Greystar

Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

Project number	27961
Country	Colombia
Sector	Oil, Gas and Mining
Department	Oil, Gas, Mining And Chemicals
Company name	Greystar Resources
Environmental category	B
Status	Active

Date ESRS disclosed	February 9, 2009

Previous Events	Invested: March 20, 2009 Signed: March 16, 2009 Approved: March 13, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The team visited Colombia in January 2009, focusing on Greystar’s Angostura mining exploration project in the Santander Department. The field trip involved a review of documents at the Greystar offices in Bucaramanga, an inspection of the potential mine site, potential sites of mining and processing infrastructure, and ancillary facilities (including the access road); and discussions with Company representatives, environmental and social consultants, government regulatory authorities, and other stakeholders.

Project description

Greystar Resources Ltd. (“the Company”) is a TSX and AIM listed junior mining company that owns 100% of the Angostura gold and silver exploration project (the Project”) near Bucaramanga, in the Santander region of Colombia. Greystar has acquired concessions covering approximately 30,000 hectares over a 15-year timeline and during this time has spent approximately C$95 million in exploration and concession acquisition/maintenance costs.

As of December, 2008, the company had completed an intensive drilling program yielding a resource estimate of 11.6 million ounces of measured and indicated gold in 330.9 million tonnes of material grading 1.09 grams gold per tonne and 3.47 million ounces of inferred gold in 90.8 million tonnes grading 1.11 grams gold per tonne, making it one of the world’s largest undeveloped gold resources.

The company is now commencing with a bankable feasibility study (“BFS”), environmental and social impact assessment (“ESIA”), and other associated work, with the goal of developing the mine in late 2009/early 2010.

Key environmental and social issues and mitigation

Key environmental and social issues relating to the project are summarized below, along with specific information about how potential impacts will be addressed by the Company. Upon implementation of the mitigation measures described below and in the attached Action Plan, the project will comply with environmental and social requirements, namely the law and regulations of Colombia, IFC’s Performance Standards on Social and Environmental Sustainability and Policy on Disclosure of information, and applicable World Bank/IFC environment, health and safety guidelines.

- PS 1 Social and Environmental Assessment and Management Systems:

The risks discussed in this ESRS consist of those associated with exploration and feasibility studies. The Company subscribes to the IFC Policy and Performance Standards on Social and Environmental Sustainability. Prior to the development of a mine, Greystar will prepare, consult on and disclose the environmental and social documentation (an ESIA) required to demonstrate how the Company will manage the risks of its operation in order to achieve compliance with the IFC Performance Standards and EHS Guidelines. The Company is now preparing the project for the development phase and is also getting the terms of reference ready for tendering a full ESIA.

As required by the regional environmental authority, CDMB, the Company developed an Environmental Impact Management Plan for the exploration phase and produced an Environmental Management Plan. The management plan adequately addresses the impacts identified, through a series of management programs that cover environmental, safety and social issues for this stage of the project.

Greystar hired Ingetec Consultants to undertake an Environmental Baseline Assessment for the Angostura project. Undertaking this baseline assessment at the exploration phase affords Greystar the opportunity to document the current environmental and social conditions and to start to identify issues that may become relevant if mine development goes ahead.

Greystar has committed to a Health, Safety, Environment and Community Policy (HSEC) document and an Action Plan to cover all HSEC aspects related to exploration activities, feasibility work and potential future mine development. Greystar has agreed to contract a consultant to help them develop an HSEC Management System to adequately manage, plan and document the environmental and social issues relating to their activities in Colombia.

During the absence of the Company from 2000 to 2003 illegal invasion by artisanal miners to extract material in the concession area took place. In 2001 there were about 25 invaders, increasing to 175 in 2003. Upon the return of the Company, it was announced that all invaders had to leave the premises and the Company helped remove all equipment from the concession area. Most of the invaders were miners with access to other mining areas, and the Company reached agreement with all miners to vacate the area peacefully. The Company offered jobs to some of these miners over a period of time as the need for labor increased. There are no pending issues related to this past incursion.

In discussion with the key communities, it is apparent that the proposed mining project enjoys broad support. The current exploration phase causes no significant or irreversible impacts on these communities. If the mine project is developed, the Company and IFC will monitor and manage any impacts on these communities as well as the ongoing level of support.

- PS 2: Labor & Working Conditions:

During the current exploration and feasibility stage there is a relatively small workforce of 191 workers directly employed by Greystar. The Company has a labor policy posted at all worksites, which complies with national labor law and IFC requirements. All workers are provided with a copy of the labor regulations and are free to organize in trade unions but are currently not unionized. Workers are represented through the health and safety committee, which consists of three elected workers’ representatives as well as the Company doctor, the Camp Manager, and the OHS Superintendent. All work related grievances raised through the committee and actions taken to address the complaints are recorded in the committee minutes. Staff members are regularly trained and updated on Company policies and new exploration programs. The Company strictly enforces the minimum hiring threshold of 18 years. Greystar exceeds the legislated minimum wage and deducts mandatory contribution to Social Security. The workday for most camp workers is 8 hours on the following shifts: 19 days work-9 days off; 21 days work-7 days off and 5 days work-2 days off. However, during drilling some workers will work 12 hours per day compensated by shorter shifts. Breakfast, lunch and dinner are provided for camp workers and contractors free of charge. The Human Resource Manager is based in Bucaramanga, while a human resource supervisor is based in the camp.

Since exploration has been completed the Company has made an effort to keep 80% of the workforce by assigning them to a reforestation project (of sites disturbed by exploration) and road maintenance. Of the 29 workers that did not have their contracts renewed, the Company has committed to provide additional training to 10 of them through the SENA program starting in February and give the rest all priority for receiving support from the income generating programs offered through the Greystar Foundation.

The Company provides a safety induction program for all new workers specifically designed for their work activities. Supervisors are trained so they can give OHS instructions to their work teams on an ongoing basis. Appropriate Personal Protective Equipment is used throughout the site by both staff and contractors. The Company has committed to prepare and implement an OHS management system supervised by their newly recruited OHS superintendent.

Main contractors are a catering company responsible for the cafeteria, the consortium Geominas and Perfortec responsible for exploration activities such as diamond drilling and tunneling, and Servicol a security Company. Contractors are required to comply with national labor law and to make the required deductions for Social Security and this is monitored. Monthly meetings of the Contractor Health and Safety Committee (consisting of Project Director, Camp Manager, and coordinated by the OHS Superintendent) ensure compliance of contractors, to disseminate safety induction and provide updates on the development. Labor and OHS requirement are also imposed on all contractors through contractual agreements and monitoring

- PS 3: Pollution Prevention & Abatement:

The Environmental Management Plan for the exploration phase adequately addresses the following impacts associated with the exploration activities.
- Management of exploration activities – control of erosion and rehabilitation of drill roads, drill sites and trenches, safe disposal of oils, waste materials, dust control; surface and groundwater protection, drainage, water and effluent management, occupational health and safety, public safety (mitigation of transport risks), hazardous materials handling and management; emergency preparedness & response.

- Environmental, Health & Safety Management System and Policy commitments to ensure IFC Performance Standard compliance of any future open pit mining project.

Exploration sites are well managed and monitored against the Environmental Management Plan. Water samples were taken by Ingetec within the survey area, according to the terms of reference of the baseline study. The results indicate that the water found in the area is of relatively good quality, although it has gradually deteriorated due to downstream activities, particularly artisanal mining, which has increased the concentration of heavy metals in various streams. Water for the exploration project is taken directly from the neighboring creeks via pipelines as permitted by the authorities. The Company is planning one or two reservoirs in the future to ensure water supply to the mine. No water quality exceedances were found to be related to Greystar’s current exploration activities. Greystar will monitor all its operations and ensure that any discharges from its activities meet all applicable IFC and Colombian standards.

The ambient air quality surrounding the Greystar Mining project is relatively good despite fugitive particulate emissions from road transportation on unpaved roads. Dust also occurs within the area, particularly in the summer, due to wind over roads and areas cleared of vegetation. Greystar is currently stabilizing and re-vegetating areas affected by exploration activities.

The Company avoids spillage of used drilling media and lubricants into water channels via the construction and use of sumps and maintains monitoring of water quality. To prevent landslides and avoid siltation of waterways, drilled areas are rehabilitated as soon as they are no longer required for exploration purposes. The Company does not deal with hazardous or toxic substances at this stage of its activities. Ground water investigations are being undertaken as part of the baseline study and Greystar has agreed to undertake a sampling program to establish a baseline. In addition Greystar will undertake monthly sampling of existing surface water sampling points.

- PS4 Community Health Safety and Security:

Since exploration activities are away from areas of habitation and no hazardous or toxic substances are used, except for fuel, there are few risks to the community. The Company is developing an Emergency Preparedness and Response Plan for the communities.

Greystar’s Angostura project has been under exploration since 1995, with an interruption of approximately three years between 2000 and 2003 as a result of the adverse security conditions in the region. Greystar restarted its exploration activities on the Project in 2003. From that time, there has not been any significant event impacting the security of the area. Military security forces have a significant presence in the Project area and the surrounding regions, thus contributing to stability in the area. As part of this project, the company will upgrade their current practices as needed to ensure they operate in accordance with the UN Voluntary Principles of Security and Human Rights.

Other PSs have been identified as potentially applicable during any future mine development phase, which shall be considered in the preparation of the project’s ESIA:

- PS5 Land Acquisition and Involuntary Resettlement:

The Company has acquired land from 12 land owners and acquisition from an additional 6 land owners is in process. Land acquisition has not lead to any physical resettlement or economic displacement. The land acquisition process has a formalized approach and is conducted in a coherent manner. All land and assets acquired have been compensated above replacement value. The Company has made efforts to ensure that land owners are well informed about the consequences of selling their land and in some cases, where land owners were vulnerable (not having formal education or awareness of and experience with commercial activities) land owners were encouraged to get advice from a local NGO specializing in land acquisition to ensure a fair negotiation process and to provide support on investing the money in a sustainable way.

Any future land acquisition required as part of a future mine development would be undertaken in accordance with the provisions of PS5.

- PS6 Biodiversity Conservation and Sustainable Natural Resource Management

Baseline studies undertaken by Ingetec provide descriptions of the natural habitats in the area of influence of the project as well as the flora and fauna, terrestrial and aquatic, within them. A habitat of key importance is the p�ramo, an area of significant biological relevance defined by Colombian legislation.

The border of the Department of Santander is also the north-eastern limit of the Angostura concession. Immediately across this border, the environmental authority of the Department of Northern Santander designated an area of 12,000 ha as the Sisavita Regional Park. The Angostura mine would be outside the regional park and in a different watershed across the continental divide, so water will flow away from the Regional Park. The ESIA will consider all potential impacts and define mitigation measures. In addition, there are nearly 6,000 ha of mining concessions in the park area, mostly Greystar properties that the Company intends to keep for potential exploration or to accommodate infrastructure; however, current development plans do not make use of the park area. Ingetec’s terms of reference for the environmental baseline include part of the area of the Regional Park that is nearest to the Angostura project.

The ESIA process will include a full assessment of biodiversity in the project affected area, including the characteristics of the p�ramo. The Company will develop appropriate strategies to manage any impacts identified in the ESIA to ensure compliance with PS6 as the project progresses through development.

- PS8 Cultural Heritage

Ingetec’s baseline will include archaeological investigations when the Colombian Institute of Anthropology and History (ICANH) grants the corresponding permissions. However, the Company has developed a procedure, within the Environmental Management Plan for the exploration phase, to address chance findings and other cultural property issues.

Client's community engagement

Four communities are situated within the project area of influence; California (1800 inhabitants), Vetas (1700 inhabitants) and Surat� (3500 inhabitants) in the Province of Santander, while Cucutilla (7000 inhabitants) located in Northern Santander Province may be affected at a later stage by project expansions.

Engagement with these communities has been undertaken by the Company since they initiated their activities in Colombia in 1995 and they have published an annual Environmental and Social Report describing these activities since 2005. The Company has, during the exploration process, had an efficient engagement process with these communities, who are informed about the activities of Greystar on an ongoing basis. Dissemination of information is coordinated by the Manager of External Relations based in Bucaramanga and in collaboration with his field staff based in California.

If the project moves to production, Municipalities within the project area of influence will receive an equitable portion of royalties from the revenues of the project, distributed according to the area the concession occupies in each Municipality. As part of their community engagement strategy Greystar has established a Foundation with the objective of supporting affected communities in the areas of capacity building, income generating activities, health and education.

The Company’s management plans for the exploration phase specifically outline the objectives and activities related to informing local communities about project activities. The Company will implement a formalized grievance mechanism documenting concerns raised by the communities and responses given by the Company.

As part of the Environmental and Social Baseline Study process, the affected communities have been informed and consulted on the findings of the study and the planned project developments and this took place during the last quarter of 2008. Public meetings were announced in advance and facilitated by Ingetec and key environmental and social staff of Greystar. All community meetings are recorded, minuted and participation lists are filed at the Greystar office in Bucaramanga.

It is Company policy is to employ workers from the local communities and mainly from the nearest village California. Of the workers hired during the exploration phase, Greystar has directly hired 79% of its staff from local communities. Of the total workers hired by both Greystar and all its contractors, 55% are from local communities.

Employment generation and capacity building are key components of the Company’s management plans. Through strategic alliances with SENA (Colombian institute for vocational training) the Company is focusing on capacity development of the labor pool in the local communities. Also, the Company has supported SENA to establish a training facility in California and is facilitating online SENA courses through their internet classroom for all inhabitants in California.

Local access of project documentation

This ESRS will be publicly disclosed at the World Bank Infoshop and will be available in Spanish at the offices of Greystar in Bucarmanga and California.

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