CAO Cases

Arne Hoel, The World Bank

East Asia & the Pacific

Indonesia / PT Weda Bay Nickel-01/Weda Bay

Complainant
Confidential
Date Filed
July 06, 2010
Concerns
Environmental impacts to water, fields, and forests
Case Status
Closed
 

Synopsis

Complaint
PT Weda Bay Nickel (WBN) is proposing to develop a nickel and cobalt mine and a hydrometallurgical processing plant in Central Halmahera and East Halmahera Regencies in the North Maluku Province of eastern Indonesia.  In August 2010, MIGA issued a guarantee of $207 million to Strand Minerals for its equity investment in the PT Weda Bay Nickel Project. Strand Minerals is jointly owned by Eramet SA of France and Mitsubishi Corporation of Japan.

 

In July 2010, a complaint from Indonesian NGOs and concerned citizens was filed with the CAO.  The signatories of the complaint comprise both national NGOs, local NGOs and directly affected people living in Halmahera Island.  Broadly, the most important issues raised in the complaint are environmental impacts to forests, fields, and bodies of water on which communities in the area depend.  The complainants have requested confidentiality.

 

CAO Action

Ombudsman:
The complaint was deemed eligible for assessment in August 2010. In January 2011 the 120-day assessment period was extended, with the agreement of the parties. The additional time was requested by the complainants and was needed in order to allow the CAO Ombudsman team to meet and communicate with the local community complainants in a manner that protected their identities. The CAO Ombudsman team spent significant time working with all parties to assist them in understanding and exploring their options for resolving the complaint issues. Ultimately, the complainants informed the CAO that they would not participate in or support a dispute resolution or dialogue process convened by the CAO and they reiterated the request to keep individual community-member complainant identities confidential.

 

In June 2011, the CAO Ombudsman concluded its involvement in the case and released its Assessment Report. In accordance with CAO’s Operational Guidelines, and to provide assurance that there were no outstanding concerns regarding MIGA's compliance with applicable social and environmental requirements related to the project, the case was transferred to CAO Compliance for appraisal.

 

Compliance:
The compliance appraisal aimed to establish whether MIGA assured itself that it diligently reviewed and assessed the environmental and social risk and potential impacts of the project. Specifically, whether there is evidence of risk of significant adverse social and environmental outcomes arising from MIGA's guarantee and the related project that indicates that policy provisions failed to provide an adequate level of protection. The CAO appraisal did not find this to be the case.

 

The appraisal also investigated whether a compliance audit of MIGA could yield information that may improve the application of policies (or other audit criteria) to future projects. The CAO found that an audit of MIGA’s due diligence of the guarantee related to the engineering and feasibility phase of developing the project, against the applicable policy provisions, would yield limited information and would be of limited value beyond the findings already identified in the appraisal:

 

1) The appraisal found that during its due diligence of the guarantee, MIGA classified the project as Category A under MIGA’s Environmental and Social Review procedures.  MIGA did not expect impacts on critical habitats or on biodiversity or the consequences of pollution to be significant during the engineering and feasibility phase. However, MIGA identified several significant potential impacts during the construction and operations phase, such as: potential erosion; impacts on biodiversity; effects of disposal of solid residues; and consequences of population influx.  MIGA stated that these impacts could be irreversible if not addressed properly.

 

2) MIGA identified Performance Standards 1–8 as relevant and applicable to the engineering and feasibility phase.

 

3) MIGA also identified that, in order to assess the impacts of construction and operations, the client had committed to conduct further work and studies related to: terrestrial biodiversity; marine biodiversity and the ecology of the Sagea Lagoon; community social assessment; public consultation and disclosure plan; community and indigenous people development plan; cultural heritage preservation plan; land acquisition and compensation plan; greenhouse gas emissions assessment; metals background study; residue management impact assessment; karst limestone deposit analysis; Kobe River watershed study; and population influx.

 

4) MIGA stated that the project sponsors had committed to comply with MIGA Performance Standards and the Equator Principles; the World Bank Group Environmental, Health and Safety Guidelines; the World Business Council for Sustainable Development Mining Guidelines; and the International Council on Metals and Minerals (ICMM) Sustainable Development Framework, and that third party ISO 14001 certification of the managements system would be sought.

 

Status
The CAO concluded that the case did not merit an audit of MIGA at the current stage, and the case was closed in October 2011.  The full CAO appraisal report for this case is available under the documents link below.

Project information

Institution
MIGA
Project Name & Number
PT Weda Bay Nickel 8113
Company
PT Weda Bay Nickel (WBN)
Sector
Mining
Region
East Asia & the Pacific
Country
Indonesia
Environmental Category
A
Commitment
Proposed $207 million guarantee

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Transferred

Compliance

  • Under Appraisal: Closed