30 April 2013 SME Mining Finance II.5

1. 30 April 2013SME Mining Finance II.5 Safety, Environment, Sustainability, and Local Economic Development Issues Lenders Standards and Key Issues: Social and Biodiversity Reed Huppman, Principal, International Finance Practice, Washington, DC

2. Finance and Environment/Social Timeline 1988 1970 World Bank issues Environmental Guidelines OECD begins environment policies NEPA establishes EIS protocols including public consultation 1998 World Bank revises and formalizes 10 Safeguard Policies, the Operational Policies and EHS Guidelines 1980 - 1995 World Bank rolls out other Safeguard Policies in reaction to particular crises 2003 2007 Equator Principles launched with 10 banks applying WB Safeguards EP II 1992 2012 IFC creates one man Environment department applying WB Safeguards Rio “Earth Summit” Convention on Global Climate Change Convention on Biodiversity 1979-1980 2006 2000 Updated PSs 2014 IFC launches Performance Standards OECD develops Common Approaches to govern ECA World Bank begins applying OD 4.01 Environmental Assessment Updated EHS Guidelines 2007 Updated EHS Guidelines 2013 EP III

3. Two of the most challenging Issues in mine development when seeking international finance: • Social (social license to operate, “free, prior, informed consultation”) • Biodiversity (Critical Habitat)

4. Social • Obtaining the Social License to operate • Need increasingly well recognized • But still not easy, and in some geographies public awareness has made even more challenging • Jobs are the typically the primary demand but employable skills lacking • Solution: invest in vocational training several years in advance of operations • Example: FCX’s Mining Training Institute in Papua • Selective process for students • Students responsible for room and board • Free to work for any employer upon graduation • FCX’s Papuan operations now employ hundreds of Papuans, many in highly skilled positions

5. Biodiversity • Can potentially present even more complex challenge than social issues • If indigenous people present, the two can be intimately linked • Does not have to be a roadblock • Issues: • IUCN data is primary source for endangered/threatened species • But not always recent or accurate • Lead time for biodiversity baseline surveys typically minimum of 1 year (more is better) • In remote sites potential for new species

6. Solutions • Screening and Scoping well in advance of development, during or even before exploration • Screening and scoping embedded in old WB OP 4.01 Environmental Assessment • Relatively rare now • In part due to lack of requirement in host country EIA legislation • Conduct local EIA and “international” ESIA separately

7. ASM – a major local economic development issue in gold bearing areas worldwide • In gold regions an enormous global crisis with very few solutions • Miners can inherit extremely challenging ASM issues when awarded concessions • Some miners have provided processing services to ASMs to reduce mercury use • but this works best in hard rock shaft mining where ASMs are concentrated • Where source is alluvial or saprolite not as viable a solution • World Bank has struggled to raise funds to continue the CASM (Communities Artisanal and Small-scale Mining)