Vedanta Resources plc and Lanjigarh Alumina Refinery IESC Monitoring Review Report Review of Progress on Recommendations Report November 2012 UNITED KINGDOM & IRELAND Prepared for: Standard Chartered Bank as Agent to the Lenders 47059086.STG3-draft Vedanta Resources plc REVIEW OF PROGRESS ON RECOMMENDATIONS URS Infrastructure and Environment UK Ltd 6-8 Greencoat Place London SW1P 1PL United Kingdom Tel +44 (0) 20 7798 5000 Fax +44 (0) 20 7798 5001 www.urs.com IESC MONITORING REVIEW REPORT 47059086.STG3 October 2012 i Vedanta Resources plc REVIEW OF PROGRESS ON RECOMMENDATIONS Limitations The conclusions and recommendations contained in this Report are based upon information provided by others and upon the assumption that all relevant information has been provided by those parties from whom it has been requested and that such information is accurate. Information obtained by URS Infrastructure & Environment UK Limited (“URS”) has not been independently verified by URS 1, unless otherwise stated in the Report. The methodology adopted and the sources of information used by URS in providing its services are outlined in this Report. The work described in this Report was undertaken before, during and after the site visits in Namibia and Zambia during October 2012 and is based on the information available during the said period of time. The scope of this Report and the services are accordingly factually limited by these circumstances. Where assessments of works or costs identified in this Report are made, such assessments are based upon the information available at the time and where appropriate are subject to further investigations or information which may become available. URS disclaim any undertaking or obligation to advise any person of any change in any matter affecting the Report, which may come or be brought to URS’s attention after the date of the Report. Certain statements made in the Report that are not historical facts may constitute estimates, projections or other forward- looking statements and even though they are based on reasonable assumptions as of the date of the Report, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. URS specifically does not guarantee or warrant any estimate or projections contained in this Report. 1. Note that following its acquisition by URS and consequent integration into the main Group, the ‘Scott Wilson / URS Scott Wilson’ brands have now been discontinued and the company that undertook the original Sustainability Review is now named URS Infrastructure and Environment UK Ltd. 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IESC MONITORING REVIEW REPORT 47059086.STG3 October 2012 ii Vedanta Resources plc REVIEW OF PROGRESS ON RECOMMENDATIONS TABLE OF CONTENTS 1 EXECUTIVE SUMMARY ................................ ................... 1 2 INTRODUCTION AND BACKGROUND ........................... 4 2.1 Vedanta Resources.......................................................... 4 2.2 Terms of Reference ......................................................... 4 2.2.1 Review of Vedanta’s Implementation Progress Report 3 .. 4 2.2.2 Site Visits ........................................................................... 4 2.2.3 Monitoring Review Report ................................................. 5 2.3 Approach .......................................................................... 5 2.4 This Monitoring Review Report ...................................... 5 3 CORPORATE RECOMMENDATIONS ............................. 7 3.1 Recommendation 2.5.7 Sustainability Committee ....... 7 3.2 Recommendation 2.5.8 Sustainability Officer .............. 7 3.3 Recommendation 2.5.4 Value Statement....................... 8 3.4 Recommendation 2.5.2 Code of Business Ethics ........ 8 3.5 Recommendation 2.5.6 Policies ..................................... 8 3.6 Recommendation 2.5.3 Stakeholder engagement ...... 10 3.7 Recommendation 2.5.13 Reporting .............................. 10 3.8 Recommendation 2.5.8bis Sustainability oversight ... 11 3.9 Recommendation 2.5.9 Professional competencies .. 12 3.10 Recommendation 2.5.16 Human rights policy ............ 13 3.11 Recommendation 2.5.24 External audit ....................... 13 4 COMPANY LEVEL RECOMMENDATIONS ................... 14 4.1 Recommendation 2.5.15 International best practice .. 14 4.2 Recommendation 2.5.11 Land management ............... 16 4.3 Recommendation 2.5.23 Incident register................... 18 4.4 Recommendation 2.5.12 Environmental communications ............................................................ 19 4.5 Recommendation 2.5.17 Consultation for new sites . 19 4.6 Recommendation 2.5.20 Vulnerable social groups .... 20 4.7 Recommendation 2.5.22 Cultural heritage .................. 21 5 LANJIGARH RECOMMENDATIONS ............................. 22 5.1 Recommendation 3.3.20 Environmental management22 5.2 Recommendation 4.5.8 Grievance mechanism .......... 22 5.3 Recommendation 3.3.3 Housekeeping ........................ 23 5.4 Recommendation 3.4.3 Proposed expansion ............. 23 5.5 3.3.79 Disaster management plan ................................ 23 IESC MONITORING REVIEW REPORT 47059086.STG3 October 2012 iii Vedanta Resources plc REVIEW OF PROGRESS ON RECOMMENDATIONS 5.6 Recommendation 3.3.32 Retrenchment plans ............ 24 5.7 Recommendation 3.3.48 Contractor accommodation 24 5.8 Recommendation 4.5.5 Dust emissions ...................... 24 5.9 Recommendation 4.6.8 Livelihood support ................ 24 5.10 Recommendation 4.6.12 Integrated development ...... 25 5.11 Recommendation 3.3.63 Health and safety management ......................................................................................... 25 6 OVERVIEW OF PROGRESS AND REMEDIAL ACTIONS ......................................................................................... 26 6.1 Group Level Recommendations ................................... 26 6.2 Company Level Recommendations ............................. 26 6.3 Lanjigarh Refinery Recommendations ........................ 27 7 SOCIAL, ENVIRONMENTAL AND H&S INCIDENCES . 31 APPENDIX 1: COMMENTARY ON “THE LANJIGARH DEVELOPMENT STORY: VEDANTA’S PERSPECTIVE” AND AMNESTY INTERNATIONAL’S RESPONSE, “VEDANTA’S PERSPECTIVE UNCOVERED” .............. 35 Table of Tables Table 6.1 CORPORATE LEVEL ........................................................................................ 28 Table 6.2 COMPANY LEVEL ............................................................................................. 29 Table 6.3 LANJIGARH ....................................................................................................... 30 Table 7-1: Summary of Incidents Apr-Jun 2012 ................................................................. 31 IESC MONITORING REVIEW REPORT 47059086.STG3 October 2012 iv Vedanta Resources plc REVIEW OF PROGRESS ON RECOMMENDATIONS 1 EXECUTIVE SUMMARY This Monitoring Review Report was commissioned as the third 6-monthly update on Vedanta’s progress in implementing the Recommendations from the original independent strategic sustainability review that Scott Wilson (now URS) undertook in September 2010. The first review of progress was undertaken in July 2011 and involved visits to the Vedanta Aluminium Limited (VAL) alumina refinery at Lanjigarh, the Sustainable Development department at its former location at Udaipur, and the Hindustan Zinc Limited (HZL) plant at Chanderiya. The second review in February 2012 included visits to the VAL Lanjigarh, Bharat Aluminium Co. Ltd (BALCO) and Sesa Goa operations and the Sustainable Development office now located in Delhi. As per previous reviews, Vedanta submitted their Third Progress Report, which was used as a basis for discussion during our site visits to the Skorpion Zinc Mine (SZ) in Namibia and Konkola Copper Mines (KCM) in Zambia. (The site visits were originally scheduled for August 2012 but unfortunately had to be delayed due to conflicting diary commitments amongst the URS team). Arrangements for governance and centralised day-to-day management of sustainability issues remain in place and are functioning well. The range of policies, management and technical standards that form the new Sustainability Framework is substantially complete, although documentation including the Guidance Notes are still outstanding. An extensive training programme is being rolled out across most of the Group to support the implementation of the Sustainability Framework, which is now subject to a combination of self assessment and an internal audit and assurance programme. However, the fact that the Sustainability Framework documentation dealing with Indigenous Peoples is still to be formally released (it was originally due in 2011 and is currently pending approval) is cause for some concern as it represents a significant omission from the core Sustainability Framework documentation. A draft was reviewed and some feedback provided, but its approval and issue requires speedy resolution as there are potential implications for Environmental and Social Impact Assessments currently in progress, and the outcome of the final audit (e.g. if insufficient evidence of implementation is available at that time). We are pleased to confirm that otherwise that Vedanta continues to make generally satisfactory progress - see section 6 of this