A Question: Whether IFC CAO Investigation Will Affect on New Investments into Amulsar Project

A Question: Whether IFC CAO Investigation Will Affect on New Investments into Amulsar Project


In spring 2016 the delegation of the Compliance Advisor Ombudsman (CAO) for the International Finance Corporation (IFC) will arrive in Armenia to initiate the investigation of the complaint on the incompliance of financing Amulsar open gold mining project with the IFC standards. The IFC is a shareholder of the offshore Lydian International Company, which implements Amulsar project, with 7.9% share and investments of Canadian US$ 17.3 million as of 1 February 2016.

Reminder: Nine representatives of the NGOs and civic initiatives, as well as Gndevaz Villagers filed a complaint to the CAO/IFC, where a heap leach facility shall be constructed to extract Amulsar gold.

The official letter sent by the CAO/IFC says that the investigation will include the following matters:

At the time of writing, the project was at an advanced feasibility stage. A bankable feasibility study and a national EIA were completed in July 2014, and a mining license was granted to the company in November 2014. An international ESIA was disclosed in May 2015. The project had signed agreements to finance construction and was targeting full gold production in 2017.

The complaints

A first complaint was submitted to CAO in April 2014 by residents of Gndevaz and Jermuk villages near the project site with support from nine NGOs. The complainants highlight concerns about the adequacy of stakeholder consultation around the project, as well as the project’s potential future project impacts on the environment and surrounding communities. Issues raised include criticisms of the national EIA process conducted by the company, alleged violations of IFC’s Performance Standards and national regulations. Further, during the CAO assessment phase the project stakeholders raised additional concerns related to cultural heritage and potential negative impacts on a World Bank project in Armenia.

A second complaint was lodged with CAO in July 2014 by 148 local residents of Gndevaz village in Vayots Dzor province raising concerns about project impacts on livelihoods, the environment and on community health. Specifically, the complaint alleges lack of adequate project information, including information about land acquisition and resettlement plans; potential environmental contamination from the project’s cyanide leaching system; dust pollution affecting fields, livestock and farmland; employee and community health issues; and insufficient community engagement.

… In the context of IFC’s E&S policies, Performance Standards and procedures, CAO has identified the following specific questions in relation to the investment include:

  1. Was IFC’s definition of the project and its pre-investment review commensurate with the level of E&S risks and impacts of the project?
  2.  Did the structure of this investment adequately consider the potential long-term E&S risks impacts of the project and the likely changing risk profile over time?
  3. Was IFC’s supervision of the evolving risk profile of the project adequate?”

Meanwhile it should be noted that in parallel with the Ombudsman Office’s investigation on the complaint, about which a report will be submitted to the top management of the IFC and then the World Bank, IFC adopted a decision to make investments of US $ 40 million into Amulsar project, according to Lydian’s announcement.

This matter will be finalized by the end of June in 2016, which coincides with the approval of the CAO/IFC report on the complaint investigation.

13:26 February 15, 2016


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