The project’s sponsor and 53.5% majority shareholder is Mitsubishi Corporation (Mitsubishi) one of Japan’s largest trading companies. Mitsubishi has a market capitalization of $10.5 billion and revenues (2002) of $5.4 billion. Other shareholders include the Industrial Development Corporation (25%), a South African developmental financial institution, ELG Haniel (14%), the world’s largest stainless scrap dealers and Hernic’s founding management team (7.5%).

This expansion project is expected to cost approximately $80 million and will consist mainly of - development of a new underground mine; - installation of a new furnace and pelletizing plant, - incremental working capital requirement, and - environmental improvement and community development activities. It is proposed that IFC will invest approximately $26 million in equity/shareholder’s loan and A loan.

28.87 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	23.87
Equity	5.0

* These investment figures are indicative

Hernic’s mining operations and processing plant are located near Brits, North Western Province in South Africa. The company’s current operations consist of three furnaces and a pelletizing plant with total production capacity of 260,000 tonnes of ferrochrome per annum.

This is a category B project according to IFC’s Environmental and Social Review Procedures. There are limited environmental, health and safety risks associated with this expansion project as mining and processing chromite does not require the use of chemicals and involves a process flow which generates a limited amount of emissions, effluents and waste. The project will not involve any significant social, resettlement and cultural property impacts, as it is an existing site located in an agricultural area at the fringe of an industrial zone. To review the current situation, Hernic has carried out a detailed environmental, social, health and safety audit of their facilities (mainly the beneficiation plant, pelletizing plant, and three furnaces) and associated opencast and underground mines. An environmental and social action plan to correct areas of non compliance has been discussed with the company and a number of detailed programs are being implemented to address air emissions, water management, soil and groundwater contamination, public participation, community development and black economic empowerment. A new environmental and social management structure will be put in place, as well as detailed monitoring and reporting protocols. Hernic is aiming at getting accreditated for a full ISO14001 Environmental Management System (EMS).
Location of environmental documents in locally affected community
All available documents will be disclosed at : Hernic Ferrochrome Pty Limited. R/E OF Ptn 103 De Kroon 44 JQ, PO Box 4534, Brits 0250, South Africa. Phone : (2712) 381-1100, Fax : (2712) 381-1111 IFC Office – South Africa : 1st Floor Oxford Gate, Hyde Park Lane, Hyde Park, 2196 Johannesburg, South Africa

IFC has already assisted Hernic in its environmental and social audit and will continue to help strengthen Hernic’s environmental and social action plan and implementation. IFC will also assist Hernic’s management to improve social management capacity including addressing issues related to Black Economic Empowerment and community development. In particular, IFC has been asked to assist the company in establishing a social plan that would meet the requirements of the new South African Mining Charter. Other potential focus areas include establishing a HIV/AIDS strategy and implementation plan, developing SME linkage programs and promoting mining related education programs.