24719 - Simandou Iron Ore

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Environmental Review Summary

Project Number

24719

Company Name

RIO TINTO SIMFER SA

Date ERS Disclosed

Feb 23, 2006

Country

Guinea

Region

Africa

Date Revised ERS Disclosed

Jul 6, 2007

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Apr 20, 2006
Signed : Jul 6, 2006
Invested : Aug 9, 2006

Sector

Iron (Pellets, etc.)

Industry

other

Department

Gbl Infrastructure & Natural Resources

Project Description

This ESRS has been revised in order to reflect a slight change in the wording relating to the process of categorization of any potential future investment in this project to ensure consistency with IFC procedures.

The project refers to the exploration, evaluation of high grade iron ore resources within a 110 km long Mining Concession that covers the Simandou mountain range in south eastern Guinea (the “Project”). The Mining Convention covering the Concession area is held by a locally incorporated Rio Tinto subsidiary, SIMFER S.A. The proposed IFC investment is the acquisition of a 5% stake in SIMFER S.A. and future contributions to equity cash calls until completion of a Feasibility Study for any of the exploration targets in the Simandou Range. In addition to the equity investment, IFC will have call options to acquire 5% stakes in potential iron ore resources in other Rio Tinto Iron Ore (“RTIO”) Exploration Licences in Guinea, applied for but not yet granted, namely Simandou North, Simandou South, Forecariah and Diéké (the “Additional License Areas”).

RTIO, a division of Rio Tinto plc., has undertaken extensive iron ore exploration work in Guinea since 1996. Most of the exploration activities were concentrated at the Pic de Fon area within a 7.5 km stretch of the 110 km long Simandou Range. The current exploration program includes 13 different targets spread out over approximately 740 km2, of which the southern zone, namely Pic de Fon and Oueleba are the most advanced. Within the Simandou Range, RTIO exploration activities are targeted at confirming sufficient high grade resources to support a 40-50 mtpa mining operation with a mine life of 50 years plus. If the exploration targets are confirmed, the infrastructure required to transport the iron ore to the coast will be significant and may include up to 650 kms of railroad and construction of a deep water port.

Environmental and Social

This project is classified a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because it has a limited number of specific environmental and social impacts which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Because this Project is at an exploration stage it has minimal environmental and social impacts. The development phase will start in late 2008 upon the completion of a Feasibility Study (“FS”) which will include detailed engineering studies, full Social and Environmental Assessments (“SEA”) and appropriate due diligence and stakeholder consultations prior to RTIO’s decision to progress to development or not.

Any future mine development financing would be appraised by IFC as a new project, with a new environmental classification based upon the projects risks and impacts. Based upon review of existing environmental documentation, it is considered likely that IFC support for future planned mine development would be classified as a Category A project according to IFCs Environmental and Social Review Procedure. As part of their FS process, RTIO commits to consulting with affected communities both during the drafting of the Social and Environmental Assessment (“SEA”) and an Action Plan (“AP”) and also prior to finalizing these documents. These and possibly other documents will be publicly disclosed in line with IFC requirements for at least 60 days prior to proceeding with any construction. This set of documentation and the resulting mitigation implementation will ensure full compliance with IFC’s Policy and Performance Standards on Social and Environmental Sustainability and IFC’s Policy on Disclosure of Information.

All RTIO’s exploration and evaluation programmes employ cutting edge technologies such as remote sensing and a small portable drilling rig that is transported via helicopter wherever possible to test various exploration targets. This ensures that the environmental and social impacts are kept to a minimum through the project cycle, including during the 5 year exploration phase of targets in the concession. Environmental and social risk assessments are carried out at each stage of the exploration programme in order to minimize impacts and to mitigate residual impacts.

The management and mitigation of impacts associated with current exploration activities are embedded in an Environmental Management System (“EMS”) compliant with ISO 14 001. The EMS Procedures ensure a cautious approach on all issues, such as minimal foot print, use of existing sampling/drilling sites for additional work and monitoring, zero tolerance of hunting and fishing, awareness of cultural and religious sensibilities, and water and waste management. RTIO has put in place a detailed emergency response and evacuation plan, which includes consideration of the local communities. The decision taken early on by RTIO to have a full time environmental officer and a community liaison officer has proven to be successful, mainly for consultation with communities and the selection of drill sites and the access road to the exploration camp and initial targets.

IFC’s review of this project consisted of appraising technical, social, health, safety, environmental and community (“HSEC”) information submitted by the project sponsor along with site visits and discussions with Government of Guinea agencies and authorities by IFC Environment and Social staff.

Prior Assessments of Environmental Issues: In 1997, RTIO commissioned Hatch and Associates of Canada to carry out a Preliminary Environmental Characterisation Study covering broad environmental and social (“E&S”) issues. The study covered the entire 110km long Simandou range. Subsequently the study was followed up by an impact assessment for the drill access road to the highly prospective Pic de Fon exploration target.

In 2002, a RTIO funded Rapid Assessment Study (“RAP”) of the Pic de Fon Forêt Classée area was conducted by Conservation International (“CI”), the Centre Forestier de N’Zérékoré (CFN/PGRR), Guinée Ecologie (local NGO), and Rio Tinto Mining and Exploration Limited. Another CI RAP with the same team of varied expertise conducted studies in the Déré, Diéké and Mt Béro Forêt Classée. The second RAP report is expected to be finalized in the first quarter 2006. The main objective of the two RAPs is to provide an assessment of the biodiversity of the region and to determine the current and future threats to the region. Results of the first RAP confirm that the Simandou Range is rich in biodiversity. Results from the second RAP indicate that Déré, Diéké and Mt Béro contain similar biodiversity to Pic de Fon and that improved management of these areas may provide opportunities for environmental off-sets for the project. Kew Gardens (UK) has been commissioned by RTIO to prepare a detailed GIS habitat map for the Pic de Fon Forêt Classée as a complement to the work completed by CI in 2004. In addition, Bird Life International is conducting similar work on fauna in the region. The key objective is to better understand how the goals of socio-economic development and protection of biodiversity can be achieved.

Overview of Environmental Issues:

Based on prior assessments and IFC site visits, the potential environmental issues associated with the development stage of this Project, if it moves forward, may include:

- major changes to topography and landscape, and possible changes to local orographic rainfall, groundwater table and surface water patterns, as the ore deposit is on a mountain ridge of which at least a section will be removed;
- water management, including erosion and potential contamination of surface streams / aquifers;
- direct, induced and cumulative impacts associated with infrastructure needed to transport the iron ore; and
- biodiversity conservation (including the two Forêt Classée).

Prior Assessments of Social Issues:

In addition to the environmental and social characterization and impact studies by Hatch Associates mentioned above, RTIO commissioned Synergy (UK) to undertake a Social Baseline Study (“SBS”) on the three villages along the access road to Canga East camp and Pic de Fon exploration targets in 2003, followed by a SBS on Beyla, the local Prefecture, and an update on the previous SBS in 2005. Furthermore, in 2005 a socio-economic assessment of the Forêt Classée was conducted by Winrock within the framework of the $5 million 3 year alliance RTIO has formed with USAID and CI for forest protection and improvement of local agricultural and pastoral practices.

Overview of social issues: Based on prior assessments and IFC site visits, the potential social issues associated with the development stage of this Project, if it moves forward, may include:

- change of traditional livelihoods in the local villages depending upon where the ore body is developed (may include land acquisition/resettlement locally, and potentially with regard to establishing a rail and port facility);
- influx management at late exploration/construction/development stage;
- community development around the mine site;
- induced and cumulative impacts associated with infrastructure needed to transport out iron ore; and
- need to address how to relocate key infrastructure outside of Conakry, as it is located on a narrow congested peninsula with no room for any expansion of existing railway and harbor facilities.

RTIO has presented plans to address impacts to ensure that the proposed project will, upon implementation of the specific measures agreed, comply with applicable Guinean laws and regulations, World Bank/IFC Safeguard Policies (to be superseded by the Performance Standards) and guidelines, Rio Tinto corporate policies, and international leading practice.

IFC and RTIO held meetings in Conakry in August and October 2005, a 5 day site visit at Simandou in December 2005, and an additional set of consultations with the Government of Guinea authorities in January 2006. IFC has reached an agreement with RTIO on how to proceed with E&S data collection, documentation and management.

Note that at this early stage in the Project which is primarily focused on further exploration and evaluation drilling on various targets and initial pre-feasibility work on some deposits, the final location of the mining sites, production facilities and ore transportation route are yet to be determined. Once these issues have been clarified, and following further baseline studies, respective SEA documents will be prepared and publicly disclosed after review of the various alternatives. Consequently, specific impacts and proposed mitigation measures related to the mine exploitation facilities will be assessed in due course (current target of calendar year 2007) when information is available from a FS. To date the Project has met Rio Tinto’s internal HSEC requirements for exploration.

Sponsor’s E&S management capacity: Rio Tinto is strongly committed to sustainability and is currently leading several mining sector initiatives on conservation, biodiversity, climate change, water and energy use. A key element of all these initiatives is engagement and consultation with local communities. With regards to the Simandou Project, environmental and social management is being properly handled and SIMFER’s Pic de Fon Prefeasibility Study area has been certified to ISO 14001-2004 for Environmental Management Systems (“EMS”) in December 2005. This is the first business in Guinea to receive EMS certification under ISO requirements. In 2006 RTIO intends to expand certification to include all its exploration activities in Guinea. All employees are aware of the RTIO HSEC Policies and receive proper induction when hired. RTIO has committed that it will abide by IFC’s Policy and Performance Standards on Social and Environmental Sustainability and IFC’s Policy on Disclosure of Information.

RTIO has recently based a team of three senior E&S professionals with expertise and extensive hands-on experience in environment, social development and management systems in the company’s office in Conakry, Guinea. RTIO is also in the process of building up local capacity on environmental and social issues by hiring additional Guinean staff. The main role of the local staff is to assist with developing the baseline and SEA documentation and ensure on going consultation and interaction with local communities. RTIO is being assisted by experienced consultants (Kew Gardens and Synergy among others) and international NGOs with specific expertise relevant to the Project, including CI and Fauna and Flora International (“FFI”), for input into the Project’s social and environmental management. A reputable international consultant will be in charge of the SEA preparation.

E&S management plans and activities: RTIO has recently finalized to IFC’s requirements a Public Consultation and Disclosure Strategy (“PCDS”) for the Project. It includes all elements of the “Procédure d’obtention de l’autorisation d’exploitation d’une installation de classe I en République de Guinée” and will be released publicly in French in Guinea at the offices of SIMFER in Conakry and at the prefecture of Beyla, Macenta and Kérouané. In parallel RTIO is developing a set of key E&S strategy documents on sustainable development, community, environment, biodiversity and regional development linkages, on which IFC was given the opportunity to provide input. A short summary of the strategy documents will be publicly available within the second quarter of 2006. As soon as RTIO develops a Feasibility Study (“FS”) and mine plan for any of the exploration targets, a specific Public Consultation and Disclosure Plan (“PCDP”) for each deposit to be mined will be prepared and subsequently disclosed. Additional strategic and action plan reports deriving from the above documents are under preparation and will be made publicly available in due course.

The current main focus for the sponsor’s E&S team is to complete the due diligence and baseline studies by the end of 2006. In parallel to these activities, the suggested program for SEA work includes: i) implementation of strategy commitments; ii) dialogue with Government on community priorities, biodiversity conservation, regional development and management of environmental and social issues; iii) increased public consultation and disclosure processes in line with the PCDS; and iv) stakeholder capacity building during the preparation of a full SEA and Action Plan. RTIO will appoint in the second quarter of 2006 a team of experienced consultants to carry out all SEA-related work. IFC is providing regular ongoing review and advice to RTIO on the preparation of the reports mentioned above.

Biodiversity Conservation: The Project is located in an undeveloped region of south eastern Guinea, in an area of high biodiversity. Furthermore, the southern portion of the Concession area is also part of two Forêt Classée areas for which conservation criteria and plans are yet to be fully established by the Guinean government. Development in the region, including Simandou and possibly other projects (Mt Nimba Project), could threaten the biodiversity in the region. Since RTIO’s approach is to ensure that there is always a positive net biodiversity balance, RTIO is committed to develop this project in line with its strategy. It will commission additional and more detailed baseline studies before any decision to mine is taken. In the event that a critical habitat is identified in areas impacted by proposed mining, Rio Tinto agrees to initiate an independent review of the area concerned to ensure that the requirements of the IFC new Polices and Performance Standards and the own Rio Tinto corporate policies are being met.

Local Community Development and Community Involvement: The PCDS which has been prepared is based on consultation during the initial baseline work and local stakeholder dialogue undertaken since 2000. It is designed to build relationships with all stakeholders, address environmental and social challenges of development and to ensure that stakeholders are informed of the Project’s activities and impacts. It is expected that the consultation process outlined in the PCDS will promote and generate long-term trust between the Project and local stakeholders. The PCDS clearly indicates how RTIO is developing its long-term public consultation approach, including meetings and ongoing presentations of the Project and its various initiatives to local citizens, authorities and community organizations in the project area to both inform and elicit their input. The PCDS includes a program of ongoing consultation in 2006 and will be further revised following dialogue with Government. Feedback meetings planned to take place during the second half of 2006 will discuss the expected impacts of the Project and proposed mitigation measures, with a range of officials, community representatives and social groups.

RTIO has committed to undertake in 2006 a broad-based socio-economic study of the Simandou region likely to be impacted by developments within the Concession.

RTIO will also:

- prepare a Regional Development and Linkages Plan (“RDLP”) by April 2006 which will identify and prioritize community needs within a Sustainable Development framework;

- seek to engage in mid 2006 with a competent NGO partner(s) to help develop plans for community development activities, including addressing HIV/AIDS threats to the communities;

- seek to engage proactively, as outlined in the PCDS, with surrounding communities, municipal / local government and business associations in order to manage expectations before and more specifically once operations commence;

- commit to have robust public consultation/stakeholders meetings in the course of deciding the best option for the transportation route. This will be in addition to a detailed action plan to mitigate associated impacts related to the railroad (notwithstanding the option selected) when the transportation study is completed;

- prepare a Land Acquisition and Compensation Plan (“LACP”) in parallel to any SEA to address compensation associated with use of land for future mining and infrastructure development. This will include consultation on land access. It should be noted that no physical resettlement is envisaged in the short to medium term; and

- prepare an Influx Management Plan (“IMP”) by early 2008 well before any construction activities, and in line with the Community Strategy and the implementation of detailed Community Development Plans.

-Under the terms of the Mining Convention between RTIO / SIMFER and the Government of Guinea, RTIO has committed 0.25% of annual turnover to fund community development programs.

Before a construction decision can be made, potential resettlement and economic displacement requirements in key areas such as along any iron ore rail transportation routes will be looked at closely by RTIO and the IFC in order to avoid, reduce and minimize any community disruption. Where resettlement is unavoidable, plans will also ensure that agricultural land holders are provided with adequate replacement land and/or compensation in order to maintain their livelihoods.

Public Disclosure: In addition to the PCDS which will be made available to all stakeholders, it is Rio Tinto policy to report annually for each business on the HSEC performance. RTIO will produce a Social and Environmental Report each year around April (starting in 2006) summarizing the previous year achievements. It includes information for local communities, the administration and employees. The RAP reports mentioned above are available on the following web site:

RTIO as well as the Government of Guinea have endorsed the principles of the Extractive Industries Transparency Initiative (“EITI”) and have agreed to commit to full and transparent disclosure of all payments made to government entities under the Project. Rio Tinto subscribes to the US/UK Voluntary Principles on Human Rights and use of Security Forces and will implement these where applicable to the Project.

Conclusion and Action Plan:

IFC concludes that upon successful completion of the agreed documentation and implementation of the proposed Action Plan (see below), the Project will be implemented in compliance with the applicable IFC Performance Standards on Social and Environmental Sustainability and Policy on Disclosure of Information, the World Bank Group’s environmental, health and safety guidelines, and the requirements of the laws and regulations of Guinea.

The following Action Plan has been agreed:

RTIO to finalizing the various strategies by end Q2 2006. Summary documents of the key Strategies will be produced for public release in French and English;

Terms of Reference (“ToR”) for the Preliminary SEA on Pic de Fon and Oueleba to be agreed between RTIO and IFC by end of February 06;

Meetings with Government, IFC and RTIO on the Forêt Classée and biodiversity issues in order to agree an action plan by the end of March, 2006;

Begin consultations with the Government on the SEA Terms of Reference by June 2006. The focus will be on reviewing the biodiversity baseline work and initiating capacity building and dialogue with key stakeholders.

Conclusion & Monitoring

IFC will evaluate the project’s compliance with the applicable environmental and social requirements during the lifetime of IFC’s financial involvement with the Project by reviewing the preparation of the SEA documentation and conducting regular site visits.

RTIO’s Environmental, Health and Safety, Employment, and Community Development Policies and the PCDS are available at the offices of SIMFER S.A in Guinea for consultation by the public. Additional detailed HSEC information will be soon available through a dedicated website for the Project. Basic information on Rio Tinto is available at http://www.riotinto.com.

Environmental and Social Documentation:
The following revised environmental and social documentation were added on July 6, 2007.

1. Final Report - Simplified Environmental & Social Impact Study -Prep. Works - Mar 07 (English)
2. Rapport Final - Etude d''Impact environmental et social simplifiee des trvaux preparatories - Fevrier (French)

Report Text: English Version - French Version

Report Figures: English Version - French Version

Tables: English Version - French Version:

Environmental and Social Documentation

File Name	Actions
Cover_English.pdf
Cover_French.pdf
Report_English.pdf
Report_French.pdf
Appendix_AJE.pdf
Appendix_AJF.pdf
AppendixD_E.pdf
AppendixD_F.pdf
Schedule_E.pdf
Schedule_F.pdf
Project_Components_E.pdf
Project_ComponentsF.pdf
Survey_Stations_E.pdf
Survey_Station_F.pdf
Perpspective_Canga_E.pdf
Perpspective_Canga_F.pdf
Landuse_Canga_East_E.pdf
Landuse_Canga_F.pdf
Airstrip_Zoom_E.pdf
Airstrip_Zoom_F.pdf
Access_Road_Options_E.pdf
Access_Road_Options_F.pdf
LandUse_Access_Road_E.pdf
LandUse_Access_Road_F.pdf
Base_Camp_ImpactsE.pdf
Base_Camp_ImpactsF.pdf
Airstrip_ImpactsE.pdf
Airstrip_ImpactsF.pdf
Cost_EstimationE.pdf
Cost_EstimationF.pdf

This Environmental Review Summary (ERS) 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. Any documentation that is attached to this ERS has been prepared by the project sponsor or in conjunction with 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. The following ERS is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

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