25924 - Lydian Resource Company Ltd

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Environmental & Social Review Summary

Project Number

25924

Company Name

Lydian Resources Company Ltd

Date ESRS Disclosed

May 22, 2007

Country

Kosovo

Region

Europe

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jul 3, 2007
Signed : Jul 27, 2007
Invested : Aug 3, 2007

Sector

Zinc

Industry

Metals and Mining

Department

Gbl Infrastructure & Natural Resources

Project Description

Lydian Resource Company (Lydian or the company) currently holds licenses for three exploration properties in Kosovo and, as part of an exploration joint venture with Newmont Mining Corporation, Lydian also shares ownership of two early stage gold exploration projects in Armenia and Turkey. The project is the continued exploration of these properties, including feasibility studies, environmental and social impact assessments and other preparatory activities.

Overview of IFC's Scope of Review

IFC’s E&S due diligence for the proposed equity investment in Lydian Resource Company (Lydian or the company) has been conducted at both corporate level and project level. A team of environmental and social specialists undertook a week’s appraisal of the projects in Kosovo, including visits to the Draznja, Crepulja and Rahovac prospects and interacted with the company’s consultants and management team on the project details, development plan, the environmental and social impact assessments, consultation conducted to-date, and any updates required thereafter. Additional visits took place in Turkey at the Muratdag property and in Armenia at Armulsar.

The appraisal team reviewed the technical, environmental and social documentation available for each of the exploration properties. The focus was on the preliminary environmental and social data, the need for documenting legal requirements as well as the initial results of exploration works such as trench, drilling and adits. Most of this information has been prepared in 2006 and early 2007. IFC did a detailed review of key strategic documents and corporate policies. During appraisal the IFC team highlighted challenges to come on community relations going forward as the projects progress through exploration works and potential subsequent development. Lydian’s Health, Safety, Environment, Community and Labor (HSEC/L) management, organization and systems for the Draznja project in Kosovo were discussed extensively as it is the most advanced project. These discussions included staffing requirements for Lydian’s HSEC/L functions, and the development of adequate environmental, safety and social management capacity at the corporate level in the medium term when mine development occurs. Information and other documents related to management of environmental, social and labor issues at Armulsar and Muratdag were also discussed.

Discussions were also held with Lydian’s senior corporate executives in the UK, and the exploration and development teams in Pristina, Izmir and Yerevan. In Kosovo, the IFC appraisal team met with representatives of the Podujevo local assembly, the Pristina civil society, local workers, and inhabitants living near Draznja, Crepulja and Rahovac. Formal meetings with the Independent Commission of Mines and Minerals (ICMM) and the Ministers in charge of Mining and Environment took place in Pristina.

Lydian has agreed to develop a systems-based approach to environmental, labor/social and community management as well as on relations with stakeholders.

The IFC PEP-SE (Private Enterprise Partnership- Southern Europe) - Technical Assistance team is involved, currently in the process of completing a scoping exercise in Kosovo involving Lydian, ICMM, the local authorities and other key stakeholders.

E & S Project Categorization and Applicable Standard

The following Performance Standards (PS) are applicable to this project:

- PS1: Social & Environmental Assessment and Management Systems
- PS2: Labor & Working Conditions
- PS3: Pollution Prevention & Abatement
- PS4: Community Health, Safety & Security

Although there will be minor economic displacement, from the acquisition and/or occupation of farming and arable lands, there will be no involuntary physical resettlement per PS5 in the concession areas of each exploration project. The site visits and review of project information suggests that there will be no impacts related to biodiversity and natural resources (PS6) or indigenous peoples (PS7).

Applicability of PS5-Land Acquisition and Involuntary Resettlement and PS8-Cultural Heritage will be confirmed upon completion of a mine feasibility study and the subsequent investment decision.

The relevant PS have been provided to and discussed with the client as have the applicable new IFC Environmental, Health and Safety (EHS) Guidelines (i.e. EHS General Guidelines, May 2007; Draft EHS Guidelines for Mining, April 2007).

The main driver for IFC equity investment involvement is the support of Lydian’s development of the Drazjna, Crepulje, Rahovec, Armulsar and Muratdag exploration projects, as a basis for setting benchmarks on sustainability in resource development in Kosovo, Armenia and Turkey. IFC’s early equity investment will be used primarily to fund the continued exploration of Lydian’s mineral resource properties in Kosovo, Armenia and Turkey, including feasibility studies, environmental and social impact assessments and other preparatory activities. Health, Safety, Environmental and Community/ Labor (HSEC/L) issues, both positive and negative, will be assessed if and when the proposed projects move into development.

Corporate HSEC/L management has been reviewed with Lydian executives in the framework of current and future exploration projects. Lydian has a comprehensive set of HSEC/L policies in place. Current management of all these issues by Lydian has been assessed as consistent with international good practice and the IFC Performance Standards.

This investment is expected to have beneficial results for local employment, livelihoods of surrounding communities and in promoting HSEC best practice mainly in Kosovo and Armenia. Initial material has already been publicly disclosed (see links within this document) including locally.

The key environmental, social and occupational health & safety and community aspects and issues associated with this project include:

Corporate level:

- Social & environmental management;
- Labor & working conditions;
- Land acquisition and economic displacement; and
- Community health, safety & security.

Project level:

- Exploration activities: dust and noise control, water management including drainage, drilling pads and access roads rehabilitation, use of forested and agriculture land for exploration and development, occupational health and safety, visual impacts and community safety; and
- Surrounding communities: traffic, land acquisition and economic displacement; and emergency preparedness & response.

Future projects may have impacts on biodiversity, human populations or cultural property – this will be assessed on a case by case basis after baseline work is completed. Documentation relating to social and environmental baseline, social and environmental assessment (SEA) and community engagement and consultation will be done in line with PS requirements.

In this context, IFC’s due diligence findings and application of IFC’s Policy and the Environmental & Social Review Procedures to this suite of aspects and issues resulted in this project being classified as Category B.

Environmental and Social Mitigation Measures

Lydian has prepared a comprehensive set of documents that address corporate and local HSEC management and potential key environmental and social impacts during exploration. It is aimed at developing best practice and will demonstrate that during both the exploration and development of projects, these greenfield mining projects will be in compliance with the environmental, labor, health and safety regulations respectively of Kosovo, Armenia and Turkey, as well as international good practice under the guidance of IFC Performance Standards. Lydian aims to address these potential impacts as follows:

Social & Environmental Management:

Environmental and social management across Lydian’s operations is the responsibility of the Operations Director based in Edinburgh. Lydian will hire when needed a Social and Environmental Advisor who will oversee the health, safety, environment and community work required. Lydian has prepared to the satisfaction of IFC an Environmental Policy and a Social Responsibility Policy. These policies have been approved by Lydian’s Board and Senior Management and will form the basis of an Environmental and Social Management System (ESMS). Further details on the ESMS implementation are provided in the Action Plan.

Lydian’s senior management is supportive of the need to build local capacity in the areas of HSEC. The company is looking to increase its management capacity in Kosovo and Armenia in the areas of community relations, social development and environmental management during the next phase of exploration activities. The company has appreciated the necessity for these key positions to be urgently filled over the course of the next six months. These personnel are expected to steer and coordinate management plans to be formulated for environmental and social management.

In addition Lydian has prepared to IFC satisfaction a Public Consultation and Disclosure Strategy (PCDS) on how to interact with surrounding communities and local authorities. The company will develop a simple monitoring and reporting system for tracking implementation events. Lydian will incorporate contractors'' environmental and social specifications in tender documents for drilling and civil works contracts and insist on compliance with its policies and IFC Performance Standards.

Lydian will hire professional consultants to compile geographical, environmental and socio-economic baseline information on exploration properties starting first on Drazjna, and then subsequently continue with the remaining license areas in Kosovo. This baseline information will form the basis for the initial Environmental Impact Assessment (EIA) required by Kosovo Law 2002/8 on Environmental Protection enacted in April 2003 (Section 4, Article 20-24) regarding Environmental Impact Assessment (EIA) requirements for exploration and pre-exploitation activities. The EIA requirements are reflected in the Action Plan.

As the company grows, Lydian will prepare operational guidelines/procedures for HSEC management for all exploration activities. A set of management plans will be developed to properly implement all required environmental and social mitigation measures at each exploration property. As projects are still at the pre-development stage it is anticipated that Lydian will update the Action Plan regularly as projects evolve, after consultations with local communities and other stakeholders.

Labor and Working Conditions:

Lydian has prepared a specific Human Resources (HR) Policy to the satisfaction of IFC. A set of procedures on labor issues as well as on community relations are being developed at the corporate level and will subsequently be developed for each country where the company operates. These procedures will include clear wording on managing ethnicities in the workforce, supply chain and surrounding communities. Per the Action Plan, Lydian’s senior management will implement gradually the HR policy and subsequent labor and community procedures. The HR Policy outlines commitments relating to the workforce, including training, grievance mechanisms, and reporting and monitoring. Lydian will make these documents available to their workforce. These plans will recognize freedom of association, occupational health and safety and provide a fair grievance resolution mechanism.

The current labor force for each project consists of a small management team comprising the project manager, a team of geologists, unskilled workers and drilling subcontractors. For the most advanced project, the Draznja project in Kosovo, the local subsidiary is currently employing 25 local workers. The workers are employed on a roster basis with every worker doing two to three day rotations to allow employment opportunities to as many local villagers as possible.

Each project company will initiate recruitment as soon as a decision for each exploration project has been made. Each project company seeks to implement a non-discriminatory and equal opportunity policy. Lydian’s executives have regional experience in handling labor management and in growing local workforces into active contributors to mining operations.

With its current multinational management staff, Lydian’s management team is fully aware of the ethnical issues in Kosovo and Armenia. Labor falls under the Operations Director (and a Board member) in charge of overseeing labor, environmental and social management. Key members of the local management team have a deep knowledge of ethnic issues in the Balkans and the CIS. The approach is to further build a multinational team in Kosovo and Armenia which includes a wide range of project management skills and mediator experience to stay away from conflict.

As modern geological exploration and industrial mining is quite new in Kosovo and Armenia, it is necessary to have a variety of labor tools and training programs to facilitate labor relations and workforce flexibility.

Land Acquisition and Economic Displacement:

Land acquisition issues identified at each of the properties do not require economic displacement or physical resettlement of farmers from project lands. It is estimated that the exploration work will have no impact on food security, loss of farm lands, scarcity of alternative arable land and water resources. In Kosovo the dislocation of the former Yugoslav mining sector has resulted in many workers without a salary, and it is expected that the recruitment of the workforce will be focused on local hiring.

Community Health, Safety and Security:

The major community health and safety issue is the additional road traffic, transportation, handling and storage of hydrocarbons and chemicals, as well as dust and noise generated by exploration activities which can affect nearby communities. Lydian is committed per its policy to properly address and mitigate these impacts.

The potential impact on community health from the influx of people during exploration and potential development will be addressed through a policy of local hiring (to minimize the influx) and a health awareness program for both workers and the communities.

On Emergency Preparedness & Response, Lydian has already developed a preliminary emergency plan for the Draznja project. As part of the Action Plan, IFC has asked the company to broaden the scope of its emergency response and contingency planning to include the transportation, handling and use of chemicals/hydrocarbons. Lydian is committed to establishing and maintaining procedures to identify potential emergency situations, to respond to emergencies and to mitigate any resulting safety, health and environmental impacts that could affect local communities as well as workers.

Lydian subscribes to the UN Voluntary Principles on Security and Human Rights and will ensure that any contracted security personnel will abide by these principles.

Project Level Environmental Issues:

Draznja prospect in Kosovo:

The license covers an area of 11.625km2 within the Podujevo municipality and includes parts of at least four villages: Draznja, Turoqice, Bairaina and Orllan. It is located 35km North-East of the capital Pristina and 5km from the Kosovo-Serbian border. The physiography of the region consists of low to moderate rolling hills (maximum 1015m) with a combination of farmland and forest cover. Watercourses within the license are typically small, and all drain into the Batlava Reservoir which lies along the southern license boundary.

The Draznja area has been subject to a long history of exploration. It is locally accepted that the area was first discovered in Roman to Medieval times, though the nature of this work is unclear. The first post-industrial exploration was conducted during the 1920’s by a British company with several exploration adits and a number of small pits. The next period of exploration was conducted by the nationalized Yugoslav company Trepča. Trepča explored the prospect sporadically from the early 1960’s to the late 1980’s. This work included trenching, geochemical and geophysical surveys, exploration adits and drilling, both surface and underground.

Kosovo Resource Company (KRC), the local Lydian subsidiary has implemented a series of procedures to monitor the impacts of past and current exploration activities. Environmental damage is kept to a minimum: where possible, existing tracks are used and the use of culverts and containment of drilling fluids keeps any effects on the natural waterways to a minimum. KRC also have a quarterly monitoring process in place including sampling and analysis of surface water from four sites around the license to check for contamination. Reclamation and revegetation work is pending the final drill results and future infrastructure requirements for development. KRC will proceed with rehabilitation of any disturbed land that is in excess of its needs.

As part of the Action Plan, a detailed environmental and social baseline study will be carried out to include an audit of any past liabilities. The principal environmental impacts relate to surface water, ground water, land use, footprint and vegetation. Additional considerations include terrestrial fauna and flora, aquatic biology, land disturbance, air quality, dust and noise. Sensitive environmental effects include water resource management of local ecosystems, past contamination, erosion and pollution control.

Other projects in Kosovo:

The Crepulja prospect occurs in north-western Kosovo, approximately 17km west of Mitrovica. The area is heavily forested and dotted with small, isolated farms. The main economic activity is small scale agriculture and logging. The main population centre is Zubin Potok, an ethnically Serbian town. The whole area has very high unemployment and the infrastructure is crumbling. Crepulja is a prospect that was originally investigated by Trepča in the 1960’s. Previous exploration work included geochemical soil sampling, ground geophysics, drilling and a series of exploratory adits and trenches.

The Rahovac prospect area is located immediately north of the municipal capital of Rahovac, located in south-western Kosovo. This area is host to a number of mineral occurrences that has been intermittently explored from the late 60’s to early 70’s. In 1958, a geophysical survey identified a number of anomalies and a 28m shaft was completed over the largest geophysical anomaly. No recent geological exploration of the deposits is known to have occurred.

Muratdag project in Turkey:

The Muratdag prospect is located in Western Turkey some 55km from the town of Usak. The region is moderately forested by what is dominantly secondary growth after selective logging. There is a small village located on the access road south east of the license areas. It is a mountainous area reaching 1500m asl with slopes steep-sided to precipitous. Early exploration took place in the 1970’s. Newmont started exploration in 2004. To date, geological mapping, detailed soil sampling and selective and channel rock-chip sampling across the area has been carried out. A drilling program is anticipated in the near future.

Armulsar project in Armenia:

The Armulsar prospect is located in central Armenia some 180km southeast of Yerevan. It is a mountainous area reaching 3000m asl. There is no agriculture land and no privately held land parcels within the license. Two villages are located outside the property on the main road from Yerevan. Exploration, mainly geological mapping, tunneling and trenching, took place between in the 1960’s and 1970’s. Recent work includes geochemical surveys, trenching and detailed soil and rock-chip sampling.

It is not expected that there will be any significant residual risks and impacts from exploration activities at the abovementioned locations after the exploration activities have been completed. Management plans are being implemented to properly address mitigation and monitoring of potential impacts. Lydian is committed to rehabilitate the land used and associated infrastructure required during exploration should they decide not to proceed with mine development.

Stakeholder Engagement

With a formal Public Consultation and Disclosure Strategy and Social Responsibility Policy in place, Lydian is demonstrating a strong commitment to develop early on the social license to operate and interact with surrounding communities and local authorities. Lydian has agreed to engage further with local stakeholders and to that effect has prepared a Public Consultation and Disclosure Plan (PCDP) for the two most advanced prospects i.e. Draznja and Armulsar. As part of the PCDS with subsequent PCDP being implemented, Lydian is developing its long-term public consultation approach, including regular meetings and ongoing presentations on its projects and its various initiatives to local citizens, authorities and community organizations in each project area.

Draznja project:

Since it could be considered a brownfield exploration project in a fairly remote area, the host communities have already first hand experience on exploration and mining operations and their potential impacts. Settlements are sparse hamlets with farmlands in-between. The Podujevo community comprises sub-communities with a population of about 71,600. There is a lack of social amenities (hospital, clinics, school and college) as well as infrastructure (electricity and water supply) and communities are dependent on Government support. The PCDP includes a program for ongoing consultation at Draznja and will be further revised accordingly. KRC wants to use local workforce and promised the people that it would take measures to safeguard community health, safety and security. The local authorities, Lydian and villagers are taking a proactive approach on capacity building for successful community engagement.

The same approach will be implemented in the two other properties in Kosovo and in Armenia. Documentation relating to SEA and community engagement and consultation will be done in line with PS requirements. Lydian and its local operating company are committed to implement transparent interactions with stakeholders and full public disclosure as it is beneficial for further strengthening of relationships with local communities and building capacity with local authorities and regulators.

Contact details:

Hugh Devlin, Operations Director and Board member

Telephone: +44 (0) 207 201 8939
Fax: +44 (0) 207 201 8938

Website: www.lydianresourcecompany.com
General e-mail: hugh.devlin@lydianresourcecompany.com

Two PDF documentation attached:

Lydian Public Consulation and Disclosure Strategy (PCDS) dated April 2007 for the Kosovo and Armenia Exploration Projects; and
Lydian corporate Action Plan dated March 19, 2007.

The complete set of Category B documentation is also available locally at the following locations:

Lydian Resource Company Ltd
151 St Vincent St
Glasgow
United Kingdom
Telephone: +44 (0) 207 201 8939
Fax: +44 (0) 207 201 8938
Contact: Hugh Devlin, Operations Director and Board member
E-mail: hugh.devlin@lydianresourcecompany.com

Lydian/ Kosovo Resource Company
Bajram Kelmendi 15
10000 Pristina
Kosovo
Telephone: +381 38 249 990
Contact: Ratibe Ismaili-Dreshaj
E-mail: Ratibe@lydianresourcecompany.com

Lydian Armenia
Ligal: 22-37, 1st district Aygedzor Str.
Yerevan, Republic of Armenia
Office: 34 Abovyan Str., Yerevan, Republic of Armenia
Telephone: +37491 419717
Contact: Hayk Aloyan
E-mail: hayk.aloyan@lydianresourcecompany.com

Client Documentation

File Name	Actions
Final Environment and Social Action Plan.pdf
Lydian Resources Company Ltd Public Consultation and Disclosure Strategy.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

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SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

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Environmental & Social Review Summary

Project Description

Overview of IFC's Scope of Review

E & S Project Categorization and Applicable Standard

Identified Applicable Performance Standards

Environmental and Social Categorization and Rationale

Environmental and Social Mitigation Measures

Environmental and Social Mitigation Measures

Stakeholder Engagement

Stakeholder Engagement

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