AYNAK COMPLIANCE MONITORING PROJECT STATUS REPORT FEBRUARY 2012

Ministry of Mines of the Islamic Republic of Afghanistan

Reference: MOM/PMU/74/QBS

IDA Grant No: H238-AF

 

SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES PROGRAMME

 

Consulting Services to Monitor Compliance with Contractual Provisions (oversight) of Aynak Mining contract

and

Capacity Building for Mining, Environmental and Social Inspection Activities for Mining Contracts in the Ministry of Mines, Afghanistan

 

AYNAK COMPLIANCE MONITORING PROJECT STATUS REPORT 

FEBRUARY 2012

 

ACRONYMS & ABBREVIATIONS

TERM MEANING
AA Ancillary Agreement(s) to the AMC
ACMP Aynak Compliance Montoring Project - GAF
ACP Aynak Copper Project
ACPA Aynak Copper Project Authority in the Ministry of Mines
AMC Aynak Mining Contract (between the Government of Afghanistan and MCC)
BFC Bankable Feasibility Study
EMP Environmental Management Plan
ESIA Environmental & Social Impact Assessment
GAF Munich-based consultancy company contracted to MoM
HEDM His Excellency, the Deputy Minister of Mines, Eng. N. Durrani
HEMOM His Excellency, the Minister of Mines
IROA Islamic Republic of Afghanistan
ISAF International Security Assistance Force
JCL Jiangxi Copper Company Ltd
MCC China Metallurgical Group Company
MJAM MCC-JCL Aynak Minerals Company Ltd
MoM Ministry of Mines
NEPA National Environmental Protection Agency
PMU Program Management Unit (of the World Bank)
S&Z Satchu & Zhouand, Legal advisers to ACMP
TL Team Leader (of the GAF Aynak Compliance Monitoring Project)

 

1.0              SUMMARY TERMS OF REFERENCE

The Aynak Compliance Monitoring Project requires GAF to systematically review the planning and execution of the Aynak Copper Project (ACP) and to measure and report on the degree to which the license holder is in compliance with:

  • The terms and conditions of MCC’s license, the Aynak Mining Contract (AMC) and all ancillary agreements (AAs);
  • All relevant laws and regulations of the IROA, particularly the Mining Law, Regulations and Procedures promulgated thereunder, but also all other relevant legislation; and
  • Internationally accepted standards: environmental, social, occupational health & safety and technical

The responsibility of GAF is to identify all aspects of the Aynak Project which require to be routinely monitored against all applicable laws, regulations, contracts, agreements and international norms; to assess the degree of compliance; identify & report deviations and to recommend corrective measures to the MoM.

 

GAF is required to establish a formal monitoring system and to implement it in respect of the Aynak Project. The monitoring system must be capable of adaptation to other major mining projects.

 

GAF will work with employees of the Ministry of Mines and of NEPA to establish and implement the formal monitoring system. GAF will provide on-the-job training in monitoring methodology & use of the system. This will be supplemented by some formal (classroom-type) training, developing their capacity to take over the monitoring of the Aynak Project and other, future major mining projects. Some general, technical training is included, as given to the Department of Inspectorate. Training will be supplemented by field trips to observe monitoring of active mining projects at foreign mine sites.

 

2.0  PROJECT HISTORY

Prior to formal commencement of the project, in August 2011, a one-week study tour was undertaken to the Kansanshi Copper Mine, Zambia, together with HEDM & officials of the ACPA unit of the Ministry of mines. Kansanshi is owned and operated by First Quantum Minerals Ltd. The tour was undertaken in association with the GAF capacity-building project in the Dept. of Inspectorate. The group saw all aspects of a large-scale, open pit copper mine with a concentrator & SXEW recovery plant, and the participants were privileged to witness in some detail the laying of the HDPE liner and construction of under-drains for a large new tailings dam.

 

The effective date of the ACMP contract between the Ministry of Mines & GAF is 10 SEPTEMBER 2011. Since then, the GAF team has established itself in offices supplied by the PMU in the Afghanistan Geological Survey and has commenced work with the Ministry of Mines & NEPA.

An Inception Report has been submitted to the PMU & MoM along with monthly and quarterly reports as required by the contract.

3.0  OVERVIEW OF THE AYNAK COPPER PROJECT

The Aynak copper deposit has been known since ancient times and was exploited possibly as early as the second and third centuries. Large deposits of ancient slag give evidence of early smelting of oxide ores and it is these activities that supported the construction of Buddhist monasteries where exciting discoveries of cultural relics have been made at the mine site.

The Government of the Islamic Republic of Afghanistan awarded a contract for the construction and operation of a mine on the Aynak deposit in 2008, the effective date of the contract being June 2008. The contract was awarded to the China Metallurgical Group company, MCC following a rigorous tender process, supervised by reputable, international consultants to ensure transparency. The contract is a confidential document but incorporates comprehensive safeguards to ensure adequate protection of the economic, environmental and social interests of the IROA. The Aynak Mining Contract, together with its Ancillary Agreements, commits MCC, through its subsidiary MJAM, to construct the mine and to commence commercial production within an agreed time period, and to construct associated, major infrastructure. The Government of the IROA has certain obligations to assist in these activities.

MJAM has established a camp at the mine site and the Government of the IROA has made adequate arrangements for security of the mine site and access road.

MJAM has carried out extensive exploration drilling to supplement data from earlier, Russian exploration programs. The company reports a total resource of 454.4Mt @1.75% Cu. Two ore zones have been identified, the Middle District, which will be mined as an open pit, and the West District which will be mined as an underground section using sub-level caving. It is planned to extract some 9.9Mt per annum of ore from the open pit, at an overall stripping ratio of about 6:1 and yielding some 197,000t of copper per annum. When the underground section commences production, output will increase to some 19.8Mt of ore per annum and copper production will rise to about 394,000 tonnes.

MJAM is currently preparing a full feasibility study incorporating an ESIA and EMP for approval by the Ministry of Mines and NEPA. Landmine clearing is at an advanced stage. The discovery of significant occurrences of cultural relics has partially disrupted the mining program. MJAM is co-operating fully with the Government of the IROA to ensure the protection of all cultural relics and a large team of local and foreign archaeologists is on site, assisted by a substantial workforce drawn from surrounding villages. No cultural relics have been destroyed or will be lost due to mining activities. ISAF has provided storage facilities for relics recovered from excavations.

The Ministry of Mines has assisted MJAM with relocation of populations affected by current and planned mining activities. International consultants are assisting in this process to ensure that sustainable resettlement processes are followed, compatible with internationally accepted guidelines. The AMC makes provision for employment of locals and for development of skills among the local population.

 

4.0  COMPLIANCE MONITORING PROJECT ACTIVITIES TO DATE

The GAF team undertook a detailed review of the AMC & AA & produced a summary highlighting key points for monitoring. In addition, a detailed legal review has been compiled by the project's legal advisers.

The GAF team, in liaison with other consultants, has assisted the MoM to develop a structure for managing all aspects of the Aynak Copper Project in the Ministry of Mines, with Terms of Reference  for each component and a summary job description for each post.

The team is actively engaged in assisting departments in the Ministry with responsibility for the Aynak project to establish the planned working structures and to implement formal work procedures and reporting mechanisms to be effective in their duties, both in facilitating and monitoring the activities of the mining company.

GAF TL has provided technical advice to HEDM on a number of issues. The team has reviewed the proposed mining schedule and made comments. The team has also provided advice on how to minimise the disruption to mining during the recording and recovery of the cultural relics on site and has taken a leading role in co-ordinating the efforts of the company contracted to clear landmines and the archaeological teams so that the priority areas required by MJAM are made available as soon as possible and efforts are not wasted in non-priority locations.

GAF has compiled a catalogue of available technical data on the Aynak deposit and has participated in meetings with various Ministry officials and consultants having an interest in the Aynak project, NEPA officials and interested external parties including Integrity Watch Afghanistan, Global Witness and EUROMINE.

The team has started compiling training material and training programs for Government officials.

 

5.0 THE FUTURE

The MoM is in the process of establishing a centralised structure for the management of future, large scale mining and hydrocarbons projects. The Aynak unit will for a model for facilitation and compliance monitoring for other major projects. GAF will assist the Ministry to implement a structured, formal system for monitoring of compliance with the law, the companies' contractual obligations and acceptable standards of practice. The GAF project will include continuing capacity development in the Ministry to provide the necessary skills for compliance monitoring. Development of skills will include on-the-job training, working with consultants in an active role in actual monitoring activities, supplemented by some formal, classroom training on specific technical issues and by further field trips to suitable, large-scale foreign mining operations.