Africo Resources Limited (ARL) is a listed, junior, Canadian mineral exploration and development company with a current capitalization of approximately $55 million. Africo holds 75% interest in the project (its primary asset) with the remaining 25% held by Gécamines, the state copper-cobalt mining company.

Approximately 75% of Africo’s shareholding is widely held by US and Canadian institutional investors. The New Africa Mining Fund, an IFC investee fund, holds just under 10% of the remaining shares. The balance shareholding is held by some family trusts and Africo board and employees. 100% of the shares are registered on the TSX.

The key members of the Board of Africo are ex-Placer Dome and Rubicon executives. Key members of the project development team are from Barrick’s Bulyanhulu project in Tanzania and have significant mining African experience.

IFC’s proposed investment is expected to be up to C$8 million of equity ARL during the feasibility study phase with on-going exploration activities to convert resources to reserves, on-going feasibility study work, and the up-grading of the environmental and social impact assessments to international standards for the Kalukundi Project. Based on the current version of the feasibility study for the Project, total project cost is estimated at $235 million inclusive of capital costs of approximately $160 million, working capital and interest during construction.

16.20 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	16.20

* These investment figures are indicative

The project is located in the Kolwezi District of the Katanga Province in the South East of the DRC, approximately 2km west of the Tenke Fungurume deposit. The Kalukundi concession has excellent access to infrastructure, with the national power grid (national grid line pass 100m from the proposed plant location), railway infrastructure to South Africa (also pass within 4 kilometers of the site), the Kolwezi to Lubumbashi road, and water from the nearby Lake Nzilo on the Lualaba River.

The proposed IFC investment will contribute to on-going exploration activities to convert resources to reserves, on-going feasibility study work, and the up-grading of the environmental and social impact assessments to international standards for the Kalukundi Project. Consequently, it is not possible to fully quantify the expected developmental impacts of the project. Based on the current feasibility study work conducted to-date the expected development impacts of the during the operational phase may include:

- Contribution to Local Economy

The project is expected to generate the following economic benefits over the mine life: total payments to Government (taxes and royalties) of approximately $200 million; Gécamines dividends of approximately $125 million; payments to suppliers and employees of $800 million. These estimates have been based on long-term cobalt and copper price forecasts.

- Community Development –

ARL is taking a proactive approach to maximizing the positive benefits of the project during the operational phase to its host community including: current budget of approximately $2.5 million for construction and social development programs in the relocated Kisankala village. The company, with the assistance of IFC, plans to leverage additional funds through partnership with aid agencies to establish an integrated community development program (ICDP) which will incorporate:
- education initiatives to increase child enrolment above the current level of 6% in addition to a women adult literacy programme;
- health initiatives focusing on HIV/AIDS, malaria and maternal care;
- establish a linkages and supply chain development program incorporating agricultural extension services, construction activities like brick laying etc.

- Demonstration Effect on Environmental and Social Standards –

IFC’s assistance to Africo on environmental and social issues relating to the potential development of the Kalukundi Project should have a positive demonstration effect in the copper-cobalt sector in the Katanga province in the DRC. This investment together with IFC’s portfolio investment in First Quantum’s Kolwezi Tailings Project, also in the Katanga province, places IFC in an opportune position to make a positive impact on some of the earlier projects being launched in the Katanga province.

- Direct and Indirect Employment opportunities for Local Community –

Project is expected to employ 540 jobs of which approx. 80% will be Congolese nationals. Should the project move to the development phase, Africo will commit to a training program over the life of mine to develop skills within the local populations that will enable them to qualify for employment at the mine. Future initiatives will focus on assisting the community to establish business and activities not fully dependent on the mining sector.

IFC’s engagement during this exploration and feasibility study phase will assist ARL in developing the project to international best practice. IFC will help contribute to the successful development in the following ways:

- Future financing:

IFC equity interest in ARL will also provide confidence to potential equity and debt investors who will be required to provide approximately $235 million in the financing for the construction and operational phase of development of the Kalukundi project. Recent legal challenges to ARL’s rights in the project confirms the need for the company to team up with developmental finance institutions with a long term commitment in the DRC, to provide some political risk mitigation on the development of the project. ARL values IFC’s involvement in the project to promote good governance and transparency in the sector in the DRC.

- Environmental and Social:

The company further values the potential role IFC can play in ensuring that the project will be developed in line with international best practice under the IFC Performance Standards (PS). In particular IFC is assisting in the planning for the potential resettlement of the Kinsankala village and helping ARL establish and maintain ‘broad community support’ for its activities in the province.

- Community Development:

IFC is assisting ARL to establish an integrated community development program (ICDP) as described above incorporating various education, health and small-to-medium sized linkages programs. Furthermore, following IFC’s initial investment in the sector in 2005, IFC has followed through with some technical assistance programs on artisanal mining and community development programs. The NGO and civil society community in the mining sector in DRC are supportive of IFC’s role in this regard and IFC’s support to various sponsors who are willing to support implementation on environmental, social and corporate governance best practices in the country.

This investment has been classified as a Category B project upon application of IFC''s Environmental & Social Review Procedure, as IFC’s equity investment will be used solely to fund the continued exploration of the property, including feasibility studies, environmental and social impact assessments and other preparatory activities. The key environmental, social and occupational health & safety and community aspects and issues associated with this exploration phase include:

Exploration activities:

dust and noise control, water management including extraction from local streams and drainage, solid and liquid waste management including sanitation associated with the exploration and drillers camps, drilling pads and access track rehabilitation, use of forested and agriculture land for exploration and development, occupational health & safety, visual impacts and community safety, use and disposal of hazardous materials (mainly fuels); and

Surrounding communities:

traffic, emergency preparedness and response, educative and preventative measures involving the exploration phase workforce with respect to communicable diseases and negotiation of key mitigation & community development measures relating to future mine development with affected community members, traditional leaders and government agencies.

These early stage activities are expected to have a limited set of impacts which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines and design criteria. More detail on the anticipated impact of the project is provided in the IFC Environmental & Social Review Summary (link provided). Any future mine development would be appraised by IFC as a separate investment, with a new environmental classification based upon the project’s risks and impacts. Based upon review of existing environmental documentation, it is considered likely that IFC support for future planned mine development at Kalukundi would be classified as a Category A.

On November 18, 2005, President Kabila signed a decree establishing a multi-stakeholder National EITI Committee. The National Committee is in charge of assuring the implementation process complies with EITI criteria. In February 2006, the Government named members of the EITI Committee and allocated a budget for its operations from the Government finances. Following the recent elections a new committee is soon to be established with a defined work programme for the implementation of the initiative.  Implementation of EITI in the Congolese mining sector is expected to be challenging. ARL is committed to supporting the implementation of the initiative as well as to declaring on an annual basis all payments made to the Government and Gecamines.

Furthermore, the DRC Mining Code of 2003, implemented with the assistance of the World Bank Group, requires 25% and 15% of mining royalties, respectively, revert to the province and district / city impacted by the respective mining project. A portion of the mining royalties reverting to the communities is an important factor in demonstrating sustainable benefits to communities impacted by mining project, and forms an important increment to any communities and social activities voluntarily implemented by the mining companies. ARL working together with the World Bank Group will seek to help ensure that this aspect of the law is implemented with regards to the Project, supported by capacity building at the provincial and district government levels.

On balance, IFC considers the governance risks to the realization of the project benefits to be reasonable. This view is based on the overall situation in the DRC and the range of benefits this Project can bring to the local communities in addition to potential benefits at the national level. This is in addition to a project sponsor that is committed to governance and transparency, and supported by on-going sector reforms being established by the Govt. of DRC and the World Bank.