While all Performance Standards are applicable to this investment, IFCs 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. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

This is a category B project according to IFC’s Environmental and Social Review Procedure because the Environmental, Social and Health & Safety (ESHS) impacts related to the investment are limited, site specific and therefore adequately managed through the implementation of appropriate mitigation measures. IFC’s review did not identify any significant adverse impacts or high risk exposures.

IFC’s categorization of this project is based on the impacts of the operation of a small scale existing iron ore mine using and exploration activities, which consist primarily of limited emissions of dust and waste streams from the movement of material, camp activities and machinery maintenance, road safety, use of water, construction of drill pads and access trails or roads for exploration drilling. The key social and environmental risks associated with the existing operation at Posse and exploration drilling at Borborema include (i) environmental, social and health and safety management of mining and exploration activities, specifically erosion control, safe management and disposal of waste and oils, dust and noise control, water and effluent management, management of flora and fauna resources, occupational health and safety, community safety and emergency preparedness and response, restoration and rehabilitation of drill pads and access roads (ii) temporary use of small fractions of land for drill pads, that have limited impacts on forested areas, livestock grazing and reduced ground for agricultural use, (iii) adequate consultation with potentially affected communities; (iv) managing community expectations with respect to job opportunities and community investment and, (v) ongoing community consultations and land use compensation planning.

Key environmental and social issues relating to the project are summarized below, along with specific information about how potential impacts will be addressed by the Company. Upon implementation of the necessary mitigation measures described below and in the attached ESAP, the projects will comply with environmental and social requirements, namely IFC’s Performance Standards on Social and Environmental Sustainability and Access to Information Policy, and applicable World Bank/IFC environment, health and safety (EHS) guidelines.

Regarding PS5 (Land Acquisition and Involuntary Resettlement), this PS is not relevant as the Posse iron mine is being developed on existing footprint already impacted by mining activities and current exploration work at Borborema only requires temporary use of land with limited impacts on local land holders and is undertaken on the basis of willing-seller willing-buyer. Regarding PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources), no sensitive biodiversity resources are being impacted from the operation of the mine or from exploration activities at Borborema. Regarding PS7 (Indigenous Peoples), no IP communities are located in the direct area of influence of either the Posse iron ore mine or the Borborema Gold Project. Finally, regarding PS8 (Cultural Heritage), although no cultural resources have been identified the Company will prepare a “chance finds” procedure at Borborema to be applied in the event of any accidental unearthing of paleontological/cultural relics.

Any IFC investment in any future mining development at Borborema would be assessed as a new project and its categorization would be determined after the necessary due diligence. Even without an additional investment, IFC would require any future mine development with major impacts to follow PS1 in its requirements for a full ESIA as well as independent monitoring of project social and environmental performance and stakeholder engagement. Crusader Resources will ensure that social and environmental assessment documents associated with such a development will be consistent with IFC’s Performance Standards and EHS Guidelines and be publicly available and consulted upon in accordance with IFC’s Access to Information Policy prior to the start of construction.

To address the above identified issues for its ongoing exploration work at Borborema and meet the requirements of IFC’s Performance Standards, Crusader Resources has committed to developing a comprehensive Health, Safety, Environment & Community (HSEC) Policy which will contain management plans and procedures to address existing risks and impacts from this phase. For Posse, the Company has committed to carry out an independent EHS audit of existing operations to align current practices with IFC’s PSs and EHS Guidelines. Any additional gaps with IFC Performance Standards will be outlined in an Environmental and Social Action Plan (ESAP).

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Environmental and Social Management System:

The Company does not currently have a formal Environmental and Social Management System (ESMS) at its Posse operation or an Environmental Policy part of a continuous improvement process at Borborema to address existing risks and impacts from its activities. The Company does have a number of operational plans and procedures at each site that are used to manage several of the existing risks.

For its existing iron ore operation, the Company will hire an experienced international consultant to carry out an independent ESHS audit of existing operations to identify any gaps with IFC’s Performance Standards and EHS Guidelines with a focus on PS1 and pollution prevention aspects (See Action 1 of ESAP).

For its exploration program at Borborema, the Company will develop and implement a HSEC Policy to identify, assess and adequately manage existing ESHS risks and impacts from exploration activities. The HSEC Policy will be developed with assistance from IFC, with key components which are part of this Policy, including the manual, management plans and standard operational procedures (SOPs) developed by Crusader with support from an external international consultant experienced in the use of good international industry practices (GIIP) (See Action 1 of the ESAP).

Based on the findings of the site visit, key management plans and/or SOPs to be developed as part of the HSEC Policy at Borborema include those addressing pollution prevention (fuel management, spills, dust, noise, etc), solid and liquid waste, erosion control and re-vegetation, footprint management, biodiversity management, surface and ground water resources management, environmental monitoring, occupational, health and safety, emergency response and contingency planning, road safety and transportation, stakeholder engagement, grievance mechanism and land access procedure. Other plans to be developed as part of the HSEC Policy and aligned with the continuous improvement cycle will include an ESHS Training Plan, an Impacts Identification Procedure and a Non-Compliance Corrective Action Procedure, among others (See Action 1 of the ESAP).



Identification of Risks and Impacts:



The management of risks discussion in this ESRS consists of those associated with the operation of the existing small scale Posse mine and of ongoing exploration activities at Borborema, as IFC is only financing exploration and feasibility study activities which have limited impacts on social and environmental receptors. If the Borborema exploration prospect proceeds to the mining development phase, Crusader will prepare the necessary environmental and social impact assessment (ESIA) documentation to demonstrate compliance with IFC’s Performance Standards.



For Posse, the Company lodged a Licenca Previa (LP) together with its corresponding EIA and RIMA (Environmental Summary), and a Licenca de Instalation (LI) which was approved by the state environmental authority (SUPRA
M) in 2013. The approval of the EIA and RIMA by the environmental authority came with a series of environmental conditions and requirements that the company has been implementing. As the Company has recently received the “Portaria de Lavra” which is the final sign off by the Minister of Mines as part of the granting of the full mining license, the final environmental permitting step, a Operational License (LO), can be requested.



The Posse mine was previously operating under a trial mining permit (or Guia de Utilização - GU) which limited the production to 300,000 tonnes per annum and allowed the mine to only use a dry beneficiation process. The GU allowed for a 3-year term for the license which expired in September 2013. Subsequent to this, the Company submitted a renewal application 2 months before expiry. The application is currently being analyzed by the Mines Department (DNPM) and automatically assumed to have been granted once the application is submitted.



For Borborema, the Company owns an operating license from the previous heap leach operation on site. This heap was initially operated by Mineração Xapetuba Ltda. between 1984 and 1992 and has an existing volume of 248,000 m3 and covers an area of approximately 54,600 m2. No soil or ground water sampling has yet been conducted of the leach pad area to determine any potential past contamination from this historic operation.



At Borborema, a new Alteration Licence “LA” request has been requested by the Company through the development of an EIA and RIMA which was submitted to the state environmental authority (IDEMA) in September 2013 for development of the expected 4.2 million ton per annum mine. The public hearing was carried out in December 2013 with the EIA/RIMA currently in review by the state environmental authority prior to approval.



Subsequent to the development of the EIA for Borborema, Crusader also secured an independent consultant (AMEC UK) to carry out a Gap Analysis of the EIA against IFC’s Performance Standards and Equator Principles. This work was completed in November 2013 and identified a number of recommendations to align the EIA process and the Project with GIIP.



As part of IFC’s involvement, the Company has agreed to update the existing ESIA for Borborema to meet the requirements of IFC’s Performance Standards and GIIP (See Action 2 of ESAP). In addition the Company has agreed to carry out a Phase I and limited Phase II Environmental Site Investigation (ESI) to determine any potential contamination of soil and/or groundwater from historic processing activities at the site (See Action 7 of ESAP).



Management Programs:



Although there is an adequate level of environmental, social and health and safety management at both Posse and Borborema, the Company has not yet developed or formalized a Management System which includes the necessary environmental, social or health and safety management plans and procedures to manage existing risks. As p
art of the development of the HSEC Policy at Borborema, the necessary management plans and/or SOPs will be developed to address current and future risks for the project. Also, as part of the ESHS audit for Posse, the necessary management plans will be identified to manage existing E&S risks from activities at the site (Action 1 of the ESAP).



Organizational Capacity:



Crusader is headed by an experienced Chief Executive Officer (CEO), Chief Operating Officer (COO), Project Manager and Mine Manager. The Company’s senior management values a relationship with IFC to assist the Company in carrying out its activities in line with GIIP.



In terms of ESHS personnel at Posse, the Company has an environmental and social officer and a health and safety officer who report to the Mine Manager. At Borborema, the Company has an environmental and social officer and a health and safety officer who report to the Exploration Manager.



In order to strengthen its E&S capacity, the Company will contract additional ESHS support in the form of an experienced international environmental, social and health and safety consultant to carry out the EHS audit of existing activities against the PSs and GIIP at Posse and the development of the relevant plans and procedures as part of the HSEC Policy for Borborema and to assist in their implementation and training. Also, Crusader will hire a corporate EHS Manager with experience in the application of the PSs and GIIP to oversee the implementation and co-ordination of the recommendations from the EHS audit at Posse and the HSEC Policy at Borborema (see Action 3 of the ESAP).



Training:



A basic Health and safety induction is carried out for all Crusader employees and its contractors. The development of formal ESHS training plans as part of the enhancement of the Management System at both sites will address the necessary competency training requirements for each project including frequency, training topics and documentation necessary to assess the level of environmental, social and health and safety awareness of direct workers and contractors.



Monitoring and Review:



The Company is required to undertake environmental monitoring as part of its approved permits at Posse, which includes measurements of the quality of effluents, water quality monitoring, noise and air monitoring. At Borborema, no ongoing environmental monitoring is carried out.



As part of the development of the HSEC Policy at Borborema, a monitoring, inspection and audit program will be developed together with key performance indicators (KPIs) to track information on environmental, health and safety and social management, training, incidents and spills, etc. The Company will also develop an Environmental Monitoring Plan to formalize monitoring requirements for this phase of work.



Community Investment:



Crusader is developing, a social mapping study with support from an external social consultant for the community of Posses wit
h the objective of contributing to social development of the community. This process is ongoing and will include the development of workshops in order to design an investment program which will support the building of relationships between the Company and the community.



Currently no community investment program is being carried out at Borborema although significant baseline socio economic studies (avaliação socioeconômica, risco e sensibilidade para estudo de viabilidade) and a compulsory Public Hearing have been carried out by a social consultancy to understand local needs, expectations and opportunities and to serve for the development of a future community investment strategy for the mine development phase.



Reporting:



As part of the environmental permit conditions for Posse, the Company submits an annual environmental report to the SUPRAM. This annual report has been made available to IFC.



As part of internal reporting at Posse, environmental weekly and monthly reports are prepared to include a list of activities carried out during the reporting period. However, limited information on statistics and key performance indicators (KPIs) for ongoing tracking of performance is provided both on environmental and health and safety matters.



Limited internal reporting is carried out at Borborema although health and safety statistics for the Project are obtained and reported to senior management.



As part of IFC’s investment, Crusader will submit an Annual Environmental and Social Monitoring Report (AMR) to IFC to describe its environmental and social performance. As part of the Stakeholder Engagement Plan, the Company will also report regularly to local communities on the progress made on its activities and progress in implementing the Company’s Environmental and Social Action Plan.



Grievance Mechanism



The Brazilian and Australian versions of the Crusader website have a “contact us” option to log questions. However, the Company does not currently have a formal Grievance Mechanism to receive and address concerns and claims from affected stakeholders. As part of IFC’s involvement, the Company will develop a formal Grievance Mechanism for its existing iron ore operation and its exploration project to adequately receive, investigate and respond to stakeholder claims and concerns (Action 4 of the ESAP).



Land Acquisition and Compensation



Mining activities at Posse are carried out within its existing footprint and, hence, no land acquisition is required. None the less, the land acquisition and compensation policy will include the Posse Mine.



At Borborema, limited land acquisition is being carried out following the development of a strategic land acquisition evaluation and a market survey of land values in the municipalities of Currais Novos and Santa Cruz. Negotiations are currently being led by a company staff with advice from a specialized social consultant (Integratio). As part of this process, Crusader has also ass
isted a number of land owners with registration of their land titles as these were mostly informal.



As part of IFC’s involvement, the Company will prepare a Land Acquisition and Compensation Plan for Borborema to outline the principles, guidelines and approaches that will be followed for land acquisitions and compensation activities in accordance with PS5 requirements (See Action 5 of ESAP).



Biodiversity Management



The Borborema Project is not located within any legally protected areas or internationally designated sensitive biodiversity areas. The habitat around the project can be described as scrubland and thorn-forest desert known as Caatinga.



The Posse site is not located within any legally protected areas or internationally recognized areas such as Key Biodiversity Areas (KBAs). However, the site is located within the wider Central Brazilian Hills and Tablelands Endemic Bird Area (EBA) which stretches along the Cadeia do Espinhao mountains of interior Brazil in Minas Gerais and Bahia states. All birds listed for this EBA are either Near Threatened or Least Concern (none are Critically Endangered or Endangered).



The Posse site is also located within the buffer zone of the Serra de Piedade which is a Private Reserve of Natural Heritage (extending approximately 2,000 hectares) created for the protection of scenic value, religious and historical significance. This area also holds important species of flora and fauna and is the source of several water springs. The Posse site is located approximately 3 km north of the protected area and, as mentioned in the EIA, is not expected to have any impact on this area.

The Company has a team based in their main office in Belo Horizonte and project personnel working at the Posse mine and the Borborema project. The Company workforce includes 16 people in the Belo Horizonte office, 49 people at Posse and 45 people at Borborema. For its recent exploration drilling campaign at Borborema, the Company and its drilling contractor employed a total of about 70 workers, of which around 50% were local staff from nearby communities.



Human Resources Policy



Crusader follows the Brazilian Labour Code (which is aligned to ILO’s core labour standards) for management of its Human Resources. The law includes aspects related to employment contracts, working hours and shifts, minimum wage and overtime, employment age, vacation, maternity leave, unionization, termination and severance pay, social security among others.



Crusader has developed a “Codigo de Conducta e Principios Eticos” to provide employees with code of conduct guidance and company policies on the non-discrimination and equal opportunity.



As part of IFC’s involvement, the Company will develop a Human Resources Policy in line with PS2 to includes aspects related to terms of employment including minimum remuneration, benefits, hours of work, overtime, leave allowances (annual, sick, maternity etc.), medical insurance, provisions on non-discrimination and equal opportunity, training, performance evaluation and promotion, termination and grievance mechanisms (See Action 6 of ESAP). Crusader will provide a copy of this Human Resources Policy to all its employees and undertake internal training on this document.



Working Conditions and Terms of Employment:



As mentioned above, working conditions are governed by the national labour code. Terms and condition of employment are currently indicated in written contracts with all staff. However, as mentioned above, the Company will develop a Human Resources Policy in line with PS2 to include additional aspects related to terms of employment (benefits, insurance, grievances, etc) and make this available to all its employees.



Workers’ Organizations



Brazilian Labour Law recognizes the rights of employees to form and join unions of their choice. There is currently no union representation at Crusader. The Company is considered to be a fair employer that “values HR”. Wages are established by the Company’s management and are comparable to the national average. The Company does not restrict freedom of association and should the employees decide to organize, Crusader will not discourage unionization.



Grievance Mechanism



Crusader has an open door policy and employees can raise workplace concerns with the Project Supervisor (who is essentially the site manager) and/or other senior staff. However, a formal Grievance Mechanisms for workers has not yet been developed to raise, document and close grievances.



The Company will formalize its current process and develop an employee Grievance Procedure
to help the Company address any concerns of claims from staff (See Action 6 of ESAP).



Occupational Health and Safety



The Company does have a number of plans and procedures in place at both sites to manage OH&S issues including a Programa de Gestão de Riscos (PGR) to identify and manage H&S risks. To date, there have been no significant Occupational Health and Safety (OHS) issues and/or incidents.



As part of the HSEC Policy for Borborema, specific Health and Safety documents will be developed including detailed procedures consistent with GIIP to minimize accidents and incidents associates with these activities. The procedures will include provisions for worker health and safety training (including contractors), emergency preparedness and response and contingency planning. Crusader will also establish a formal health and safety incident reporting system to document and track incidents and implement corrective and preventative measures as required.

Current infrastructure at the Posse site includes 2 crushers, 2 screens and 7 conveyors, a guard house, offices, sample shed, a fuel station and a welding room and a storage shed. At Borborema, facilities include the exploration camp, offices, a core shed and mess facilities.



At the existing Posse iron ore mine and during exploration work at Borborema, potential impacts from Crusader’s activities to surface and ground water, soil and air are limited and can be adequately managed through the establishment of the necessary EHS practices.



At Borborema, historic mining activities used heap leaching to extract the gold and have left an existing abandoned heap leach pad on site. This existing pad has a footprint of approximately 54,600 m2 and an estimated volume of 248,000 m3. Sampling of the area will be conducted by the Company to determine any existing environmental liabilities from these historic activities (See Action 7 of ESAP).



From a walk-through within the Posse mine and the Borborema exploration areas, good housekeeping was observed with some opportunities for improvements on EHS aspects as noted below.



Solid and Liquid Waste:



Posse and Borborema generate minimal amounts of solid waste mainly from office facilities at both sites and from the drilling activities at Borborema. Waste is collected in plastic containers at the camp and in plastic bags at each drill site. At Posse and Borborema, the Company does make an effort of segregating waste on site and will do additional efforts to minimize the amounts of waste generated and disposed of by reuse and recycling of materials as much as possible.



Hazardous waste generated at both sites is minimal and consisting mainly of spent rags and oil products. Hazardous waste is currently collected on site and transported offsite to designated secure facilities.



Regarding sanitary liquid waste generated at the Posse and Borborema camp, this is directed to a septic system within the boundaries of each site.



Water Quality and Use:



Potable water at Borborema is currently trucked in. This water is only used for domestic purposes (cooking, showering). Bottled water is used for drinking.



For Posse, water for dust control is trucked in from nearby water bore. The Company has a permit for this extraction with a limit of 1L/s for use at the mine site.



An issue which needs attention is erosion control and management at the Posse Site. Currently all water falling on the open pit and land surfaces around the open pit is directed to a series of sumps which allow for the settling of solids prior to any discharge off site. This is a continuous process as mining process moves forward and attention needs to be given to the building of erosion control channels and structures to assure water is adequately treated prior to discharge.



Management of Hazardous Materials (Fuel):



At Posse, fuel is stored in bunded diesel tanks with a capacity of 15,000 liters. At Borbore
ma, fuel is stored in a bunded container with a capacity of 1,000 liters. Signage is also installed as well as a fire extinguisher in case of emergencies. As part of the HSEC Policy at Borborema, the Company will develop a Pollution Prevention Plan to set specific procedures for the storage and handling of fuel products and requirements in case of accidental spills.



Energy Use:



Current supply of energy to at Borborema is through connection to the local grid. At Posse, the Project has two diesel-powered generators on site (one in reserve). Each generator has a capacity of 500 kVA.



Fuel consumption at the Borborema site is approximately 1,800 liters per month. At Posse this is estimated at 20,000 liters per month.



Noise:



Current noise generated from exploration activities at Borborema is limited with the distance to any households or single potential receptors (such as local land owners) being several kilometers away. At the drill sites, drilling operators and helpers are required to use hearing protection in areas of high noise levels. At Posse noise monitoring is carried out at a point about 250 meters from the project boundaries at the location of a group of households closest to the site to make sure noise levels are within local requirements. As a preventative measure the Company has also carried out a reforestation program in the area between the mine and this group of households to act as a sound barrier and manage any high noise level from mine activities.



Emergency Preparedness and Response:



As part of IFC’s investment, Crusader will develop a robust Emergency Response Plan (ERP) for each site outlining emergency scenarios and response actions, key contacts and responsible staff. The Company will also conduct training to employees and contractors on the information within this Plan.



Management of Contractors:



For the recent drilling activities at Borborema, the Company hired a Brazilian drilling company. Drilling equipment and drilling crews are the responsibility of the contractor as well as the management of EHS aspects at the drilling locations. As part of the development of its HSEC Policy, Crusader will standardize drilling contracts and ESHS requirements within these contracts to provide clarity on the obligations of the contractors in this regard.

Community Health and Safety



As mentioned, no communities are located in the immediate vicinity of the Posse and Borborema Projects.



The closest community to Posse is Posse (325 inhabitants) located approximately 1 km from the site with the larger Town of Caete (41,000 inhabitants) located approximately 17 km from the mine.



At Borborema, the closest farmhouse (Pedra Branca) lies on the farm border at the base of the NW waste pile 900 meters from the current offices. The closest community (Conrado) is located northwest of the project approximately 2.8 km away (from current site offices) consisting of three farmhouses. The closest village (Maxixe) of around 30 houses is located 4.2 km west of the project outside the farm boundary. The Town of Currais Novos (42,000 inhabitants) is located about 27 km from the Borborema Project.



During exploration work at Borborema, potential impacts from Crusader’s activities to surface and ground water, soil and air and, subsequently to human health, are limited and can be adequately managed through the establishment of the necessary EHS practices. Access to the camp and the drilling sites is via graded and tarmac roads and although the current level of traffic to the site is relatively small, there are potential risks of road incidents or accidents related to workers and uses of the road network. The HSEC Policy will address road safety and the management of risks from transportation of any materials and personnel.



In the case of transportation risks for Posse, the mine is currently using 35 trucks (27 tons) per day to transport material off site. With the expected increase in production to 1 million tons per year, the number of trucks is expected to increase to 118. Currently there is no formal Traffic Management Plan at the site but monitoring of truck entrance and exit does take place and safety signage has been installed on site.



The presence of vehicular traffic associated with the mine poses a potential safety risk to project related workers as well as to users of the road network. In this sense, the Company will develop a formal Transport Management Plan to identify and manage risks from this activity, assure vehicles are in good working conditions and provide training including defensive driving training to employees and contractors (See Action 8 of ESAP).



Security Personnel:



Crusader currently has non-armed in-house security personnel at both project sites.



To date, there have been no grievances or incidents involving security personnel and the community. However, any grievances from the community relating to security incidents at either site will be captured through the community grievance mechanism (Action 4 of ESAP) and will be investigated to identify any necessary corrected or preventative actions.

For its exploration program at Borborema, Crusader has undertaken a series of engagement meetings with the local community of Currais Novos, other local rural communities and key stakeholders to raise awareness about the company, the exploration program and drilling activities and the land access process. These meetings have all been video recorded and a list of attendees taken. Crusader has also held public hearings as part of the licensing process for the EIA and RIMA in December 2013. These public hearings were also attended by IFC staff. Participants at the public hearing were in general highly favorable of the project moving forward.

At Posse, the social interaction has been less organized, but several meetings have been held during stakeholder mapping work and during operations.

Both for Posse and Borborema, the Company will develop a Stakeholder Engagement Plan (SEP) that describes the Company’s policies and procedures for consultation with all the relevant stakeholders and affected communities and disclosure of project information and documentation. The SEP will be commensurate with the project’s risks and impacts and will document the process for engaging the communities in line with Brazilian regulatory requirements and consistent with the IFC Performance Standards (See Action 4 of the ESAP).

The company will also report annually on progress made in implementing the company’s environmental and social action plan.

Crusader will make a copy of the ESRS and the attached ESAP available in the following locations and near the project site:

Company Office Avenida do Contorno, 2090, Pilotis
Bairo Floresta, CEP 30.110-012
Belo Horizonte, MG

For further information, questions or comments please contact:

Name: Laura Muls
Position: Secretary
Address: Avenida do Contorno, 2090, Pilotis
Bairo Floresta, CEP 30.110-012
Belo Horizonte, MG

Telephone: +55 31 2534 3635
E mail: mailto:laura.muls@crusaderdobrasil.com
Website: http://www.crusaderbrasil.com

Broad Community Support is not applicable for this project