EBRD response to a letter regarding its involvement in Phase 2 of the Chelopech mining project

Advocacy letter    |    15 May 2008

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Dear Mr Popov

Chelopech Mining project – phase 2

Thank you for your letter of 2 May, 2008 in which you share with us your concerns about Chelopech Mining Project (copy attached for reference).

Phase II of the Chelopech Mining Project is at a very early stage of consideration by the EBRD; it has not yet been presented within the Bank for Concept Review and no decisions have been taken on the likely financing. Also, as you may know, the environmental approvals for the expansion of the Chelopech Mine ("Phase II") have not yet been secured from the Bulgarian Ministry of Environment and Waters (MoEW). It would not therefore be appropriate for EBRD to comment on the ongoing process which also means that we are not able to respond to some of the questions you raise.

Should Phase II of Chelopech go ahead it would be an example of a transformation-conversion project requiring a full Environmental Impact Assessment (EIA) under Bulgarian and EU legal requirements regarding the production of copper metal, gold ore and sulphuric acid through the installation of a Pressure Oxidation facility ("Pox") and related processing capacity (flotation, pressure oxidation (POX), solvent extraction and electrowinning (SX/EW) for copper, and carbon in leach (CIL) and cyanidation of the residue for gold). It is also our understanding that the Chelopech expansion has been designed according to the recent EU Mining Waste Directive, which the Dundee Precious Metals will implement in full should the necessary approvals be granted.

Although an EIA has been completed for Phase II and submitted to the authorities, the role of the Bank in Phase II has, to date, been purely as an observer and we cannot comment on its substance. The Bank has verified that the EIA Statement and all accompanying documents were available to all stakeholders within the time frame provided under the relevant law for public access and continue to be available at the Company’s dedicated Information Centre in Chelopech Village

In the context of the original Chelopech project (Phase I) and the Bank’s loan, while it is not the Bank’s policy to release confidential due diligence documents you requested, all recent monitoring and appraisal studies have confirmed that the existing mine is operating properly, is managed appropriately and has improved significantly since the involvement of the project’s sponsor. Operations at Chelopech have already benefited from the introduction of the highest environmental standards currently available in the industry through the upgrading of the existing mine, mill and tailings dam facilities.

The Bank remains willing to facilitate further constructive discussions on any areas of concern between the project sponsor, local communities, NGO groups and other interested parties.

Yours sincerely,
Alistair Clark
Corporate Director
Environment and Sustainability Department
EBRD
Tel: +44207 338 6020
Fax: +44207 338 7486