The Sponsor is Newmont Mining Gold Corporation (Newmont), a company listed on the New York Stock Exchange and with parallel listings in Canada and Australia. It has a market capitalization of about $17.5 billion with producing operations in the US, Canada, Mexico, Bolivia, Peru, Uzbekistan, Indonesia, Australia, and New Zealand. In 2004, Newmont produced about 7 million ounces of gold from these countries, representing 9% of global mine supply, at an average cash cost of $231/oz. It earned revenue and net income of $4,524 million and $434 million respectively, and cash flow from operations was $1,557 million. At the end of 2004, Newmont’s gold reserves stood at 92.4 million ounces, it had $1.6 billion in long-term debt (Rated BBB+ by Standard and Poors), and over $2.1 billion in cash and marketable securities. Newmont’s current exploration efforts are focused on Peru, Ghana, Nevada and Australia.

The total project cost is estimated at $470 million. The proposed IFC investment is a $75 million A loan for IFC’s own account and a $50 million syndicated B loan.

75.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
Equity

* These investment figures are indicative

The project site is located in the Asutifi district, in the Brong Ahafo Region, 300 km northwest of the capital city Accra, in Ghana. It is approximately 42 km from the nearby Sunyani town (Sunyani is a major regional center – with a modern hospital, schools, banks and a post office) and close to the twin towns of Kenyase (Kenyase 1 and Kenyase 2). The dominant activity in the area is primarily subsistence farming.

- World Bank Group Strategy:

The World Bank Group’s Country Assistance Strategy (CAS) for Ghana, covering the period 2004-2007, was endorsed by the Bank’s Board in March 2004. The strategy, rooted in the Strategic Framework for IDA’s Assistance in Africa, rests on three pillars to support the Government of Ghana’s Poverty Reduction Strategy (GPRS):

- sustainable growth and jobs creation;
- service provision for human development; and
- governance and empowerment.

There is an intensive and integrated Bank Group approach to growth, exemplified by joint Bank-IFC work in a number of sectors.

IFC’s program is complementing IDA’s to:

- focus on improving the investment climate and assist with implementation of key reforms;
- attract the private sector to the provision of infrastructure services and utilities, including energy and telecommunications;
- help build and expand services of competitive financial institutions;
- enhance micro, small, and medium enterprise development through expansion and integration of financing and technical assistance interventions; and
- promote exports.

- Project Development Impact:

Mining is an important sector in the Ghanaian economy accounting for approximately 3-4% of government fiscal revenues, 5% of the country’s GDP and 30% of the country’s total exports (cocoa exports contribute 38% of total exports). In 2004, the Government earned $41 million in tax revenues from mining companies (corporate tax – $11 million; royalties – $24 million; and reconstruction levy – $6 million). The formal mining sector paid approximately $62 million in gross salaries plus an additional $9 million in employer’s social security contributions to its estimated 15,000 employees (small-scale mining operations in Ghana employ in additional forty to fifty thousand people) – from whom the Government earned an additional $15 million in payroll taxes. The sector is dominated by gold production, which accounts for about 95% of total mining export proceeds. It is expected that this project will increase Ghana’s gold output by 30%, and result in the following specific developmental impacts:

- Contribution to Economy:

The Government of Ghana will over the 20-year mine life receive taxes, royalties, reconstruction levy and profit participation totaling an estimated $140 million (discounted at 10%).

- Direct and Indirect Employment Opportunities for local community:

It is expected that the project will provide full time employment to about 450 people (professional/skilled/non-skilled) when fully operational. During construction, employment will peak at 1,300 people (out of which approximately 650 will be unskilled positions). Studies have shown that as much as 14% of the mining sector’s total export revenues are spent on local purchases so local communities are expected to benefit from the indirect employment opportunities – as SME suppliers to the project.

- Strengthening of Power Grid:

In order to supply power to the project, the Volta River Authority (VRA) plans to construct a new 161 KV 155 km transmission line from Kumasi to Sunyani. This new transmission line was planned long ago by VRA as part of a program to improve the northern power grid and extend electricity supply to small outlying communities, but was delayed due to lack of funds. Newmont has agreed to arrange financing required for the construction of this transmission line – expediting the timeline of VRA’s program and hence the improvement/strengthening of power distribution and reliability in the northern region of Ghana. Communities living along the path of the transmission line including those around the mine are also expected to benefit from improved access to electricity.

- Demonstration Effect:

This project is expected to become a demonstration case for how to handle environmental, social, and community development issues in Ghana. Ghana has a long history of mining and unfortunately in some cases mining operations have resulted in negative environmental and social impacts on local communities. It is expected that this project would become a model for other mining companies to follow; for example, the level of multi-stakeholder involvement in the resettlement process is expected to become the benchmark for the future.

- Upgrade of training facilities:

Newmont is currently utilizing the facilities of the National Vocational Training Institute of Ghana (NVTI), a government-training institute located at Yamfo 25 km from Ahafo, to provide basic training to its contractor labor pool. Newmont plans to continue utilizing these facilities to provide training to its full-time employees during the operational phase and has embarked on a program to upgrade NVTI’s facilities. This includes the construction of additional buildings and provision of equipment. These improved facilities will be made available to all other NVTI students (i.e. non-Newmont employees) including individuals from the local community.

- Infrastructure Upgrades:

In preparation for commencing of operations at the project site, Newmont has already arranged for one of Ghana’s cellular phone operators, Spacefon, to provide cellular phone coverage at the project site and the nearby Kenyase and Ntotoroso towns. Newmont has also upgraded several access roads improving transport access of the local communities.

- Governance Context:

Ghana is a stable multi-party democracy, with a free and vibrant press and strong civil society. Moreover, it is perceived as one of the more transparent and progressive sub-Saharan countries. IMF assessments indicate concerted efforts to improve fiscal transparency. Overall, development partner coordination is strong. The government’s GPRS seeks to, among other things, ensure good governance by building a more inclusive state and improve public sector management for better service delivery. In June 2003, Ghana announced its decision to participate in the Extractive Industries Transparency Initiative (EITI). If the Ahafo project becomes operational before Ghana completes the process of accession to the EITI, Newmont has committed to make public all payments made to the Government of Ghana.

It is expected that substantial benefits from the project will accrue to different levels of Government in Ghana in the form of taxes, royalties and profit participation. Large benefits to the local community are also anticipated. On balance, given the governance situation in the country and the project’s expected development benefits, IFC believes that this is a project in which it should invest.

In financing this project, IFC’s role will be:

- Mobilizing and Providing Long-term Financing:

In addition to providing long-term financing to this project, IFC participation will mobilize financing for the project by providing comfort to other lenders to the project allowing them to consider providing up to 10-year loan financing to the project. It would otherwise be very difficult for a project in Ghana to obtain debt with a tenor longer than 5-6 years without IFC involvement.

- Neutral Broker:

IFC will play a neutral broker role in this project, providing Newmont with comfort to proceed with this investment in Ghana. Newmont does not currently have mining operations in Africa and is making a comeback after a 40-year hiatus. Very often IFC participation in projects makes sponsors more comfortable and willing to invest and take on political risks in new locations, especially developing countries.

- Advancing Existing Value-added Programs:

As part of its resettlement and community development programs, Newmont will be implementing programs to train local communities on alternative livelihood skills. IFC will support and complement these programs through the implementation of a SME linkages program to increase the sustainable impacts of the project. In addition, through its “IFC Against HIV/AIDS” program, IFC will support Newmont in the implementation of its already comprehensive HIV/AIDS program.

- Monitorable Indicators:

During the project, the key monitorable indicators that will be monitored will include:

- Taxes, royalties and profit participation paid to the Govt of Ghana;
- Direct employment created during the construction phase and during the operational phase;
- Foreign currency earned by Ghana from the project; and
- Number of employees that have received training at NVTI.

This is a category A project according to IFC’s Environmental and Social Review Procedure. The key environmental and social issue which is associated with this project, and which has been reviewed in detail during project appraisal, is ensuring broad community support (particularly relating to resettlement and livelihood restoration). The sensitivity of the project is the reason three separate appraisal missions have been undertaken. These missions provided adequate assurance that Newmont are planning and designing their approach within WBG Policies & Guidelines.

The project extends over a strike length of about 16km although the known ore deposits extend to about 70 km, trending in a SW-NE direction. Initially, a processing plant and four southern pits will be developed, and an ESIA has been completed covering these deposits. Later, NGGL may develop ore deposits further north along the strike, which may include up to ten new pits. Should NGGL decide to proceed to develop the north deposits, a full ESIA in accordance with IFC Policies and Guidelines would be prepared and disclosed.

The southern deposits and the reserves further north are bisected by a narrow strip of gazetted forest reserve. Newmont is implementing a bio-diversity management plan to ensure that its operations do not cause any significant degradation or conversion of critical natural habitats.

Other significant issues with this mining development will include those common to all large gold mining operations, including handling of cyanide and other hazardous materials, and tailings facility management.

NGGL is committed to implement a socially responsible business model and to improve the economic situation of local communities through the mining operation. Consultation with local groups have been taking place since early 2003. NGGL staff work hard to ensure that good relations are maintained with local communities. NGGL has a capable local team of competent staff working together with partners including local NGOs, international development NGOs (OICI), and Ghanaian communication professionals (StratCom).

The development of the project involves 3,111 hectares of total mine area and is expected to result in the physical or economic displacement of 1,701 households.

The resettlement planning efforts have been a collaborative process with project-affected persons. Resettlement principles, policies, procedures, and compensation rates have been determined through multi-stakeholder involvement in a Resettlement Negotiation Committee (RNC), which includes representatives of villages, traditional authorities, local government, and non-governmental organizations, and NGGL. This has resulted in a Resettlement Action Plan that will be disclosed publicly.

In order to achieve livelihood restoration, resettlement and community development programs include programs geared toward job training and creation as well as an ongoing search for both ways to enhance agricultural productivity on underutilized land and identification of replacement land through traditional systems in coordination with traditional leaders.

These efforts are complemented by community development initiatives including provision of water, sanitation, upgrading of the local clinics and training centers, and small and medium enterprise (SME) activities that can enhance the sustainability of positive economic impacts of the project. NGGL has also launched an HIV/AIDS program for workers and their families and a program on malaria prevention. IFC’s SME program is developing linkage programs that can further maximize the local development impact.

Location of environmental documents In locally affected community
Hard copies of the project documents will be available at the following locations:

- At NGGL Kenyase Office;
- At NGGL Office, Accra;
- At the Land Valuation Board office (Resettlement Action Plan);
- At the Brong-Ahafo Regional Coordinating Council Office;
- Offices of the Traditional Authorities at: Kenyase 1 and 2; Ntotoroso; Gyedu; and (iv) Wamahinso;
- At the Asutifi District Assembly;
- At the Town and Country Planning National Office, Regional Office, and District Office;
- At the Brong Ahafo Regional Coordinating Council Office;
- Newmont Mining Corporation Web Site: http://www.newmont.com/en/operations/projectpipeline/ghana/index.asp.