Potential investment by EBRD

Potential investment by EBRD

Hambledon Mining PLC

Hambledon Mining plc (“Hambledon” or the “Company”)

Potential investment by EBRD

12 January 2012

Hambledon is pleased to announce that today the European Bank for Reconstruction and Development (“EBRD”) has posted on its website a Project Summary Document (“PSD”) relating to a potential US$15 million debt facility along with an equity investment of US$3 million for Hambledon to develop the Sekisovskoye underground mining operation and other group projects. It is also proposed that EBRD will be issued with warrants to a value of US$2 million.

The EBRD PSD is set out on its website and can be accessed through the following link: http://www.ebrd.com/pages/project/psd/2012/42831.shtml

The full text of the PSD is set out below.

Final approval is expected to be received in the middle of quarter 1, 2012, and further updates will be announced to shareholders as soon as possible. The total amount mentioned here of US$20 million is subject to exchange rate variation.

Tim Daffern, CEO of Hambledon commented:

“We are very pleased by the prospect of this partnership with EBRD. The Board is excited about the future of the Company which can only be enhanced by having the backing of a lender and investor of the stature of EBRD”.

Enquiries;

HAMBLEDON MINING:

Telephone [phone]
Charles Zorab

FAIRFAX I.S. PLC (NOMAD AND BROKER):

Telephone [phone]
Ewan Leggat/Katy Birkin

TAVISTOCK COMMUNICATIONS:

Telephone [phone]
Ed Portman/Jos Simson

EBRD PSD extraction:

Project description and objectives:	Â	The EBRD is continuing to support the safe exploration of natural resources in Kazakhstan with a planned investment into the development of the Sekisovskoye gold and silver deposit in the province (oblast) of East Kazakhstan. The Bank is considering a joint loan and equity investment of up to US$21 million to contribute to the expansion of the underground mine and processing operations at Sekisovskoye. As outlined in the current EBRD Strategy for Kazakhstan, the Bank supports the development of responsible mining and pursues projects that increase private sector participation and are committed to improving environmental standards and energy efficiency. The investment in Sekisovskoye which the EBRD is considering will contribute to further improvements of the application of best environmental, health and safety (EH&S) standards at the deposit.
Transition impact:		The Transition Impact potential of the project is derived from: (i) support of private sector development and increased competition in the project sector and (ii) setting higher standards of EH&S practices and the adoption of the International Cyanide Management Code.   Through the proposed financing, the Bank will support the successful development of a medium–sized independent gold producer in Kazakhstan’s gold market dominated by a handful of large operators. Hambledon Mining plc’s development will contribute to the economic development of the East Kazakhstan region by stimulating economic activity. The Company will adhere to the ‘Publish What You Pay’ principles and implement an Environmental and Social Action Plan to bring EH&S in line with best international standards, including the adoption of the International Cyanide Management Code. The Bank will also be instrumental in ensuring that Hambledon Mining Plc implement high environmental standards across all its operations in accordance with the Bank’s Performance Requirements (PRs).
The client:		Hambledon Mining plc is a public limited company, registered in England and listed on AIM, with mining operating assets in Kazakhstan.
EBRD finance:		Joint equity and debt financing of up to US$21 million.
Total project cost:		US$66 million investment program.
Environmental and social categorisation, impact, and mitigation:		Screening and rationale for classification:   The further development of the Project site from above ground mining and processing operations to include below ground mining activities and associated infrastructure has been categorised B in accordance with the EBRD’s Environmental & Social Policy 2008 (ESP). Independent due diligence has confirmed that potential adverse environmental and social impacts associated with the Project are site specific, readily identified, and the residual impacts are to be addressed through mitigation measures in a timely manner, as agreed with the client in an Environmental and Social Action Plan (ESAP).   As the investment includes participation in the company’s equity capital, the client is required to adopt the ESAP at a corporate level and apply the Performance Requirements (PRs) at a site level for all existing and any future operations.   Information reviewed: An international environmental and social (E&S) consultancy firm was mandated by the client to undertake pre-financing E&S due diligence against the ESP and associated PRs. Due diligence comprised site visit (accompanied by EBRD E&S specialists), management interviews, project stakeholder focus discussions and document review.   The consultant and the client have developed an ESAP in discussion with EBRD which has been agreed and will be part of the legal commitments of the client. A summary of the key issues are provided in the relevant section below.   Environmental and Social issues: Independent due diligence has identified that site operations have historically been managed to meet the requirements of Kazakh law. Senior company management has acknowledged that additional works are required to meet international standards and agreed to address outstanding E&S issues in a timely manner through the implementation of the ESAP.   While it is not an EBRD requirement for Category B projects, the company has, under its own initiative, commissioned a full life of mine (above and below ground activities) E&S Impact Assessment (ESIA) by an independent consultant, including the development of an action plan for additional studies and assessments. This is currently work in progress and is part of the company’s stated aim to meet best practice. Many of the action items arising from the ESIA are anticipated to be similar to those agreed in the ESAP developed during due diligence. Where additional recommendations are provided in the ESIA action plan these are also to be adopted by the client. In accordance with best practice, the ESIA shall include disclosure and consultation, including a non-technical summary.   Management Systems: As a result of the reactive approach to E&S management stipulated by the Kazakh regulations a proactive management system is required to achieve continuous improvement in E&S performance. Similarly, due diligence has identified that a Health & Safety management systems is required to be developed and formally implemented to meet best practice. The company has committed to designing and implementing management systems that are aligned with international best practice.   Workforce The conversion of operations from above ground to below ground will require a different skill set of mine workers and is likely to result in some redundancies (circa. 300) on the one hand and worker influx (circa. 200) on the other. The company is therefore in the process of developing a retraining and retrenchment plan that will meet EBRD and other International Financial Institutions requirements. In addition, worker accommodation to be constructed shall be done so in accordance with EBRD requirements.   Pollution Prevention The mine is regulated under the Kazakh permitting system and an environmental engineer is responsible for maintaining regulatory compliance. Cyanide is used on site and the company has agreed, at the request of the EBRD, to commission an International Cyanide Management Code (ICMC) auditor to review site operations provide recommendations that will be adopted by the client to meet the code where necessary. With the exception of the tailings dam leak (detailed below) the site is generally in compliance with Kazakh emission and discharge limits. The company is in the process of converting wet tailings management to paste technology which shall further reduce the risk (volume and structural) associated with tailings management while also reducing the amount of water required for processing.   Community Safety The lack of a formal social impact assessment undertaken to date means impacts to community health, safety and security are not fully understood. The completion of the SIA (as part of the ESIA process) to satisfactory standard will address each of these residual risk issues and mitigation measures proposed are required to be adopted by the company in full. This work will be carried out as a priority and the ESAP updated with any additional actions needed. Emergency response plans is place at the site are currently being revised and communication of risks and procedures to local communities is a requirement of the ESAP.   Resettlement Resettlement of local householders situated within the Sanitary Protection Zone (SPZ) of the mine has occurred historically and is to be completed in 2012 with the acquisition and resettlement of the final two households. There has been no consistent policy applied to land acquisition for resettlement to date and it is therefore a requirement of the EBRD that past land acquisition impacts be assessed and mitigated and future land be undertaken in accordance with EBRD and other IFI standards.   Tailings Dam 3 (TD3) Leak During the due diligence period, TD3 was in commissioning phase when the liner failed resulting in a release of low level cyanide containing effluent to a stream which flows across the mine site. The client informed the competent authorities and was requested to add a cyanide neutralising agent to the watercourse. A fish kill resulted from the leak and/or treatment, and temporary ban on the use of the watercourse was imposed. The company provided an alternative water supply for local residents until the authorities declared that the stream no longer presented a risk to water users.   The local authorities have completed their investigations and the company has received a fine for the leak following court proceedings. In addition, the company has entered into a formal agreement with the local communities to provide investment in local social infrastructure, including provision of municipal water supply, recreational facilities for communities, road surfacing, etc. to which the company has agreed. This is in addition to the existing social infrastructure investments that the company is currently implementing.   The company appointed an international mining engineering consultant to undertake a root cause analysis of the failure and to design remedial measures. EBRD requested that the company provide a report relating to the incident and EBRD was furnished with all the information requested. An independent third party consulting firm was then mandated jointly by the EBRD and the client to review the incident analysis and proposed remedial works.   On the basis of the above, EBRD is satisfied that all information has been provided and that the root cause of the recent failure is understood, and a feasible engineering solution to TD3 remediation and recommissioning has been proposed. Detailed design is currently underway by the company engineers and independent engineering consultants and shall be reviewed by another independent consulting firm at the appropriate time. EBRD has stipulated a number of requirements within the ESAP to ensure that the situation is closely monitored and appropriate measures are adopted in the future. Implementation of these measures provides a high level of confidence that repetition of such an incident will not occur.   Environmental or social opportunities The company has the stated aim of achieving E&S best practice and through the EBRD’s involvement the company has agreed to review operations and achieve timely alignment with the below international standards:     EU Mine Waste Directive EU Best Available Techniques ISO/OHSAS Standards International Cyanide Management Code In addition, the company has an existing social infrastructure programme that is associated with the mine operations and shall be of benefit to the local communities in the provision of clean water, paved roads, waste management and recreational areas.   Summary of Environmental and Social Action Plan Management of E&S issues by the company has, up to this point, been focused on local Kazakh regulatory compliance. Requirements set out in the ESAP therefore aim to promote best practice while maintaining regulatory compliance, including:     Establish consistent baselines of current E&S performance; Increase E&S management capacity and capability; Establish formal policies and management systems to provide a robust means of controlling and measuring E&S performance; Ensure that the substantial changes and challenges posed by the development of the mine and the move from open-cast to underground mining are managed in accordance with the EBRD's PRs; Finalise the mine closure and rehabilitation plan; Complete rock blasting studies and propose mitigation measures for prevention of fly-rock; Conform SPZ required for current and future operations and develop a future / retroactive resettlement action plan in accordance with EBRD requirements; Implement Stakeholder Engagement Plan. In addition, the ESAP states that the client is to implement EBRD requirements for any future acquisitions and developments.   Project monitoring will assess the timely implementation of the ESAP; due to the nature of the Project, monitoring in the first year of signing shall include a visit by EBRD.   Stakeholder Engagement A Stakeholder Engagement Plan (SEP) has been developed by the client to meet EBRD requirements and was reviewed by both the E&S consultant and EBRD. The SEP included a summary of the project site, identifies stakeholders and defines a stakeholder engagement programme, including a grievance mechanism and monitoring and reporting.
Technical cooperation:		None. For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants.
Company contact:		Charles Zorab, Head of Investor Relations Hambledon Mining Plc 42, Queen Anne’s Gate, London SW1H 9AP United Kingdom Tel: [phone] Email: [e-mail] www.Hambledon-mining.com
Business opportunities:		For business opportunities or procurement, contact the client company.
General enquiries:		EBRD project enquiries not related to procurement: Tel: [phone]; Fax: [phone] Email:[e-mail]
Public Information Policy (PIP)		The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. The text of the PIP can be found under: http://www.ebrd.com/about/policies/pip/index.htm
Project Complaint Mechanism (PCM)		The EBRD has established the Project Complaint Mechanism (PCM) to provide an opportunity for an independent review of complaints from one or more individuals or from organisations concerning projects financed by the Bank which are alleged to have caused, or likely to cause, harm. The Rules of Procedure governing the PCM can be found at http://www.ebrd.com/about/integrity/irm/about/pcm.pdf , the Russian version can be accessed at http://www.ebrd.com/about/integrity/irm/about/PCMRulesRussian.pdf Any complaint under the PCM must be filed no later than 12 months after the last distribution of EBRD funds. You may contact the PCM officer (at [e-mail]) or the relevant EBRD Resident Office for assistance if you are uncertain as to the period within which a complaint must be filed.