IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors. The ERS was locally released on February 29, 2004 at the Jiexiu City public library.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, as well as site appraisal. The following potential environment, health and safety and social impacts of the projects were analyzed. - air emission control; - wastewater management; - site acquisition and related social impacts; - employment opportunities. - sustainable coking coal supply; and - performance of other local activities owned by the same sponsor company.

The sponsor has presented plans to address these impacts to ensure that the proposed project will comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. - General environmental considerations: The coal handling facilities and preparation areas will include crushing and blending, while the washing will primarily take place at the coal mines. The remaining wash water will be cleaned in a biological waste water treatment facility with both aerobic and anaerobic treatment, before being recycled and finally used as quench water to avoid any discharge. Sludge from the biological treatment will be mixed in the coal feed stock for the coke batteries and will be burnt in the process. The quench towers have baffles to limit the escape of coarse dust. The basic design takes into consideration an option of later doubling the capacity should the project be successful. For this event a design option of changing to dry cooling with inert gasses have been included. The coke batteries will have 6 meters doors to minimize the number of fillings, and will be based on Nippon technology. All loading and transfer point will be equipped with bag filter based dust controls. The coke battery pushing and handling systems will be equipped with traveling fume controls and bag filter cleaning. All head gasses will be treated to remove organic materials, ammonia and sulfur (by-products) before being transferred to a nearby gas fired power plant owned by Antai. In this way the plant will have no direct air emissions and energy will be recovered from the coke oven gasses. The by-products will consist of tar, benzene, ammonium sulfate and solid sulfur, which will be stored in a safe tank farm with vapor recovery systems before being sold on the domestic chemicals market. The new coking plant company will provide job opportunities for approximately 1000 new employees. The total number of employees by other sponsor owned companies in the area is in the same period anticipated to go up by 950. Upon successful implementation the company will prepare for ISO 14001 certification in line with the other independent facilities owned by the same sponsor in the same area (see description below). - Site Acquisition: Antai already owned approximately a fourth of the land needed for the project. The sponsor had previously produced coke on the land, using a beehive technology. To-date the company has acquired control of a total 398,072 m2, the amount needed for the 1 M tpa facility. Of this area the company is leasing ~302,000 m2 from surrounding villages and has effectively purchased ~95,000 m2. All land appears to have been acquired through a willing-seller/willing buyer relationship with the local villages. Local communities appear eager to lease the land because of the needed cash income that the lease generates. Communities are using the funds from leasing to improve agricultural production on their remaining land. The addition of irrigation to these lands, which had previously relied on rainfall agriculture, has increased production by up to 40%. Leasing some land to purchase irrigation equipment and keep it running appears to provide a substantial overall improvement in the agricultural production of the communities. Additionally, in some of the recent leases, communities have received a preferential hiring policy on the part of the company. The basic plant layout gives an option of expanding to double capacity (2 M tpa) but this will require an extra ~110,000 m2 to a total acquired of 510,000 m2. For the potential expansion, at a later stage, the company has agreed with a village on leasing the additional land. The company’s contributes to the local communities. However, the current, ad hoc approach could be improved through a more broadly planned approach with multiple year plans. IFC will work with the company to develop such plans. The coke project fully complies with the relevant World Bank policies and guidelines. Coal sourcing practice: Antai will in the interest of securing a safe and sustainable coal supply employ a due diligence system to assess existing and potential future suppliers of coal. New suppliers will immediately have to fulfill the criteria and existing suppliers will not have contracts renewed unless they within a reasonable time frame meet the following criteria: - hold a current “Shanxi Coal Mine Safety Basic Condition Evaluation” rating of ‘A’; - hold a current “Annual Evaluation Certificate” from the Land Resources Bureau; and - be in full compliance with EPA regulatory requirements. Antai will further ensure that the coal will be delivered by trucks living up to good safety standards, following selected routings, and operated by companies/drivers who has attended defensive driving training and has good driving records. The final product will be transported to the export harbor facilities by train to minimize transport loads on the local road system. - Other sponsor relations: Antai is also, in a separate company, the sole owner of a coking, steel and cement complex (the complex) located in the same town and serving the domestic market. Due to the proximity and the technological and ownership links between the companies Antai’s total operations have been reviewed during the appraisal, both to give a picture of Antai’s commitment to performance standards and to ensure the combined company would comply with the relevant World Bank policies and guidelines for both international and domestic oriented operations. Antai’s limestone quarry operation has also been reviewed due to the steel and cement plants reliance on it. The facilities mentioned below are not part of the investment but gives an impression of the sponsors commitment to sound environmental and social performance. The sponsor has further agreed to keep these facilities in compliance with the World Bank guidelines. - Limestone quarry: Located in a mountain range approximately 14 kilometers from the complex. The lime stone quarry belonging to Antai is one of a series of quarries in the area. Antai’s quarry has well prepared roads and is in the process of having its mechanical operations updated to modern standard, although the quarry already before the modernization has significantly higher standard of operation than the adjacent mines. The limestone formation extracted by Antai is one in a series of small continuous mountain peaks. Once removed the peak will have supplied Antai with 100 years of limestone supply at the planned 2004 consumption level. The limestone formation has very limited topsoil and no quarry reclamation plan has been prepared for the extraction area, which will end up as a plateau. Topsoil has been collected and used in a green belt immediately downhill of the operation. This green belt is planted with fruit trees to minimize the visual effect of the quarrying operations and improve the local environmental conditions. A number of shafts used for limestone burning will be closed down when Antai’s new lime plant at the complex site is ready for operation at the end of 2003. A new lime plant is due to start operation at the complex site at the end of 2003.This new lime plant is a rotary kiln operation equipped with bag filters. The dust emission will hereby be limited to below 50 mg/Ncm. - Sinter plant facilities: In connection with Antai’s ongoing pig-iron plant renewal and environmental upgrade a new sinter plant is under construction. This plant will be equipped with electro static precipitators and bag filter hereby reducing its emissions to around 50 mg dust/Ncm and a maximum of 250 mg SO2/Ncm. No other sintering operations will be carried out on site once the new plant is operational. - Pig-Iron production : Antai’s old pig-iron production plants are under total renewal to ensure environmentally sound operation and improved quality and reliability. Currently two 0.6M tons per year blast furnaces are undergoing the renewal, and the last plant will follow shortly after. The new facilities will, based on Chinese technology, comply with modern environmental requirements for dust control, slag recycling facilities, and extraction of the furnace gasses for utilization in an existing gas fired power plant on site. Hereby the emissions from the blast furnace operation will be limited to 10 mg dust/Ncm and 73 mg SO2/Ncm well within local requirements and World Bank guidelines. - Cement Manufacturing plant: Slag from Antai’s pig-iron production has since 1992 been used as additive in a 120,000 tpa cement plant located within the complex. The cement plant relies on raw material supply from the limestone quarry described above, iron ore (which like the rest of Antai’s iron ore consumption is sourced on the World market, mainly Australia), special soils and slag from Antai’s own production. The cements plant is a dry coal fired process. All major emission sources are equipped with electrostatic precipitators, except for the cement grinding facility, which has bag filters. In this way the facility operates well below the local emission regulation (100-150 mg dust/Ncm, dependent on source) and just around the World Bank guideline level of 50 mg dust/Ncm. - Coke batteries: Antai has closed down all beehive technology based coke production units in line with the future requirements of the Chinese legislation. This leaves Antai with its 600t tpa coke battery commissioned in 1997 and able to deliver the needed coke for internal consumption. This battery is in exceptional good operating standard with very effective leak control, a “pushing gas” collection system (under implementation for commissioning later this winter), a gas treatment system removing organic components, ammonia and sulfur from the coke oven gasses before the gas is utilized in two onsite power production plants. The by-products from the gas treatment system (consisting of tar, benzene, aqueous ammonia, and solid sulfur) are stored in secure containments and sold as commodities on the industrial market. Wastewater is biologically treated to remove phenol and other impurities and is afterwards used either for irrigation purposes or in the quenching towers, hereby eliminating the need for wastewater discharge. The unit complies with local requirements and the World Bank guidelines for coke production. Power plants: Antai has two power plants with a combined capacity of 24 MW. Up to 12 MW are generated by the utilization of blast furnace and coke oven gasses, while two 6 MW boilers can use coal residues from the coal washing process. The gas-fired units have operated with Dust levels around 9 mg/Ncm, and SOx levels around 26 mg/Ncm. Both are well within local requirements and the World Bank guideline levels. There is no NOx measuring capacity in the area and these values are therefore not known. The coal-fired units are designed to keep the dust levels below the local requirement of 233 mg/Ncm. Initial testing has shown levels below 100 mg dust/Ncm and Antai is willing to take extra measures to keep this limits if need be, to stay within the World Bank maximum allowable level for existing boilers. SOx has not been measured yet, but will, based on the coal having below 0.6 % sulfur, comply with the relevant World Bank guidelines. Safety, quality and Environmental Management System (EMS) standards followed at these facilities: Accident statistics for all operating plants have been reviewed for the period January 2000 to September 2003. Within this period Antai has not experienced any fatalities, and the Lost-Time-Accident/Million-Man-Hour rate has been in the range of 2.13-5.31. This is an acceptable range while it at the same time leaves opportunities for improvements. Antai is committed to pursue further safety improvements as part of their continuous modernizations. On December 6, 2000 Antai obtained ISO 9002 (quality) certification from OEC for its complete production complex, consisting of coke production, pig iron production and cement production. This certification is up for renewal in 2003 and Antai intend to renew the certification once the current reconstruction is finalized in early 2004. On April 19, 2001 Antai was awarded ISO 14001 (environmental management system) certification by OEC for the same production units and the two power plants. This certification is up for renewal in 2004 and Antai intend to pursue a renewal.

This ERS contains the full environmental and social documentation prepared for the project.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits will also be conducted.