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| Gold Ridge |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public 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 decision. Board dates are estimates only. |
| Project number | 27766 |
| Company name | Gold Ridge Mining Limited |
| Country |
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| Sector | Gold |
| Environmental category | A |
| Department | Reg Ind, Infra & Nat Res, ASIA |
| Status | Active |
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| Date SPI disclosed | May 15, 2009 |
| Projected board date | July 20, 2009 |
| Previous Events | Invested: September 1, 2010
Signed: June 24, 2010
Approved: September 3, 2009 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed project is a $134 million investment to restart operations of Gold Ridge mine, owned and operated by Gold Ridge Mining Limited (“GRML”), an indirect wholly owned subsidiary of Australian Solomons Gold Limited (“ASG” or “the Company”). The Gold Ridge mine is an open pit gold mine on Guadalcanal Island (the largest of the Solomon Islands) which operated from August 1998 before closing due to civil unrest in June 2000. Following an international tender, the mine assets were purchased in December 2004 by ASG, a company listed on the Toronto Stock Exchange (“TSX”), which was established to acquire and redevelop the Gold Ridge mine.
The Gold Ridge mine area consists of 4 adjacent deposits together with a crusher, mill and processing plant located 27 km by road from Honiara, the capital city of the Solomon Islands. The proposed investment program will rehabilitate and replace existing equipment and redevelop the mine area with a view to restarting production by 4th
quarter 2010. At full production GRML is expected to produce an average of 124,000 oz. of gold annually. The projected mine life, based on current reserve estimates is just under 8 years, with potential to extend mine life to 12 – 15 years and beyond. |
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| Project sponsor and major shareholders of project company |
| ASG is a TSX listed company with a diversified shareholder base. The company’s controlling shareholder is the Resource Capital Funds Group (“RCF”), an investment management firm based in Denver, Colorado which is specialized in investment in the mining sector. RCF currently has total funds under management of $890 million with investment to date in 35 companies across the mining industry. |
| Total project cost and amount and nature of IFC's investment |
| The estimated total cost of the mine redevelopment is $134 million. IFC’s investment is expected to consist of a loan of $25 million together with an equity investment of $5 million. The balance of project funding is expected to come from an equity placement to current and new shareholders together with loan financing expected to be raised primarily from other international development finance banks. |
| Location of project and description of site |
| The mine is situated on the lower northern slopes of Mt Chaunapho (1300m), in steep forested terrain incised by several small rivers. The original rainforest vegetation is significantly impacted in the project area due to several episodes of commercial logging, significant artisanal mining activity and historical industrial mining activity. The mine site is connected via a secondary road to a main road to Honiara port. Electric power requirements will be met from on-site diesel power generation sets. |
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| Anticipated development impact of the project |
The Gold Ridge Mine redevelopment is the largest private sector project in the Solomon Islands and is a strong fit with IFC investment strategy in the Pacific area and in support of financing of poorer (IDA eligible) countries. At full production the project can be expected to account for as much as 20% of Solomon Islands GDP, which relies today on external aid and rapidly dwindling revenues from logging. If successful, the project would also encourage investment in other mining developments and generally would enhance the reputation of the Solomon Islands as an investment destination. The Project is expected to generate a range of positive development impacts including:
Revenues for the Government of Solomon Islands and provincial government: The Solomon Islands government will receive an export tax of 1.5% of revenues for the life of mine, with an additional royalty of 0.3% to provincial government. GRML will pay corporate taxes of 30%, which are expected (depending on gold prices) to become payable in the fourth year of operations. GRML will also pay a 15% goods tax on consumables and fuel.
Benefits to local communities: In addition to new housing and direct compensation to meet the Company’s obligations to compensate households affected by the mine redevelopment, local landowners will receive, through a representative local landowner council, a royalty of 1.2% of revenues for the life of the mine. In addition the Company will implement community development initiatives under a Community Economic Development Plan.
Job Creation In addition to employment during construction, the Project would create approximately 500 full time jobs. Additional employment will be generated in downstream service businesses (food services, various local contractor services, fuel supply, haulage, travel and bank services).
Development indicators to be monitored during the life of the IFC investment are:
- direct employment levels
- payments to Government in the form of royalties and taxes
- annual Company expenditures on domestic goods and services
- community development expenditures by the company. |
| Governance risks assessment |
| A part of the project's expected benefits are in the form of royalties, corporate and other tax payments to Government. In coming to a view of whether to support this project, IFC considered the value of the Project’s benefits and the governance and other risks to these benefits. In doing so, IFC has reviewed a variety of governance assessments on Solomon Islands, including the 2008 World Bank Doing Business rankings which ranks Solomon Islands 5th out of 47 low income countries. Solomon Islands compares favorably with peer countries, ranking 109th of 180 on Transparency International’s Corruption Perceptions Index. A key consideration for IFC’s proposed investment is the active engagement of regional partners through the Regional Assistance Mission for the Solomon Islands (RAMSI), which is working closely with the Solomon Islands Government: in stabilizing public finances, enabling the delivery of basic services to the community, payment of salaries to public servants and budget management. |
| IFC's expected development contribution |
Funding: Given the project risk profile and very limited availability of commercial bank financing in the current stressed lending environment, development finance institutions (“DFI’s”), together with equity finance partners are the only viable source of financing for the Gold Ridge mine redevelopment. In addition to providing debt and equity finance, IFC is leading the structuring of the project financing, working with the Company to attract parallel funding from other DFI’s. IFC’s involvement is also a catalyst for attracting equity finance under a planned public offering.
Management of E&S Risks: IFC is playing an active role in assisting the Company to ensure compliance with Performance Standards and in managing environmental and social risks, especially with the challenges associated with a relocation of some 1,350 people who are directly impacted by the mine redevelopment.
Community Development: IFC is drawing from experience of similar mine developments to explore ways to help the Company with community development programs for affected communities including SME and agricultural linkages, community investment strategy and measuring results. |
| Environmental and social issues - Category A |
IFC’s review of this Brownfield investment has identified the following main environmental issues: strengthening of project EHS capacity to ensure full implementation of the Environmental Management Plan (EMP) and development of more detailed mitigation procedures; erosion and sediment control related to open pit development in steep topography with high rainfall; protection of ground and surface water quality with respect to acid rock drainage, cyanide and metals loading; overall management of cyanide in accordance with the International Cyanide Management Code; emergency response procedures; proper management of the waste rock dump and tailings storage facility (TSF), including tailings and return water pipelines; control over biodiversity impacts such as vegetation clearing and timber sourcing (note that no protected areas or critical habitats have been identified); and comprehensive closure planning/costing. Several legacy issues will need to be dealt with, e.g. treatment and release of rainwater which has collected in the TSF since mining ceased, to ensure technical stability of that facility and repair of damaged sediment control dams.
The main social issue associated with the project is the proposed relocation, to adjacent land areas, of some 1,350 persons residing on or near the Mine Lease area, in order to pave the way for restart of open pit operations and haul road development. This will involve somewhat complex compensation and royalty arrangements which were exhaustively negotiated under the prior mine owners and which have subsequently been modified in consultation with affected parties. Many of the people who will resettle had moved away as part of the original mine development but subsequently returned to the concession area during the unrest period around 2000. Most affected households are currently engaged in subsistence artisanal gold mining activities on Gold Ridge. Cessation of these activities will be accompanied by alternative livelihood programs and – for eligible households – payment of royalty monies. Stakeholder engagement is a key issue for this Project and is currently managed by a team of eight community liaison staff, including a manager, backed up by expatriate consultants. There are no critical cultural heritage sites impacted by the mine redevelopment. All IFC Performance Standards except PS 7: Indigenous Peoples are applicable for this investment. Based on IFC’s review this investment will require 60 days public disclosure by IFC prior to Board and has been categorized as “A”. |
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| For inquiries about the project, contact: |
David Roach
Chief Executive Officer
Australian Solomon’s Gold Limited
Ground Floor, 60 Kingsford Smith Drive Albion Queensland 4010
Australia
david.roach@solomonsgold.com.au
Telephone: +61 7 3624 9000
Facsimile: +61 7 3862 1100
Keith Nielsen
General Manager (Acting)
Gold Ridge Mine Ltd
Solomon Islands
keith.nielsen@asg.com.sb
Telephone: +677 38 351
Facsimile: +677 38 353 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 1-202-473-3800
Fax: 1-202-974-4384
E Mail: Webmaster |
| Local access of project documentation |
IFC’s Environmental and Social Review Summary and associated GRML environmental and social documentation is available for public review starting Monday, 18 May 2009 on the IFC disclosure website: www.ifc.org/disclosure in addition to the ASG website www.solomonsgold.net.au and at the following locations during normal business hours (9:00 am to 5:00 pm). Monday to Friday, for a period of 60 days.
Inspection sites:
Gold Ridge mine site: GRML Community Relations Building, Bubulake
Public location in Honiara: National Museum and Cultural Centre,
Medanna Avenue, Honiara
Members of the public can view this document until July 17, 2009 |
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