While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: - PS1: Social and Environmental Assessment and Management Systems; - PS2: Labor and Working Conditions; - PS3: Pollution Prevention and Abatement; - PS4: Community Health, Safety and Security; and - PS6: Biodiversity and Sustainable Natural Resource Management.

The project proposed for IFC support is an expansion of the downstream processing capacity of the integrated stainless steel plant. The capacity expansion does not require any land acquisition, since the new mills and ancillary facilities will be constructed within the current boundaries of the Columbus plant. The undeveloped areas, which are part of the company’s property, will also not be affected by the new industrial development. Two new borrow pits have been opened within the company’s property boundaries to provide construction material. IFC’s review included the potential risks and impacts of the project and company’s steel complex which is considered an associated facility. The key environmental and social issues in on-going and proposed operations are: - assessment and management of environmental, health and safety, and social performance associated with the existing integrated stainless steel manufacturing operations; - labor and working conditions, including provision of safe working conditions for direct and contracted employees; - management of emissions to the environment from the steel mill and other associated facilities and carrying capacity of the local environment; and - host community safety and impacts from existing and proposed operations and community engagement. As a result of its due diligence, IFC has concluded that: - the potential adverse environmental and social impacts presented by the project are few in number, site-specific and have been or can be readily addressed through mitigation measures; and - the adverse environmental and social impacts caused by the existing operations have been adequately addressed and can be further reduced through a limited number of mitigation measures, already identified by the company. It is therefore concluded that this is a Social and Environmental Category B project.

Columbus has presented plans to address the impacts of the project and to ensure that the existing and proposed operations will, upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the IFC environment and social Performance Standards and Environmental, Health and Safety Guidelines. The information about how these potential impacts will be addressed by the Company is described in the paragraphs that follow and summarized in the attached Environmental and Social Action Plan (ESAP).


1. PS1: Social and Environmental Assessment and Management Systems

- Environmental and Social Assessment: The development of an Environmental and Social Impact Assessment (ESIA) for the cold-rolling mill (Z-Mill 4) project was not required by the local authorities. However a Basic Environmental Impact Assessment (EIA) was required, in terms of the National Environmental Management Act, 1998, for the proposed relocation of the stormwater pond and Dam No. 1 next to the new Z-Mill 4 construction site and for the construction of a new stormwater dam (Dam 6) to collect runoff from the portion of the Columbus site east of the Middleburg Ferro Chrome (MFC) slag dumps and to construct a berm to divert clean water runoff around the site. Dam 6 will allow for the collection of potentially contaminated stormwater and improving stormwater management from the area of the Heckett Multiserv (a Columbus contractor) reclamation plant, the Columbus slag dumps, the Calmasil Columbus slag processing plant and the temporary stockpiling of Columbus raw materials. The EIA was approved by the Environmental Impact Management Directorate of the Mpumalanga Provincial Government. Approval requirements are being implemented by the company, including the development of an Environmental Management Plan.

The company maintains an environmental, health and safety (EHS) permit register. Some permits are currently under renewal, including the Water Use Permit and Atmospheric Pollution Prevention Act (APPA) registration certificate. Columbus has also indicated that, due to the evolving legislative framework, the waste storage facilities located within the plant, including slag dumps and temporary stockpiling of raw materials, need to obtain regulatory approval and an EIA might be needed. The company has therefore required its on-site slag treatment contractors to ensure that the regulatory approval for their slag stockpiles is obtained. The company is also following up with its offsite waste management contractors to monitor their permitting process. Columbus will provide regular information to IFC on the status of its permits and status of approvals for its water use, air emissions (APPA) and waste storage.

- Management Systems and Organization:

Columbus obtained ISO 14001 certification in 1998. The company has a formal health and safety, and environmental (SHE) management system, that is also consistent with OHSAS 18001 standards. The management system documents are available and easily accessible to all staff through the company’s intranet. Data recording and retrieval are effective. The company has developed an Environmental Improvement Programme, linked to the key components of the company’s SHE management system, where the planned actions are described, responsibilities assigned, target dates, and progress documented.

EHS management organization is well staffed and under the Utilities Management Business Unit. Five managers (SHE Management, Central Water Treatment Plant and Garage, Environmental and Salvage Yard, Effluent Treatment Plant and Stormwater, Property and Contracts) report to the Business Unit Manager. Labor and labor relations are managed by the Human Resource (HR) Department in collaboration with Labor Relations service.

- Training:

Columbus has an established program to provide necessary induction and periodic training for all its direct and contractor employees on occupational health and safety aspects related to its operations, environmental management, labor issues and corporate social responsibility. Emergency preparedness and response training, and first aid training are also consistently provided. The Company records and reports all training performed and trainees.


2. PS2: Labor and Working Conditions

- Human Resources Policy and Management:

The number of employees is approximately 1,950, among which about 33% are managers and supervisors, 50% are permanent workers and the rest are temporary positions, including trainees and apprentices. HR management department provides the staff with clear terms of employment [position, wage, annual bonus, annual review, retirement fund and other benefits (including housing allowance, settling in allowance, medical insurance, group personal accident insurance), medical examination, annual leave, sick leave and hours of work, emergency tasks, termination of service, change in conditions of service, flexibility, security and confidentiality, and business ethics], and staffing policy and procedures for recruitment, promotion, disciplinary action and dismissal are available. New staff participate in an induction program and on-going training opportunities are provided. Columbus HR policy and industrial relations policy are provided to the new staff and all procedures are readily available in the company’s intranet. Right-to-know information is also readily accessible and provided to the staff. Copies of the business ethics policy statement and of the induction manual, providing additional information relevant to industrial relations, disciplinary code and procedure, roles and responsibilities within the organization) are also provided to the staff.

For all workers Columbus guarantees minimum wages (as defined by law) and the average monthly salary is reported to be at or above the 60th percentile of the market salary for this industry sector in South Africa. The company is suffering from a relatively high turnover of personnel (13 percent since 2005) due to competition with other large industrial and mining groups. Out of a total number of 209 lost staff in 2007, approximately 87% are resignations, mainly related to skills mobility issue in the country.

- Worker’s Organizations:

The company supports the freedom of association which is enshrined in South Africa’s constitution. At the end of 2007, 47% of the permanent employees belonged to trade unions. Columbus entered into a Five Year Wage agreement in 2003, reporting a stable industrial relations climate, with limited impact in terms of strikes or work stoppage. All unions are bound by the company''s policies and procedures as well as specific substantive and procedural agreements.

- Grievance Mechanism:

HR is responsible for managing grievances. A formal employees’ grievance mechanism exists, and IFC’s review verified that the procedure is given to the staff during induction and that staff are aware of this mechanism. External worker protection mechanisms are ensured by the national labor laws.

- Non-Discrimination and Equal Opportunity:

As spelled out in the industrial relations policy and recruitment procedures, Columbus is an equal opportunity employer, promoting fair and equitable treatment of employees. The company complies with relevant legislative requirements, including Employment Equity Act, Skills Development Act, Black Economic Empowerment (BEE) legislation, etc. Approximately 12% of the permanent staff is female. The HR department has developed training programs to support skills development, and opportunities for promotion exist and are adequately disclosed to the workforce, through intranet and announcement posting.

- Occupational health and safety (OHS):

OHS management system is consistent with OHSAS 18001 standards. Detailed procedures are available on hazard identification, risk assessment and risk control, resources, roles and responsibilities, training and awareness, emergency preparedness and response for internal events and coordination with local authorities to manage emergencies that may escalate or impact on areas outside plant boundaries, accidents/incidents register, corrective and preventive actions, and audits. Site hazards are adequately identified and all Material Safety Data Sheets (MSDS) are available on line.

Employee’s training is systematically conducted, and health and safety performance show an improving trend since the past five years. Incident frequency rates are generally low and within good industry standards, ranging from 1 to 0.46 for disabling injury frequency rate (DIFR, number of lost time injuries per 200,000 employee hours) and from 6 to 5 for minor injury frequency rate (MIFR, number of non-lost time reportable injuries per 200,000 employee hours). The accident/incident reporting system is available to the workforce on the company’s intranet.

An emergency plan to respond to major accidents is in place. The plant is fully equipped with fire and emergency alarms. Ammonia is used in the bright anneal furnace to provide a non-oxidizing furnace atmosphere and in the De-NOx plants as a reductant. Potential ammonia releases from storage area are considered the highest risk scenario. Automatic detectors and alarms for potential ammonia releases are available throughout the plant. Several safe gathering rooms (G-Rooms) are located within the plant boundaries: high integrity G-Room, fully equipped to sustain life and located within areas where dangerous substances are stored or handled, and low integrity G-Room. Evacuation drills are conducted once a year and properly documented with problems and corrective actions identified. An internal emergency team (“Siza” team), consisting of especially trained workers, is also in place to immediately respond to accidents.

Fire safety is ensured through several concurrent systems, including fire extinguishers, fire hoses and hydrants, CO2 systems, water and foam systems, deluge valves, and isolation valves/compartments. Columbus has an emergency clinic staffed with a doctor and three paramedics and a fire brigade with nine fire fighters. There are two ambulances, hazmat and rescue trailers, and a fire engine available.

Health and safety protection measures in the plant are adequately implemented: personal protective equipment (PPE) was found to be consistently enforced among staff, physical protections are adequate and well maintained, emergency and area signage is extensive, housekeeping is also adequate. Some inconsistencies in terms of enforcement of adequate PPE and provisions of safe working conditions were observed at some contractor’s yards.

An Occupational Hygiene Risk Exposure Profile (OHREP) is available covering all the plant areas (steel plant, hot mill, plate processing, raw material processing, and finishing lines) and job functions. The Company conducts a comprehensive medical surveillance program, involving all its employees, according to their potential exposure. The relevant procedure does not include employees hired through third party contractors. For all direct employees, with the exception of the administrative personnel, medical examinations are conducted semiannually or annually. Workplace monitoring include physical stress factors (noise, vibration, heat stress, ultraviolet, visible and infrared radiation, ergonomics, manual handling) and exposure to process pollutants and to consumables and maintenance-related chemicals and pollutants. In addition to the periodic monitoring, a noise survey and an OHS risk assessment were conducted in October-November 2007 and areas for improvement were identified.

The company will extend OHREP to cover all contractor work areas and employees, and ensure that all contractors use adequate PPE, are subject to medical surveillance and examinations, and ensure safe working conditions to their workers. The company will also ensure that adequate workplace monitoring is conducted by the main contractor operating in the plant area, particularly the contractors involved with slag management and waste management.


3. PS3: Pollution Prevention and Abatement

- Pollution prevention, resource conservation, energy efficiency:

Dust emissions from process sources are controlled through the use of cyclones and bag filters and their abatement efficiency is adequate. Nitrogen oxides (NOx) from the two anneal and pickle (AP) lines and the acid regeneration plant (ARP) and from the vertical plate pickle (VPP) line are abated through selective catalytic reduction (SCR) reactor - De-NOx systems. Oil mist emissions from the cold mills stacks are controlled by oil mist eliminators. Continuous emission monitoring of dust is conducted at the steel plant bag house and continuous NOx emission monitoring is conducted at the AP, ARP and VPP stacks. For all other main dust emission sources (including AP scale master and quench and AP/VPP shot blasts, steckel mill, slab cutting, raw material tippler, slab grinders, reheat furnace, and steckel coiling furnace), monitoring is conducted once per year. Results are reported in compliance with the limits (dust: 50 mg/Nm3; NOx: 350 ppm for AP1/ARP, 205 ppm for AP2, and 120 ppm for VPP) defined by the local authorities. The company will revise the monitoring program to ensure that representative testing is conducted and meets IFC emission guidelines, both in terms of frequency and parameters tested. The company will also prepare a plan to increase the number of stack emission points which are subject to continuous monitoring for dust. The company will assess the content of heavy metals in particulate matter emitted from existing stacks, as well as in ambient air PM10. If heavy metals are present in the particulate matter in concentrations that may represent a health risk, Columbus will develop a plan to further reduce emissions within the applicable and relevant IFC guidelines.

Fugitive dust is recognized by Columbus as the main area for improvement. Fugitive emissions appear to be adequately controlled in most of the plant areas, with the exception of the slag management areas and along the unpaved roads in the production area and where heavy vehicles traffic is significant. Fugitive dust is particularly significant in the area where the contractor for slag treatment and metal recovery operates, from the excess slag stockpiles, and along the plant roads crossing this area. Dust particles are fine sized and with heavy metals content.

The company, together with other industries of the region, including MFC, has implemented an ambient air quality baseline study, including stack emission monitoring, dispersion modeling, ambient air quality monitoring, with the objective of assessing ambient air quality, both at local scale and regional scale. The study is under implementation and will be made available to IFC for review and comments. Ambient air quality (PM10, SO2 and NOx) and meteorological parameters are monitored by Columbus through a monitoring station located within the company boundaries, east of the plant. Data reviewed for years 2006 and 2007 show compliance with the national standards. Average and maximum levels measured are well within the standards for SO2 and NOx. PM10 maximum levels are approximately 50 to 60% of the current national standard of 180 μg/m3. National standards are scheduled to be made more stringent by 2012 (127 μg/m3) and 2022 (75 μg/m3). Monthly averages are between 50 to 59 μg/m3, slightly below the national standard of 60 μg/m3.

Taking into consideration the potential presence of heavy metals in particulate matter and relatively high monthly averages measured for PM10, the Company will develop a Fugitive Dust Control and Abatement Program to reduce fugitive emissions from all areas, including contractor operational areas, and contribute to improve air quality conditions. The company will regularly update the air emission dispersion model: the first update will be conducted before commissioning of the new cold-rolling mill and subsequently in case of a major change in the emissive pattern due to modified plant operations. The company will review the location of the monitoring station based on the results of the ambient air quality baseline study, to ensure that the monitoring data are representative of the air quality conditions at the closest residential receptors (Nazareth community). The company will make its best effort to develop an integrated air quality management plan with MFC.

The company has adopted a zero-effluent policy since 1993 and developed an Integrated Water and Waste Management Plan. Wastewater and stormwater management consists of a closed water reticulation and treatment system, including a system of 11 collection ponds and dams for contaminated water and for clean water. The system is designed to achieve 1:100 year 24 hour storm event retention. Potentially contaminated stormwater “first flush” is collected in lined ponds, while subsequent runoff is diverted to the clean stormwater dams. Potentially contaminated and clean stormwaters are then tested, and, if suitable for process, treated in the Central Water Treatment Plant (CWTP) and recycled to plant operations. Contaminated process water is collected into storage dams, which are mostly lined or double lined, and then sent to treatment, together with the contaminated stormwater.

Contaminated stormwater treatment consists of a reverse osmosis (RO) plant, with two parallel treatment units for redundancy. An effluent treatment plant (ETP), consisting of four parallel batch reaction vessels where Cr(VI) is reduced to Cr(III) and precipitated as metal hydroxides, is available to treat process water. The ETP allows for a 98% water recovery. Treated water is conveyed to the CWTP for further treatment (settling and sand filtration) and distribution to the users. The solids are dewatered in pressure plate filter presses, and the filtrate is collected and sent to a storage dam and then to an evaporator, which allows for brine concentration and further water recovery. The brine is treated in a crystallizer to allows for further water recovery and to obtain two other streams: solid calcium sulfate and sodium nitrate (solids, disposed of as waste), and liquid calcium nitrate which is sold to fertilizer and explosive industries.

Columbus water monitoring is comprehensive and includes monitoring of water stored in the pond/dam system and water collected from storage dam underdrains, and monitoring of surface water quality along the Vaalbank spruit, which is the immediate receiving water body and is a tributary of the Klein Olifants river, and along the Nazareth spruit. Surface water monitoring along the Vaalbank spruit shows an impact from the industrial site, particularly in terms of conductivity, nitrates and sodium. Columbus has identified possible seepage from Dam 3C as a potential source of contamination. Other sources are possibly associated to insufficient control of contaminated runoff from the slag management and slag stockpile areas, in addition to potential sources from other industrial sites present in the area. The company has developed a plan to install double HDPE liners with leachate control and underdrain control in all its storage ponds and dams which can be used to collect contaminated water. Columbus will also construct a new Dam 6 to collect all potential contaminated runoff from the slag management areas. Columbus will ensure that all slag material stockpiles are adequately stored within Dam 6 drainage area and stockpiles located outside this area are removed. The company will add to its surface water monitoring network, two new stations along the Klein Olifants river, located immediately upstream and downstream of the confluence of Vaalbank spruit.

Columbus has a network of deep and shallow groundwater monitoring wells to monitor the shallow weathered aquifer and shallower perched groundwater bodies, respectively. A comprehensive groundwater monitoring and quality assessment study was conducted in July 2007. The study indicated that there are groundwater contamination plumes, but they are contained within the industrial site. The only significant situation was found beneath the ARP site, where a nitric acid and hydrofluoric acid plume, caused by historical spills before full containment of the site was implemented, was identified. Columbus has started the groundwater remediation of the ARP plume by “pump and treat” technique. The closest groundwater users are located more than one kilometer from the plant and there is not contamination exposure pathway. Columbus will continue to monitor groundwater quality and ensure plume containment and reduction.

Plant’s sewage is discharged to the municipal sewer and treated in the municipal wastewater treatment plant. Potable water is supplied by public sources.

Columbus recently conducted surveys to identify and quantify the presence of asbestos and polychlorinated biphenyls (PCB). Asbestos was detected in some plant structures and PCB in a limited number of the 300 transformers present on site. A program to progressively eliminate these substances has been developed and included in the Environmental Improvement Programme.

The company will also implement noise monitoring at plant boundaries at selected locations to ensure that noise levels at the closest industrial and residential receptors are within the IFC guideline values.

- Solid and hazardous waste management:

Solid non-hazardous waste and hazardous waste management at the plant is adequate. Waste generation, storage and disposal are conducted according to the company’s waste management plan and to specific procedures developed for non-hazardous and hazardous waste. The non-hazardous waste is disposed of at the municipal permitted landfill site, whereas hazardous waste is disposed of at the Holfontein permitted landfill.

Slag from the smelting operations is treated to recover metals and then to produce agricultural lime, a soil ameliorant. Another significant waste stream is the filter dust, which, depending on the metal content (especially nickel), is either sold for metal recovery to an offsite facility (austenitic dust) or disposed of at the hazardous waste landfill (ferritic dust). Although waste reuse and recycling is adequately implemented, the company will continue to study methods to reduce waste quantities to be disposed of and maximize recovery of materials from process waste.

Filter cake from the ETP is another hazardous waste stream and consists of calcium sulfate and calcium fluoride with a significant metal content, but not easily recoverable. The production is approximately 1,500 tons per month. It is collected in a paved area and disposed of to Holfontein permitted landfill. The company will improve the filter cake storage area, providing it with adequate bunding to protect it from rainfall and preventing runoff contamination.

- Hazardous Materials:

All hazardous material storages and handling facilities are adequately contained and accident prevention and control measures implemented appear adequate. Hazardous material management procedures have been developed and enforced throughout the plant. A risk assessment of all major hazardous installations was conducted to identify potential risks in terms of fires, explosions, and vapor clouds. The most significant risks are associated to the release of toxic vapors of ammonia, hydrofluoric acid and nitric acid, but only a loss of containment of ammonia was found to result in a toxic vapor cloud possibly extending beyond the site boundaries. As a result, a water deluge system was implemented at the ammonia storage to reduce risks to an acceptable level within most of the site boundaries. Ammonia detectors and alarms are present throughout the site. The company plans to fully encapsulate the ammonia storage installation to further reduce risks.

- Greenhouse Gas Emissions:

The company quantified carbon dioxide (CO2) direct emissions from plant operations as being approximately 250,000 tons per year, based on the methodology developed by International Iron and Steel Institute. Emissions associated with electrical consumption (600,000 tons/year) and off-site activities associated with raw material production were also quantified. The average value of carbon dioxide emission intensity from the plant is 0.45 tons CO2 per tons of product, which is consistent with average emission reported for the industry sector. The company has identified areas for improvement and set a target to ensure optimal utilization of raw materials and energy sources by reducing energy consumption of 10% in 2008. Actions have been identified, including increase of the use of liquid ferrochrome from MFC, and improvements for the operations at the EAF and the hot mill. Other opportunities are being evaluated, including potential recovery of waste heat in conjunction with MFC operations. Columbus will continue to work on the development of an Energy Reduction Investment Program.


PS4 Community Health, Safety and Security

- Community Health and Safety:

Issues include emergency preparedness and response to major hazardous installation risks, transport of dangerous goods and security. As discussed under PS2, the company has an adequate emergency preparedness and response system in place. Columbus has signed an agreement with the Steve Tshwete local municipality for the development and implementation of a contingency action plan to respond to fire and other emergencies.

Transport of dangerous goods, including acids, is contracted to licensed specialized contractors: Adequate internal procedures are in place to support contractors, in minimizing risks from off-loading and potential interactions with workforce and other vehicles in the plant. The company has implemented water deluge system and plans to encapsulate the ammonia storage facilities. Internal audits are conducted to ensure that dangerous good transport contractors are adequately implementing company’s procedures. The company contract with its suppliers of dangerous and hazardous goods is formulated in such a way that responsibility is transferred at the point of consumption. However, the company will ensure that all contractors transporting hazardous materials are compliant with national legislation to minimize risks associated to dangerous goods transport, particularly with regard to selected transport routes and implementation of incident prevention measures.

- Security Personnel Requirements:

Private security is used by the company. The current protection services structure include 18 staff positions and 47 security people from a security provider. Columbus has a Security Policy in place and does not allow guards on site to be armed. Security contractors need to be certified by the Private Security Regulatory Authority (PSIRA) and comply with PSIRA’s Code of Conduct. The Company is part of a joint partnership (Business against Crime) between the government and large business to fight criminality in the country. Programs undertaken include crime stop campaign through schools, training of police officers, cash in transit monitoring, etc. Crime statistics provided show a decreasing trend of cases, including fence penetrations.


PS6 Biodiversity and Sustainable Natural Resource Management

As part of environmental management system, since early 2007 the company has initiated a biodiversity monitoring initiative conducted in the undeveloped parts of its land property. The company recognizes the importance of taking a proactive approach in considering a framework for protecting biodiversity in its region of operations. The Columbus site is located in a region where the vegetational type is classified as Bankenveld which is a transitional zone between bushveld and grasslands, and therefore has an important ecological role. The protection of the Bankenveld is seen as especially important since most of this transitional zone is modified and degraded by human interventions, including urbanization, mining and agriculture, fire occurrence, and overgrazing. More than 200 species of plants have been surveyed in the company’s property, including natural vegetation associated to areas of shallow groundwater and seepage wetlands. Although no endangered plant and animal species were found, several rare or uncommon species were identified, including the threatened grass owl. Weeds and invasive species were observed to be limited to some disturbed patches in the area, such as old non-reinstated borrow pits and debris dumps. It appears that natural vegetation resilience to invasive species is relatively high, but not in disturbed areas.

The company has already started progressive reinstatement of the two new borrow pits opened for the project and will reinstate the old (primary) borrow pit, as soon as they receive government approval. The company is also committed to continue the biodiversity monitoring initiative and evaluate possible actions to contribute to the protection of biodiversity of the Bankenveld.

Columbus has a Social Responsibility Program, which includes HIV/AIDS programs for workers and their family members, and also extended to organizations assisting the local communities. The Company is involved with the local Department of Labour and local organizations focusing on encouraging local entrepreneurs and on job creation. Columbus is assisting schools in local communities to improve infrastructure, and sponsoring students to take scientific education up to university level grants. The company participates in artisan training program, securing grants for apprentices.

This Environmental and Social Review Summary, and the associated Environmental and Social Action Plan may be viewed at Columbus webpage and at following addresses. Columbus Stainless (Pty) Ltd Reception Office at the Main Gate Hendrina Road, Middelburg, Mpumalanga 013 - 247 2197/2087 Middelburg Chamber of Commerce and Industries 292 Church Street Middelburg Mpumalanga 013 - 243 2253 Contacts within Columbus are: Name Mr. Dave Martin  Title Chief Executive Officer  Telephone Number 27 13 247 2797  Fax Number 27 13 247 2484  Address Hendrina Road, Middelburg, Mpumalanga Province, 1050, South Africa   Company webpage: www.columbusstainless.co.za