Lundin Mining Corporation

Tenke Fungurume (DRC)

Tenke Fungurume Mining (TFM), in which Lundin Mining holds a 24 percent stake, is the largest private foreign investment in the Democratic Republic of Congo (DRC).


TFM offers a vital source of revenue for regional and national development. The mine, now under full production, is operated by our partner, Freeport-McMoRan Copper & Gold Inc. (Freeport-McMoRan).

The DRC is a challenging operating environment and Lundin Mining has been a proactive partner in the design, financing, implementation, and monitoring of health, safety, environmental, and community aspects of this world class operation. The project operates in alignment with the International Finance Corporation (IFC) Performance Standards on Social and Environmental Sustainability amongst a number of other international standards applicable to mining activities in developing countries.

Responding to frequently asked questions related to the status of mining contract reviews, distribution of project benefits, conflict minerals, human rights, and artisanal mining, we have included details of our approach and activities in the pages that follow.

Mining Contract Review

On October 22, 2010, the Government of the DRC and Freeport-McMoRan announced the successful conclusion of the review of TFM's contract. The announcement outlined several amendments agreed by TFM, including: an increase in Gécamines ownership interest in TFM from 17.5% to 20%; an additional royalty of $1.2 million for each 100,000 metric tonnes of proven and probable copper reserves above 2.5 million metric tonnes; additional payments totalling $30.0 million to be paid in six instalments upon reaching certain production milestones; conversion of $50.0 million in intercompany loans to equity; and a payment of $5.0 million for surface area fees. These amendments became effective upon the issuance of a presidential decree which occurred in mid-April 2011.

Conflict Minerals

TFM recognizes the international concern over trade in minerals that are being sold in the DRC by rebel groups who frequently use the proceeds to purchase weapons fuelling both regional conflicts and attacks against innocent civilians. Conflict minerals in the DRC include tin, tantalum, tungsten, and gold. TFM produces only copper and cobalt and processes only those minerals mined by the company itself. TFM is supportive of supply chain transparency initiatives, such as the Electronic Industry Citizenship Coalition, that trace mineral custody from mine through to final customer.

Artisinal Mining

Artisanal mining often creates economic and social tensions between the local community and outside groups drawn to artisanal mining activities, as well as increased environmental, health and safety risks. From time to time, artisanal miners have been active within the boundaries of the TFM concession. TFM engages actively with authorities and local communities regarding safety and security issues related to artisanal mining activities. TFM has also engaged with the DRC authorities to install control measures at the entry and exit points of the concession to interdict shipments of illegal product, which has been greatly effective. The International Council on Metals and Mining (ICMM) recently published a document: "Working together -- how large-scale miners can engage with artisanal and small-scale miners", which TFM plans to use to guide its ongoing engagement efforts.

The Voluntary Principles on Security and Human Rights

The Voluntary Principles provide guidance to extractive companies on maintaining the safety and security of their operations within an operating framework that ensures respect for human rights and fundamental freedoms. Freeport-McMoRan was a founding member of the Voluntary Principles in 2000 and TFM has incorporated the Voluntary Principles into their site-based human rights policies. TFM has also developed and implemented a Voluntary Principles training program, which all TFM guard force personnel are required to complete before starting work. In 2010, refresher training was also conducted for 77% (298 members) of the TFM guard force, and TFM conducted presentations to the National Mines Police to raise awareness on the Voluntary Principles and human rights.

Resettlement

To date, 379 households have been relocated under a Resettlement Action Plan (RAP) in accordance with national DRC law and international best practice. The relocation sites have each been equipped with a school, clean water wells and household latrines. Health posts have also been constructed for the relocation communities in rural areas. In June 2010, a survey of more than 200 farmers displaced by mining operations found that more than half of the population had already restored their livelihoods. Monitoring of livelihood restoration activities is ongoing.

In 2010, TFM commenced working on an addendum to the 2007 Environmental and Social Impact Assessment, to include an expansion of the TFM plant and mining operations to the Tenke-Fwaulu deposits. As part of this addendum, a Resettlement Action Plan has been developed for an additional 70 households that must be resettled because of unavoidable impacts.

Extractive Industries Transparency Initiative

Lundin Mining shares a belief that the prudent use of natural resource wealth should be an important engine for sustainable economic growth that contributes to poverty reduction but, if not managed properly, can create negative economic and social impacts. We further underline the importance of transparency by companies and governments in the extractive industries and the need to enhance public financial management and accountability.

DRC is an often cited example of the so-called "paradox of plenty." Extremely rich in natural resources (80% of world-wide resources of Coltan, 10% of world-wide resources of copper), but the population suffers from extreme poverty (80% of the Congolese population lives on less than US$1.00 a day). The Government of the DRC identified the Extractive Industries Transparency Initiative (EITI) as a tool to resolve the paradox of plenty and was accepted as an EITI Candidate Country at the board meeting in Accra in February 2008. In December 2010, the EITI Board designated the Democratic Republic of Congo as an EITI Candidate country that is "Close to Compliant". The Democratic Republic of Congo was granted six months (until 12th June 2011) to complete the remedial actions needed to achieve compliance. The Board retains the right to require a new validation if the remedial actions are not completed within the next six months. TFM actively participated in the EITI process and submitted data for the DRC's first EITI country report.

Economic Benefits


TFM plays an important role in local and national development through the payment of royalties and taxes, wages, local procurement, and infrastructure provision. During 2010, the company paid a total of US$142 million in taxes, royalties, and other payments to the government of the Democratic Republic of Congo. It should be further noted that when economic benefits from the provision of local services are included, more than two-thirds of the project's benefits will remain in the country. By measure of sector benefits in other major mining countries around the world, this performance represents a progressive model in terms of fostering national economic development by an extractive industry.

TFM commenced production in 2009 and during the full calendar year of 2010 produced approximately 120,300 tonnes of copper cathode and 9,200 tonnes of cobalt metal (as cobalt hydroxide). The initial project was designed to produce 115,000 tonnes of copper and 8,000 tonnes of cobalt per annum over its anticipated life. TFM has commenced a feasibility study to evaluate an expansion of the initial project. In addition, TFM is continuing its exploration programs in order to identify additional proven reserves that can be readily developed, should the commodities market and the national business climate support future investment decisions.

Employment

The TFM concession area comprises a rapidly growing host community of 130,000 residents, living in two urban and 43 rural village communities. The current project phase provides employment to approximately 2,500 full-time operational workers and 1,500 contractors. Approximately 98% of the operational employees are DRC citizens. TFM supports collective bargaining and 100 percent of full-time employees belong to a labour union.

Infrastructure

Though constructed principally to meet corporate requirements, TFM has undertaken several infrastructural improvements that will bring diffuse benefits to the DRC on both a regional and national basis. The company is investing up to US$170 million to rehabilitate the N'seke Power Station, with completion scheduled in 2013. TFM has made additional infrastructure investments in highway construction, border crossings, and airport upgrades. Ongoing activities focus on maintenance work, including dust control on roadways.

Social Benefits


In September 2010, TFM incorporated a non-profit association under DRC law called the TFM Social Community Fund. This Fund is financed by payments from TFM at a rate of 0.3% of net sales revenue. The Fund formed a Stakeholder Forum and its members identified education, health, agriculture, water/electricity infrastructure, and employment as priorities. The first project grants are scheduled to be selected for funding in the first half of 2011.

Education and Training

Among active initiatives in the fields of education and training, TFM has constructed six new elementary schools, one new high school and renovated and expanded two additional high schools. TFM additionally established a scholarship fund for top performing students (aged 11 to 14) from these schools to attend the Mutoshi Institute of Technology in Kolwezi. The objective of this program, along with an internship program with University of Lubumbashi, is to increase local capacity and, ultimately, representation in senior management positions. In addition the Lundin for Africa Foundation has committed to supporting 20 students on full scholarship over the next two years.

Community Health

Due to TFM's clean water program providing over 60 village wells and development of urban water distribution systems, there were no cholera cases reported in 2009 and 2010. In 2010, the Ministry of Health also officially certified 12 communities in Fungurume, totaling around 2,500 households, as "Clean Villages" based on a TFM and Health Zone-led initiative to help community members build household latrines, hand washing facilities, trash pits and to access TFM-supplied clean water sources. A comprehensive malaria prevention plan, including indoor residual spraying of households and the distribution of insecticide-treated bed nets, has led to a 60% decrease in disease prevalence since 2007. To mitigate the spread of HIV / AIDS, TFM continues to participate actively in several initiatives intended to raise awareness and build local capacity.

Livelihoods

TFM and the Lundin for Africa Foundation have together created a vertically integrated financial infrastructure to support the establishment and growth of small- and medium-sized businesses with the objective of creating 10,000 jobs. This support encompasses capacity building, microfinance, loan guarantees and social venture capital. TFM also seeks opportunities to maximize the procurement of goods and services from local suppliers and contractors, and TFM has held a number of supplier summits to share information on how local businesses can work with TFM. TFM has also provided specific training to local farmers, along with credit for purchasing fertilizers and improved seeds, resulting in a tripling of crop yields. In addition, a number of local farmers have received support to become suppliers of fruits and vegetables to TFM.