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Mining

Villagers demanding proper compensation for an old accident in Kumtor gold mine, Kyrgyzstan, during a blockade in August 2005
Villagers demanding proper compensation for an old accident in Kumtor gold mine, Kyrgyzstan, during a blockade in August 2005

Work on the mining sector – and the extractive industries in general – is one of CEE Bankwatch Network's key issues. The international financial institutions have financed a number of projects in our region that have brought little – if any – benefits to communities or countries, but have created a number of environmental and social problems including large amounts of toxic waste.

These mining projects are not able to demonstrate a real development impact. Most of the projects, especially those financed by the International Finance Corporation and the European Bank for Reconstruction and Development, are done in a “business as usual” manner. They are not more transparent, not more socially responsible, nor are they more environmentally friendly than other foreign investors in the respective countries. It is unfortunate that when it comes to the extractives sector the main interest of these development institutions is to promote the interest of multi-national companies.

One of the main IFI mining arguments – that they duly bring increased standards to the mining industry – proved to be completely wrong at the Kumtor gold mine in Kyrgyzstan. Despite the financing of the project by the IFC and the EBRD, the project had a number of serious flaws; one of them – a lack of an adequate emergency plan – multiplied the impact of a cyanide spill. On May 20, 1998 a mine truck spilled two tons of cyanide into the Barskoon River , a local drinking water and agricultural water source. Government and health officials attributed a number of human fatalities and many illnesses to the cyanide spill. Various reports listed the number of deaths at one, four or zero. The company, the previous Kyrgyz government and others disputed the reported deaths. There is no dispute, however, that many illnesses followed the spill, with 2,600 people having to be treated and more than 1,000 people hospitalised.

In some cases, communities and NGOs working together can generate enough pressure to prevent the abuse of public funds. In the case of Rosia Montana in Romania , Bankwatch supported local NGOs in their advocacy work aimed at getting the IFC to drop the proposed gold mine being promoted by Gabriel Resources, a Canadian company. However, the fact that the IFC ever engaged in negotiation with a company owned by a convicted drug dealer, on a project that is supposed to resettle thousands of people and which involves the risk of another major cyanide accident, clearly illustrates the need for clear rules and procedures in this sector.

Many of Bankwatch's demands were reflected in the final document of the World Bank Extractive Industries Review and Bankwatch continues to pressure the IFIs to change their policies and procedures.

Some of Bankwatch's key demands on lending to the extractive industries

  • Extractive industry projects should not be accepted by the IFIs if there are no substantial social and economic benefits for a significant part of the local population of the host country from the given project.
  • The IFIs should establish no-go zones in areas of high conservation value, the territories of indigenous peoples' and nations, areas where local communities oppose such projects, and areas where investments may exacerbate armed conflict.
  • Each project has to have an emergency response plan as part of the EIA documentation and the IFIs must assume responsibility for any damage caused by their projects and must provide resources for compensation for damage and the physical restoration of affected areas from their own capital base.
  • The IFIs must clearly forbid the use of highly toxic methods of mining (e.g. cyanide leaching).
  • Lending in the mining and oil sectors must be conditional on full transparency and public accessibility of production sharing agreements, profit sharing agreements and other similar documents; there must also be full transparency in the use of exploration royalties and financial profits.