Greystar Resources is a junior mining company listed on the TSX and AIM exchanges, and it has a market capitalization of approximately C$121 million. The company’s principal office is in Vancouver, Canada with its operational office in Bucaramanga, Colombia. The company’s ownership includes both institutional and individual investors. The company’s largest shareholders are currently JP Morgan Asset Management UK Limited (13.1%) and Mr. George Milton (12.9%).

The total project cost of the exploration and pre-mine development phase of the project is estimated at C$131 million, and the company is seeking to raise up to US$20 million from IFC. It is proposed that IFC will initially contribute approximately C$12.04 million in equity with a right to invest approximately up to an additional C$12.19 million on the exercise of warrants to be issued as part of the equity subscription (these estimated proceeds are based on current exchange rates). IFC’s investment would be used to fund completion of the BFS, ESIA, and other needed ground works to prepare for the project development stage. For the period from 2001 to the present, the company raised C$122 million in equity financing, including the exercise of warrants related to the financings.

19.34 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	19.34

* These investment figures are indicative

The Angostura project is located 55 km by road from Bucaramanga, the capital of the Santander Region. The deposit elevation ranges from 2,600 to 3,400 meters above sea level. The project is in a traditional mining area; it enjoys access to the existing power grid, water and materials, and a skilled local work force. There are three villages which are located within 15 km of the project site.

Colombia has substantial mineral resources, but the country still suffers from country risk perceptions among many potential foreign investors. A successful project of this size would likely spur significant additional global mining interest in Colombia, particularly valuable at a time when Colombia has demonstrated considerable progress in addressing security issues and political risk and is well positioned for continued economic success.

IFC has identified Colombia as a primary target for mining investment because of the potential for substantial development impact from the mining sector. This would be IFC’s first mining investment in Colombia.

A mine development of the expected size could have substantial impact on the local communities, not only through direct employment and services, but also from government royalties and taxes that flow back directly to local municipalities. It is estimated that 97% of the royalties will flow back directly to the region, with 87% of total royalties flowing to the municipality level. The Government of Colombia and oil and gas companies have been working with IFC on a pilot municipal level royalty management and capacity building program in the petroleum sector. The Government of Colombia, the Ministry of Mines, and mining associations have expressed interest in expanding this program to the mining sector. The two municipalities where the project is located could be part of any second pilot program, further ensuring greater development benefits to the local communities.

IFC’s proposed investment will fund the completion of a BFS and ESIA, which will be used as the basis by which a decision for mine development will be made. The immediate development impacts from this investment will be limited. However, in the event that the mine goes forward, it is currently estimated that the Angostura project will generate approximately 1,500 direct jobs during the construction phase and approximately 500 during operations. It is currently estimated that approximately four indirect jobs will be created for each direct job created in the mine. The majority of the new jobs would be for local residents from the California municipality and for Colombian engineers from the region; one of the leading engineering schools in the country is located in the city of Bucaramanga, which is close to the mining site. The company is working with local technical institutes to train local people for future employment at the expected mine.

Capital: The project is at a critical stage - completing its BFS, ESIA, and preparing to move to project development stage is paramount. The company sees IFC as a strategic partner with potential to provide long term value added services (see below).
IFC Input to ESIA and Other Environmental and Social Studies: IFC environmental and social specialists will engage with the company to provide input and guidance to ensure that Environmental and Social Baseline Study and the Environmental and Social Impact Assessment meets the IFC Performance Standards.

Political Risk: Despite significant improvements to security in Colombia, the country still suffers from a lack of investor confidence. IFC’s investment is expected to help reassure foreign investors and encourage increased participation in Colombia’s growing economy.

Subsequent Project Development Support: In the event the mine development moves forward, IFC expects to contribute in various ways:

IFC Royalty/Taxes Management Program: IFC has applied its royalty/taxes municipal management program developed in Peru to Colombia’s petroleum sector, and there is interest from the Government, Ministry of Mines, and mining associations to pilot this program in the mining sector. The company has considerable interest in including the two municipalities in the project area in this type of pilot.

SME Linkages: Given the large scale of the project, there should be opportunities for engagement from IFC''s Linkages program, which would help maximize local benefits.

Project Financing: After completion of the pre-development phase and move to the project development stage, IFC would consider other ways to continue financing support to the company.

This is a Category “B” project according to IFC’s Environmental and Social Review Procedure. This investment covers the exploration and feasibility study activities. The development phase will require additional financing and with an IFC requirement of a full ESIA, with appropriate consultation and disclosure prior to any substantive work taking place.

The key environmental and social issues related to Greystar’s project are:

- Management of exploration activities – control of erosion and rehabilitation of drill roads and drill sites, safe disposal of oils and waste, potential mercury and cyanide contamination from artisanal and small scale miners downstream from the concession areas, etc.;
- Development of Environmental, Health & Safety Management System and Policy commitments to ensure PS compliance of any future mining development to manage, plan and document the environmental and social issues relating to their activities;
- Infrastructure– public safety, dust control, hazards management and mitigation of transportation risks.
- Management of community expectations during ongoing consultation and disclosure;
- Local capacity building and employment generation;
- Community development planning;
- Management of Armed Security Forces through implementation of the Voluntary Principles for Human Rights and Security

The project area is a traditional mining area with communities demonstrably supportive of mining projects. Three villages are located within 10 km of the project site and are considered within its zone of influence. Greystar management has had a particular focus on community engagement, and in 2006 Greystar won the Prospectors & Developers Association of Canada (PDAC) Environmental Excellence in Exploration award. Greystar has met with LAC’s royalty management program team and has expressed interest in tapping into this program to ensure greater benefits accrue to the local communities.
The company is committed to conduct its operations in accordance to the provisions of the International Cyanide Management Code (ICMC) and has commissioned an ESIA which will address the requirements of the IFC Performance Standards. The company will be required to commit to a Health, Safety, Environment and Community (HSEC) Policy and an ‘Action Plan’ as needed addressing mitigation actions from its related exploration activities and potential mine development. The company will prepare a Community Consultation and Disclosure Plan to ensure proper stakeholder consultation, monitor community support and identify needs and priorities for sustainable development. The company will implement procedures in accordance with the Voluntary Principles due to the presence of armed public forces in the project area. The company has expressed interest in obtaining IFC support in the implementation of a royalty management program.

IFC will provide guidance for Greystar to develop a sustainable environmental management system and build its internal environmental and social management capacity.

A part of the benefits of a future mine development will come in the form of taxes and royalties that will be paid to government (part of which will be distributed to local level). The IFC has considered the risks to these benefits and, given its assessment of the Government capacity to effectively use these revenues (including the potential for engagement in programs at the municipal level), believes that on balance this is a project it should support. The company has agreed to disclose publicly in Colombia its payments to governments at the state and local level.

The World Bank’s Mining Policy Division is in discussions with the Government of Colombia regarding participation in the Extractive Industries Transparency Initiative (EITI) program.