Concordia University

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Mining and Human Rights in Guatemala

• Concordia University
• Montreal
• June 1, 2005

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Table of Contents

1. IFC and the World Bank Group
2. Background on the Marlin Gold Project
3. Why IFC Supported the Marlin Project
4. What the Company Has Done
5. Governments Approach to Mining
6. World Bank Group Action Plan

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The World Bank Group Four Institutions

• International Bank for Reconstruction and
  Development International Development Association
  
• Lending and support for Governments
• International Finance Corporation
• Lending and investments for private sector
  projects
• Multilateral Guarantee Insurance Association
• Political risk guarantees for private sector
  projects
• International Center for the Settlement of
  Investment Disputes

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International Finance Corporation

• Part of the World Bank Group. Set up in 1956 50
  years old next year.
• Net Worth of over 6 Billion
• Mission Promote Sustainable Private Sector
  Investment in Developing Countries to Reduce
  Poverty and Improve Peoples Lives
• Operates commercially - profitable every year
  since 1956
• AAA Rating allows IFC to offer competitive
  financing to its clients
• Syndicates finance (B loans) and mobilises
  co-finance from commercial banks, other financial
  institutions
• Provides loans, equity, quasi-equity and
  technical assistance
• Strong focus on poverty reduction and
  sustainability on all projects

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Joint World Bank-IFC Global Mining Group
World Bank Global Mining Group

• World Bank Mining Policy Division
• Works with Governments to facilitate
• Investor-friendly economy
• Reformation and modernization of mining Sector
• Privatization of state-owned assets
• Community relations equitable rent sharing

• IFC Mining Investment Division
• Works with Private Companies to ensure
• Sound economic fundamentals
• Sufficient funding and financial strength
• Environmental rigor
• Sensitivity to the community

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Some IFC mining deals in Frontier Countries
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The Land
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Background

• 1954-1996 Protracted, bitter civil war.
• 1996 -- Peace Accords. Government program to
  encourage investment including reduction of
  mining royalty on gross revenues from 6 to 1
  (on low side but reasonable compared to other
  countries must look at entire tax package
  including income tax).
• -- ILO 169 ratified by Guatemala (effective in
  1997).
• 1998 Marlin deposit discovered.
• 1999 Previous owner initiated discussions with
  communities and local governments. Land
  acquisition started.
• 2000 Initial exploratory drilling started.
• 2002 Glamis Gold acquires Montana.
• 2003 Extensive consultations.

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Background (continued)

• Aug 2003 Local disclosure of ESIA by Company.
• Sept 2003 IFC starts appraisal.
• Jan. 2004 President Berger elected.
• March 24, 2004 IFC discloses ESIA.
• June 3, 2004 IFC Board approval. IFC loan for
  45 million.
• December 3- 4, 2004 Government holds Mining
  Conference to promote stakeholder dialogue.
  Sponsored by WBG, Canadian government and
  local NGOs.
• 2004-2005 Various Bank / IFC missions meet
  with government, Catholic Church and local
  communities.

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Why IFC Supported the Marlin Project

• Mining with sustainable development can be a key
  to poverty reduction, but all risks and issues
  must be evaluated.
• Glamis and Montana had demonstrated their
  commitment to sustainable development (including
  social and environmental issues).
• Impressive consultation and community development
  work already had been done.
• Employment generation, including opportunities
  for local suppliers in one of poorest regions of
  Guatemala.
• Opportunities for additional community
  development programs.
• Revenues to Government and benefit sharing with
  local municipality.

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What Company Has Done

• Up to 1,500 construction jobs (870 local
  indigenous 2.4 million in salaries in 2004).
• 400 operational jobs estimated 80 local
  indigenous people.
• Company spent 1.5 million on non-project related
  local improvements.
• Company has established community development
  foundation (contribution of 400,000 per year) to
  benefit municipalities.
• Provision of health services to local
  communities.
• Trained 250 people in vocational skills.
• Local reforestation program (with support from
  IFC trust funds).
• Company voluntarily will pay royalty of 0.1
  (about 100K per year) to Sipacapa.
• Company renews their community engagement and
  communications strategies.

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Consultations

• IFC reviewed and was satisfied with extensive
  local consultation and that there was local
  community support in the communities affected.
• Land acquisition used willing buyer / seller
  process, i.e., free, prior and informed consent
  of all local land owners.
• ILO 169 provides flexibility as to mechanisms for
  consultation.
• IFC confirmed with new Berger government its
  support of project and its satisfaction with
  consultation process supervised by prior
  administration.

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Governments Approach to Mining

• Policy
• Promote mining investments that are technically
  and financially viable and socially and
  environmentally responsible
• Link mining operations to local development
• Strengthen the rule of law
• Modernize the legal framework
• More specific environmental regulations and
  procedures
• Consultation processes and ILO Convention 169
• Streamline cadastral procedures
• Distribution of fiscal revenues royalties
• Strengthen the institutions
• Mining Cadastre
• Information and transparency

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Governments Approach to Mining (cont.)

• Develop its capacity as a facilitator of Civil
  Society Private Sector Government
  Partnerships
• Promote dialogue and information (foros
  mineros)
• Build capacity of local governments to manage
  revenues
• Build capacity of communities to participate in
  local development planning
• Independent and participatory monitoring

Government MEM and other Ministries
Civil Society NGOs, Local Communities
Private Sector
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Governments Approach to Mining (cont.)

• Government is more sensitive to mining concerns,
  taking a more proactive approach
• Government has formed high level commission to
  address mining issues at the national level
  (participants include government, Catholic
  church, local universities and an NGO).
• Government is undertaking national and regional
  forums to discuss responsible mining with
  stakeholders.
• Positive response to working with Bank on mining
  regulatory and institutional reform.
• Government is trying to set up a national and
  local mediation mechanism for mining.

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WBG Action Plan

• Help the Company and Glamis to address key
  stakeholder concerns.
• Assist the Company with its plans to establish an
  independent community-based monitoring of
  projects impacts.
• Work with the Company to
• Bolster the Sierra Madre Foundation
• Target investments in communities
• Building partnerships and relationships

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WBG Action Plan (cont.)

• Provide SME linkages support.
• Provide technical assistance to municipalities if
  requested.
• Support the governments mediation and conflict
  resolution process.
• Provide technical assistance to improve mining
  code and regualtions.

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Sharing of Benefits
Desired outcome Sustainable Mining Providing
Benefits to all Stakeholders
Profitable long run investment
Income and economicgrowth
Employment, income, improved social services,
infrastructure, spin-off businesses
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• END OF PRESENTATION