MIGA to Support Feasibility Study for Mining Project in Indonesia

The Multilateral Investment Guarantee Agency (MIGA) plans to support an exploration and feasibility study for a nickel mining project in Indonesia following approval today from the agency’s Board of Directors. The project sponsors, Eramet of France and Mitsubishi Corporation of Japan, have asked MIGA to provide a guarantee of $207 million to support the detailed exploration and feasibility study stage of a potential mining project on Halmahera Island, North Maluku Province. MIGA’s contract of guarantee, which would be for a period of up to three years against the risks of expropriation, breach of contract, and war and civil disturbance, has not yet been signed.

"MIGA sees this project as an opportunity to influence the way such complex projects are done —with the best environmental and social safeguards in place and company compliance," says MIGA Executive Vice President Izumi Kobayashi. "This stage is precisely to assess what the potential environmental and social impacts might be and to identify appropriate mitigants to address them."

A major purpose of the feasibility and exploration phase is to study social and environmental impacts in detail, design mitigation measures, and test their effectiveness. These potential impacts include biodiversity loss, pollution, erosion, population influx, and potential impacts on indigenous groups and cultural heritage.

MIGA’s involvement in this early phase will help the sponsors to identify and address these issues according to MIGA’s Performance Standards, environmental guidelines, and good industry practices. MIGA carefully studies environmental and social issues for all projects in accordance with these standards. Its experts will be looking at all the issues and consult with concerned stakeholders as the process moves forward.

The agency has already met with many non-governmental organizations in Indonesia and in Washington to discuss the project and to hear their concerns. In June, MIGA held discussions with local villagers near the project site and civil society organizations in Ternate, Indonesia. The local population is highly supportive of this project in anticipation of the positive development impact resulting from employment and other economic opportunities. However, they also recognize, as does MIGA and the project sponsor, that it is critically important to carefully assess the potential impacts of such a major project. This is precisely one aim of the feasibility study stage of the project.

Once the studies are complete, an investment decision will be taken by the project sponsor on whether to continue developing the mine and building a processing plant. It is anticipated that the final investment decision should be made before the end of 2012.

"No decision from MIGA is being sought at this time on the construction and operation of the mine itself," says Kobayashi, noting that decision will not be made until the feasibility assessments are completed. "It is extremely important that these assessments and other studies, and the plans that are then formulated based on them, are done carefully and well. That is exactly the value-added that MIGA has to offer."