35 8.3 Assistance Measures 35 9 Livelihood Restoration 36 9.1 Overview of Potential Livelihood Impacts 36 9.2 Issues of Inheritance 36 9.3 Livelihood Restoration and Improvement Measures 37 10 Monitoring and Evaluation 38 10.1 Internal Monitoring of LARF Commitments 39 10.2 External Audits 39 11 Implementation Arrangement 41 11.1 Resources & Organization 41 11.2 Outsourced Tasks 41 11.3 Information Management 42

Appendix 1: References 43 Appendix 2: Bonus and Fairness Commitment Letter 44 Appendix 3: Lease Calculator 46

FIGURES AND TABLES

List of Figures List of Figures Figure 1: Čukaru Peki Location 6 Figure 2: Land Acquisition Team 41

List of Tables List of Tables Table 1: Total Parcels and Structures for Acquisition 16 Table 2: Registered Parcel Land Use 16 Table 3: Land Ownership as of August 2018 17 Table 4: Entitlement Matrix 23 ACRONYMS

ESIA Environmental and Social Impact Assessment GLAC Guide to Land Acquisition HRIA Human Rights Impact Assessment IFC International Financial Corporation LARF Land Acquisition and Resettlement Framework PS Performance Standard RAP Resettlement Action Plan RS Republic of Serbia SEP Stakeholder Engagement Plan TSF Tailing Storage Facility 1 INTRODUCTION

This Land Acquisition and Resettlement Framework (LARF) provides an updated overview of the policies guiding land acquisition for the Čukaru Peki Upper Zone Project (the Project) which is being developed by Rakita. It deals with the land access, acquisition, compensation and resettlement associated with the Project's Čukaru Peki copper-gold deposit. This report reects the Project's alignment with the International Finance Corporation's (IFC's) Performance Standards (PSs). The Project also has a Stakeholder Engagement Plan (SEP), which was publicly disclosed in Serbian and English in February 2017. The Project is dedicated to open and transparent communication with local communities. The rst version of the LARF was prepared by Rakita and a team of land acquisition and resettlement consultants, following work done in Serbia between October 2016 and April 2017. Initial disclosure and information meetings on the LARF were held in May, 2017. This updated report captures changes in Project planning, development, and land acquisition policies up to August 2018 and is expected to be publicly disclosed in October 2018. Where changes have been signicant, both the older and newer policies are detailed for ease of reference.

1.1 Summary Project Description

The Project is located within Rakita's Brestovac-Metovnica Exploration license. The Čukaru Peki mineral deposit which is currently the primary focus of development, has been subdivided into two zones, the 'Upper Zone' and 'Lower Zone'. Rakita has completed Pre-Feasibility Studies on the Upper Zone, and is currently undertaking a Feasibility Study with the objective of evaluating this high-grade deposit for the mining and processing of copper and gold ore. In parallel, exploration of the lower grade, but higher tonnage, Lower Zone is ongoing. As the pre-feasibility study has progressed, the projected footprint of the Project has been revised a number of times and remains under development.

1.2 Project Owner

Rakita is a Serbian company currently carrying out exploration and development activities in the Timok district of Eastern Serbia, near the city of Bor, and holds the exploration license for the Project. It is expected that the Project will represent a signicant investment for Bor Municipality and Serbia as a whole. Rakita is currently

As described below, Rakita is conducting exploration activities, under the authority of the Decision of the Sector for Geology and Mining of the Ministry of Mining and Energy No. 310-02-0221/2012-14, dated 03 March 2015.

5 owned and operated through a joint venture between Nevsun Resources Ltd. (Nevsun) and Freeport-McMoRan Exploration Corporation (Freeport). Nevsun is a mid-tier Canadian mining company. Freeport is the world's largest publicly traded copper producer, the world's largest producer of molybdenum, and a signicant gold producer. The Project has attracted considerable interest from other investors, but as of October 2018, ownership of the Project has not changed. Rakita adheres to high health, safety end environment standards and strives to make a positive, long-term and sustainable impact in the local community it operates.

1.3 Project Location and Key Components

The Project is located approximately 6 km south of the city of Bor, which is a regional administrative and mining centre approximately 245 km southeast of Belgrade, Serbia (see Figure 1). The Project site is favorably located for mining infrastructure (road, rail, power, water) and close to a recently upgraded copper smelter complex in Bor.

Figure 1: Čukaru Peki Location (Image Source: Google Earth)

1.3.1 Project Components

Currently, it is expected that the underground mine developed in the Upper Zone will have a depth of 450 m to 850 m below ground surface. Access to the underground area

6 will be through a pair of twin decline tunnels, which will initially serve as an exploration decline for the purpose of conrming the viability of the Upper Zone deposits. It is expected that the rst tunnel will eventually form the primary access for the underground mine when developed, and the second one will be used for ventilation. Operational support facilities are expected to include typical mine site infrastructure and oﬃces, including an equipment workshop, fuel storage, shotcrete batch plant, administrative oﬃces, and power and water management infrastructure. As currently planned, at the end of the operating phase of the underground mine in the Upper Zone, the site will be reclaimed. A depression would remain in the ground surface above the mine, and some ground subsidence would be expected within a circular zone (i.e. the subsidence zone) around this depression.

1.3.2 Expected Development Schedule

Rakita is conducting exploration activities under the Decision of the Sector for Geology and Mining of the Ministry of Mining and Energy No. 310-02-0221/2012-14. Notably, although some limited exploration work had been carried out in the Project area in the past, no mineralized deposit had been identied until Rakita made the discovery of the Čukaru Peki deposit in July 2012. Following exploration in 2017 and 2018, the Project's Feasibility Study is expected to be published in mid-2019. Throughout the years 2018 to 2020, Nevsun will continue to work to permit and develop the Čukaru Peki deposit and, subject to positive feasibility studies, permitting and approval from applicable authorities and suﬃcient nancing, Nevsun projects rst production from the Čukaru Peki Upper Zone in 2022. The mining and mineral processing operations are expected to run for approximately 10 years, but the exact timeframe for these activities will be further claried in the Feasibility Study for the Upper Zone. Construction and operations are expected to take place on a 24-hour/day, seven-day/week, and 365-day/year work schedule. The Lower Zone will continue to be evaluated, however Lower Zone mine development has yet to be conrmed with considerable drilling and technical/economic studies still required. The Project area has also been broken down into six zones according to the facilities or infrastructure expected to be located within them. These zones are described in Section 4: Overview of Potential Land Impacts.

1.4 Principles for Land Acquisition and Access

Land is currently being permanently acquired by Rakita from private landowners on a willing buyer/willing seller basis utilizing sale purchase agreements. Land is also being

It is noted that the last version of the LARF presented a preliminary map of the general mine arrangement here. However, the location of mine facilities has undergone significant revision since then and the mine design continues to evolve. In this context, no map of projected facilities is currently available. A map will be available in the Project's Special Purpose Spatial Plan, projected for submission to government in November 2018. 7 leased from landowners on a temporary basis for exploration drilling, the installation of monitoring infrastructure and other short-term needs. These leases are negotiated prior to land entry by the Project and like the purchase agreements, are voluntary. To guide land acquisition and access activities Rakita has established the following principles. • Alignment of the land acquisition process with applicable Serbian legislation and IFC PSs; in particular IFC PS5; • Minimizing land acquisition requirements through alternatives analyses to avoid unnecessary economic and physical displacement; • Land purchase based on willing buyer/willing seller negotiated settlement transactions; • Alignment of the land acquisition process with international human rights standards, assessed through an independent human rights impact assessment (HRIA); • Compensation for lost land, structural and agricultural assets at replacement value and premiums applied to the market value of the land, calculated to make the seller whole after the transaction so that people are able to fully restore all their assets in a new location if they choose; • Compensation for forest assets at market value, in alignment with Serbian legislation; • Iterative consultation with land owners to reach mutually agreeable solutions; • Assessment and mitigation of any impacts to livelihoods; Identication and assistance of households and owners considered vulnerable; and • Rehabilitation of land wherever legally, technically and economically feasible to return land to its previous conditions and use category following mine closure.

1.5 Rationale for Resettlement Framework

This LARF sets out the policies and procedures that Rakita has in place so that land acquisition and access is achieved in accordance with the principles above. While the footprint continues to evolve, this LARF is designed to meet IFC requirements, which state: "Where the exact nature or magnitude of the land acquisition or restrictions on land use related to a project with potential to cause physical and/or economic displacement is unknown due to the stage of project development, the client will develop a Resettlement and / or Livelihood Restoration Framework outlining general principles compatible with this Performance Standard. Once the individual project components are dened and the necessary information becomes available, such a framework will be expanded into a

8 specic Resettlement Action Plan." Accordingly, subsequent to the October 2018 LARF being publicly disclosed, once the Project footprint has been nalized, Rakita will develop a Resettlement Action Plan (RAP). The RAP is expected to: • Quantify the number of people and assets to be displaced; • Demonstrate that displacement is unavoidable and detail eﬀorts to minimize resettlement; • Describe the regulatory framework underpinning land acquisition; • Describe the process of informed consultation with aﬀected people; • Describe the methodology for asset valuations; • Describe the entitlements for all categories of displacement; • Document any livelihood restoration requirements and livelihood programs; • Document the organization framework for RAP implementation; • Document grievance mechanisms; • Document the assessment and mitigation of risks to vulnerable people; • Document monitoring and evaluation requirements; and • Develop a preliminary implementation schedule and budget.

2 LEGAL AND INSTITUTIONAL FRAMEWORK

2.1 Key Relevant Laws of the Republic of Serbia

2.1.1 Constitution

The Constitution of the Republic of Serbia (Oﬃcial Gazette of the RS 98/2006, Article 58) guarantees peaceful enjoyment of ownership and other property rights obtained in a legal manner. The Constitution further guarantees the equality of private, cooperative and public property ownership. The right to property can only be limited in the public interest (a designation granted by the government), and even then, only after compensation at no less than the market value of the property.

2.1.2 Land Tenure and Registration

In Serbia, property rights, including rights over land, are acquired over assets which are lawfully created/ constructed, acquired (as a sale purchase, as a gift, based on a contract for lifelong support), inherited, or awarded by the court. In some cases, property rights can be acquired based on use over time (acquisitive prescription).

9 Property rights can be subject to certain use restrictions. For example, agricultural land can only be used for agriculture, unless converted to another use through a regulated planning procedure, including payment of associated fees. As a general matter, everyone is obliged to refrain from violating others' rights and protection can be sought from the State. A Real Estate Cadastre has been created by the Serbian Government and is maintained in accordance with the Serbian Law on State Surveying and Cadastre (Oﬃcial Gazette of the RS 72/2009, 18/2010, 65/2013 and 15/2015, 96/2015, 47/2017, 113/2017, 27/2018, 41/2018). All rights or obligations related to real estate must be registered with the Cadastre, including property titles and encumbrances. The accuracy of registration data in this registry has progressed in terms of consolidation of data from previous registries (including hard copy registries kept by some municipalities) and public disclosure of available data in all municipalities, however there are still areas and/or individual cases where data needs to be updated. The recently adopted Law on the Procedure for Registration in the Real Estate Cadastre (Oﬃcial Gazette of the RS 41/2018) aims to further modernize and digitalize the real- estate records in Serbia.

2.1.3 Valuation

Property valuations are regulated by the Law on Property Valuators (Oﬃcial Gazette of the RS 108/2016 and 113/2017). This law introduced a framework to guide the work of property valuators and accredited valuation organizations in Serbia. The guidelines detail valuators' professional responsibilities and set out their ethical code, which is drawn in part from European and international valuation standards. Specically, regarding valuation reports, the law stipulates the highest standards of clarity, integrity, and impartiality as well as the appropriate level of detail for professional valuations. The law recognizes the following international professional organizations for valuators: The European Group of Valuers' Associations, Royal Institution of Chartered Surveyors and Appraisal Institute and their professional designations that are issued to qualied property valuators. International certicates recognized under the law are: (i) the Recognised European Valuer (ii) the Registered Valuer Member of The Royal Institution of Chartered Surveyors and (iii) Member of Appraisal Institute – MAI. National valuation licences are issued by the Ministry of Finance.

10 2.1.4 Property Transactions

Property transactions are regulated by the Real Estate Transfer Law (Official Gazette of the RS 93/2014, 121/2014 and 6/2015), including transactions of both private and public property. The law species that transfer agreements must be formalized, i.e. conrmed by public notaries registered in the territory where the property is located. Notaries must forward every transfer agreement to the local real estate cadastre, to the relevant court, and to the local Tax Administration which collects a transaction tax. The law also stipulates that regarding agricultural land and state-owned forest land, owners of adjacent parcels have pre-emptive purchase rights. This means that they must be given the opportunity to match offers made to their neighbouring owners. The acquisition of State-owned property is regulated in more detail in the Serbian Law on Public Ownership (Official Gazette of the RS 72/2011, 88/2013, 105/2014, 104/2016, 108/2016, 113/2017)). This law establishes the general principle that the provisions that apply to the disposal of private property (such as for sales, swaps and leases) also apply to public property, unless otherwise prescribed by law. However, the use, lease and acquisition of State-owned agricultural land is regulated in detail by the Law on Agricultural Land (Official Gazette of the RS 62/2006, 65/2008, 41/2009, 112/2015). This law prescribes the public tendering process for the lease or purchase of land.

2.1.5 Joint Ownership

Men and women have equal rights in the Serbia (Article 15 of the Constitution of the Republic of Serbia), including the possibility to have formal legal rights on properties. According to the Family Law (Oﬃcial Gazette of the RS 18/2005, 72/2011, 6/2015), if formal legal rights over properties/assets have been acquired during the marriage, the law assumes they are shared equally between the spouses, unless a diﬀerent agreement is formally registered with the court (Article 171). Where spouses jointly own a property, spousal consent to any transfer agreement is required.

2.1.6 Environmental Protection

Serbia has an extensive body of laws relevant for the protection of environment. Among others, the Environmental Impact Assessment (EIA) Law (Oﬃcial Gazette of the Republic of Serbia, No. 135/2004, 36/09) requires entities implementing projects in certain industries (including mining) to conduct an environmental impact assessment in advance of such a project, to achieve a preventive environmental protection.

11 3 OVERVIEW OF SOCIO-ECONOMIC CONDITIONS IN THE PROJECT AREA

3.1 City of Bor

Bor (Serbian Cyrillic: Бор) is a city and the administrative centre of the Bor District in eastern Serbia. The territory of the City is 856 km. Although it is surrounded by mountains with altitudes of over 1,000 m, the city of Bor has a relatively low altitude of 378 m. The territory of the City of Bor has over 400 km of roads, of which about 300 km are paved. Bor is connected with Town of Donji Milanovac by road which continues onward as the Danube (Đerdap) highway. Bor is situated on a road and railroad running southeast from Belgrade to Zaječar and Niš. The city of Bor is comprised of local communities which are divided into two groups - urban (located within the boundaries of the city of Bor) and rural. Three local rural communities are expected to be aﬀected by Project related land acquisition – Brestovac, Slatina and Metovnica. Bor is the site of one of the largest copper mines in Europe, and it has been a mining centre since 1903, when a French company began operations there. Apart from exploitation of the copper ore, metallurgical processing and production of blister and electrolytic copper and related metals, numerous processing facilities have been built in the City, on which industrial production in the town itself is based, as well as other processing capacities in Serbia.

12 3.2 Communities in the Project Area

The Brestovac community is close to the city of Bor, and a signicant part of the population share a connection with the city. Many people own or reside in ats or houses in the city of Bor, and the educational status of the population is higher than the municipal average. Brestovac is the largest of the three identied local settlements potentially aﬀected by land acquisition activities. Land acquisition activities were initiated in the Brestovac local community in September 2015. The small community of Slatina is also located close to Bor. This village appears to have experienced many historical negative impacts from other mining operations in the area. The Bor River ows through the village and also upstream near a historic tailings site, which appears to have contaminated the river. Accordingly, the population of Slatina is generally sensitive to pollution and environmental issues. The third local community that is expected to experience less direct impacts from the Project is Metovnica. Unlike Brestovac or Slatina, this community is more scattered, spread across a number of smaller settlements.

3.3 Key Demographic Trends

The City of Bor is relatively diverse, with a total of 32 diﬀerent nationalities reported to be living there. The latest publically available data on ethnicity is from the 2002 census, and shows that at that time, the settlements in the Bor with Serb ethnic majority are: Bor, Brestovac, Donja Bela Reka, and Oštrelj. The settlements with Vlach ethnic majority were: Bučje, Gornjane, Krivelj, Luka, Metovnica, Tanda, Topla, and Šarbanovac. More ethnically mixed settlements included: Zlot (relative Serb majority) and Slatina (relative Vlach majority). In the 2011 census, the population of the city of Bor numbered 48,615 residents, while the city had 34,160 residents.

3.4 Livelihoods

The local economy of Bor is almost exclusively reliant on the mining and metallurgy sectors. Other relevant economic activities include trade, manufacturing, real estate, and for a very small percentage of workers, construction, agriculture and transport. The area has potential for tourism, which is currently underdeveloped. Agriculture in the area is also underdeveloped, partly as a result of poor land quality and historical contamination from mining, illegal waste dumping, use of septic tanks, and the fact that the preferred source of livelihood for the local population is employment in

13 the mining sector. Land plots are also very small and scattered with relatively poor access which makes farming diﬃcult. The agricultural land that is farmed is usually worked by senior members of households, often to supplement pensions, while younger household members typically derive their incomes from more formal employment. Agriculture outputs are mainly used for household consumption or as fodder for small livestock.

3.5 Access to Public Services

Electricity, provided by the Public Enterprise “Elektroprivreda Srbije”, is available throughout Bor, however, as a result of outdated equipment, power outages occasionally happen. Over 90% of households and institutions are connected to the public heating system. In the city of Bor, connectivity to the public water supply, provided by the Public Communal Enterprise “Vodovod” (Water Supply) is 100%, while in rural areas it is approximately 75%. Metovnica is among the settlements that have their own rural water supply, however, a portion of the settlement's households are connected to the public water supply system. Rural areas are not connected to the public sewer system and households use their own septic tanks. Waste is collected and transported to the city waste dump two times per week from the city and once a week from rural areas. Street lighting is provided for approximately 85% of the territory of the city and 75% of the rural area. The entire territory of Bor is covered by telecommunication networks. Fixed and mobile telephony is available, and several internet and cable television operators are present. Educational facilities are available in Bor, from preschool to secondary school, including private schools. The Technical Faculty extension of the University of Belgrade is located in Bor. Available public services include a health centre and rural clinics in villages, sports centre, a tourist organisation, public library, culture centre, and a centre for social welfare.

3.6 Survey and Data Collection for the LARF and RAP

There was little additional secondary socioeconomic data available on the local communities potentially aﬀected by the Project. Supplementary primary socioeconomic data has been collected through household surveys, informant interviews and focus group meetings, both for land acquisition related activities and as part of the environmental and social impact assessments. The results of these data collection activities will be presented in detail in the RAP.

Source: Strategy for Sustainable Development of the Municipality (now City) of Bor for the period 2011 – 2021.

14 4 OVERVIEW OF POTENTIAL LAND IMPACTS

4.1 Project Footprint and Land Requirements

Land acquisition is required for the development of the Project and the construction of associated facilities. For safety, the area to be acquired will include the subsidence zone. Although the Project footprint has not been nalized, land acquisition is ongoing in six proposed zones where it is anticipated land will be needed. Together, the six zones are expected to contain the following facilities: • Zone 1 includes the area for the mine entrance and decline and is approximately 191 ha; • Zone 2 includes the expected underground mine and is approximately 148 ha; • Zone 3 includes the area for the mill and associated facilities and is approximately 45 ha; • Zone 4 includes the infrastructure corridors and external monitoring stations, and is approximately 179 ha; • Zone 5 includes the TSF and is approximately 435 ha; and • Zone 6 includes the rail terminal, loading station and public road realignment, but the total area is not currently known.

4.2 Estimated Land Impacts

To date, an approximate total of 998 ha of land has been identied for acquisition. This includes 880 ha of private land and 118 ha of municipal and state-owned land. This is expected to lead to the displacement of people who own land and / or live within the Project footprint. It is expected that the large majority of this displacement will be economic, meaning that people will be losing access to land they do not live on, as well as any structures or planted assets on that land. As of August 2018, ten households are expected to be physically displaced, meaning that they have been living at least in part (often seasonally) on parcels sold to the Project. The 998 ha to be acquired covers an estimated 1,888 parcels, with an estimated 43 registered structures on these parcels. Few of these structures are of residential quality, rather, many are barns and other storage buildings. Table 1 presents the parcel and structure count, by zone.

15 Table 1: Total Parcels and Structures for Acquisition LAND ACQUISITION ZONE PARCELS STRUCTURES 1: Decline 300 8 2: Underground mine 200 3 3: Mill and associate facilities 51 - 4: Infrastructure 367 12 5: TSF 970 20 6: Potential rail and/or road infrastructure Total parcels 1888 43

Table 2 presents the land uses originally registered in the cadastre for the land within the Project footprint. More than 50% of the land Rakita is planning to acquire is currently registered as eld or meadow, and another 36% is forest.

Table 2: Registered Parcel Land Use W ARD VINE THER A ASTURE ORCHARD VINEY O MEADO LAND ACQUISITION ZONE FIELD FOREST P R

1: Decline 86.2 59.7 20.1 1.3 2.7 20.0 0 1.0 2: Underground mine 76.1 18.6 5.3 0.2 12.8 33.6 0 0.7

3: Mill and associate facilities 17.1 5.1 0.4 - 17.6 4.8 0 - 4: Infrastructure 90 32.3 24.6 1.7 5.0 24 0 1.9 5: TSF 173.3 146.5 47.0 22.9 9 34.4 0.1 1.8 6: Potential rail and/or road infrastructure Total parcels 442.7 262.2 97.4 26.1 47.1 117.2 0.1 1.8

Table 3 presents the August 2018 status of land ownership across the parcels, including those already acquired and those still in the acquisition process. Overall, the Project has acquired just under 70% of privately owned parcels within the zones, and 62% of the total currently projected land take when public land is also included.

16 Table 3: Land Ownership as of August 2018 RAKITA ALL PRIVATE STATE OWNED PARCELS OWNED OWNED LAND ACQUISITION ZONE (OF TOTAL)

# ha # ha # ha # ha

1: Decline 300 191 285 185.7 15 5.3 229 150.3 2: Underground mine 200 148 129 83.2 71 64.8 92 65.5

3: Mill and associate facilities 51 45 47 26.2 4 18.6 30 14.5 4: Infrastructure 367 179 347 173.1 20 5.9 246 113.9 5: TSF 970 435 920 411.4 50 23.6 580 261.8 6: Potential rail and/or road infrastructure Total parcels 1888 998 1728 880 160 118 1177 605

Lastly, there will also be parcels outside the Zones above that the Project will acquire. This is because some owners of parcels within the Zones have made or will make their sale of those parcels contingent on the Project buying all their parcels in the area. These requests are managed on a case-by-case basis. The total number of these parcels is not yet known. As of August 2018, the Project has agreed to purchase an additional 228 parcels totalling 100 ha outside of the Zones. Evaluations and the preparation of purchase oﬀers on a further 209 parcels are also in process.

4.3 Analysis of Alternatives

Throughout the ongoing acquisition process Rakita has tried to avoid the acquisition of unnecessary land that could result in otherwise avoidable physical or economic displacement of people. Design alternatives have been iteratively assessed on the basis of social and environmental considerations. Adjustments in the routing or siting of Project facilities have been made to avoid displacement, in particular of those land owners who do not wish to sell to the Project. Many of the parcels owned by people not willing to sell have been removed from the areas the Project previously hoped to acquire. A full description of the Project's nal design and the alternatives assessed to minimize displacement will be presented in the Project's Environmental and Social Impact Assessment (ESIA), which is currently under development. The ESIA will document the rationales for selecting the nal design. The ESIA will also include bio-physical and socioeconomic studies and an impact assessment.

17 4.4 Temporary Land Access

The Project has also been accessing land on a temporary basis for exploration drilling and other shorter-term activities. To enable this access, Rakita signs lease agreements with landowners. The Project pays land owners on an annual basis for the use of their land, and compensates for any damages to crops, trees or other assets that occurs.⁴ When the lease process is over, the Project restores the land to its original condition.

5 ELIGIBILITY AND ENTITLEMENTS

5.1 Land Acquisition Process

To date, the land acquisition process has included the following key steps: • Development of compensation framework based on municipal land values, land premiums and bonuses, and the principle of replacement value for land, structures and agricultural assets, and market value for forest assets; • Development of asset inventory and social survey eld instruments and protocols to capture necessary data on a parcel and household basis; • Stakeholder engagement on land acquisition zones, survey activities and compensation processes: • Construction of parcel database on the basis of national cadastral data; • Valuation of land and built and planted assets (structures, trees, and crops) on each affected plot; • Implementation of social surveys with affected households, including on livelihoods; • Identication of vulnerable people and development of appropriate assistance measures; • Preparation of purchase offers on the basis of asset inventories; • Finalization of purchase offers with willing sellers; • Payment of sellers and conrmation of registration of land transfer with national cadastral office; • Design of monitoring and evaluation methodologies; and as necessary • Grievance management.

Asset and social surveys were initially begun in 2016 and have continued through 2017 and into 2018. More detail on surveys and the compensation process if provided in the next section.

⁴ There are a small number of leases that are paid monthly, as these were signed before the Project transitioned to annual payments. If these monthly leases require renewal, they will be transferred to annual leases.

18 5.2 Eligibility

Project affected persons will be eligible for compensation and / or support to mitigate impacts to the following assets resulting from land acquisition. • Project affected persons will be eligible for compensation and / or support to mitigate impacts to the following assets resulting from land acquisition. • Land • Agriculture, forest trees, fruit trees, and perennial and annual crops; • Infrastructures: private & public, residential & commercial, and other immovable structures; • Incomes (during relocation and/or restoration livelihoods' phase); • Other livelihood assets, including common resources such as those belonging to cooperatives; • Cultural heritage sites; and • Access routes to assets. Support related to the above could include, for example, allowances for relocation of property, transitional allowances, or the in-kind provision of transportation to local banks, courts or notary offices.

5.2.1 Formal and Informal Ownership and Use

Assets may be owned or used formally, with these rights registered with and recognized by the relevant authorities; or informally, without these protections in place ('vanknjižno vlasništvo'). Assets may also be owned by an individual, or by two or more individuals (spouses or co-owners). Historically, some assets have been held communally (the now obsolete 'društvena svojina'), which can complicate cadastral records. Legally, landowners are dened as individuals who have formal legal ownership of land, registered in the Cadastre. Where individuals are asset owners but do not have the necessary ownership documentation, the company will work with them to formalize their ownership within the legal system. This will enable the Project to sign the same contracts and agreements, and provide them with the same compensation and other rights, as other formal asset owners. Users can also be divided into formal and informal users. Formal land or structure users are people who have signed lease or tenancy agreements with owners. Informal users are those borrowing land or structures from friends or family, or those that are using public land without sanction. Both types of users will be compensated for any built or planted assets that they own.

19 Although the Project formally acquires land once a sale has been completed and registered with the cadastre, all owners and users being displaced are given at least three months advance notice prior to land entry by the Project. This means prior to the date that the Project will be using the land and will be require other uses to stop.

5.2.2 Formal and Informal Structures

Structures may also be either formal – registered with the cadastre, or informal. Where informal (un-registered) structures exist, these structures will be demolished prior to Rakita taking ownership of the parcel, in alignment with Serbia's legislated procedures for structure demolition. Owners of these structures will nonetheless receive full compensation for the structures as dened below.

5.3 Replacement Value

The Project is compensating for the majority of lost assets (immoveable property: land, structures, and planted resources located on the parcels to be acquired) at replacement value. Replacement value is calculated to include the market value of assets, with rates set by the State Geodetic Institute and made publically available. Replacement value also includes any transaction costs associated with restoring such assets (e.g. transfer taxes, registration costs). Notably, however, not all inventoried assets are expected to be completely lost to the Project. Land and structures will become the property of Rakita, and aﬀected people will no longer have access to these assets. For planted assets however, the Project plans to maintain people's access as long as possible, to enable owners to salvage additional value from these assets. More detail on compensation methodologies for each of the asset categories is provided below. All land is compensated for at replacement value, plus applicable premiums, bonuses and top-oﬀs (see entitlement matrix for detailed amounts). Land owners are able to choose in-kind replacement, wherein an alternative parcel is identied for the land owner to acquire. Owners are also able to choose in-cash compensation. Replacement value for in-cash compensation is calculated by independent, legislated evaluators using a comparative method. The land plot is compared to relevant recent transactions (plots which are for sale or have recently been sold) in the area, taking into account various characteristics of the plot, such as access to infrastructure, quality of land and current use. The quality of land is assessed by evaluators on the basis of national standards and land categories. Notably, these land evaluations also form the basis of prices paid by the Project to land owners from whom land is leased on a temporary basis.

20 Where ownership of a parcel is shared, compensation is split equally between co- owners, or split according to the shares that each of the owners holds in the property. In rare cases, a minimum of RSD 25,000 is paid to each land owner selling land to the Project where their total compensation calculation was lower due to split compensation. This means that where small parcel size and an unusually high number of owners creates a per-owner total compensation of under RSD 25,000, a top-off is paid to bring the compensation to the minimum. All structures are compensated for at the replacement value of a new structure of the same design. This means that depreciation of a structure is not taken into account. The replacement value of structures is calculated to include materials, labour costs, transport and transactional costs. Replacement value is applied to both formal and informal structures. Agricultural planted assets, including productive pasture, crops, fruit trees and nut trees are compensated for at replacement value. Replacement value is calculated to account for the costs of land preparation for planting, new seeds or saplings, the time to maturity (i.e. production) for new plants and forgone yields, and input labour prior to cultivation. No deductions for any depreciation are made. In addition, owners will be allowed to salvage (i.e. harvest) their agricultural assets where possible. Further, if land owners wish to continue using the parcels they have sold to the Project for agriculture, they will be allowed to lease the same or similar parcels back from the Project at no cost until the land is required by Rakita. This new mechanism was not available in 2017, and represents an effort by the Project to ease landowner's transitions off their former land. Should the Project need land leased to a former land owner in the future, the lease holder will be given a minimum of one month's and any planted assets will be compensated for prior to displacement. Forestry assets, i.e. naturally grown trees that are suitable for timber or rewood, are the only assets that are compensated for at market value. This is because Serbian legislation prescribes market value compensation for these assets, and rates for different species are set by the government. As with agricultural land however, the Project is working to develop a system for land owners to continue to salvage or lease back forestry assets after the transfer of parcel ownership to the Project.

5.4 Compensation Methods

Currently, planted assets and structures are only eligible for compensation in-cash. However, for land and residential structures, owners are eligible to receive compensation either in-kind or in-cash. For land, in-kind replacement means a parcel of the same size and similar quality in a

21 nearby location, or in a location near the landowners other assets. In practice, the majority of owners have not been interested in in-kind compensation for land and have opted for cash. When a land owner chooses to receive replacement land rather than cash, the preference is for the owner to identify their proposed replacement parcel (with assistance from Rakita if necessary), after which Rakita normally buys the land and transfers it as compensation to the owner. Alternatively, Rakita can also assist the aﬀected person to process the transaction with compensation received in-cash. In some cases, Rakita also oﬀers parcels outside of the Project footprint which are already owned by the Project for in-kind replacement. Notably, for the few cases where owners have sold their residences to Rakita as part of the land acquisition, the Project has worked with them throughout the contract negotiation process to identify where they will live after the sale. In most cases, home owners already owned a home of the same or better quality elsewhere. In other cases they purchased a suitable home with their compensation money. More details on these cases of physical displacement will be provided in the RAP.

5.5 Entitlements

The entitlement matrix summarizing the above is presented in Table 4. Changes made in August 2018 relative to the 2017 LARF include the minimum per-owner payment described above. They also include that the land premium for most land owners has been raised from 60% of evaluated replacement value for each parcel to 100%. Additionally, for most land owners, there is now 50,000 RSD per parcel bonus. Critically, the additional premium, parcel bonus and minimum payment will only be available to owners who owned their parcel prior to December 5th, 2017. Finally, the entitlement matrix now includes provisions for temporary land access leases. The letter announcing these changes in December of 2017 is appended in Appendix 2: Bonus and Fairness Commitment Letter. The lease payment calculator form is appended in Appendix 3: Lease Calculator.

22 Table 4: Entitlement Matrix

TYPE OF LOSS AFFECTED ENTITY ENTITLEMENTS

Monetary compensation at full replacement value plus applicable premium, bonus, top-off (if applicable) and transaction costs. For those with formal ownership of their parcel prior to December 5th, 2017, the premium is 100% of replacement value, the bonus is 50,000 RSD per parcel, and where relevant, a top-off is applied to ensure a minimum per-owner payment of 25,000 RSD. For those with formal ownership of their parcel on December 6th or later, premium is 60% of replacement value and no bonus or top-off applies. Owner OR Replacement land in-kind up to the value of cash compensation total. Permanent sale AND of land Other assistance, e.g. transaction costs or legal assistance. (agricultural, AND residential, Eligibility for participation in livelihoods restoration programming. Based on extent of forest land, residual livelihood impacts. At minimum, this includes free and voluntary nancial pastures, etc.). management training and prioritization for leasing agricultural land from the Project.

Information about the acquisition of land at least three months in advance of land User entry, to enable the user to nd other land for lease. (formal or informal) AND Other assistance, e.g. assistance to identify replacement land for lease.

Compensation, whether in cash (at replacement value) or in-kind. To be negotiated on Institution a case-by-case basis with the relevant authorities. TYPE OF LOSS AFFECTED ENTITY ENTITLEMENTS

Monetary compensation, calculated at 50% of the land's sale value (RSD / m2) multiplied by the area of land being leased, plus any relevant top-oﬀ. Leases are annual, securing the Project's use rights for the designated area for one year, with subsequent payments made according to the same formulas if more time is needed. A per parcel minimum payment of 31,000 RSD is in force, with top-oﬀs applied as needed.⁵ AND Owner Lump sum nuisance payments for the type of facility or infrastructure installed, also paid annually. Current rates (all in RSD) are 5,000 for a road, 15,000 for a facility, 5,000 for a test Temporary pit and 50,000 for a drilling pad. loss of access AND to land Compensation for loss of access to any crops, trees, construction areas or hay elds paid annually at at (RSD / m2) rates. Current are rates 10 for crops, 15 for trees, 50 for construction areas and 10 for hay elds.

Information about the use of land at least three months in advance of land entry, to enable the user to nd other land for lease. User AND Other assistance, e.g. assistance to identify replacement land for lease.

Monetary compensation at full replacement value. AND Loss of planted Rights to harvest planted assets. assets: annual and AND Owner garden crops, fruit Prioritization for leasing agricultural land from the Project. trees or vineyards AND Eligibility for participation in livelihoods restoration programming. Based on extent of residual livelihood impacts.

⁵ The form used by the Project to calculate lease payment amount is appended in Appendix 3. TYPE OF LOSS AFFECTED ENTITY ENTITLEMENTS

Monetary compensation at market value of trees (nationally set rates). AND Loss of Priority rights to lease land from Rakita to use forest assets, where possible. Owner forest trees AND Eligibility for participation in livelihoods restoration programming. Based on extent of residual livelihood impacts.

Monetary compensation at full replacement value. Material, labour and transactional costs of rebuilding a new structure of the same design and characteristics. AND Owner Other assistance, e.g. organised transport of movable assets or moving allowance, Loss of private assistance to purchase a diﬀerent residential structure of comparable quality with residential compensation money. structures (formal or Information about the acquisition of the structure at least three months in advance of informal) land entry, to enable the lessee to nd new accommodation. This term may be extended User under special circumstances. (tenant) AND Other assistance, e.g. organised transport of movable assets or moving allowance, assistance to nd new accommodation for lease.

Loss of private Monetary compensation at full replacement value. Material, labour and transactional non-residential costs of rebuilding a new structure of the same design and characteristics. Owner structures (fences, AND sheds, irrigation, etc.) Other assistance, e.g. organised transport of movable assets or moving allowance.

Loss of transport Alternative roads to maintain access. All other infrastructure to be mitigated for on a Communities / government infrastructure case-by-case basis. TYPE OF LOSS AFFECTED ENTITY ENTITLEMENTS

Loss of public Compensation, whether in cash or replacement structures and facilities. To be structures (airports, Government negotiated on a case-by-case basis with the relevant authorities. public buildings etc.)

Monetary compensation for lost net income during the period of transition (until the re-establishment of business activities) Loss of business Owner of business AND income and/or (formal or informal Other assistance, e.g. organised transport of moveable assets or moving allowances. sources of business) AND livelihood Eligibility for participation in livelihoods restoration programming Based on extent of residual livelihood impacts.

Loss or impacts Any structures determined to be of cultural signicance will be photographed and the to Cultural Community / Owner of site building plans will be archived prior to acquisition. Any graves found will be the subject Heritage sites of consultation with authorities to determine the correct relocation procedures. 6 LAND ACQUISITION PROCESS

6.1 Surveying

Rakita engaged nationally certied appraisers to be involved in the asset valuation process for forestry, and agriculture (specialists for evaluating land, crops, and fruit trees), as well as civil engineering for the valuation of all structures on the aﬀected land plots. Rakita also hired dedicated staﬀ to conduct the household surveys on social well- being and livelihoods. The survey exercise includes three components: • Field verication of cadastral data and new measurements if corrections appear necessary; • Asset inventory by certied evaluators; and • Socio-economic survey of land owning households. (To date, no land users have been identied, only land owners.)

6.2 Preparing Purchase Oﬀers

6.2.1 Identication and Valuation

Identication of parcels, owners and users

Cadastral data was acquired from the local Cadastral Oﬃce. Each parcel that Rakita hopes to acquire was entered into a Project database along with available information on land owners. Prior to the start of the surveys, Rakita met with municipal leaders and spoke with individual land owners to: • Verify the accuracy of cadastral information, particularly regarding the names and whereabouts of owners and co-owners, and obtain owners' addresses and contact information; • Verify, in cases of co-ownership, which owner was using or managing the parcel; • Obtain the names of any formal or informal land users (where applicable); • Organise survey appointments; and • Flag potentially complex ownership scenarios (deceased individuals, persons whose whereabouts are unknown, persons residing abroad).

27 Field verication of cadastral data and surveys

Further verication of cadastral data by licenced surveyors occurred in the eld. This included checking that topographic data was accurate and interviews with landowners and neighbours to determine whether there were any boundary disputes associated with parcels. No such disputes between neighbours were found. This eld verication also served to ground-truth the results of the socio-economic surveys regarding the types of assets on each parcel. The appropriately-skilled evaluators then visited each parcel to conduct the asset inventories. These licensed evaluators assessed land use, counted trees and crops according to species and productivity, and inspected structures for valuation. Combined, these asset evaluations served as the basis for the purchase oﬀers.

6.2.2 Purchase Oﬀer

Purchase offers have been prepared for each evaluated parcel based on the asset inventories. These offers are approved internally by Rakita management after a review of the asset evaluation and compensation amounts. They are kept condential until they are presented the landowner(s). As necessary, Rakita staff work with landowners to establish that they understand the details of the offer and contract. Also, as necessary, legal assistance is offered for resolving issues related to property rights.

6.2.3 Contract Process

A two-step process is normally required to nalize a purchase contract.

• First, a Rakita staff member will meet the landowner(s) in their home or at a Rakita office, photocopy their identication documents, explain the grievance mechanism, present the purchase offer and discuss any emerging questions or issues. The purchase offer is normally left with the landowner(s) for their consideration, for the time period dened in the offer. Often, a group of co-owners will give the Power of Attorney to a single one of their group to speed up this process, particularly where some co-owners live elsewhere. • Secondly, where all parties are interested in accepting the purchase offer, another meeting is held to sign the contract. At this time, a notary is present in order to certify (solemnise) the contract by placing a conrmation clause on the contract, which makes the transaction valid. This second meeting usually takes place at the notary's office.

28 For those parcels where pre-emptive rights exist, a letter is also sent to all relevant neighbours after the initial oﬀer is made to the parcel owner. A waiting period of 15-30 days is observed, starting from the moment when the last neighbour receives their letter. After the waiting period, the neighbours are legally considered to have waived their right to purchase the land from the owner at the same price as the purchase oﬀer.

Closing the transaction

To nalize the contract with the notary, the following documents are required: • 5 copies (or more depending of the number of landowners) of the purchase contract; • 2 copies of the immovable property certicate for cadastre parcels; • Photocopy and copy from electronic Identication reader of sellers' ID cards; • Photocopy and copy of Rakita's legal representative ID card; • Copy of Rakita's excerpt from Agency for Business Registers; • Landowner's proof of property ownership; • Certicate of parcel identication (identication of the old parcel numbers – applicable for Cadastre in the Municipality of Brestovac) from Cadastre Oﬃce in Bor; • Proofs of oﬀers of pre-emptive rights, along with cadastral excerpts establishing number and locations of neighbouring parcels and their owners' information; • Blank copy of payment forms; • Consent of the owner's spouse to the contract, where applicable; and • Proof of fee payment. In addition to the above, courts or notaries have the right to request additional documentation, either from the seller or the buyer of the property.

Other agreement types

To date, Rakita has been signing the sale purchase contracts described above with landowners. These contracts fully transfer the ownership of the parcels to Rakita. Rakita has also gained land access through temporary lease contracts, such as leases or easements. These are the types of contracts that Rakita has been using for land access during the drilling program. For example, easements could be potentially used for transmission lines, pipelines, or buﬀer zones.

29 6.2.4 Payment & Registration

Once a contract is signed, it is delivered to Rakita's head oﬃce where it is processed for payment. Payments are made by wire transfer into bank accounts. In cases where landowners or land users have no bank account, they are assisted by Rakita in opening one. Rakita then submits the contract with the necessary documents to the Tax Administration oﬃce in Bor to determine the tax due on the transfer of ownership rights. Once the transfer tax is paid, Rakita submits a request for the change of the legal owner to the Cadastre with the necessary documents (purchase contract and paid taxes). The Cadastre then registers Rakita as the parcel's owner.

6.2.5 Transfer of Ownership

Once the Cadastral Oﬃce completes the registration of Rakita as the owner of a purchased parcel, formal notice of the change is sent to Rakita and the former landowner. There is a 15-day period for possible complaints, after which Rakita's ownership of the parcel becomes legally valid.

7 ENGAGEMENT AND GRIEVANCE MANAGEMENT

7.1 Engagement Strategy

Rakita is committed to the integration of environmental and social considerations in the design and development of the Project, as well as establishing and maintaining constructive relationships with stakeholders, including local communities in the Bor City area. In 2014, Rakita established the Rakita Information Centre located in the central area of the city of Bor. It provides a location where stakeholders can meet with Rakita representatives, engage face-to-face on issues and concerns they may have, and consult Project documents. Rakita is also committed to aligning plans and processes with the main requirements of the IFC on meaningful engagement and consultation. The SEP is updated every two years at maximum, with the latest version dating to February 2017. This version of the SEP is publicly available at the Rakita Information Centre and on the Rakita website. The SEP covers engagement around the land acquisition process and the public meetings for consultation of communities aﬀected by land acquisition. Meetings and

30 consultations with local communities have been ongoing and will continue to be held with community groups and members throughout the development phase of the Project. Aﬀected landowners and users will continue to be consulted and informed regarding entitlements and eligibility criteria, valuations, compensation rates and options, livelihood programming and cultural heritage issues.

7.2 Engagement Plan

Engagement will happen across all stages of land acquisition planning and implementation. Past and future activities are detailed below.

7.2.1 Past Consultation Activities around Land Acquisition and Compensation

To date, the following land acquisition consultations have taken place: • Initial meetings in 2015 in the three aﬀected communities with owners of parcels in Zone 1 to provide preliminary information on the land access planning process; • Two additional community meetings in September 2015 with all identied landowners with land of interest at that time;

31 • Household surveys in 2016 with affected landowners in Zone 1 interested in selling their land; • Face-to-face interviews and information sharing meetings with community members and a selected sample of landowners in 2016; • A meeting in Brestovac in January 2017, to repeat the presentation of information on the land acquisition process; • Training of the Bor-based land acquisition and community liaison staff in January 2017 on the SEP; • Public information meetings and open houses in March 2017 in Brestovac and Slatina, where affected stakeholders were given an opportunity, in verbal format, to receive information and provide feedback regarding the proposed land acquisition program being developed to support the LARF; • Meetings with community leaders in Bor, Slatina, Brestovac, and Metovnica in March and April, 2017; • Individual engagement with land owners by telephone and launch of a new round of household surveys in April 2017; • Open houses with a strong focus on land acquisition in Bor, Slatina, Brestovac, and Metovnica in August 2017; • Community meetings with a partial focus on land acquisition in Slatina, Brestovac and Metovnica in August 2018, and • Ongoing socio-economic surveying, asset inventories and land valuations through to August 2018. Purchase offers based on the results of parcel evaluations are delivered individually to parcel owners for consideration. These deliveries typically happen in person for property owners who live in the area, and by mail to property owners who live away from the Bor region. these interactions also present an opportunity to clarify elements of the offer or other related issues. Additional meetings and interactions may be organised, as necessary. During this time, Rakita also discusses possible assistance measures that could be provided in cases of physical displacement and/or impacts on livelihoods. A particular focus is placed on determining the vulnerability status of affected people and dening assistance measures to t the needs of those deemed vulnerable.

7.2.2 Focus Groups

Focus groups discussions have been conducted during the ESIA and HRIA. As necessary, additional focus groups may be held to discuss potential livelihood restoration measures for people displaced by the land acquisition.

32 7.2.3 Disclosure of the LARF

The 2017 LARF was disclosed to the national government, local authorities, the local city and the three aﬀected communities in the Project area. Specic events included presentations to the Ministry of Mines and Bor City, and open houses in the communities and Bor with local administration. The LARF was also published in English and Serbian on the Rakita website and available at the Rakita Info Centre. The update 2018 LARF will be made available online at the Info Centre, and a notice of this update will be disseminated to the City of Bor, to the villages of Brestovac, Slatina, and Metovnica.

7.3 Grievance Management

Rakita is committed to providing an effective grievance mechanism for resolving stakeholder concerns or complaints in a timely, fair and consistent manner, with resolutions that are mutually acceptable to both parties. The Rakita Community Grievance Mechanism has been designed to meet the requirements of the IFC Performance Standards and the effectiveness criteria for non- judicial grievance mechanisms according to the UN Guiding Principles on Business and Human Rights. The Rakita Community Grievance Mechanism may receive complaints from any external stakeholder, but has been designed primarily to resolve concerns and complaints from the following stakeholder groups: • Local individuals and groups who are potentially affected by the Project; • Landowners or users of parcels who are affected by Rakita exploration, land acquisition and/or resettlement activities; • Local and national NGOs or other representative organizations that may raise concerns or complaints on behalf of affected stakeholders. Rakita will apply the following principles in respect of grievance management and remediation in the context of the Project: • Grievances are registered and acknowledged within 8 calendar days of receipt, responded to within 22 calendar days of receipt, and tracked until closed; • Grievances should be closed within a maximum period of 30 calendar days⁶; and • The grievance management arrangement includes opportunities for the involvement of independent third parties (e.g. independent valuators) to try and resolve disagreements fairly and amicably; however, Rakita will not prevent affected stakeholder(s) from using other judicial or non-judicial mechanisms if they are not satised with the proposed resolution of their grievances.

⁶ This is an indicative timeline and the actual timeframe for the resolution of each grievance will be adapted to provide opportunities for the affected stakeholder(s) to participate in the process of investigation and dispute resolution.

33 The overall objective is to avoid resorting to the judicial system for as many grievances as possible. Grievances, questions or concerns can be submitted directly to Rakita, through contact details provided below: Rakita Exploration doo Moše Pijade 46/6 19210 Bor Phone No. 030 2150067 E-mail: [email protected]

Grievances can also be submitted anony- mously by being inserted in the grievance box placed at the entrance of the Rakita Information Centre in Bor. However, Rakita may have limited means to investigate anonymous grievances as the company is unable to contact or respond to the person responsible for the submission. Additionally, Nevsun's Whistleblower Policy mechanism is available to internal and external stakeholders to report suspected breaches of its' Code of Ethics, including violation of corporate policies, including health and safety, environmental, operational or ethical issues. The Whistleblower Policy provides assurances for condentiality and anonymity and non-retaliation. The Whistleblower Policy mechanism can be accessed through the following channels: • Telephone: Call 1-866-921-6714 (collect) to talk to an experienced professional or leave a message. • E-mail: [email protected] • In writing to the Chair of the Audit Committee of the Nevsun Board of Directors. • Posters with information about the Nevsun Whistleblower policy have been placed in the Rakita oﬃces and Rakita Information Centre in Bor for further information.

34 8 ASSISTANCE TO VULNERABLE PEOPLE

8.1 Denitions

Vulnerable people are people who by virtue of gender, ethnicity, age, physical or mental disability, economic disadvantage, or social status, may be more adversely aﬀected by the land acquisition process than others and who may be limited in their ability to claim or take advantage of compensation. In the context of the Project, potentially vulnerable people may include: • Disabled persons, whether mentally or physically; • Seriously ill people; • The elderly, particularly when they live alone or are retired and rely on their land for income; • Households whose heads are female and who live with limited resources; and • Households who have no or very limited resources. To date, Internally Displaced People have not been identied in the Project aﬀected communities. Vlachs are an important minority ethnic group with a presence in the Project area, especially in Slatina. While among the Vlachs there may be vulnerable individuals, Vlach ethnicity does not itself create vulnerability in the context of the Project's land acquisition.

8.2 Identication Process

The pre-identication of potentially vulnerable people happens during the socioeconomic survey for each zone. People agged as vulnerable are engaged during the negotiation process and for those who are in fact vulnerable, assistance measures are developed. These measures allow vulnerable people to participate fully in the land acquisition process. Where relevant, family members are encouraged to become a part of the negotiation process to protect the interests of more vulnerable individuals. Input on potentially vulnerable people and groups has also been solicited from local authorities, and community representatives including from the Social Welfare Oﬃce.

8.3 Assistance Measures

Working with relevant local authorities, Rakita is seeking to avoid disproportionately aﬀecting vulnerable people by the land acquisition and resettlement process. Assistance measures during the land acquisition and resettlement process have included the following:

35 • Specic assistance in negotiations (additional visits); • Specic assistance in understanding and preparing paperwork; and • Transitional and temporary assistance (to date this has been primarily transport to and from legal appointments, but could in the future include food aid, other in-kind items, or temporary medical assistance) Where appropriate and feasible, vulnerable people will be prioritized for inclusion in Rakita's other social and community programs, or for employment by contractors. There have been no cases to date where livelihood impacts of land acquisition have been estimated to make people more vulnerable. If such a case presented itself, Rakita would strongly encourage the parcel owner to choose the land replacement option rather than cash compensation. Further, if livelihood impacts emerge in the future, Rakita will encourage land owners or users to lease parcels back from Rakita in order to mitigate these impacts.

9 LIVELIHOOD RESTORATION

9.1 Overview of Potential Livelihood Impacts

Based on engagement with land owners and the socioeconomic survey results, land does not appear to be a major source of livelihoods. Where productively used, land usually serves to produce limited food for household animals. Some bartering of crops has also been reported. In cases when the affected person/household has access to other land for use, i.e. the affected plot is not the only land they use/farm, impacts are likely not signicant. However, where the affected land is the only land owned/used by affected people or where people farm the land more intensely to produce food for sale or for feeding animals for sale (or sale of animal products), impacts would be more signicant. Any such impacts will be discussed in detail in the RAP.

9.2 Issues of Inheritance

Notably, special cases may emerge where parcels have been held jointly by a married couple, but one spouse is now deceased. In these cases, the risk of livelihood impacts resulting from land acquisition by Rakita for the surviving spouse may be elevated. Unless there is a will that stipulates diﬀerently, the law mandates that the deceased co- owner's share be inherited by all legal inheritors, including both the spouse and all children according to equal shares. In some cases, the surviving spouse may be

36 continuing to use the parcel, because other inheritors have not formalized their legal claim to the land. However, the formalization of ownership would be required for Rakita to purchase the parcel, and this could risk depriving the surviving spouse of their means of livelihood. Where such situations arise, the spouse will be registered as vulnerable and will become eligible to assistance meant for vulnerable peoples, including the possibility to be allocated a replacement plot.

9.3 Livelihood Restoration and Improvement Measures

To date, no livelihood impacts have been identied, with land owners fully compensated for their economic displacement through the cash compensation process. The Project will continue to monitor for livelihood impacts and develop appropriate mitigation measure should any residual impacts to livelihood or the social welfare of aﬀected households emerge. In this context, the Project remains focussed on opportunities for livelihood improvement. In February, 2018 the Project developed two livelihood improvement mechanisms: nancial management training and a lease mechanism so that people can lease agricultural land from the Project for free until it is required by Rakita for the Project. Both mechanisms are described in more detail below.

9.3.1 Financial Management Training

Financial management training is an important part of mitigating the risk of vulnerability emerging during the land acquisition process as a result of cash compensation. Many land owners have been on low or xed incomes prior to the Project's arrival and will be receiving relatively large amounts of money from the land sales. To mitigate the risk that some people may misspend the compensation money, and maximize the benets that compensation could represent, the Project has contracted an independent third party to provide nancial training. The training is not prescriptive and does not suggest one type of investment over another. Rather, it covers the basics of investing and an overview of diﬀerent opportunities and risks. Courses are completely voluntary, and open to all adult members from households that have sold or have been made oﬀers to sell their land to Rakita.

37 9.3.2 Agricultural Land Leases

The Project is making agricultural land available for lease to all land owners who have sold land to the Project. The lease agreements are free of charge and allow users to engage in agricultural activities only. They do not allow the construction of structures, water infrastructure or other infrastructure. The leases can be terminated with one month's notice by either party in writing. If crops have been planted on the leased property and cannot be collected within the one month notice period, Rakita will compensate the lessee for the evaluated value of the crop. The leases will allow any land owner who wishes to take up or continue previous agricultural activity to do so. It also serves to mitigate the risk that if land owners who have received compensation tried to buy or lease agricultural land elsewhere, they might be charged an inated rate due to general knowledge of their previous sale to the Project.

9.3.3 Other Community Programs

The measures above t within the broader programme of cultural activities and community development initiatives that Rakita has implemented as part of its corporate social responsibility programming. To date this programming has included livelihood improvement measures that have been open to the community as a whole, not just to land owners who have sold land to the Project. The Project has organized trainings in information technology and handicraft production, and supported local organizations with donations of equipment. Unrelated to livelihoods, the Project has also been involved in environmental clean-ups along local rivers.

10 MONITORING AND EVALUATION

Monitoring and evaluation will take place to determine what has worked with the land acquisition process to date and why, and whether adjustments, changes or corrective actions, if any, need to be made to acquisition procedures. Monitoring is the collection of data over time that measures progress towards land acquisition objectives. Evaluation is summarizing that data to determine whether objectives are being met as hoped and whether additional social management measures are necessary.

38 10.1 Internal Monitoring of LARF Commitments

Monitoring and evaluation are divided into the following three components: • Input monitoring; • Output monitoring; and • Outcome evaluation.

Input monitoring: Measures whether inputs are delivered on schedule and as dened in the LARF. Inputs are the services, resources or goods that contribute to achieving outputs and, ultimately, desired outcomes. Input monitoring is done internally by Rakita representatives on an on-going basis.

Output Monitoring: Measures the direct results of the inputs, for example the number of people receiving compensation or completing training courses. Input and output monitoring together keep track of Project implementation eﬃciency.

Outcome Evaluation: Denes the extent to which the Project inputs and outputs are achieving or are likely to achieve the objectives of a program. Outcome evaluation, coupled with output monitoring results, indicate whether the program is genuinely working and should continue to be implemented as is, or whether fundamental changes have to be made. Outcome evaluation is usually carried out by an external auditor. Outcome evaluation can be integrated with the process of compliance and completion monitoring and auditing.

10.2 External Audits

The Project is planning to undertake external audits, including a completion audit for land acquisition activities.

10.2.1 External Audits

The external audit, conducted by an independent auditor, will be conducted at least once, when the commitments in the RAP have been delivered. Additional audits may be conducted at regular intervals if new commitments results from the initial audit, or if further RAPs are required later in the Project's development. An important component of the external audits will be the evaluation of Rakita's land acquisition activities for alignment with the IFC PS5. The scope of work of the external auditor is expected to include the following tasks:

39 • General: • Review the LARF and RAP and assess for alignment with PS5; and • Interview a representative sample of aﬀected households and enterprises on their experiences of land acquisition and any changes in their quality of life. • Compensation process: • Assess entitlement delivery against RAP commitments; and • Evaluate compensation rates against replacement values. • Livelihood restoration: • Assess the implementation of livelihood programming and success of livelihood restoration. • Monitoring & evaluation: • Review internal monitoring and reporting procedures to ascertain whether these are being undertaken in conformance with the LARF and RAPs; and • Review internal monitoring records as a basis for identifying any potential areas of non-compliance, any recurrent problems. • Grievances: • Review grievance logs for evidence of signicant non-compliance or recurrent poor performance in resettlement implementation or grievance management. • Vulnerable people: • Assess the vulnerable people screening and assistance measures, related records, and performance to determine compliance with the LARF and RAP. • Implementation: • Assess whether resources were adequate for implementing the LARF and RAP • Assess the need for training or capacity building with the land team; and • Assess the success of the data management system.

10.2.2 Completion Audit

Rakita is also planning to organise a completion audit to be carried out by an external auditor two to three years after the active phase of land acquisition has been completed. The completion audit will serve as a nal evaluation of the elements described in the scope of work above. It will also verify that recommendations from any external audits have been taken into account and that no grievances have been left outstanding.

40 11 IMPLEMENTATION ARRANGEMENT

The overall responsibility for LARF and RAP implementation lies with the Senior Land Acquisition Manager. The current organizational chart of the Land Acquisition Team is presented below in Figure 2.

Figure 2: Land Acquisition Team

11.1 Resources & Organization

Land access is the direct responsibility of the Senior Vice President Serbia Projects & Managing Director, Rakita. The day to day work related to the LARF, including land acquisition tasks, will be managed by the Senior Land Acquisition Manager.

11.2 Outsourced Tasks

The following tasks will be outsourced: • Alignment to key IFC PS5 objectives: Local and international resettlement consultants have been responsible for assisting in LARF development and implementation;

41 • Valuation: valuation of aﬀected plots and assets has been sub-contracted to nationally certied evaluators; and • Auditing: Rakita is planning to hire an auditor selected amongst reputable individuals with signicant international experience in land acquisition and resettlement.

11.3 Information Management

Information management will be kept as simple as possible. Information needed for the land access programme is expected to be gathered and managed at two levels: • At the parcel level, because compensation entitlements are associated to land plots; and • At household level, because livelihoods are measured and monitored at the level of households aﬀected by loss of land.

42 APPENDIX 1: REFERENCES

International standards • IFC Performance Standard 5, paragraph 16.

Serbian legal requirements • Constitution of the Republic of Serbia (Official Gazette of the RS 98/2006, Article 58) • Law on State Surveying and Cadastre (Official Gazette of the RS 72/2009, 18/2010, 65/2013 and 15/2015 – Constitutional Court decision), 96/25, 47/2017 – Authentic Interpretation, 113/17, 27/18 and 41/18) • Law on Property Valuators (Official Gazette of the RS 108/2016) • Law on Planning and Construction (Official gazette RS no. 72-09, 81-09 - corr., 64-10 – CC decision, 24-11, 121-12, 42-13 - CC decision, 50-13 - CC decision, 98-13 - CC decision, 132- 14 and 145-14) • Law on Land Transactions (Official Gazette of the RS 93/2014, 121/2014 and 6/2015) • Law on Public Property (Official Gazette of the RS 72/2011, 88/2013, 105/2014, 104/2016, 108/2016) • Law on Agricultural Land (Official Gazette of the RS 62/2006, 65/2008, 41/2009, 112/2015, 80/2017) • Family Law (Official Gazette of the RS 18/2005, 72/2011, 6/2015) • Law on Legalization of Structures (Official Gazette of the RS No. 96/2015) • Law on the Procedure for Registration in the Real Estate Cadastre and Plumbing (Official Gazette of the RS 41/2018)

Rakita plans • Stakeholder Engagement Plan

Nevsun Resources Ltd.'s policies • Whistleblower Policy

For further information, please contact the Rakita Information Centre at: Address: Moše Pijade Street 46/6, Bor, Serbia E-mail: [email protected] Telephone number: +381 30 215 00 67 Website: www.rakita.net

43 APPENDIX 2: BONUS AND FAIRNESS COMMITMENT LETTER

44 45 APPENDIX 3: LEASE CALCULATOR

46 Rakita Information Centre Moše Pijade Street 46/6, Bor, Serbia [email protected] +381 30 215 00 67 www.rakita.net