IFC to double number of mining investments in Africa

IFC to double number of mining investments in Africa

Bloomberg News Service

14th March 2007

Rashad Kaldany, outgoing Director of the Oil, Gas, and Mining department at the World Bank Group, told Bloomberg that the International Finance Corporation (IFC) expects to double the number of its investments in Africa's mining sector. He added that the World Bank's private lending arm intends to diversify its mining portfolio in Africa from primarily gold production to include base metals such as copper, aluminum and iron ore, which are currently fetching high prices on international commodity markets.

During the 2006 calendar year, the IFC approved 3 mining projects worth $280 million in sub-Saharan Africa, including $125 million for the controversial Ahafo gold mine in Ghana, a $5 million equity investment in an iron ore project in Guinea, and up to $150 million for platinum miner Lonmin in South Africa. According to an article in Business Report, the $100 million loan and $50 million equity deal with Lonmin, which was signed last week, constitutes IFC's single largest investment in Africa today.

Kaldany noted that the IFC prefers to invest in countries that have subscribed to the Extractive Industries Transparency Initiative (EITI), an international campaign requiring disclosure of company payments and government revenues from oil, gas and mineral extraction in resource-rich countries. He also added that the IFC would only finance lowest cost producers, to prevent default when the prices of commodities return to their long-term levels.

The IFC's stated intention to double its mining investments in Africa is troubling, though perhaps not surprising. Last year, the volume of the IFC's extractive industries lending increased by over 50 percent.

Serious questions remain about the development impacts of extractive industry investments; all too often, the environmental and social consequences of mining projects outweigh the potential benefits for affected communities. In the case of the IFC-supported Ahafo gold mine, for example, nearly 10,000 local residents have already lost their homes and/or livelihoods as a result of the mine, and thousands more in farming-dependent communities are expected to be physically or economically displaced by the mine's second phase. Meanwhile, the project sponsor is planning to open another mine site in the country, which could threaten a forest reserve and jeopardize local water sources.