IFC support for Newmont’s Ahafo Gold Mine in Ghana
On January 31st, 2006, the Board of Directors of the International Finance Corporation, approved loans of $125 million to Newmont Ghana Gold Limited (NGGL) (a wholly owned subsidiary of Newmont, hereafter referred to as “Newmont”) for its Ahafo gold mine in Ghana, a “greenfield”, open-cast, cyanide-processing mining operation. The approval came in spite of serious concerns raised by local and international civil society organizations and affected community members about unresolved problems with the project’s displacement of thousands of local farmers and deficiencies in the social and environmental impact mitigation and monitoring mechanisms.
The Ahafo site is in one of three concession areas that Newmont acquired in Ghana. It is divided into two parts—Ahafo South, which comprises the project’s first phase, and Ahafo North, which is expected to begin production in 2010. One of Newmont’s other concessions in Ghana, the Akyem site, is located in a forest reserve and has been the subject of intense controversy and local protest. These developments are Newmont’s first mines in Africa in over forty years.
The total area of the mine at Ahafo is more than 3000 hectares, with 10 mining pits planned – four in the first phase (Ahafo South), and six additional pits during the project’s second phase (Ahafo North). Ahafo South and Ahafo North are physically separated by a narrow strip of two forest reserves. There are nearly 12 million ounces in estimated gold reserves at Ahafo. IFC estimates that Ghana will earn approximately $300 million over the 20-year life of the project, receiving 3% royalties on gold sales. The $475 million project is expected to create 620 permanent jobs.
Social and Environmental Impacts
The open-pit cyanide gold mine has generated widespread concern over a range of significant social and environmental impacts, including, among others:
- Physical and economic displacement impacts on livelihood
More than 9000 people, over 95% of whom are small-scale farmers, have been displaced in the mine’s first phase alone. Displacement from the second phase of the mine (Ahafo North) is expected to be of a similar magnitude, but cumulative impacts have not been fully assessed. Independent monitoring reports on the implementation of the resettlement plan for Ahafo South indicate that land replacement efforts have been inadequate and express concern that affected people are at risk of economic hardship. The loss of access to farmland and inflation of the prices of food stuffs in local markets, have jeopardized food security. “Livelihood restoration and improvement programs,” such as those run by the non-governmental organization, OICI, have come under criticism from civil society groups concerned that their focus on activities like soap-making and snail-raising are not appropriate or adequate substitutes for farming.
- Risk of contamination and depletion of water supply
IFC did not respond to comments on the environmental and social impact assessment (ESIA) submitted by the non-profit organization, Center for Science in Public Participation, which called attention to a number of deficiencies in the studies and the need for additional information about risk management, reporting and closure plans, among others. Tests of the acid generation potential from the mine’s waste rock, which poses a threat of leaching of heavy metals into local ground and surface water, are incomplete and the results have not been made public. Extraction of water from local rivers, the damming of the Subri River, and displaced families’ loss of access to free water sources poses a major threat to the wellbeing of local populations.
- Safety hazards
The use and transport of cyanide, the dam on the Subri River, and the disposal of tailings and other toxic chemicals for mine use, present potential threats to the safety of the communities and the ecosystem surrounding the mine site. Ghanaian environmental legislation and regulatory capacity is weak, making it extremely difficult to hold companies accountable for harms resulting from spills or other environmental accidents.
- Impacts on forest areas and protected forest zones
Forests near Ahafo are directly or indirectly affected by Newmont’s mining activities and the construction of associated facilities, such as the Sunyani-Kenyase-Kumasi electricity transmission line that will serve the mine site, as well as by population influx and resettlement. At the time of the IFC’s approval of the project in January 2006, there was no publicly available EIA for the electricity transmission line, which, as designed, will pass through four forest reserves on its way to the mine site.
Institutional Context
Consideration of this Category A project comes at a time when the World Bank Group is facing a crisis situation at an IFC-backed gold mine in Guatemala, where mining operations have precipitated social unrest and led to the filing of a complaint with the IFC’s ombudsman (the Compliance Advisor Ombudsman), and when concerns about sponsor complicity in violence around a MIGA-backed mine in the Democratic Republic of Congo have prompted a CAO compliance audit.
The Ahafo project must also be viewed against the environmental and social legacy of IFC’s past mining investments in Ghana and that of World Bank interventions in the country’s mining sector, as well as Newmont’s own track record around the world. The IFC should explain how Newmont has reformed its operations in response to problems encountered in other projects (such as the IFC-supported Newmont goldmine at Yanacocha, Peru), and the specific mechanisms used to avoid similar problems in Ghana. IFC should also explain how its management of this project differs from its past mining projects in Ghana (Ghana Australian Goldields and Bogoso Gold Limited), which have resulted in ongoing environmental problems including cyanide contamination and harmful social impacts. It is critical to examine how the IFC intends to ensure that long-term impacts of this new gold mine are mitigated and managed.
Ahafo as indicator of EIR implementation and test case for new IFC policies
Not only does the Ahafo project have profound impacts on the local population and ecosystem, but it is an important indicator of the IFC’s willingness to implement EIR commitments and recommendations, and of the IFC’s ability to learn from problems with past projects. A critical examination of the due diligence conducted for this project may offer lessons to consider as IFC applies its revised safeguard policies (now called “performance standards”) which arguably allow a more discretionary approach to project preparation and evaluation.
According to World Bank Group commitments made in response to the EIR, the IFC should:
- demonstrate that the Ahafo project has “broad community support” from local populations
- establish an independent monitoring system that involves local communities
- establish measurable indicators of poverty reduction against which the project can be evaluated
- require disclosure of all payments by project sponsor to the Ghanaian government and/or local communities
- work to ensure the disclosure of the terms of key agreements with government.
While Newmont and IFC reported in January 2006 that they had agreed upon the Terms of Reference for an external monitoring body for the Ahafo project, those terms of reference were developed without prior disclosure to or adequate input from the public. Similarly, the plans for ongoing monitoring of the impacts of resettlement and economic displacement had not been published at the time of project approval by the IFC’s Board. The Board requested that another independent resettlement monitoring report be produced, as a follow-up on the two previous reports commissioned by the IFC (produced in August and December 2005), but it remains unclear when the next report will be issued or for how long impacts of resettlement will continue to be tracked. Neither Newmont’s land replacement action plan, to address displaced families’ lack of access to farmland, nor a description of planned measures to ensure food security on a long-term basis, was publicly available at the time of the project’s approval.
IFC claims that the Ahafo project “is expected to become a demonstration case for how to handle environmental, social, and community development issues in Ghana. … [and] a model for other mining companies to follow.” However, the problems already encountered suggest that far from being a model, the project poses significant risks to the local population and environment—risks that demand urgent attention and mitigation if the harms associated with countless other gold mines in Ghana and elsewhere are to be avoided.