mopani copper mine - a scandal in zambia

8/7/2019 Mopani Copper Mine - A Scandal In Zambia

1/15

The Mopani

copper mine,Zambia

How European

development moneyhas ed a mining scandal

December 2010


2/15

The mission o Counter Balance: Challenging the EIB is to make the European InvestmentBank an open and progressive institution delivering on EU development goals and promotingsustainable development to empower people aected by its work. The Counter Balance coalitionconsists o the ollowing NGOs: CEE Bankwatch Network (Central and Eastern Europe), lesAmis de la Terre (France), urgewald (Germany), Campagna per la Riorma della Banca Mondiale(Italy), Both Ends (Netherlands), Bretton Woods Project (United Kingdom).

CTPD (Centre or Trade Policy and Development) is an NGO with the objectives o inuencing

pro-poor trade reorm at national, regional and multilateral levels as well as acilitating or theparticipation o various stakeholders - including member organizations - in ensuring that tradeis used as tool or poverty eradication. CTPD carries on advocacy work, monitoring o policies,and awareness raising activities related to trade issues. The network gathers 12 memberorganizations in Zambia and regularly collaborates with European NGOs.

Les Amis de la Terre is an association or the protection o Man and the environment. Createdin 1970, the organization participated in the environmental movement in France, and in theormation o the largest global environmental network, Friends o the Earth International, withmore than two million members in 77 countries. Les Amis de Terre engages in advocacy witheconomic and political policy makers and policy and raises public awareness o environmentalissues. It relies on a network o 30 local groups.

CONTENTS

1.

2.

2.1

2.2

2.3

2.4

3.

3.1

3.2

3.3

3.4

4.

4.1

4.2

4.3

4.4

5.

6.

7.

INTRODUCTION

ZAMBIAS MINES: A KEY SECTOR FOR DEVELOPMENT?

The privatization o Zambias mines: opacity and corruption

A tax system that deprives the state o mining profts

Communities heavily impacted by privatization

Environmental impacts poorly managed

MOPANI: MINIMUM TAX REVENUE AND MAXIMUM SOCIAL

DEGRADATIONA minimal contribution to the Zambian budget

Public services abandoned

Forced expulsions and violation o human rights

Temporary, dangerous and poorly paid jobs

DISASTROUS ENVIRONMENTAL IMPACTS

An essentially environmental project?

Mopani and air pollution

Acid water pollution

Contamination by mining waste

CONCLUSION

RECOMMENDATIONS

ANNEXES

5

7

7

8

9

11

1212

13

15

16

18

18

19

20

21

23

25

26

Written by:

Anne-Sophie Simpere - Les Amis de la TerreEdited by:

Greig Aitken - CEE Bankwatch NetworkTranslated by:Liz LibbrechtPhoto credits:Petr Hlobil, CEE Bankwatch Network, Anne-Sophie Simpere

Layout:Ola Dolinska

December 2010

This publication was produced with the nancial support o the European Commission. The content othis document is the sole responsibility o CEE Bankwatch Network and does not necessarily refectthe position o the European Union.


3/15

The Mopani copper mine, Zambia. How European development money has ed a mining scandal.

5

The European Investment Bank (EIB) is the fnancialinstitution o the European Union (EU). It invests inprojects that contribute to achieving the EUs objectives.In Arica, the EIB supports European cooperation anddevelopment policies. It acts on a mandate rom theCotonou Agreements, the top priorities o which arepoverty alleviation, sustainable development, and thegradual integration o the Arican, Caribbean and Pacifc(ACP) states into the global economy1.

When we examine the EIBs activities in Arica, we fndthat it invests millions o Euros in large mining projects.Since 2000, loans amounting to 650 million Euros havebeen granted to mining companies on the continent.

From 2000 to 2007, over 80% o EIB unding in Zambiawent to the mining sector2.

1 See the EIB website: http://www.eib.org/about/cr/responsible/development/acp/index.htm?lang=en

2 See the EIB website: http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=en

The European Investment Bank: a catalyst or investment(s)

Founded by the Treaty o Rome in 1958, the EIB is not well knownand keeps a low profle, even though it manages a loan portolioo EUR 79 billion (2009). Its shareholders are the member stateso the European Union who contribute to its capital. The banksorientations are thereore decided by the European fnance ministerswho orm the Board o Governors. France, UK, Germany and Italy arethe our largest shareholders o the EIB and have a decisive positionwithin the bank.

Although its initial mission was to invest in Europe, the EIB hasgradually expanded its activities throughout the world. It fnancesprojects in Arica, in particular, where it has a development mandate.It thus claims to support projects that contribute to the achievemento the objectives o the Cotonou Agreement and the UN MillenniumDevelopment Goals (MDGs).

EIB unding is o particular interest to frms as the bank has atriple-A rating on the fnance markets and can supply them withlong-term fnancial resources either not available at all or atleast not available on terms suitable to e nsure the sustainability oprojects, while oten having a strong catalytic eect to attract othersources o unding1. Thus, apart rom particularly avourable loanconditions, the EIBs involvement sends a strong signal to privateinvestors, who will perceive the projects as less risky because theyare supported by this public institution.

Since 2007, Les Amis de la Terre has been campaigning to challengethis international fnance giant and to redirect its investments.They have also participated in the creation o Counter Balance:Challenging the EIB, a coalition o NGOs in the banks shareholdercountries, set up to put international pressure on the institution.

1 See the EIB website: http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=en

Even though the mining industry is highly controversial,the EIB considers that these investments can contributeto development, mainly because they create tax revenueor the host states and jobs or the local populations. Itrecognizes that the mines can have heavy environmentalimpacts, but claims that it pays particular attention toenvironmental sustainability, and strong attention tothe social and governance acceptability o projects.3

Focus on a controversial project: Mopani

The present report examines the real impacts on

development and the environment o a project unded bythe EIB: the Mopani copper mine in Zambia.

This mine belongs to the consortium Mopani CopperMine (MCM), whose main shareholder is the Swiss frmGlencore. MCM owns the mines at Nkana and Muulira,both situated in the Copperbelt, a mineral-rich areastretching across a part o Zambia and the DemocraticRepublic o Congo. The Muulira mine borders on thetowns o Kantanshi, Kankoyo and Muulira. It consists oan underground mine, a concentrator, a smelter anda refnery.

In February 2005 the EIB granted a EUR 48 millionloan to MCM or the construction o a new smelter atthe Muulira mine. The aim o this loan was to make itpossible to reduce pollution in the area by cutting dustand sulur emissions, to saeguard jobs, and to alleviatepoverty through economic growth and the spin-o oMCMs activity (wages, taxes, social services)4.

Our report was drawn up ater two missions to Zambia,in March 2009 and August 2010 with the NGO Center

3 Les Amis de la Terre, Banque europenne dinvestissement : six ansde fnancement du pillage minier en Arique, November 2007.

4 See the EIB website: http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=-en

1.Introduction

Map o Muulira. The mine is surrounded by three towns :

Kantashi, Kankoyo and Muulira.


4/15

The Mopani copper mine, Zambia. How European development money has ed a mining scandal.The Mopani copper mine, Zambia. How European development money has ed a mining scandal.

6 76

or Trade Policy and Development (CTPD). We heldinterviews with Zambian government ofcials, localcouncillors, miners at MCM, and inhabitants o Muulira.We visited the smelter fnanced by the EIB and the areaaround the mine, especially the town o Kankoyo.We also collected ofcial reports and studies by localand international NGOs. Unortunately the managers oMCM reused to meet us.

Our study also draws on inormation communicated bythe EIB on the mining projects that it fnances (oundon its website and in our correspondence letters andemails with the bank). Note that this inormationis oten limited. For instance, when we asked the

EIB to supply us with environmental impact studies,presentation documents and project monitoringreports, we received nothing but 3-4-page descriptivesummaries5.

On the basis o these data, our study leads us to

conclude that:

The mining context in Zambia does not enable us tobelieve that the Mopani project is likely to supportthe countrys development

The project is benefting neither the Zambian statenor the local communities

The project has disastrous environmental impacts.

The positive eects o the project that were announcedhave thereore not been orthcoming, and its social andenvironmental impacts have been negative. Even worse,in this Zambian context, this situation was oreseeable.

The Mopani project is only one example o the manymining projects that have received EIB support.

Without being identical, many o the acts recorded atMopani apply to other cases. Thereore, roma broader perspective, this analysis raises the questiono the impacts o EIB-unded mining projects on theenvironment and development in general.

Our conclusions suggest that the EIB is no longerendeavouring to meet its objective o implementingthe EUs cooperation and development policies. Itis thereore necessary to urgently reorm the EIBsactivities and the modalities o European unding ordevelopment.

5 EIB, Summarized description o the project (see Annex 1).

Mining is a key activity in Zambia. It is important to beaware o its history and current situation i we are tounderstand the situation at Mopani.

1. The privatization o Zambias mines:opacity and corruption

Whatever the weaknesses o Zambias negotiators,there is no excuse or massive multinational investors toblackmail one o the worlds poorest countries to providespecial concessions rom its national laws.Alastair Fraser and John Lungu,For Whom the Windall?

Zambia is an inland country in southern Arica that isparticularly rich in mineral resources, especially copper.At the end o the 19th century, the country was colonizedby Cecil John Rhodes British South Arican Company(BSAC) which mined its mineral wealth. The mines weresubsequently taken over by two mining giants, RoanSelection Trust (RST) and Anglo American.

In 1964 Zambia gained its independence and in 1969the government announced the nationalization o themining industry. The state took over a majority share inall the countrys mines, through two national companiesthat merged in 1982 to orm the Zambian ConsolidatedCopper Mines (ZCCM).

At the time, ZCCM was responsible not only or miningbut also or public and social services throughout theCopperbelt: maintaining the towns, health, education,housing, recreation, etc. Through a system sometimesqualifed as paternalist, ZCCM acquired crucialimportance in the region, where it was present inall aspects o the lives o its employees andneighbouring communities.

At the time, on a macro-economic level, Zambiaremained a moderate-income country with a GDPhigher than that o Brazil. But with an economy basedessentially on copper mining and exports, it was hit veryhard by the oil crises and plummeting copper pricesin the 1970s. The result was a drastic increase in itsdebt and, in the 1990s, structural adjustment policiesimposed on it by its fnancial backers.

Thus, under the inuence o its lenders especiallythe World Bank and ollowing the election o a newgovernment in 1991, Zambia decided to dismantle andprivatize its mines. The price o copper was very low

at the time, and the country was heavily in debt. MrsEdith Nawakwi, ormer fnance minister responsibleor supervising the privatizations, commented: Wewere told by advisers, who included the InternationalMonetary Fund and the World Bank, that not in mylietime would the price o copper change. Theyput production models on the table and told us thatthere [was] no copper in Nchanga mine, Muulirawas supposed to have fve years lie let and all theproduction models that could be employed were showingthat, or the next 20 years, Zambian copper would notmake a proft. [Conversely, i we privatised] we wouldbe able to access debt relie, and this was a huge carrotin ront o us like waving medicine in ront o a dying

woman. We had no option [but to go ahead]6

.

From 2004, the price o copper shot up to record levels,even topping the 7,000 dollar per ton mark: a 350%increase compared to prices at the time o privatization.

The process o privatization o the mines rom 1997

to 2000 was characterized by Zambias weakness anda context o rampant corruption. Frederick Chilubaspresidency (1991-2001) has been called the decadeo plundering. In power during the privatization, thisormer president was prosecuted and sentenced ormisappropriation o unds by the London High Court in2007. The sentence will not be applied in Zambia.

In this context, privatization negotiations took place inopaque conditions, resulting in the mines being sold o.Dr. M. Mpande, proessor at the University o Zambia(Lusaka) and ormer vice-minister o mining, explained

6 ACTSA, SCIAF and Christian Aid, Undermining Development?Copper mining in Zambia, October 2007.

2. Zambias mines: a key sectoror development?

EIB loans in Zambia 2000-2010

The EIBs lending policy in Zambia is striking. Between2000 and 2010, ten out o ourteen projects involved themining industry. This comes down to a share o 81%o the total amount o the EIB loans engaged in thisperiod.For some o these projects, such as the KansanshiCopper Mine, the 8th largest copper mine 1, anEnvironmental Impact Assessment is untraceable.Neither the EIB nor the Environmental Council oZambia (ECZ) was able to provide this document.Ater pressure rom civil society organisations theEIB published only a two-page Project SummaryInormation saying Mine and plant design appearsto be compliant with international best practice andnational laws.2

EIB lending in Zambia to the mining sectorbetween 2000-2010

Project: Munali Nickel Mine ProjectLoan amount: 29.5 million eurProject description: Development o new underground nickel mine andconstruction o processing plant in Munali, south o LusakaSignature date: 24th April 2007

Project: Small scale mining sector loan (sysmin)Loan amount: 8,5 million eurosProject description: Financing or small and medium-scale ventures in thenon-traditional mining sectorSignature date: 13th December 2006

Project: Lumwana Copper ProjectLoan amount (in 3 dierent contracts): 85 million euros (in total)Project description: Development o new copper mine near Lumwana inNorth-Western Province o ZambiaSignature date: 29th November 2006

Project: Mopani Copper ProjectLoan amount: 48 million eurosProject description: Rebuilding and modernisation o Muulira copper smelterSignature date: 25th February 2005

Project: Kansanshi Copper MineLoan amount: 34 million eurosProject description: Development o open-pit copper mine in Kansanshi,north-west ZambiaSignature date: 11th December 2003

Project: Bwana Mkubwa Mining Expansion

Loan amount: 14 million eurosProject description: Expansion o a copper production acility near NdolaSignature date: 9th August 2002

Project: Lumwana StudyLoan amount: 7 million eurosProject description: Feasibility study or mining o copper deposits in LumwanaSignature date: 18th October 2001

Project: Small scale mining sector loan (sysmin)Loan amount: 8 million eurosProject description: Financing or small and medium-scale ventures in thenon-traditional mining sectorSignature date: 12th October 2000

Source: EIB website, 02.12.2010

1 www.frst-quantum.com/i/pd/Kansanshi_Fact.pd

2 Project summary inormation: Kanshanshi Copper Mine And PowerSystem (Zambia). Source: EIB website

A copper mine around Kabwe (Copperbelt)


5/15

The Mopani copper mine, Zambia. How European developme nt money has ed a mining scandal. The Mopan i copper mine, Zambia. How Eu ropean development money has ed a mining scandal.

8 9

that in 1991 experts estimated the minimal value oprivatization o the mines at 3 billion dollars7. Yet allthe ZCCMs mining assets, divided into seven units,were sold to various private consortiums or a total o627 million dollars8. According to Pro. Mpande, thesepayments were probably accompanied by bribes.

The privatization process went hand-in-hand with a newInvestment Act and a Mines and Minerals Act passedin 1995, both o which were particularly avourable toinvestors. In particular, they set up an attractive taxsystem or the mining companies and allowed or therepatriation o their profts back to their home countries.

In parallel, the private companies buying the minessigned development agreements with the Zambiangovernment, which established their rights andobligations. These were to remain secret or a longtime, but the publication o some o them revealed thatthey granted even more exemptions and privilegesto the mining consortiums, with regard to taxes,the environment and social issues. Moreover, theseagreements provided or periods o stability o upto 20 years, in which the mining companies would beexempted de acto rom any laws that parliament mightpass during that period, and rom any other amendmentto the national legal ramework.

2. A tax system that deprives the stateo mining prots

In 2007, mining revenues contributed something like0.2% o the GDP in Zambia: this looks more likea statistical error.M. Kapil Kapoor, country representative or Zambiaat the World Bank, Lusaka, March 2009

With the new legislation and development agreements,the mining companies beneft rom a highly avourabletax system in Zambia: the right to carry orward theirlosses over 15 to 20 years, 100 per cent oreign currencyretention, no withholding tax, various tax and special taxexemptions ranging rom customs duties to penalties orenvironmental pollution.

One o the most symbolic aspects o these taxexemptions is royalty rates. An IMF study estimated

7 Interview with Pro. M. Mpande, Lusaka, August 2010.

8 Christian Aid, A rich seam: who benefts rom rising commodityprices?, January 2007.

that, in 2001, the average royalty rate or minerals indeveloping countries was between 5 and 10%. Yet inthe Zambian legislation passed or privatization, it wasset beneath this average, at 3%. And the developmentagreements make provision or even lower rates, rightdown to 0.6%.

These exorbitant advantages have been justifed by thenecessity to attract private investors to the country a questionable argument, or when it comes to exploitingresources investors have no choice but to go to whereverthese resources are located. The relevance o thissystem is thereore doubtul. In 2004 the consultingfrm McKinsey acknowledged that: popular measures

seeking to attract investors, such as temporarytax exemptions, only serve to inate the value oinvestments that would probably be made in any case.

In addition to this tax system, there is a problemwith tax collection and control over multinationalsby the Zambian tax administration. The ZambianRevenue Authority (ZRA), which collects taxes on thegovernments behal, acknowledges that the size othe frms and the complexity o their operations makeits mission a real challenge. It lacks resources andautomatically fnds itsel in a position o weakness acedwith huge corporations operating internationally andskilled in tax optimization.

All these actors lead to a situation where miningcompanies contribute virtually nothing to Zambiasbudget. Various sources o inormation exist on thesecompanies eective participation in the Zambianbudget, but they all tend to show that this participation isweak at best and at worst, negative.

A World Bank report thus recognizes that tax incentivesand low tax rates enable the mining sector to beneft

rom a marginal eective tax rate o around 0%9.

According to the ZRA, only one out o the 12 miningcompanies in Zambia pays tax on its profts; the othersshow no profts in terms o the tax legislation in orce.With regard to other taxes, the ZRA considers that themining sector contributes no more than 10 to 15% oZambias tax revenue, and most o that is rom theincome taxes paid by the mines employees. Taking into

9 Foreign Investment Advisory Service (joint service o the InternationalFinance Corporation and The World Bank), Zambia, sectoral study othe eective tax burden, December 2004: Because o the relatively lowtax rates and signifcant incentives, the mining sector enjoys an METRo around 0%.

account only what is paid by the frms themselves, theZRA recognizes that their contribution dips to 4% o thetotal o Zambias tax revenues.

Dr. M. Mpande considers that the situation is evenmore serious than that. He explains that not only dothe mining companies pay no taxes, they also ask theZRA or reimbursement o the VAT that they pay. In thefnal analysis, the mining companies contribution to theZambian budget is negative10.

3. Communities heavily impactedby privatization

Zambia is experiencing very serious social problems.Currently, 68% o its population is living under thepoverty threshold, lie expectancy is under 40 years, andthe rate o HIV/Aids prevalence very high (around 15%).

10 The Post: Mining frms are claiming tax reunds rom ZRA,29 June 2010:http://www.postzambia.com/post-read_articlephp?articleId=10898

It is estimated that 10 million Zambians are threatenedwith malnutrition11, and general inrastructure and socialservices are oten in a deplorable state. Unortunately,it does not seem that the mining sector is improving thesituation, especially since privatization.

In the days when the mines were run by ZCCM,the company took care o all the public services inthe neighbouring communities: hospitals, schools,maintenance o inrastructure, activity centres orwomen, recreation or children, etc. Ater privatization,the private mining companies discontinued most othese social activities, which have not been taken over bythe state or the municipal authorities.

Generally, the mining towns have been abandoned andmuch o the services and inrastructure is in a deplorablestate. Roads, in particular, are badly damaged due toa constant ow o trucks to and rom the mines, and noone takes responsibility or repairing them. Hospitalsand public schools now charge ees, whereas in thedays o ZCCM these services were available ree-o-charge to all the mining employees and their amilies.Most recreational activities (recreational centres, sportsacilities, centres or women) have been discontinued.

Privatization has, moreover, been accompanied bymassive employee layos. In 1991, despite the crisisin the sector, 56,582 people were still employed by themines. The government however had to implementa large-scale retrenchment programme to prepare thesale o the sector, and in 1997 only 31,000 employees

11 Source: http://www.ipsnews.net/news.asp?idnews=52829

The companies resistance to taxation or the short-lived ate othe windall tax

One consequence o Zambias attractive tax system: rom 2004to 2008, copper prices soared on the international markets,without the country benefting one iota rom the exceptional proftsgenerated by the mining companies. In act, the share o revenuebenefting the country was halved rom 1.4% in 2003 to 0.7% in2004, whereas exports doubled (2005-2006), totalling 2.78 billiondollars.

Faced with this situation, and ollowing multiple campaigns byNGOs, the government decided to change its tax system and tointroduce a windall tax on companies exceptional profts.

The companies did not take kindly to this threat to their advantagesand reacted strongly against the insecurity that this changeo system created or them. Lucy Bwalya rom Caritas Zambiaexplained: To my knowledge, only two frms paid windall tax, andthey then laid charges against the government.

The mining companies reerred to the stability clauses o thedevelopment agreements and threatened to close the mines aterthe fnancial crisis o end-2008. Under pressure, the governmentbacktracked and replaced the windall tax by a variable proft tax.Dr. Mpande, who severely criticizes this option, believes that thecompanies will not readily reveal their profts, and that the Zambianauthorities will never be able to collect this tax based on complexcalculations. Considering that only one mining company nowpays income tax, it seems highly unlikely that the others will startcontributing to this new levy.

In the background : Mopanis smelter


6/15


10 11

were let in the mines. Ater privatization, new socialplans cut this fgure urther: in 2004, the year precedingthe EIB loan, the Zambian mines had no more than19,900 workers12.

Clearly, the mining companies objectives did not includethe creation or stabilization o employment.Miners wages are, moreover, very low, sometimesbelow the basic needs basket level, a price index o thebasic needs o a amily o six. These workers also live inconstant ear o retrenchment at short notice with toolittle compensation to survive.

Finally, even though the mining companies have started

to recruit again, they now do so on dierent terms,contributing to the precarious situation o most workers.Many jobs are outsourced to sub-contractors whooer ewer social benefts than those o permanentemployees (conditions o access to the mine hospital,wages, etc.). This precariousness makes it difcultto organize unions and causes serious problems o

12 Alastair Fraser and John Lungu, For Whom the Windall?, 2007,p. 21.

insecurity on the mines. For instance, sub-contractorswho pay excessively low wages tend to dig undergroundgalleries that are longer they are paid per metre but less sae, thus exposing miners to rock alls thatcan be atal13.

The deterioration o living and employment conditionsthroughout the Copperbelt has generated resentmentwithin local communities who fnd the heavy impactso mining activity less and less tolerable. The minesdrain many resources. It takes on average 13 to 28cubic metres o water per second or the copper minesto unction, and the mines buy water licenses or a ewthousand dollars a year only. Likewise, Mr Kapil Kapoor,

country representative or Zambia at the World Bank,confrmed that the mines consume over hal o Zambiaselectricity14. Finally, the concessions include resourcessuch as wood, ertile land and rivers, o which the localpopulations are consequently deprived.

13 Alastair Fraser and John Lungu, For Whom the Windall?, 2007,p. 24.

14 Interview with M. Kapil Kapoor, Lusaka, March 2009.

4. Environmental impacts poorly managed

The regulatory dispositions or the mining sector arecurrently so weak that they do not deter pollutersIdentication and monitoring o environmental risksresulting rom mining activities is oten inadequate.World Bank, Environmental project or theCopperbelt.15

From an environmental point o view, mining companiesin Zambia beneft rom exceptional rights. Theirmandatory environmental management plans takeprecedence over national legislation and enable them,

or example, to exceed the emission levels set by law.

Patson Zulu, director o the Environmental Councilo Zambia (ECZ)16, explained to us that the miningcompanies are granted emission permits renewedannually. I their emissions exceed estimates, thecompanies simply have to pay more or their licenses 17.

Emission standards are thereore dispensatory or frms,which can exceed their thresholds by paying more ortheir licenses. The ECZ does not really have the meansto wield any more control than that over the mininggiants operating in the Copperbelt.

In addition to this slack legislation, the companiesare largely sel-regulated since they supply their ownemission readings to the ECZ. The public agency hasneither the equipment nor the human resources to carryout independent controls.

15 Khadija Sharie, Zambia: Riches to rags, 4 December 2009.

16 ECZ is the government agency responsible or implementing theenvironmental law in Zambia.

17 Interview with Patson Zulu, Lusaka, March 2009.

Finally, any decision by the ECZ can be quashed bya ministerial ruling. Patson Zulu explained to us thatseveral environmental impact studies reused by theECZ were subsequently approved by the Ministry othe Environment: Youve got to have riends in thegovernment18.

As a consequence, the Copperbelt is seriously polluted.The Kaue National Park the second largest nationalpark in the world, and one o the places with the mostendangered wildlie species is threatened by thepollution o the Kaue River running through it.

Pollution also aects the local communities exposed to

toxic waste. Traditional activities such as agriculture,livestock arming and fshing are all adversely aectedby air, ground and water pollution.

-----------

Mining contracts signed in questionable conditions,tax systems that are highly disadvantageous to thegovernment, negative social consequences and poormanagement o environmental impacts: all theseconditions should have alerted the EIB and dissuadedit rom unding mining projects in Zambia that wereunlikely to correspond to its development mandate. Yetthe bank has invested millions o euros in the countrysreshly privatized mines, notably at Mopani.

18 Interview with Patson Zulu, March 2009.

The smelter seen rom Kankoyo township


7/15


12 13

In 2000, in the context o privatization o the mines,a consortium composed o the Swiss company Glencore(73.1%), the Canadian First Quantum (16.9%) and ZCCM(10%) bought the Nkana and Muulira mines. In thesame year MCM signed a development agreement withthe Zambian government.

In 2005 the EIB granted the consortium a EUR 48 millionloan.

1. A minimal contribution to the Zambianbudget

I they werent making prots, they should have let.Pepino Musakalu, armer and ormer miner, Kankoyo,August 2010

The EIB claims that MCM has been very successulto turnaround the loss-making mining activities,generating added value, reected in [...] royalties andcorporate taxes19.

Denounced in a Christian Aid report A rich seam:Who benefts rom rising commodity prices?, thedevelopment agreement between the Zambiangovernment and MCM20 reveals that Zambia accepteda royalties rate o 0.6% and a company tax o 25%(compared to the usual 35% rate), as well as taxexemptions on imported equipment and various otheradvantages or the company21. This contract is thereoreparticularly inequitable and unavourable to Zambia.

As this agreement was in orce when the EIB grantedits loan to the consortium, it is surprising that the bankconsidered that Mopani would contribute any addedvalue to Zambia.

Moreover, the ZRA has confrmed that Mopani is one othe companies that, since their arrival, have claimedto make no profts (in the fscal sense o the term). Itthereore pays no profts tax. This situation annoys theworkers at Mopani, who insist that a mining companythat had made no profts or ten years would never havestayed in the country.


20 GRZ and MCM, Muulira Mine, Smelter and Refnery and NkanaMine, Concentrator and Cobalt Plant Development Agreement, 31March 2000.

21 Christian Aid, A rich seam: Who benefts rom rising commodityprices?, January 2007.

In 2008 Mopani also reused to pay the windall tax. It isthereore one o the companies that pays the least taxesin a sector that, as it is, pays very little.

Apart rom this inormation, we were unable to obtainquantitative data on the revenue generated by Mopanioron the share thereo that goes into Zambian statecoers. The ZRA reers to an obligation o confdentialitywhen reusing to disclose the amount o taxes paidby a company. This situation is somewhat surprising,in so ar as the EIB publicly supports the Initiative orTransparency in the Extractive Industries (ITEI) and

has committed to introducing greater transparencyand consistency in reporting on payments ata project level22.

A very worrying aspect o Mopanis tax managementstems rom the act that its main shareholder, Glencore,is registered in Switzerland, a tax haven. The WorldTrade Organization (WTO) reported that in 2008 over halo Zambias copper exports went to Switzerland23. It isvery unlikely that this was all or Swiss consumption,and as the WTO report modestly states, these exportsprobably have more to do with accounting operationsthan with real transers o minerals.

Another suspect element concerns the price o thesetransactions, or the price o copper exported romZambia is ar lower than that o copper exported bySwitzerland24. Given the complexity o prices per type ocopper, it is difcult to imagine that such variations inrates stem rom dierences in quality.

22 See: http://www.eib.org/projects/news/eib-support-or-the-extractive-industry-transparency-initiative.htm

23 WTO, Trade Policy Review Zambia, June 2009.

24 Christian Aid, Blowing the Whistle: Times Up or FinancialSecrecy, May 2010.

These anomalies in processes o commercializationo copper between Zambia and Switzerland suggestthat the mining companies use tax optimizationprocedures, especially price transers25. As Glencore isbased in Switzerland, the company would fnd it easy toimplement this type o practice.

Despite this situation, the EIB does not mention anyorm o control o Mopani Copper Mines tax practices inany public document.

To conclude, the EIBs argument that MCM participatesto poverty alleviation through tax contributions seemsunounded. It seems, on the contrary, that Mopani has

benefted rom the lowest possible rates o taxation andhas evaded all proft taxes. Furthermore, it is likely thatthe company practices tax optimization that enables italso to evade the ew taxes that remain to be paid.

2. Public services abandoned

Its Baghdad Its as i there had been a war, exceptthere was no war.Inhabitant o Kankoyo, public meeting, 21 August2010.

On arrival near the Muurila site one is shocked bythe extent o the poverty and the deterioration o the

25 The practice o price transers consists o a company sellinga product at a loss to a subsidiary based in a tax haven, which thenresells it at a higher price. Hence, th e company avoids makinga taxable proft in the country o extraction and localizes its profts inthe tax haven where they are taxed ar less or not at all.

3. Mopani: minimum tax revenue andmaximum social degradation

Glencore, a giant shareholder

Glencore, the majority shareholder o the consortium MCM, isa particularly opaque corporation ounded in 1974 by Marc Rich,a heretical American businessman sentenced in the US orembargo violation and tax evasion. The corporation is based in thecanton o Zoug, in Switzerland, and has one o the countrys highestturnovers, along with Nestl.

In 2008 Glencore earned the worst corporations o the yearPublic Eye Award or the multinational with the most irresponsible

behaviour and its record is indeed astounding. In the oil or oodaair, it is cited in the Raul Volcker report or having paid secretcommissions to ormer Iraqi president Saddam Hussein.In Columbia, on the site o the Cerrejon coal mines, it razed entirevillages and orcibly expropriated their inhabitants land with thecompliciity o government authorities and the army. In France itwas implicated in the MetalEurop scandal as the companys mainoperator when it closed its subsidiary MetalEurop Nord, retrenchingthe employees without due notice and leaving behind a heavilypolluted site without cleaning up. In Zambia it was quoted by theMinister o Finance as one o the companies implicated ina corruption aair concerning cobalt sales in 1998 and 1999 1.

It is surprising that the EIB agreed to fnance a consortium inwhich Glencore is the main shareholder. Considering its turnover,this company should not have difculties raising unds on privatemarkets. Moreover, given its legal, environmental and human rightsrecord, Glencore was perhaps not the best candidate to receivepublic unds or development.

Finally, note that Glencore is the main shareholder not only oMopani mine but also o Xstrata, the frm that built the smelterbought by Mopani and fnanced by the EIB. The mining branch oXstrata also has a long history tainted by various scandals, andhas been responsible or constant violations o environmental,economic, social, cultural and political rights in the countries inwhich it develops its projects2.

1 Swedwatch, Powering the mobile world, November 2007, p. 66 .2 See the Amis de la Terre website: http://www.amisdelaterre.org/Xstrata-multinationale-miniere.html

Public meeting in Kankoyo, August 2010


8/15


14 15

inrastructure. The houses are dilapidated, there is nostreet lighting, and the open sewers are overowing.The roads are badly damaged due to the constant trafc,especially trucks, travelling to and rom the Mopani site.Locals explained to us that there had been talk o settingup a toll or the use o the roads by the companystrucks, but this initiative was blocked by the minister26.

The local authorities seem to have ew resources tomaintain municipal inrastructure. At a public meetingin 2010, municipal councillors confrmed that thetowns receive no revenue rom the mine. Unlike ZCCM,the company has not taken charge o managing theinrastructure27.

In the days when the mine was state-owned, ZCCMalso managed the unctioning o all the public services:hospitals, schools, activity centres or women, recreationor children, etc. Locals explained that i one needed tochange a light bulb, one just had to etch it at the shopand ZCCM would pay.

26 Interview with Pepino Musakalu, armer and ormer miner, Kankoyo,August 2010.

27 The national mining company, see Part 1 o this report.

Ater privatization, MCM discontinued these activitiesand services, except or building a arm or retiredemployees, and a programme to combat malaria andHIV/Aids, which seems to be intended more to avoidworkers absenteeism than to improve the lie o thelocal populations. Although the frm does have a privatehospital, only its employees have access to it, andadmission charges are ar too high or the rest o thepopulation which has to use the public hospital.A parishioner explained: MCM is a private company,they come or the profts, they dont eel responsible orthe community28.

Nowadays the schools and hospitals charge ees and

most o the services available in the days when themines were nationalized no longer exist. The EIB doesnot seem to be ully aware o this situation, since thebank claims that MCM will continue to contribute tothe provision o adequate housing, school and clinicservices. 29

28 Interviews at Kankoyo in March 2009.

29 EIB, Summarized description o the project (see Annex 1)

3. Forced expulsions and violationo human rights

Its dicult or the communities to deend their rights.When we organize things, the company doesnt show up,they hide....Lucy Bwalya Munthali, head o the Economic Justiceprogramme, Caritas Zambia, August 2010

The EIB claims that it also pays high attention to thesocial and governance acceptability o projects, basedamong other things on the EIB guidelines on vulnerablegroups, occupational and community health and saety

and labour rights30.

The situation at Muulira strongly undermines this claim:the behaviour o Mopani Copper Mines towards thelocal communities is scandalous and violates its owncommitments.

In 2001, Oxam Canada and the Zambian NGODevelopment Community Project (DECOP) laid chargesagainst Mopani. They accused it o orcibly expellingsubsistence armers in the Muulira area, in violation othe OECDs guiding principles, especially with regard tohuman rights.

They reerred the matter to the National Contact Point(NCP), a government service responsible or promotingthe OECD guiding principles and conducting inquiries.The NCP consequently organized the signing o anagreement between Mopani and DECOP to put a stop tothese abuses. Yet since 2002 Mopani has systematicallyviolated the terms o this agreement31. It has expelledover a hundred armers and their amilies, leaving themin situations o extreme poverty and depriving them o

their land and means o subsistence.

Although the company has granted permits to certainarmers, the terms o these permits are so restrictiveand precarious that they show total disregard orinternationally recognized human rights and the OECDguiding principles.

A report by Toronto University law aculty explains thatMopani is issuing licences that eectively prohibit the

30 http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=en

31 Umuchinshi Initiative, University o Toronto, Can the OECDGuidelines protect human rights on the ground? A case study, August2008.

progressive realization o a number o human rightsincluding the right to lie, the right to an adequatestandard o living, the right to adequate ood, clothingand housing, the right to be ree rom hunger, theright to health, the right to education and the right toemployment32.

As the EIB granted its loan to Mopani in 2005, it musthave been inormed o the complaint fled by the NGOs in2001. It should have been essential or the EIB to ensurethat Mopani ulflled its obligations, beore granting theconsortium a loan on behal o the EU something thatit clearly did not do.

32 Ibid Note 34.

Financial crisis and massive layos

The repercussions o the subprimes crisis have been elt as ar asZambia. The crisis caused a dip in the price o copper and massivelayos, including by Mopani. No one was prepared or this: theworkers were sacked without notice. During a mission to the areain 2009, we spoke with several retrenched miners. They explainedthat due to very low wages1, most o them had to take out bank

loans. When they were laid o, all their compensation went topaying back their loans and they ound themselves with nothing.Due to pollution o the soil, they were not even able to arm theirland. Some o them went to look or felds one days walk romthere, and would consequently spend several daysa week away rom home. As most o them had been able to buytheir own house at a low price in the days o ZCCM, they wereunable to aord to move with their amilies. In February 2009 ourretrenched workers committed suicide. When people lose their

jobs they lose everything, we were told.

NGOs, notably the Amnesty International ofce in Muurila, earthat the situation may lead to problems o amine, extreme povertyand migration. Increasing alcoholism is another problem regularlymentioned by NGOs and churches.

The situation does not o nly aect the retrenched worker, it alsoimpacts on the whole amily. Many people depend on the miners.When a ather loses his job, his children have to leave schoolbecause they are unable to pay the ees. Many children are let totheir own devices in the villages, to play in the streets or harvestsugar cane. In the best o cases, they remain at school withoutpaying ees, but this creates problems or schools which lackthe unds to pay teachers and buy equipment. Women are easilytempted to resort to prostitution to earn some income or theiramily. This in turn increases risks o HIV/Aids contamination andunwanted pregnancies, especially among teenagers. Another eecto job losses is that the workers immediately lose access to theMalcolm Watson hospital, which belongs to Mopani. They thereorehave to go to the public Ronald Ross hospital, where admission ees

are aordable. But this hospital was not prepared or so many newpatients; it lacks sta, medicines and resources to treat them all.

1 A permanent worker earns 2.4 million Kwacha, or 1.7 millionKwacha net (around 260 Euros). This corresponds to slightly lessthan the value o the basic needs basket at Kitwe.

School in Kankoyo, March 2009


9/15


16 1717

4. Temporary, dangerousand poorly paid jobs

The EIB also justifes its involvement in the Mopaniproject by reerring to the saeguarding o at least1,210 jobs and the stabilization o 4,800 others at MCM.It considers moreover that the companys miningactivities generate an added value that positivelyaects salaries.

In general, the mining sectors capacity to create manyjobs is highly questionable: it is a largely mechanizedactivity that requires heavy investments compared to the

number o jobs created.

As we have seen, since privatization the impact o miningcompanies on employment has tended to be negative,rom both a qualitative and a quantitative point o view.Once again, Mopani is no exception to this rule.

Hence, the stabilization o employment promised by theEIB is ar rom being a reality. For example, in 2008 and2009, the frm cut over a thousand workers in just a ewmonths. The reason: the fnancial crisis which causedthe copper price to drop. Yet the price is still in excesso US$2,000 per ton, which is higher than when Mopanibought the mine. In act, ater experiencing record priceso close to US$9,000 per ton rom 2005 to 2007, MCMpreerred to reeze operations until they became moreproftable again. The impact on the local communitieshas been disastrous.

The wages o MCM miners are also very low. In 2004and 2005, they were under the value o the basic needsbasket calculated by the Jesuit Centre or TheologicalReexion34 or some permanent workers and or allworkers employed by sub-contractors.When we visited Muulira in 2009 and 2010, the minersconfrmed that their wages were still ar rom sufcient,and that those employed by sub-contractors could bepaid as little as hal the wages o permanent employees,or the same work. This caused them to do overtime, tomake up or their low wages.

Moreover, working conditions are difcult. In the minethey are described as pathetic due to the lack oventilation and the heat. A worker explained: They willtell us to go ahead, where there is no ventilation, as longas theyre producing () When there is an inspection,they show other parts underground [than those that arenot ventilated]35. Many miners complain o leg pain andrespiratory problems.

In general, it is difcult to obtain precise data onthe relationship between the workers diseases and

34 See: www.jctr.org.zm/bnbasket.html

35 Interview with Kankoyo miners in March 2009.

working conditions in the mine, especially because theauthorities only have inormation supplied by Mopani onthe pollution levels and activities on their site. A study in2008 revealed, however, that in the mines managed bythe company (Nkana and Muulira), the levels o silica inthe air exceed rates authorized by US regulations 36. Thismeans that emission controls are insufcient, and thatthe miners are exposed to greater risks o lung diseases,especially silicosis37.

Finally, serious security problems exist at Mopani.In 2005, the year in which its loan was approved bythe EIB, at least 71 miners were killed in occupationalaccidents, o whom over 20 were Mopani employees.

Tim Henderson, the CEO o Mopani, reused to answerthe unions questions on security problems38. Since then,the situation has not improved much and the nationalpress regularly announces the death o miners employedby the company39. In 2008, Dayord Muulwa, the districtcommissioner at Muulira, described the number ooccupational accidents at Mopani as alarming40.

It is surprising that the EIB granted unds to a projectwith such a poor record in terms o workers security,and scandalous that it has not put pressure on thecompany to improve the situation immediately.

36 US Occupational Saety and Health Administration exposure limits.

37 International Journal o Environmental Research and Public Health,Cross-sectional Silica Exposure Measurements at Two ZambianCopper Mines o Nkana and Muulira, June 2008.

38 Jackie Range, Zambias miners paying the price, 12 October 2005.

39 See various articles: http://maravi.blogspot.com/2008/03/number-o-accidents-at-mopani-worries.html,

40 http://www.reuters.com/article/idUSL2281675620080122?pageNumber=1&virtualBrandChannel=0

Since then the situation has hardly improved: the priceo copper has increased and Mopani has decided tocontinue its activities, but with less manpower. Thismeans that many o the miners laid o during the crisiswill not get their jobs back.

Hence, jobs at Mopani depend on the price o copper,a highly variable actor. In general, the companyspriority is to maximize profts and minimize costs.It may also retrench workers i it hopes or higher proftsin the uture, and tends to reduce labour costs as muchas possible. As the town clerk o Muulira, CharlesC. Mwandila, explained: Here, they dont enable thepopulation to beneft rom their profts, its not a problem

o retrenchment. The prices are very high again andtheyre not recruiting33.

Mopani also contributes to the act that mining jobsare increasingly temporary in Zambia. In 2006 overhal o the companys workers were employed by sub-contractors on temporary contracts, with smaller wagesthan permanent workers and ewer ringe benefts. Theminers explained to us, or example, that a permanentworker had ree access to the mine hospital or himsel,his wie and all his children, whereas the temporaryworker had access only or himsel, his wie, and three ohis children.

33 Interview with Charles C. Mwandila, August 2010.


10/15


18 19

1. An essentially environmental project?

Is it good or a bank to contribute to pollution? It shouldcheck the benets or the local populations. What arethe benets or the people today? Nothing. The EIBshould monitor this. It should look at the people in thearea, and not only ocus on the mining business.Charles C. Mwandila, town clerk o Muulira, August2010.

The EIB considers that its loan to Mopani is essentiallyan environmental project41; one that is supposed tosubstantially reduce dust and Sulphur Dioxyde (SO2)

emissions 42.

The rest o the banks presentation o the project is morenuanced: In 2014 the Muulira smelters SO2 emissionswill be in line with Zambian environmental regulationsand World Bank guidelines or copper smeltersand reect EU principles based upon best availabletechnology.43

Thus, the EIB, that claims to be particularly attentive

to environmental impacts, agreed to invest millions oEuros on behal o the European Union in a project thatwill not comply with Zambian legislation until nineyears hence!

Charles C. Mwandila, town clerk o Muulira, commentedindignantly: You cant carry on poisoning people andsaying that youre going to stop later! They talk oemissions but its a question o poisoning44.

41 Letter by the EIB to Amis de la Terre, dated 6 March 2008.



44 Interview with Charles C. Mwandila, Muulira, August 2010.

Moreover, the EIB argues that as the project is locatedwithin an existing industrial area, negative natureconservation and biodiversity issues do not arise.45

Yet fnancing is situated in the overall ramework othe project o which it is part. The EIBs Statement onEnvironmental and Social Principles and Standards o18 March 2008 is very clear in its Article 32: The EA[Environmental Assessment] required by the EIB shouldrelate to the entire project and its sphere o inuence not

just to the part that is being fnanced by the Bank.It is thereore regrettable that, in the case o Mopani, thebank chose to ignore the global, pre-existing impacts othe project.

The EIB moreover guarantees that all miningprojects with a signifcant impact on the environmentfnanced by EIB require an EIA (Environmental ImpactAssessment)46. But in the case o Mopani, the priorevaluation o the project was carried out by MCMemployees47 and can under no circumstances beconsidered as objective.

Finally, the EIB considers that it is contributingreal environmental added value to the project byaccelerating the planned investment and making itunconditional48. The reality o this added value isquestionable, to say the least:

The previous smelter was reaching the end o its lieand had to be replaced; the construction o the newsmelter was to take place in 2005;

In its development agreement Mopani hadundertaken to build a new smelter; it thereore hada legal obligation to do so;

The new smelter reduced the companys operational

costs by increasing the capacity o the site andenabling the operator to produce its own sulphuricacid, through the acid actory linked to the buildingo the smelter49.


46 See the EIB website: http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=-en

47 Mopani copper mines plc, Muulira mine, Environmental projectbrie or the smelter upgrade project, July 2004. This is not a completeenvironmental impact study, which was not required in this case. Theconstruction o the smelter was approved simply on the basis o anenvironmental brie.

48 Ibid Note 47.

49 Ibid Note 51.

From a legal and economic point o view, MCM was goingto build this smelter anyway. The EIB has thereoreadded no environmental value to this project. In actthe project has no environmental value at all. On thecontrary, it is a source o very serious air and waterpollution at Muulira.

2. Mopani and air pollution

Around the Muulira smelter there is enormous airpollution, with sulphur dioxide in the part o the townwhere the miners live.Head o the Pl anning and Inormation Department,

Zambian Ministry o the Environment, March 2009.

The announced objective o air pollution abatementowing to EIB unding is discredited as soon as onearrives near the Muulira site where the pollution isobvious. The air is heavy and leaves a metallic tastein ones mouth. The mines chimneys are constantlyspewing out smoke, day and night.

The inhabitants confrm that the sulphur dioxideemissions have not ceased. Christopher, a miner onthe site, explained: The renovation project had twoobjectives: the expansion o the smelters capacities, andthe harnessing o sulphur by the sulphuric acid actory.The expansion, that they did. But the sulphur acid actorythat they built is too small to treat all the sulur, so theycarry on discharging it50.

The sulphur emissions havent changed. Its stillthe same. You can see the devastating eects o theemissions here, at Kankoyo,51 confrmed MumbaMichael Lubinda, coordinator o Caritas or Kankoyo andco-author o a damning report on pollution in the town,

published in 2009, our years ater the EIB loan52.

The town clerk o Muulira, Mr Charles C. Mwandila,showed us air pollution readings taken over severalmonths. The results are scandalous: most o thepollutants measured largely exceed the emissionthresholds (see Annex 2); sulur emissions are up to72 times higher than the legal limits; those o arsenicare sometimes more than 16 times higher than the limit;

50 Interview with Christopher Nkata , Kankoyo, August 2010.

51 Interview with Mumba Michael Lubinda, Kankoyo, August 2010.

52 Caritas Ndola, Research Report in Muuliras Kankoyo townshipon the eects o sulphur dioxide on human and natural environment,October 2009.

and those o lead are up to 90 times higher than legallimits! No detail is given on the emissions at the smelterbut its dust emissions are indicated twice, at respectively13.6 and 47 times higher than the acceptable leveldetermined by the WHO.

This pollution has impacts on the local communitieshealth. While no exhaustive study has been carriedout on the link between exposure to sulphur dioxideand health in the area, the Ronald Ross hospitalindicates that classical symptoms include asthmaattacks, lung inections and respiratory complications53.At Kankoyo the inhabitants complain o coughs andeye irritations, and worry about the eects o these

emissions on babies.

Sulphur emissions are moreover responsible or acidrain which deteriorates the soil and the inhabitantshouses. At Kankoyo the paint on houses is peeling oand their corrugated iron roos are eroded by the acidity.

53 Visit to the Ronald Ross public hospital, Muulira, March 2009.

4. Disastrous environmental impacts

The mines chimneys eject umes that particularly aects th e

western side o the site

People are concerned about the eects o sulphur dioxide

emissions on newborns

In Kankoyo, the roos and paints on houses are corroded by

the acidity


11/15


20 21

Acid rain also contributes to the deterioration o thesoil, which becomes unft or arming. At Kankoyo allthat grows is cactuses and avocado trees; nothingelse survives. The town clerk explained that the townloses economic opportunities due to this situation:entrepreneurs ask to see soil analyses and then giveup the idea o developing agricultural projects in thearea. The acid rain has made the soil acid. You have toapply lime to neutralize it. Its expensive, and youve gotto start all over again ater the next acid rain. Peopledont want to arm here. In general, shops, schools,people dont want to go west o the mine, because o theemissions. Its a wasteland.54

3. Acid water pollution

The main dierence since privatization is that they useacid to extract copper in the mine. Beore, they usedother methods. More expensive, but saer.Pepino Musakalu, armer and ormer miner, Kankoyo,August 2010.

54 Interview with Charles C. Mwandila, Muulira, August 2010.

In 2003 Mopani started to develop a new extractionmethod at Muulira: in situ leaching (ISL). This techniqueconsists in injecting a sulphur acid solution into theground to dissolve the copper directly in the deposit. Thesolution is then pumped to the surace and processed toseparate the copper rom the acid.

The value o this method or the frm is that it is cheapand requires little manpower. But the system is highlycontroversial. While theoretically the acid is controllable,in practice the migration o an acid solution underpressure in a deposit cannot be perectly contained.

Moreover, hydro-geological impacts (i.e. impacts on

movements o underground water) and impacts onthe stability o land raise many questions. In the caseo the Mopani site, the use o ISL is all the more opento criticism because the acid is injected into a depositadjacent to the underground water that supplies thetown o Muulira.

The frst accident occurred in 2005 during ISL testing.Ater the acid polluted the underground water, thedomestic water supply was cut o. Some communitiesspent several weeks without running water.

In January 2008, acid contaminated Muuliras waternetwork once again and close to 800 people had tobe hospitalized ater drinking contaminated water55.Lorraine Tembo at the Amnesty International ofce inMuulira told us that polluted water also caused skinirritations that could last up to several months i theperson used the water to wash. The water was again cuto or several days. What happens to us, we cant aordto buy bottled water daily?56

MCM was sentenced to a ew hundred dollars fne orthis accident. It was accused o not having alerted the

water utility and o thus having allowed contaminatedwater to be distributed in the networks. The companywas also sentenced or not having met its commitmentsollowing the 2005 accident, by ailing to install anadequate pumping system57.

Following this incident, the EIB took no sanction againstMopani.

55 Interview avec Lorraine Tembo, Amnesty International ofce atMuulira, March 2009.

56 Interview with Lorraine Tembo, Amnesty International ofce atMuulira, March 2009.

57 Mulonga Water and Sewerage Company Limited, Report on theimpact o water contamination in Muulira, January 2008.

The water utilitys Mulonga Report on this accidentis alarming: As long as Mopani carries on practisingin situ leaching, there is no guarantee that acidcontamination will not occur again58. The only solutionor the company is to draw water elsewhere, whileMopani carries on polluting the underground resources.

A worker at the mine confded to us that, while thisleakage had been particularly serious, it was not thefrst, and that there were regular water cuts due to themines activities. It is difcult to know exactly what levelsthe pollution attains, since the Environmental Council oZambia (ECZ) admits that it does not have the equipmentto check water contamination. It thereore has to rely

solely on the data supplied by MCM.

Apart rom underground water pollution, the large-scaleuse o sulphuric acid is an ever-present danger becauseit means that trucks transporting acid are constantlytravelling on bad roads. In December 2009 one o thesetrucks overturned and its sulphuric acid spilled into theTukula Mutima River, a tributary o the Kaue River, theCopperbelts main water source. The fsh immediatelydied and the plant lie was burned by the acidity59.

4. Contamination by mining waste

One o the most spectacular aspects o mining projectsis probably the quantity o waste that they generate.On average, or one ton o copper, 110 tons o wasteare produced, and 200 tons o material are moved 60.Moreover, the extraction methods involve the use o toxicsubstances such as sulphuric acid and hydrocarbons.

Hence, like all mining companies, Mopani has to managehuge quantities o contaminated sludge and water daily.Our inquiries revealed several aws in this management.

The most immediately visible materialization o thiswaste is the pipes that evacuate toxic tailings rom thesite o the mine. In the case o Mopani, these pipelinesleave the mine and cross towns and countrysides, totallyunprotected. The only warnings are: Do not walk onthe pipeline, mining waste is very dangerous. Thisinjunction is obviously not respected and many children

58 Ibid Note 61, p. 6.

59 See: http://maravi.blogspot.com/2009/12/tanker-overturns-spills-acid-into-cbelt.html

60 Oxam America, Dirty metals, mining, communities and theenvironment, 2004.

sit and play on these pipes carrying toxic matter,bordering streets and main roads.

Pepino Musakalu told us that one night, three or ouryears ago, one o the pipelines exploded outside hishouse. Although Mopani came to fx it the next day, thecompany let him to clean up the tailings that had owedonto his property. Leakages are reportedly requent oncertain pipelines. Here again, while Mopani replaces thepipes, it does nothing about cleaning up the mess 61.

The tailings are pumped into tailing dams. The damcurrently used by Mopani is situated near the town.It consists o huge dunes o tailings in the orm o whitepowder. These fnes are let open, even though theyprobably contain silica, which can cause lung diseases.

61 Interview with Pepino Musakalu, Kankoyo, August 2010.

The use o large quantities o suluric acid by Mopani make

the risks o dangerous accidents and contaminations higher.

People sitting on a tailing pipeline

Tailing dam used by Mopani


12/15


22 2322

Large quantities o water ow out o this tailing dam,especially during the rainy season. Undergroundpipes and an evacuation system or ood waters carryit directly into the Butondo River. There is no waterpurifcation plant around the dam, and we wereunable to obtain data on the chemical composition othese tailings. The water evacuation system in caseo oods is rudimentary, to say the least. It containsa sort o mechanical flter, but given the quantity o fnesstocked here, it is likely that some are carried away withthe water leaving the dam, into the river. This wouldcontribute to increasing the rivers turbidity and thusdamaging the aquatic ecosystems.

One o the main problems o this installation is probablythe risk o it collapsing. Mopani has tried to builda rockfll on the sides but it is already overowing.I this dyke ruptures, tons o ailings would ood the

surrounding land and block the water owing behind it.The risks are higher during the rainy season.

In addition to these tailings, Mopani dumps varioustypes o waste. In 2007 the NGO Citizens or a BetterEnvironment (CBE) published a report denouncing theact that Mopani discharges sludge into the LuanshimbaRiver. This sludge has seriously impacted on theturbidity o the water, to the point o killing o all signso aquatic auna. Water analyses reveal copper andcobalt levels exceeding authorized limits in certainspots. The vegetation also seems to be aected in so aras it has apparently turned an unusual yellowish colour.The tailings contaminate the dams that supply local

populations with water, thus orcing them to fnd newsources or their own consumption and crops. Finally,mudslides on roads and bridges block the trafc62.Mopani deends itsel by explaining that it obtainedauthorization rom ECZ to discharge its sludge intothe river.

During our visit to Kankoyo, we also noted thathydrocarbon euents were discharged into opensewers. Mr Lubinda, o Caritas, confrmed to us that thisis common.

In the seriously damaged environment around Mopani,it is difcult to believe that the EIB pays particularattention to environmental sustainability, themitigation o and adaptation to climate change, naturalresource management, protection o biodiversity andsaeguards to improvements o the general and urbanenvironment,63 as is claimed on the banks website.The present study shows that neither the Zambian statenor its population has benefted rom the Mopani project,and that, on the contrary, it has had very serious socialand environmental impacts. In view o the context o themining sector in Zambia, it is evident that the current

situation o the Mopani project was totally oreseeable.

62 CBE, Report on the pollution o Luanshimbo Stream by MopaniCopper Mines PLC, June 2007.

63 http://www.eib.org/projects/news/eib-fnancing-or-mining-projects.htm?lang=r

One example among so many others

These conclusions are particularly worrying in so aras the EIB has fnanced many other mining projectsin similar contexts. While it has never suppliedevaluations o these projects on the basis o precisedevelopment criteria and independent analyses on theground, in recent years the EIB has developed an activecommunication strategy to boast the merits o themining sector in Arica. Most o the articles publishedon the subject are content to afrm that the sectorcan alleviate poverty, without supporting these claimswith empirical evidence. Yet many well-documented

studies call into question the link between mining anddevelopment64.

In August 2010, or instance, the EIB published twoarticles on its website, praising the positive eects othe Lumwana mining project, also situated in Zambia,or which the bank has granted three loans amountingto a total o EUR 85 million. The jobs created and theinrastructures built are highlighted.

Yet a more in-depth analysis reveals that with a totalinvestment o 925 million dollars, Lumwana plannedto create 1,150 direct jobs65, corresponding to aninvestment o over 800,000 dollars or the creationo one job. One wonders i, in Zambia, there are notother sectors in which an investment o this size wouldgenerate ar more jobs. The EIB also orgot to pointout that the construction o the mine involved theexpulsion o over 600 armers who were arming onthe concession66. This meant the disappearance notonly o these jobs, but also o ertile land that would bedestroyed permanently by the mining activity (pollution,movement o material, etc.). The inrastructure builtrevolves around the mine and its operation, and ismoreover associated with the arrival o hundreds omigrant workers.

Thus, the impacts o these upheavals on the social abrico the region could be extremely heavy. The project is

64 Sachs, Jerey D. and Andrew Warner. 1997a. Natural ResourceAbundance and Economic Growth. HIID Working Paper, November.See also Ross, Michael L. 2001. Extractive Sectors and the Poor: AnOxam Report. Boston: Oxam America.

65 See EIB, Summarized description o the Lumwana project. NB:In the articles, the EIB announces the creation o 3,000 jobs because italso counts indirect employment.

66 Interview with Pierre Louw, Financial Director o Lumwana andBrenda Tambatamba, Sustainability Manager at Lumwana, March2009.

located in a very rural and isolated area: its like havinga mining project in Alaska or the Australian desert67.In its communications on Lumwana, the EIBsystematically ails to mention a crucial point: thecompanies will be mining not only copper but alsouranium. Only very ragmented inormation has beendisseminated among the local communities on the risksrelated to uranium, via brochures in English, in an areawhere illiteracy is particularly high and where manypeople do not understand English.

A recent study commissioned by the Zambian Council oChurches revealed that Zambia is totally unequipped oruranium mining. Currently it has no appropriate legal

ramework or this activity, be it or the managemento risks, responsibilities and radioactive waste, or thesharing o the wealth created68. Dr. M. Mpande sumsup the situation: They dont pay taxes, they haveexpelled the armers and closed o the land, theyrebuilding the inrastructures that interest them, theyrenot going to employ many people because everythingshighly mechanized, but theyre going to discharge hugequantities o polluting waste, including radioactive.So rom an economic point o view, with a simplecost/beneft analysis, it is clear that the Lumwanaproject is o no advantage to Zambia 69.

This is very ar rom the success announced by the EIB.

Diversication rather than exhaustion

An economy based primarily on mining must bediversifed to reduce its vulnerability to the variabilityo mineral prices. The needs in Zambia are huge:development o inrastructure, social services,manuacturing industries, and agriculture. It isestimated that close to ten million Zambians arethreatened with malnutrition70 that is, a large majorityo the population, whereas the country is rich in ertileland. It is incomprehensible that the EIB did not examinethe relevance o these investments in mining projects inrelation to the general economic situation o the country,and that it did not seek to direct its unding towardssectors that could have contributed more eectively tothe countrys development.

67 Interview with Pro. M. Mpande, Lusaka, August 2010.

68 Council o Churches in Zambia, Prosperity unto death, Is ZambiaReady or Uranium Mining?, 2010.

69 Ibid Note 71.

70 http://www.ipsnews.net/news.asp?idnews=52829

5. Conclusion

Children rom Kankoyo cleaning rom the open s ewer ater

Mopani released hydrocarbon efuents in it. They have no protection.


13/15


24 2524

It is also shocking that, having chosen to fnance minesin Zambia despite an evidently unavourable contextand despite the countrys other urgent needs, theEuropean Unions bank did not ensure that the highestinternational standards in this respect were applied. TheEIB should have imposed on Mopani a level o social andenvironmental responsibility in keeping with Europeanstandards. The EIB should maintain regular and seriousmonitoring o the project to evaluate the impacts interms o environment and development. It should haveensured that it had the powers to take measures againstthe company in case o ailure to meet its commitments.

The present study illustrates the consequences o the

EIBs shortcomings with regard to meeting standardsand controlling the benefciaries o its loans. We havenot witnessed any improvement related to the EIBsparticipation in this project. Its contribution has allowedan environmental disaster to be amplifedand perpetuated.

A ew kilometres rom Muulira there used to be theKabwe zinc and lead deposits. They were the richestin Arica until they were mined to exhaustion by AngloAmerican. Since then, despite the clean up programmeinitiated by the World Bank, Kabwe is one o the tenmost polluted industrial towns in the world71. Thechildren have an average level o lead in their blood thatis fve to ten times higher than the limit set by the USEnvironmental Protection Agency. The soil and wateralso contain alarmingly high concentrations o metals.

One day, as at Kabwe, the mines fnanced by the EIB willbe exhausted, and nothing will remain but pollution.

71 Study o the Blacksmith institute: http://www.worstpolluted.org/

The EIB is the Bank o the European Union. As theEuropean member states and institutions decide on itsunctioning, they are responsible or ensuring that EIBunding is consistent with European commitments ondevelopment and environmental aairs.

In the short term, concerning the Mopani miningproject, they must urge the EIB to:

Make public all the documents concerning theproject, including the EIBs monitoring reports;

Put pressure on Mopani Copper Mine to ensure thatthe consortium remedies the environmental and

social problems described in this report, withoutdelay;

Demand that MCM make public its tax contributionto the Zambian state, including details on the varioustaxes paid and all exemptions;

Publicly take a stand in avour o a reorm o theZambian tax system so that the country can beneftrom the profts o the mining companies operatingon its territory.

In the short term, concerning t he mining sector, theymust impose on the EIB:

A moratorium on the fnancing o miningprojects, extended until the bank adopts all therecommendations o the Extractive IndustriesReview72 and guarantees that the appropriatemechanisms have been set up to ensure theirapplication.

In the medium term, they must demand rom the EIB

that it:

Sets up a system o strict controls or the projectsthat it continues to fnance, throughout theirimplementation and based on developmentindicators as well as environmental, human rightsand social protection criteria consistent withEuropean standards;

72 The Extractive Industries Review (EIR) is an in-depth study o theextractive industry sector, commissioned by the World Bank. It hasproduced key recommendations to ensure that extraction projectshave positive impacts. As an international reerence (based on multi-sectoral consultations in several regions o the world), t he EIR servedas the basis or the fnal report Striking a Better Balance, publishedin December 2003, which analyses the situation, highlights the mainproblems, and makes recommendations.

6. Recommendations

Systematically evaluates the impacts o theproposed projects on the local communitiesand vulnerable groups (especially women,ethnic minorities and the poorest segments othe population), and only fnances projects thatbeneft all the aected groups, including the mostvulnerable;

Ensures that the benefciaries o these loans donot implement tax strategies that make use olegal loopholes and tax havens, and that developingcountries beneft rom an equitable share o theprofts made on their territory;

Systematically carry out independent ex postevaluations o its projects, on the basis o precisecriteria, which show their impacts on povertyalleviation and sustainable development;

Makes public all the studies and publications relatedto the monitoring and evaluation o such projects.

In the long term they must:

Produce an evaluation o the eectiveness andadded value o the EIB with regard to povertyalleviation and the promotion o sustainabledevelopment in countries o the global South.This evaluation should be undertaken with theparticipation o all relevantstakeholders, includingcivil society, in the global North and South;

Take into account the conclusions o this evaluationin order to limit the EIB mandate outside theEU to those areas in which it is likely to havepositive impacts on the local populations and theenvironment;

Redirect EIB unds towards other institutions whichare probably better suited to managing the undingo development in countries o the global South.

Mulira mine consists o an underground mine, a concentrator,

a smelter and a renery.


14/15


26 27

Annex1. PROJECT SUMMARY INFORMATION: MOPANI

COPPER PROJECT (ZAMBIA)

1. Private sector Operation

2. The Project

The project concerns the frst phase o the rebuilding andmodernisation o the Muulira copper smelter part o Mopanis1operations. i.e. a new primary smelting urnace, a matte settlingurnace, an oxygen plant, a sulphuric acid plant and upgrade o therelated inrastructure and installations. It will replace outdatedtechnology and equipment, increase smelting capacity and signifcantlyreduce dust and SO2 emissions.

Financing proposal:Borrower/Promoter: Mopani Copper Mines Plc, a company

incorporated in the Republic o Zambia

Amount: EUR 48 m, up to the equivalent o USD 50 m,

to be disbursed in EUR or USD

Term: 12 years

Terms and Conditions: Senior loan on Investment Facility resources

Interest: The Banks reerence rate or lending plus

credit risk spread

Article 14/28 Member States Committee opinion:The Investment Facility Committee gave a avourable opinion on theproject at its meeting on 28th October 2004.

Financing plan:

EUR m %

Pro posed fnancing rom the Inve stment Facility 48 50

Own unds o the promoter 48 50

Project cost 96 100

4. Value-added identication

Consistency with the priority objectives o the EU (Pillar 1)The project is ully consistent with EU objectives as specifed in theCotonou Agreement and the mandate given to the Bank under theInvestment Facility.

Zambia was the worlds 4th largest copper producer in 1969, but inthe 1970s and 1980s production (under State ownership) decreasedsubstantially: restructuring and privatization o the mining sectorwas completed in 2002. With a private sector-driven mining industry,Zambia is now better placed to stimulate economic growth and reducepoverty. Investments in modern mining practices, like the Mopaniproject, reduce the environmental liabilities created by past miningpractices and create additional value through downstream benefts(employment, inrastructure, skills, etc.). The projects fnancingclosely corresponds to the Investment Facilitys objectives to createdevelopment through private sector, commercially run enterprises.

Quality and soundness o the investment (Pillar 2)As one o the two copper smelters in Zambia, the project will upkeepand expand the local capability to process concentrates rom miningactivities in Zambias Copperbelt (both rom MCMs own mines, and

1 Mopani Copper Mines Plc (MCM) is an integrated copper and cobalt producerlocated in the Copperbelt o Zambia

rom others).The project will directly secure at least some 1 210 jobsand stabilise another 4 800 at MCM. The local availability o smeltingand refning capacity increases the locally added-value o miningoperations and copper related exports, and reduces transport costs.Currently, the Muulira smelters SO2 emissions are totally vented.The envisaged investments in the auxiliary sulphuric acid plant willeliminate up to 97% o the SO2 emissions o the primary smelter.MCM will use most o the produced sulphuric acid internally, while thebalance will be sold in the Copperbelt and surrounding regions. Theproject is considered sound and o high quality in terms o its technical,economic and environmental impact.

Financial value-added (Pillar 3)The proposed loan rom the Investment Facility is or a term o12 years which is longer than can be accessed in the local bankingmarket. The preparedness o the Bank to lend to the borrower,with appropriate pricing and security conditions, without externalguarantee, contributes to the development o a strong and sustainablecorporate sector in Zambia.

5. Key issues

Environmental issuesPromoters are committed to staged investments in order to complywith Zambian environmental regulations by 2015. As a result o theBanks project, MCM will bring these investments orward and theproposed project is the frst stage o an investment programme atthe end o which in 2014 the Muulira smelters SO2 emissions willbe in line with Zambian environmental regulations and World Bankguidelines or copper smelters and reect EU principles based uponbest available technology (IPPC Directive). The project complieswith the Zambian EPB/EIA permitting process, which is in line withthe principles o the EU Directive 97/11 on environmental impactassessment. I located within the EU, this project would all underAnnex II o the EU Directive 97/11 regarding environmental impactassessment requirements (point 13 or the smelter modernization andexpansion, point 6(b) or the oxygen and sulphuric acid plant). As theproject is located within an existing industrial area, negative natureconservation and biodiversity issues do not arise

Social IssuesMCM has been very successul to turnaround the loss-making miningactivities, generating added value, reected in salaries, royaltiesand corporate taxes. It urther contributes to the Mining CommunityDevelopment Fund. The project secures at least some 1210 jobs, 660in the smelter and 550 in the refnery, and stabilises another 4800 atMCM. However, the economic ripple eects extend much urther as

there is a close interdependence between the mine and the towns wellbeing. MCM will continue to contribute to the provision o adequatehousing, school and clinic services and has initiated a small armingproject or ex-employees. It has a pronounced HIV/AIDS policy inplace and is actively involved in a malaria programme. The companypromotes core labour and saety standards.

ConclusionThe relevant environmental issues have been properly addressed bythe promoter. The project is the frst stage o an investment whichat its completion will ensure that EU standards will be met. Theenvironmental impact is largely positive due to the overall reductiono some 250 000 t/a o SO2 emissions. The EIB intervention addsenvironmental value to this project by accelerating the plannedinvestment and making it unconditional. The project is in line with allkey points o EU and the Banks environmental policy and is thereoredeemed environmentally and socially acceptable.

6. Previous Relations with the Borrower/PromoterThe Bank has no previous relations with the borrower.

7. Annexes

Annex 2. EMISSION READINGS ON THE MUFULIRA SITE, JUNE-SEPTEMBER 2009

ALFRED K NIGHT (ZAMBIA) LIMITEDMettalurgy departement

Project No: MM2287 Stack Emissions Complian Audit Muulira Smelter or June 2009Report No: 6

Table o computed average pollutant concentrations

The Stack Pollutant concentration (mg/Nm3)

Dust SO2 CO NOx As Bi Cd Cu Co Pb Hg

Long term emission limits 50 1000 - - 0.5 - 0.05 1.0 - 0.2 0.05

Converter - Slag blow

Converter - Cu blow

Acid plant

Matte Settling Furnace

Project No: MM2287 Stack Emissions Complian Audit Muulira Smelter or July 2009Report No: 7





Isa-smelt 679.54


Converter - Cu blow

Acid plant


Project No: MM2287 Stack Emissions Complian Audit Muulira Smelter or August 2009Report No: 8





Isa-smelt 2354.16


Converter - Cu blow

Acid plant


Project No: MM2287 Stack Emissions Complian Audit Muulira Smelter or September 2009Report No: 9






Converter - Cu blow

Acid plant



15/15

mopani copper mine - a scandal in zambia

Documents