EBRD Extractive Mining Industries Strategy - 2018-2022 As approved by the Board of Directors on 13 December 2017
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EBRD Extractive Mining Industries Strategy
2018-2022
As approved by the Board of Directors on 13 December 2017
PUBLIC
Abbreviations
1. ABI – annual business investment 32. OECD - Organisation for Economic Co-operation and
2. ADB – Asian Development Bank Development
3. AIIB - Asian Infrastructure Investment Bank 33. OEM - original equipment manufacturer/manufacturing
4. BAT – best available technology 34. R&D – research and development
5. BGR - Bureau of Governmental Research 35. RMI – Raw Materials Initiative
6. CEE – central and eastern Europe 36. SDG – Sustainable Development Goals
7. CIT – corporate income tax 37. SME – small and medium-sized enterprise
8. CIS - Commonwealth of Independent States 38. SOE – state-owned enterprises
9. CO2 – carbon dioxide 39. TA – technology assessment
10. COOs – countries of operations 40. TIMS – Transition Impact Monitoring System
11. CSR – corporate social responsibility 41. USAID - United States Agency for International Development
12. DFID - Department for International Development 42. WC – working capital
13. DREA – Atlantic Research Centre (part of DRDC)
14. EBRD – European Bank for Reconstruction and Development
15. EC – European Commission
16. EHS&S – environment, health, safety and security
17. EIB – European Investment Bank
18. EITI – Extractive Industries Transparency Initiative
19. ESP – Environmental and Social Policy
20. EU – European Union
21. EVD – Evaluation Department
22. FDI – foreign direct investment
23. IBRD – International Bank for Reconstruction and Development
24. ICMI - International Conference on Machine Intelligence
25. ICT – Information and Communications Technology
26. IFC – International Finance Corporation
27. IFI – international financial institution
28. KfW - Kreditanstalt für Wiederaufbau (German development
bank)
29. KIGAM - Korea Institute of Geoscience and Mineral Resources
30. MIGA - Multilateral Investment Guarantee Agency
31. O&M - operations and management
18 December, 2017 PUBLIC 2
Executive Summary
Mining is a global industry which can create jobs, spur innovation and bring large-scale investment and infrastructure over longer time
horizons. The Mining Industry is a large contributor to economic growth and social development in a number of the EBRD's resource-rich
countries of operations (COOs), such as the Kyrgyzstan, Mongolia, Kazakhstan, Russia and Ukraine. Local communities also frequently
benefit significantly from mining activities.
However, if managed poorly, mining operations can also lead to challenges including environmental degradation, displaced populations,
inequality and increased conflict. Over the last two decades we have seen major improvements in the global understanding of how mining
operations can be run more responsibly and with more attention paid to sustainability issues. Good practices to address environmental,
health, safety and social (EHS&S) issues have made significant advances and continue to evolve. Good governance, stable and
constructive institutional relations and good economic management have also been recognised as key issues that responsible companies
should address. In particular, the importance of adhering to the highest standards of transparency and reporting in extractive industries
(including mining) as enshrined in the principles of the Extractive Industries Transparency Initiative (EITI) is highlighted.
The Mining Strategy takes stock of these developments in the sector and identifies the remaining transition challenges in the COOs
through the six transition qualities. It also sets out the Bank's operational response and approach to environmental, health, safety, social
and gender inclusion issues. The Mining Strategy clarifies the rationale for the Bank’s continued involvement in the sector and reaffirms
the importance of mining in fostering transition. As such, the key cornerstones of the Mining Strategy are to: (i) Support competitiveness of
the mining sector by helping mining companies to increase operational efficiency and become more competitive; (ii) Support good
governance in the mining sector by promoting greater transparency and regulatory reform where necessary; (iii) Support sustainability of
the mining sector by promoting environmentally friendly mining methods and resource efficiency; (iv) Promote inclusiveness in mining
operations by supporting both the local servicing sector and the participation of women, young people and other inclusion target groups in
the workforce, thereby maximising the multiplier effect on local economies.
The Bank recognises the macroeconomic impact of mining, in particular in smaller economies. The Bank intends to reflect this in the
comprehensive approach that is developed through relevant Country Diagnostics and Country Strategies.
18 December, 2017 PUBLIC 3
Table of Contents
Scope and structure of the new strategy………………………………………………………………………………………..…….5
Introduction The Mining Strategy works in conjunction with all of the Bank’s governance policies…………………….………..6
Rationale for the Bank’s involvement in mining………………………………………………………….…....………..………….7
Section 1: 1.1 EBRD mining operations 2012 – YTD 2017…………………………………………………………………………………..…8
Reflection on the 1.2 Lessons learned in the last five years……………………………………………………………………………………….……..9
previous strategy
2.1 Impact of mining on the Sustainable Development Goals……………………………………………….………………10
Section 2: 2.2 Current market trends in the mining industry…………………………………………………………………….…………..11
2.3 Importance of mining in the economies of the EBRD countries of operations……………………….………..12
Mining sector
2.4 Challenges in the mining industry through the six transition qualities…………………………………………....13
context 2.5 EBRD mining projects and the six transition qualities……………………………………………………….………….…14
3.1 EBRD approach to mining activities……………………………………………………………………………….…..………….15
3.2 EBRD policy engagement in the mining sector……………………………………………………………….………………16
Section 3: EBRD 3.3 EBRD financial support for mining companies……………………………………………………………….……..……….17
approach and 3.4 EBRD financial support for value chain companies………………………………………………………….…………..…18
areas of 3.5 Address the investment gap facing exploration and development…………………………………….…………….19
engagement 3.6 Conclusion: what will the Bank do? (Performance Monitoring Framework)………………………………20-21
3.7 Working with other IFIs …………………………………………………………………………………………………….….……....22
EU Critical raw materials, Project/Policy Examples, Licenses/ESP, Public Consultation……………………24-29
ANNEXES Mining country snapshots………………………………………………………………………………………………….……….…30-46
18 December, 2017 PUBLIC 4
Introduction
Scope and structure of the new strategy
What activities are covered by the new
mining strategy? Section 1
• All COOs with particular attention paid to the metal Reflection on the previous strategy
and mineral rich countries, taking into account (lessons learned)
transition gaps.
• All industries involved in mining and processing of • What the Bank did in the last five years
• The lessons we learned from 23 mining
ores and minerals, including associated
operations in the last strategy period
industries, such as steel and cement, through
• Recurring messages from consultations with
cooperation between Natural Resources, a number of different industry bodies
Manufacturing and Services, and Financial
Institutions departments.
• Financing of coking coal projects.
• Only in exceptional circumstances, HSE&E
improvement projects at uranium and thermal
Section 2 New
coal mining operations. Mining
• All types of financial instruments used by the
Section 3
Mining sector context Strategy
Bank, including investments in financial (remaining and new EBRD approach and
intermediaries. transition challenges) areas of engagement
(how can we solve the
What is not covered? • Transition challenges in the challenges?)
mining industry
• Action for achieving best
• The extraction of hydrocarbons, such as oil and • Current market trends in
impact with various
gas, and the use of thermal coal, which are the mining industry
stakeholders
covered in the Bank’s Energy Strategy. • Importance of mining in the
• Strategic action plan for
economies of our COOs
• Uranium and thermal coal mining operations that technical cooperation
the Bank does not finance (other than health and
safety, operational safety improvements, or mine
remediation). 5
PUBLIC 5 5
Introduction
The New Mining Strategy will work in conjunction with
all of the Bank’s policies, procedures and strategies
Environmental Project
and Social Complaint
Gender Policy Mechanism Green
Equality Economy
Strategy Transition
Approach
The EBRD’s
Engagement with NEW Public
Civil Society: Information
Roadmap (2017-20) MINING Policy
STRATEGY
Domiciliation
Procurement
of EBRD
policies and
clients
rules
Economic Integrity
Inclusion Risk Policy
Strategy
18 December, 2017 PUBLIC 6
Introduction
Rationale for the Bank’s involvement in mining
For resource-rich COOs, the mining sector is a critical contributor to economic activity at local, regional and
Mining Mining
national levels, and has important downstream value-chain linkages in the economy. Mining also has Country as % as %
potential negative impacts when international environmental standards are not respected and economic GDP exports
diversification is not pursued. It is therefore important to develop mining activities sustainably and improve Mongolia 27 88
the resilience and integration of our COOs. This will be achieved by using new types of financing currently Kazakhstan 18 12
missing in the market, financial instruments to mitigate against commodity price shocks, and greater trade Kyrgyzstan 11 45
integration between new export markets and remote mining areas. The rationale for the Bank’s involvement
Russia 9 6
in mining is expected to be primarily based on the four transition qualities below:
Bulgaria 7 14
Serbia 6 1
Competitive: The mining sector in some of our COOs is often characterised by inefficient operational
practices. To improve the mines’ competitiveness, the EBRD will seek to increase private sector participation Poland 6 4
and the adoption of new technologies. The involvement of company restructuring in our projects will help Ukraine 5 8
achieve operational efficiency and lead our clients to be more cost-competitive. Morocco 4 8
Uzbekistan 4 1
Well governed: The EBRD will aim to finance projects that promote improvements in the corporate Armenia 3 44
governance and corporate social responsibility of our clients, and that also try to achieve compliance with Tajikistan 3 23
EITI principles at company and country level. These efforts will contribute to the application of good Albania 3 11
international governance standards and practices throughout our COOs. Greece 2 2
Montenegro 1 26
Inclusive: The potential positive impact of mining operations in our COOs is often restricted by limited Georgia 1 28
availability of technical skills, particularly in remote areas where mining operations are most prevalent. Our Turkey 1 2
projects would bring inclusive growth by promoting the economic participation of women, youth and
populations living in underserved areas, as well as by introducing high-quality training and transparent
supply-chain management. Source: Various government statistics
UNCTAD/SNL, Skarn Associates
* For further detail please see respective
Green: Mining operations and rehabilitation can have significant environmental risks that require careful Country Slides in “Annex G”
adaptation and mitigation at every stage of the project. Through supporting energy and resource efficiency, ** For further details on transition qualities
please visit:
EHS regulations and other environmental management systems, the Bank has an important role in http://www.ebrd.com/our-
values/transition.html
controlling the environmental impact of mining projects.
PUBLIC 7
Section 1: Reflection on the previous strategy
EBRD mining operations 2012 – YTD 2017
The breakdown below shows that over the last 5 years a majority of investments included financing of gold
and copper projects (mostly in Central Asia). This reflects continued buoyant trade in these commodities.
Mining annual business investment 2012 – Sept 17 investment by resource New business Current
700
583 700 641 2012 – Sept 17 Portfolio
600
600 24 31
500
EUR million
500 private projects active mining operations
EUR millions
400 428
286 400 1 €1,284 million
300 209 219
300 Public project Portfolio
200
200
100 56 114 101 €1,364 million €1,051 million
10 100
0 37 37 6 cumulative ABI operating assets
2012 2013 2014 2015 2016 2017 0
72/28% 95% of exposure in
Year
debt/equity split in ABI private sector
2012 – Sept 2017 investment by region Resource
Historical Investment
Southern Turkey Transition performance Breakdown Per Mineral/Metal
and Eastern
90 79
Med.
75 75 (1999 – Sept 2017)
South 80 71
Eastern 65 64 Gold 47%
70
Transition score
Europe 60 Copper 21%
60
Eastern Coal 9%
50
Europe and Chromium 5%
Caucasus
40
30 Zinc 4%
20 Limestone 3%
10 N/A Iron ore 3%
0 Aggregate 3%
Central Asia 2013 2014 2015 2016 Potash 2%
Mining services 1%
Expected Transition Impact Aluminium 1%
Portfolio Transition Impact Silver < 1%
Silicate < 1%
* For further details on transition achievements please refer to the latest EBRD
PUBLIC 8
transition report: http://www.ebrd.com/transition-report
Section 1: Reflection on the previous strategy
Lessons learned in the last five years
In the new strategy, the Bank is actively looking to use the lessons learned from the 23 mining projects, which
were financed during the last five-year strategy.
Learning
Challenges to implementation Key lessons
methods
• Some COOs are now at a critical point in depleting endowment
• Finite endowments • Issues that may influence government decision making (for example, in terms of
• State intervention licencing) or can lead to interference need to be carefully evaluated
Civil society
• Commodity price volatility • Effects of external shocks and client sensitivity to commodity prices need to be
engagement
thoroughly assessed
• The Bank’s comprehensive approach to EHS&S and strict implementation of the
Project ESP have proven to be a robust tool to address environmental and social issues,
• Effective implementation of monitoring and to increase client capacity to solve problems with governments
environmental health and safety (TIMS)
• To effectively ensure that health and safety standards at client level are met, it
and social practices (EHSS) is important to insist on strict implementation at the start of projects
• Engagement with civil society Discussion
with partner • Early engagement with civil society organisations has proven key to resolving
institutions potential conflicts
• Financing Clients’ and • Close cooperation with partner organisations increases leverage and can help
• Impact at a larger scale consultants’ encourage wider sector reform
feedback
• A solid monitoring framework and baseline assessment are required to
• Transition impact assessment
Sector adequately evaluate impact
reports and
• Capacity building with clients and studies • TA can increase technical capacity building in small to medium-sized projects,
governments and can be a roadmap to advance transition with SOEs
• Move towards international • TA can contribute substantially to increasing resource efficiency and reducing
standards environmental impacts, by improving standards at client level and enhancing
national regulations
PUBLIC 9
Section 2: Mining sector context
Impact of mining on the Sustainable
Development Goals
The mining industry impacts all 17 of the Sustainable Development Goals to varying degrees through mining
itself, social investments, taxes and investment of public revenues.
Source: “Mapping Mining to the Sustainable Development Goals: An Atlas”
Mining has the most direct impact on six goals:
• SDG15 (Ecosystem and Biodiversity Protection)
• SDG13 (Climate Action)
• SDG9 (Infrastructure, Innovation, and Industrialization)
• SDG8 (Employment and Economic Growth)
• SDG7 (Energy Access and Sustainability)
• SDG6 (Clean Water and Sanitation) For further details on SDGs please visit: http://unsdsn.org/wp-
content/uploads/2016/11/Mapping_Mining_SDGs_An_Atlas.pdf
18 December, 2017 PUBLIC 10Section 2: Mining sector context
Current market trends in the mining industry
Price and cost pressures Evolving Corporate and Social Responsibilities
• The end of the price super-cycle. This lasted through the first • EHSS requirements. These will become more challenging to meet as standards are
decade of 2000, with high metal prices and strong demand tightened. At the same time, mining is more likely to be taking place in sensitive
growth. China’s remarkable industrialisation drove metal markets: locations as declining ore grades require greater inputs and produce more waste.
its annual steel production grew eight fold to over 800 million The industry will need to deal with more stringent environmental permitting and
tons. As China slows and its growth becomes less infrastructure- higher upfront and operating costs to limit impacts.
and materials-intensive, so its demand for materials will slow and
could even fall for some products. Much of the world’s population • Communities increasingly expect mining companies to contribute to the local
still use low levels of metals per head, and the long-term potential economy and provide a springboard for local development, while ensuring human
for growth in global demand use remains high. However, the rights are respected. Mining companies are increasingly encouraged to incorporate
medium-term outlook is uncertain. relevant Sustainable Development Goals into their business operations. While some
areas are under companies’ control, many are not. These will require partnerships
• Cost pressures. Rich, low-cost resources will continue to be with government and others to make progress.
found. But the new mines needed to replace depleting mines and
meet growth will usually contain lower grade ore and pose more • Workforce dynamics. In many countries, miners are faced with aging workforces
challenges. Over a long period, advances in technology, and the need to broaden their recruitment, training and leadership programs, to
management and scale have helped offset such pressures, but meet not only diversity and equality expectations but also their own operational
this may be difficult to maintain. The COO countries have a larger needs.
share of higher-cost underground mines than their global peers. Government Policies
• Increased politicised sector and risk of fiscal nationalisation. The mining sectors in
• Exploration shortfall. Global exploration spending is highly most of the EBRD’s COOs have changed remarkably over the last 20 years and are
cyclical, and is failing to enable larger, higher-grade orebodies to largely privately owned and run. But as more countries depend on it, mining has
be discovered. Most of the COO countries have received a become a more politically sensitive sector and the resource nationalisation risk has
disproportionately low share of global exploration spend increased (often via taxes and fines). Too high a taxation and too great a level of
uncertainty deters needed exploration and investment.
Climate change and resource efficiency
• Climate change creates significant challenges for the mining and • Increased focus on critical raw materials. This has led to concerns about the secure
metals industry. These include flood and storm damage to market supply of some raw materials. The EU has a strategy to secure the supply of
infrastructure, transport disruption affecting supply chain a number of critical raw materials for European industries by aiming to remove
reliability and increased competition for climate-sensitive unfair trade barriers, foster European supply and improve efficiency of use.
resources, such as water and energy. Individual countries have adopted a number of initiatives. Such initiatives pose
• Increasing scarcity of resources. Adapting to climate change opportunities and risks for producing countries and investors. The rapid growth in
and a more efficient use of resources can improve efficiency, clean energy technologies, renewables, and hi-tech information technology caused a
productivity and sustaining the industry (four per cent of the substantial demand increase for a number of minerals and metals and for these
world’s power is used in crushers and grinders). critical raw materials. (See annex B).
18 December, 2017 PUBLIC 11Section 2: Mining sector context
Importance of mining in the economies of the EBRD
Countries of Operations (COOs)
Countries with high risk reliance
on mining
Countries with long-term mining
business potential
Countries with low to medium
mining business potential
Countries with leading
international mining companies
• 11 key mining countries: Greece,
Kazakhstan, Mongolia, Morocco, Russia,
Poland, Serbia, Tajikistan, Turkey,
Ukraine, Uzbekistan.
• 6 COOs have high reliance on mining
and an uncertain future in mining:
Albania, Armenia, Bulgaria, Georgia,
Kyrgyzstan and Montenegro.
• 9 COOs have limited mineral
endowments: Azerbaijan, Bosnia and
Herzegovina, Egypt, Croatia, Hungary,
FYR Macedonia, Romania, Slovak
Republic, Tunisia.
• 10 COOs host little mining activity due
to insignificant endowment: Belarus,
Cyprus, Estonia, Jordan, Kosovo, Latvia,
Lithuania, Republic of Moldova,
Slovenia, Turkmenistan
• 22 of the top 150 international mining
companies operate in 15 COOs.
18 December, 2017 PUBLIC 12Section 2: Mining sector context
Challenges in the mining industry through the six
transition qualities
Competitive Inclusive Resilient
• Mining costs: Prices of mining commodities • Access to employment and skills: Miners in • Financial Diversification: Many COOs
are usually set on international markets with our regions face challenges in attracting still lack access to financing
little company control. Ensuring efficient qualified and diverse talent into their instruments that can improve the
management and cost control are thus operations. Through the introduction of resilience of local capital markets
essential to the competitiveness of our training and work-based learning and improve diversification of
clients. The sector can be helped to be more opportunities in partnership with local funding, and/or alleviate maturity
competitive by investing in exploration for education institutions, miners can diversify or currency mismatches.
new resources, innovative new technologies their workforce, tap into new talent pools • Financial instruments, such as
and reform of state-owned companies and up-skill their staff. futures contracts, can help improve
(including privatisation). • Sharing benefits. Through the more the resilience of our clients, by
effective use of government revenues mitigating against commodity price
Well governed generated at national and local levels, and downturns.
improved supply chain and community
programmes, mining can bring benefits to Integrated
• Transparency: Mining can suffer from a lack of local populations in the least developed
transparency that undermines investor and public regions.
confidence, weakens governance and deters • Local and national links: Mining
investment. The EITI now includes transparency Green operations are most prevalent in
about payments to governments, contracts and remote areas. Supply and labour
beneficial ownership. By embracing initiatives relations can help integrate these
• Environmental footprint: Miners can
such as EITI, governments and companies can mining areas with the national
minimise their impact by promoting resilience
attract private investment to the sector and economy through transport
enhance development outcomes. to expected climate change impacts, as well infrastructure projects.
• Regulatory and Legal framework: Mining as through applying good international • International trade: New
companies often operate in weak legal and standards, such as minimising mine waste, infrastructure, products and
institutional frameworks. With better regulations, recycling water, handling chemicals more standards that facilitate exports to
and fair and predictable tax regimes, effectively and improving energy efficiency. non-accessible countries can
governments can provide an enabling enhance the global and regional
environment for the sector to develop. integration of our COOs.
18 December, 2017 PUBLIC For further details on transition qualities please visit :13
http://www.ebrd.com/our-values/transition.htmlSection 2: Mining sector context
EBRD mining projects and the six transition
qualities
Through its investments, the Bank strives to implement a number of processes in the mining industry that help advance
transition to a well-functioning market economy. Some examples of those are shown in the table below for each transition
quality.
Competitive Well governed Inclusive Green Resilient Integrated
International cross-border
Positive impact on the
Local employment, Application of good practice A new type of ownership, financing,
Company mining sector through the
including recruitment and policies (see Annex F) by financing that will spur management and
restructuring through application of good
training programmes for companies such as: the development of supply/services flows
operational efficiency corporate practices such
disadvantaged groups local capital markets through significant FDI
as:
Links with new Potential special role of Management and pollution
Transparent processes, New infrastructure /
suppliers and locally mining in bringing control through the New types of financial
through CSR reporting, products / standards
sourced raw benefits to remote, introduction of environmental instruments to
cyanide management and leading to exports to new,
materials (investing underserved regions and management systems and mitigate against the
health and safety currently inaccessible
in upgrading value reducing regional disclosure of relevant impact of price shocks
management markets
added processing) inequalities environmental data
Climate mitigation and
Contract and tax payments Use of mining infrastructure
Introduction of Gender-diversity focus in adaptation actions (eg:
disclosure (see Annex E), (eg: road transport) by local
efficient new employment, supply chain resource efficiency ) to
and compliance with EITI businesses and
technology (eg: heat management and manage the impacts of
principles communities
recovery system) community programmes climate change (including
CO2 emissions evaluation)
Helping to privatise Partnerships with Partnerships with
Improvement of energy
the operations of a communities and communities and
efficiency and EHS
formerly state-run governments to enhance governments to enhance
regulations
mine mine impacts mine impacts
Developing tailored Appropriate closure
corporate governance procedures and rehabilitation
action plans of mined areas
18 December, 2017 PUBLIC 14Section 3: EBRD approach and areas of engagement
EBRD approach to mining activities
Country diagnostics shows scope for policy actions to enhance transition. The Bank’s most effective focuses are on (i) countries
where mining is important today but at risk due to lack of new investment/exploration, and (ii) countries with high mining
potential. The EBRD’s efforts will achieve the best results when working effectively with governments in what can be a politically
sensitive sector.
Mining countries
Country diagnostics
The country diagnostic tool will look at the mining
sector’s role in a country’s economy (framed within
Countries with high Long-term viable and the six transition qualities). The tool will also focus on
exposure to unviable important mining the risk and potential relative to ore endowment, state
mining endowment countries
budget dependency, size of domestic value chain,
licence regime, EITI principles and EHSS in mining.
Strategic mining sector challenges
Government
EBRD value added
willingness
Investment
Policy engagement
Recommendations for Country
Strategies
Technical cooperation
and fee-based advisory
18 December, 2017 PUBLIC 15Section 3: EBRD approach and areas of engagement
EBRD policy engagement in the mining sector
Countries with a good business environment, fair mining potential and willingness to address barriers to new
exploration and development are likely to be good opportunities for EBRD technical assistance. To maximise the
impact of these opportunities, EBRD helps induce or reignite reforms through 3 different types of policy engagement:
Business Environment
Type I: Policy advice is provided by or under
the leadership of EBRD experts on policies
Weaker Stronger and legal/regulatory frameworks, based on
further analytical work. The EBRD offers policy
Higher
Kazakhstan,
Mongolia, Russia. options to authorities who are committed to
Serbia Ukraine, Greece, Poland, reform in the mining industry and who have
Uzbekistan, Turkey, requested such services from the Bank.
Tajikistan,
Resource Potential
Morocco,
Type II: Capacity-building technical
Albania, Bulgaria,
assistance to institutional counterparts so as
Armenia, to support policy reform implementation.
Georgia, FYR
Egypt, Jordan
Macedonia,
Kyrgyzstan
Montenegro, Tunisia,
Type III: Reform advocacy aims to further
general or particular reform agenda points. It
Croatia, Cyprus,
provides analytical evidence of problems,
Belarus, Moldova, Azerbaijan, Bosnia & Estonia, Hungary,
shares knowledge on good practices and
Lower
Turkmenistan Herzegovina, Kosovo, Latvia. Lithuania,
Romania Slovenia, Slovakia 'nudge thinking' and gauges reform appetite
and commitment.
18 December, 2017 PUBLIC 16Section 3: EBRD approach and areas of engagement
EBRD financial support for mining companies
The industry has many different miners serving a diverse demand for about 300 types of metal and 4,000
types of mineral. The industry description below is simplified and shows the EBRD’s financial support.
Minerals and metal cost leaders Critical raw materials
Key success factors: Most miners in the EBRD Key success factors: Supply risks are higher for a
• Economies of scale region extract a few • Resource control number of industrial minerals
Narrower range
• Mining cost control metals or industrial • Supply chain control (eg: magnesia, graphite,
• Efficiency, productivity minerals for sale as world • Supply risk mitigation fluorspar) and Rare Earth
• Outsourcing services • Material and metal Metals. These are key to many
The mining company’s product range
bulk commodities. Some
• Digitalisation, robots such metals and minerals stewardship industries and renewable
• Attracting young labour are dominated by global Typical EBRD finance: energy technologies. The EC is
Typical EBRD finance: players (eg: iron ore, • Exploration finance facilitating supply to EU. This is
• Project finance borates, talc). an emerging opportunity for
miners in the EBRD region.
Construction materials “Know-how minerals”
One-stop shop for advanced industrial applications
The EBRD region has Key success factors: Many industrial minerals are sold
Key success factors:
many dispersed mines • R&D in mineral use to
• Economies of scope with technical support (involving
supplying a wide scope of
• Efficient logistics control develop new markets deep in-house R&D) to meet user
minerals used locally for
Wider range
• One-stop shop • Customer partnerships needs. Innovative supplier-client
construction materials. • Deepen the R&D
• Build brand, service product partnerships are only
Typical EBRD finance: Such mines are mostly ecosystem with high- found among miners of industrial
owned by construction
• Multi-product facility tech clients and minerals and not really seen
material groups operating
• M&A facility university research among metal miners. This mining
large distribution networks Typical EBRD finance: segment is currently small in the
and ‘one-stop shops’ for • FDI risk comfort facility EBRD region. Attracting FDI
minerals and rocks. could help grow the segment.
Large bulk Product market Small niche
18 December, 2017 PUBLIC 17Section 3: EBRD approach and areas of engagement
EBRD financial support for value chain companies
Universal excavation and buildings works Tailored installations services and mine O&M
Key success factors: Universal works are mostly Tailored installations and mine
• Working capital Key success factors:
provided by integrated • Resilient balance sheet O&M require very high expertise
• Geo presence companies providing and close relationships with
• New technologies • Deep mining know-how
construction services to • Alliances / partnerships technology vendors. Mine
• Attracting younger
Services
various industries, • Bear hugs with vendors contracting usually involves a
Supplier’s target mining activities
skilled labour including mining. Local longer-term O&M contract,
Typical EBRD finance: • Attracting skilled talent
SMEs are very often Typical EBRD finance: which only the most resourceful
• WC finance and back- subcontracted and add contractors can handle. Mine
up for guarantees • O&M contract finance
local impact to projects. contracting can be an effective
• SME contractor credit way to turnaround an SOE.
lines
Universal construction OEMs Mining-specific OEMs
Mining-specific OEMs are more
OEMs in this segment Key success factors:
Key success factors: vulnerable to the sector’s
are more resilient to the • R&D into BAT with clients
• Dealership coverage cyclicality and want a bear-hug
mining cycle. Some are for productivity
• After-sales support relationship with solid miners.
able to provide very • After sales support
• Risk diversification These niche OEM players also
sophisticated vendor • Resilience to cyclicality
Equipment
• Upgrade to latest pursue higher resilience
finance for miners and • BAT supplier of choice
automation through offering adjacent
offer equipment with the • Modular systems
• 3 party vendor finance
rd businesses, such as energy
latest digitisation and • 3rd party vendor finance
Typical EBRD finance: and water treatment,
automation. This is Typical EBRD finance:
• Fleet and trade finance maintenance and training
crucial to productivity in • Project finance
services to support equipment.
mines.
General construction Mining activity focus Mining tailored
18 December, 2017 PUBLIC 18Section 3: EBRD approach and areas of engagement
A combination of technical cooperation and finance is needed to
address the investment gap facing exploration and development
Ore exploration Mine development
Continued exploration investment Metals production
• Crucial for long term metals supply • Global competitiveness is crucial: resource quality, logistics and infrastructure costs, economies of
• Vital for realising the potential of under-explored scale, efficient production and cost control
EBRD countries • Most metals trade at international prices: product differentiation and offtake deals and similar are rare
• High-failure risk, lengthy pay-back; needs right • Financial structure is important to develop large long-term projects and deal with the price cycle
terms and conditions to attract risk capital (5-10 • For a few commodities (e.g. aluminium and iron), businesses can be run as integrated chains
years to discover and develop a new deposit)
• Role of large and small companies varies between Potential roles for the EBRD:
products and over time • Equity, project finance loans and mobilisation
• Support for good practice and standard-setting in sustainability and enhancing local benefits
Potential roles for the EBRD: • Encourage simplification, transparency and attractiveness of COO mining codes
Focused policy support: • Encourage governments to use reputable advisors in negotiations with mining companies
o Support national geological data hubs
o Support countries in developing the best Construction materials
legislation on subsoil use • Most often focused on supply to local or national markets
o Support COOs in promoting their exploration • Often small scale with some large-scale global operators in sectors such as cement
potential to investors; level the playing field for
licensing and permitting Potential roles for the EBRD:
o Build institutional and technical capacity of • Limited when small scale and needs to meet EBRD requirements. Some potential with appropriate
relevant government bodies large operators
o Encourage governments to use reputable
advisors in negotiations with mining companies Fertilizers
o Support equity investments to fund exploration • Relatively few large private companies and a strong involvement of state companies across regions
and development-appraisal projects.
o Indirectly fund exploration through support of Potential roles for the EBRD:
mining company programmes that include • Financing private expansions, state privatisations and energy efficiency
exploration components
18 December, 2017 PUBLIC 19Section 3: EBRD approach and areas of engagement
Conclusion: what will the Bank do?
Performance Monitoring Framework
COMPETITIVE: Support competitiveness of the mining sector by helping mining companies to reduce costs and increase output
Tracking indicators
Specific objectives Activities Outputs Outcome
(for relevant countries tracked in Country Strategies)
1.1 Innovative or new Number/volume of investments financing innovative Number of clients (and qualitative account)
technologies and processes that technologies and processes in mining introducing innovative/new technology
lead to cost reductions Number/volume of TCs supporting introduction of Average increase in profitability/total number of
introduced Investments new technologies clients reporting increase in profitability
TCs designed and Number/volume of investments supporting Number (and qualitative account) of mining
1.2 Improved operational funded organisational restructuring of mining companies companies undergoing restructuring
efficiencies in mining through
Capacity building Number/volume of relevant TCs and capacity-building Improved performance or efficiency metrics after
organisational restructuring
Policy engagements activities restructuring
External partnerships Number/volume of investments designed to support Number (and qualitative account) of mining
1.3 Increased private-sector privatisation and private-sector-led mining companies undergoing privatisation/increased private
ownership and participation in Number/volume of TCs supporting private-sector sector
mining participation Improved performance or efficiency metrics after
Number of policy dialogue activities privatisation/increased private sector involvement
WELL GOVERNED: Support governance in the mining sector by promoting transparency and regulatory reform where necessary
Number/volume of investments supporting improved Number (and qualitative account) of clients
2.1 Improved transparency transparency, and environmental and social introducing better disclosure/transparency (EITI,
standards in mining, including standards in mining environmental and social, etc.)
on environmental and social Number/volume of TCs supporting better standards Improved transparency in mining on a country level
aspects Investments Number of policy dialogue activities aimed at (qualitative account/ number of countries adopting
TCs designed and improving transparency in mining at a country level EITI)
2.2 Improved corporate funded Number/volume of investments aimed at improving
governance in mining Capacity building corporate governance, including through adopting
Number (or qualitative account) of supported mining
companies through action plans Policy engagements CGAPs
based on OECD standards clients that improved their corporate governance
Advocacy Number/volume of TCs and capacity-building
(implementing CGAPs)
External partnerships activities supporting clients’ corporate governance
improvements
2.3 Improved institutional Improved institutional capacity of supported
Number/volume of TCs supporting regulatory and
capacity of mineral bodies and mining/mineral bodies (qualitative account)
institutional improvements in mining
enhanced regulatory Improved regulatory environment in mining in
frameworks Number of policy dialogue activities
supported countries (qualitative account)
Note: (i) The Performance Monitoring Framework has been designed to align with the Bank’s approach to results measurement. Outcomes tracked across all activity types and aggregated at country level where
PUBLIC 20
relevant, based on a Country Strategy Results Framework under a relevant transition quality.Section 3: EBRD Approach and Areas of Engagement
Conclusion: What will the Bank do… (continued)
Performance Monitoring Framework
GREEN: Support sustainability of the mining sector by promoting environmentally friendly mining methods and resource efficiency
Tracking indicators
Specific objectives Activities Outputs Outcome
(for relevant countries tracked in Country Strategies)
3.1 Reduce environmental impact Number/volume of investments financing good “green” Total CO2 reduced or avoided (ton/yr)
and resource intensity through technologies and practices in mining Total energy saved (GJ/y)
financing good available Investments Number/volume of TCs and capacity building aimed at Number of clients with improved environmental
technologies and practices introducing green technologies and practices in mining management practices and standards (eg: ICMI)
TCs designed and
funded Number/volume of investments supporting improved water and
3.2 Promote good-practice water Total water saved (m3/y)
Capacity building waste management in mining
and waste management Total material reduced/recycled (tons/y)
Advocacy Number/volume of relevant TCs and capacity-building activities
Policy engagements
External Number/volume of investments designed to support sustainable
• Number (and qualitative account) of mines operating in
3.3 Support environmentally partnerships mining closure and remediation of contaminated sites
line with international standards
responsible mine remediation and Number/volume of relevant TCs, capacity-building and advocacy
• Number (and qualitative account) of mines operating in
remediation of contaminated sites activities
line with good practice mine closure plans
Number of relevant policy dialogue activities
INCLUSIVE: Promote inclusiveness in mining operations by supporting the local servicing sector, facilitating female and youth and other inclusion target groups’
participation in the workforce and maximising the multiplier effect on local economies
Number/volume of investments aimed at improving access to
4.1 Increase local impact and Number of clients/suppliers/distributors with improved
skills or standards enhancing economic opportunities for
inclusiveness of operations and standards (HR, procurement etc.)
underserved groups across the value chain
supply chains through support of Number of new suppliers offering training and work-based
Number/volume of TCs supporting improved skills or standards,
action planning in mining learning opportunities to a specific target group
including capacity-building for suppliers
Investments
Number of people (F/M) target group employed by the
4.2 Increase access to skills TCs designed and Number/volume of investments supporting improved access to
development and employment client
funded skills development and employment opportunities for inclusion
opportunities for inclusion target Tailored training/capacity building/work-based learning
Capacity building target groups
groups programmes developed and implemented
Advocacy Number/volume of TCs supporting improved skills or standards
Number of people receiving new/improved skills as a
Policy engagements at company level
result of training, by inclusion target group
External
Number of cooperation or partnership agreements
partnerships
Improving quality of institutions for employment and education established or strengthened between private sector and
4.3 Improve quality of institutions MOU signed with relevant government authority education providers
for employment and education Number/volume of TCs supporting new or strengthened Number of improved legal, institutional or regulatory
partnerships between private sector and education providers frameworks in target areas (removing restrictions for
employment of women and youth in mining, etc.)
Note: (i) The Performance Monitoring Framework has been designed to align with the Bank’s approach to results measurement. Outcomes tracked across all activity types and aggregated at country level where
PUBLIC 21
relevant based on Country Strategy Results Framework under a relevant quality.Section 3: EBRD Approach and Areas of Engagement
Working With Other IFIs
• In Mongolia, the World Bank (IFC, MIGA, IBRD)
Partners Geography Policy participated in financing Oyu Tolgoi. ADB and the World
Bank are also active in financing regional infrastructure
for mining, and extensive policy dialogue on
Competitiveness
EU Countries
transparency, licencing and regional inclusion. Active
Governance
Kazakhstan
Integration
Kyrgyzstan
Resilience
Caucasus
Other CIS
Mongolia
Inclusion
bilateral agencies are from countries including
SEMED
Turkey
Green
CEE
Germany (GIZ, BGR, KfW), Korea (KIGAM), Canada,
ADB €P P Australia and Czech Republic.
World Bank P P €P P P P P • In the Kyrgyzstan, the Bank is working closely with
USAID, DFID and the World Bank on EITI
IFC € € € € € €
implementation assistance.
AfDB €P €
• In Kazakhstan, apart from the EBRD there are no other
P
Bilaterals* P € €P P P P P IFIs currently involved in financing mining projects or
engaged in policy dialogue with the government.
EBRD €P €P € € €P € € €P € €P P P P
• In SEMED, IFC is active in financing junior mining
projects in Morocco. AfDB has financed OCP in
€ Morocco and is engaged in policy dialogue on
Area of significant Focus mostly
investment on private sector
P
Area of significant
policy dialogue
Focus mostly on
public sector
governance through the African Legal Support Facility.
• In Central and Eastern Europe, the rest of the CIS and
*Including: USAID, DFID, FMO, KfW, DEG, BGR, Australian AID, CESO, Government of
Canada, GIZ, Government of Finland, Swiss Agency for Development and Cooperation, Turkey, IFC and the EBRD have been the only IFIs
KIGAM, Czech Republic, BGR, Eurasian Development Bank.
financing projects. Policy dialogue is limited.
• AIIB and EIB have no outstanding financing for mine
development in EBRD countries of operations.
PUBLIC 22Annexes
Annex A: General messages from public consultations
Annex B: Critical raw materials for the EU
Annex C: Two examples of past EBRD projects
Annex D: An example of policy dialogue: economic and gender inclusion in natural resources (Kazakhstan)
Annex E: Subsoil contracts and licenses
Annex F: The Environmental and Social Policy and The Extractive Mining Industries Strategy
Annex G: Mining snapshot country slides:
1. Albania 10. Montenegro
2. Armenia 11. Morocco
12. Poland
3. Bulgaria
13. Russia
4. Georgia
14. Serbia
5. Greece
15. Tajikistan
6. Kazakhstan 16. Turkey
7. Kyrgyzstan 17. Ukraine
8. Mongolia 18. Uzbekistan
18 December, 2017 PUBLIC 23Annex A
General messages from Public Consultations
Feedback from discussions with civil society groups, industry bodies, mining companies and general public
can be summarised as follows:
• There is a growing importance of climate change to the industry, which pose threats and opportunities.
• The industry must focus more to align outcomes with sustainable development goals (SDGs).
• Miners should work together to advance reforms in in the fields of trade, education and infrastructure.
• Transparency requirements from IFIs, EITI and Stock Exchanges have important impacts, albeit uneven.
It is particularly important to advance disclosure on-line, which are easy to find and review.
• EBRD should:
o Support private infrastructure with mines as anchor tenants operated as open access.
o Robustly support transparency, human rights and local civil society.
o Recognize progress made by countries to encourage reformers.
o Take account of climate change and encourage governments to take a long term strategic approach.
o Require good cost benefit analysis by governments while EBRD should include use of carbon shadow
costs, full mine life analysis and account for cumulative impacts from multiple developments.
o Work with smaller companies less able to manage complex and competing issues.
o Account for water issues including catchment area impacts, conflict avoidance and bio-diversity loss.
o Take a broad approach to gender issues in mining including management and entrepreneurship.
18 December, 2017 PUBLIC 24Annex B
Critical raw materials for the EU
The EU’s Raw Materials Initiative (RMI) is a response to the challenges of accessing raw materials. The three parts of the RMI are:
(i) ensuring a level playing field for access to resources in third countries; (ii) fostering a sustainable supply of raw materials from
European sources, and (iii) boosting resource efficiency and promoting recycling.
Sources of critical raw materials imported
for EU-based industries
Horizon 2020 is the biggest ever EU research and innovation
programme. Nearly €80 billion of funding is available over
seven years (2014 to 2020) in addition to the private
investment that this money will attract. It promises
breakthroughs, discoveries and world-firsts by taking great
ideas from the lab to the market.
18 December, 2017 PUBLIC 25Annex C
Two examples of past EBRD projects
Oyu Tolgoi copper mine, Mongolia Lydian Amulsar gold mine, Armenia
Project snapshot A twelve-billion-dollar mine with over 50 years mine life and peak A 500-million dollar mine with annual production of about 250,000
annual output of more than 500,000 tons of copper. Gold and other ounces of gold over 10 years. Exploration began before 2007 and
metals are also produced. Decades of exploration led to ore being first extractions scheduled for 2018.
discovered in 2001, with the first extractions from the mine 13 years
later.
A 1.2 billion-dollar EBRD project loan with USD 800m syndicated to EBRD equities with a total of CD 16.3m over 2012-2016.
EBRD roles Cooperation with IFC.
commercial banks. Cooperation with IFC, MIGA and ECAs.
Expected transition Competitive Competitive
impacts • An increase in private-sector copper production in Mongolia to • One of the first private-sector mining investments in Armenia,
over 60 per cent which constitute 1 per cent of GDP. The investments should lead
• Efficiency improvements in mine operations resulting in a to more competitive gold production, the success of which should
decrease in the average cash cost of production encourage further private investment
• First use of block-cave mining technology • Extensive local supply chain through linkages with local suppliers
and contractors
Inclusive
• Establishment of mining vocational centres, professional training Well governed
courses and colleges • Payment to the government and terms of that payment have
• Greater employment of locals in the construction and mining- been made public
related workforce • Support for Armenia’s compliance with EITI
• Application of good-practice E&S standards that meet national,
Well governed EBRD and IFC standards
• Compliance with EITI • Certification under the international cyanide management code
• Higher standards set for E&S and community programmes,
including capacity building on biodiversity protection and
mitigating biodiveristy depletion
Particular project Extensive political debate about the terms, revenue management and E&S management of water and other local amenities. Short mine
issues E&S approach for this large scale project. life, if no further resources are discovered*
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