Kiwara Plc was created by the reverse takeover of Wadharma Investments Plc in August 2007 by Kiwara Resources Ltd, a company formed earlier that year to hold the JV interest in PL 267 that had been obtained by the current management in 2006. The company was listed on London’s AIM on 6 August 2007 and subsequently on Johannesburg’s JSE on 3 April 2008. Kiwara management holds over 60% of the Company’s outstanding shares. The company’s shareholder register also includes equity funds like Geiger Counter Ltd, New Africa Mining Fund and New City Investment Managers Ltd.

The financial plan reflects the company’s budget for exploration activities in Zambia over the next 2 years. The total project cost over this period is estimated at approximately $7.2 million.

The proposed IFC investment is an equity investment of $6.0 million coupled with a warrants package.

15.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	15.0

* These investment figures are indicative

PL 267 lies in northwestern Zambia, some 472 kilometres (km) northwest of the Zambian capital, Lusaka, and approximately 316 km west of Kitwe and 122 km west of the provincial capital, Solwezi. The property is a greenfield site. Access is by paved and unpaved roads, with driving time of about 2 hours from Solwezi and 6 hours from Ndola.

The project is located in a frontier region in a rural area of Zambia with very limited employment opportunities. The proposed financing will support the company’s existing workforce of 58 staff.

Recent changes in Zambia’s mining tax regime are aimed at improving investor perception of Zambia as a good destination for mining investments. IFC’s investment will demonstrate support for the mining sector which is being adversely affected by the currently low copper prices. Furthermore, the company has a very prospective nickel deposit which, if developed with IFC’s assistance, would help the Zambian economy diversify away from copper dependence.

Because the investment predates any feasibility study, it is not yet possible to fully quantify or specify the potential development impacts during production stage. However, potential development impacts at the mine production stage could include:

- local employment and sourcing;
- taxes, royalties and other payments to the government;
- technology and management skills transfer;
- setting new environmental and social benchmarks for mining operations in Zambia; and
- development of transportation and energy infrastructure which would improve possibilities for other economic activities.

IFC contribution during the pre-project development phase includes:

Capital: Up to $6.0 million equity investment now and potentially further funding if the project were to move to Feasibility Study Stage and project development. Junior mining companies have been particularly hit by the current financial crisis and IFC has an important counter-cyclical role to help bring the company to the next development stage. In the current climate, equity funds are also scarce, particularly for base metals, and IFC support will help the exploration phase move forward.

IFC input to environmental and social practices and standards: IFC environmental and social specialists will engage with the company to provide input and guidance to ensure that the company’s environmental and social practices and studies are in line with IFC Performance Standards. The company already has a project brief covering environmental and social issues as would normally be included in a Health, Safety, Environment & Community (“HSEC”) Policy document and IFC’s initial guidance will be towards bringing the brief up to international best practice standards.

In the event a mine gets developed in future, IFC expects to contribute in various ways including:

SME Linkages: IFC is implementing an SME Linkages program in the Copperbelt region of Zambia and a similar program could be implemented for the company. The company will be introduced to key stakeholders even at pre-project development phase to allow for better planning in structuring the company’s participation in the program. This program is helping to maximize benefits to local communities.

Project Financing: When the company completes the pre-development phase and moves to the project development stage, IFC would consider other ways to continue supporting the company’s projects with funding.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards and guidelines. The review of the company consisted of appraising technical, environmental and social information associated with its projects.

The key environmental issues related to Kiwara’s project are (a) management of exploration activities – control of erosion and rehabilitation of drill roads, drill sites and trenches, safe disposal of oils, waste, etc.; and (b) infrastructure & associated facilities – public safety, dust control, hazards management and mitigation of transportation risks.

The key social issues related to Kiwara’s project include (a) management of community expectations during ongoing consultation and disclosure; and (b) consultation & disclosure – free, prior, informed consultation (“FPIC”) and broad community support (“BCS”) for the project.

Potential future impacts (if Kiwara prospects are developed into mines) are typical of those associated with mining – community impacts, influx management, community development planning, waste management, surface and groundwater protection, health & safety, hazardous materials, emergency preparedness & response.

The IFC has considered the governance risks in Zambia, e.g. effective use of revenues generated from mining operations, transparency in awarding prospecting/mining licenses, etc., and believes that on balance this is a project it should support. The Zambian government is actively engaged with the World Bank Group (“WBG”) to establish fiscal and macroeconomic policies to ensure that government revenues are targeted at poverty reduction goals and objectives. The Government has requested and won WBG support in assisting with EITI implementation and EITI++ scoping analysis.

Kiwara is supportive of the efforts to implement good governance and transparency in the sector and will provide IFC with an undertaking that it will disclose publicly all payments made in the form of taxes, royalties, fees, etc., to the government once it begins production. The proposed investment in Kiwara provides IFC with an opportunity to support the WBG’s strategy in Zambia of promoting private investments in mining in a transparent and socially sustainable way.