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Antares Minerals
Environmental & Social Review Summary

This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Project number 28215
Country
Peru(IDA)
RegionLatin America and the Caribbean
SectorCopper
Department
Company nameAntares Minerals Inc.
Environmental category:B
StatusCompleted
Date ESRS disclosedMay 14, 2009
Previous EventsInvested: July 17, 2009
Signed: June 25, 2009
Approved: June 19, 2009
View Summary of Proposed Investment (SPI), click here

OverviewCategory &

Applicable Standards
Key Issues

& Mitigation
Community/

Engagements
Client's

Documentation

Overview of IFC's scope of review
IFC specialists visited the Antares Haquira project site from 30th March - 3rd April 2009, and met key Sponsor representatives. Following high-altitude safety induction (and medical tests), field visits were organized to the different exploration areas within the concession license area. Various discussions were held with members of the workforce, five community projects were visited and a discussion was held with the President of the community of Huanacopampa which lies adjacent to the exploration camp.

Follow up detailed technical, E&S and financial discussions were held at the Antares Minerals Arequipa offices. Documents reviewed have included Baseline Environmental Assessments covering air and water quality, biodiversity, noise and archaeology, as well as a Diagnostic Social Assessment and the Company’s draft Community Relations Policy. The Antares team also made three detailed PowerPoint presentations to the IFC team (General, E&S and Geology).
Project description
Antares Minerals Inc is a listed (TSX V.ANM) Canadian junior mining exploration company focused on the Haquira Copper (Cu) exploration project. This is located 80 km south west of Cusco (some 215 km by road), at high altitude (3800-4400 m) in the Apurimac Department of southern Peru, which is considered to be one of the poorest regions in the country. Its local subsidiary is Minera Antares Peru S.A.C. The Haquira project straddles the boundary of the Provinces of Cotabambas and Grau.

The nearest town with services is Chalhuahuacho located ~15 km east of the project camp although the small community of Huanacopampa lies next to the exploration camp. All supplies and fuel are trucked in from either Arequipa or Cuzco. An electrical sub-station is located approximately 16 km to the SE of the project. Electrical lines for limited domestic use are currently being installed to many of the small communities near the project, but are not yet activated.

Minera Phelps-Dodge del Peru S.A.C. discovered the Haquira deposits and obtained all the necessary environmental and surface access agreements to undertake initial exploration activities at the Haquira project between 2001 and 2003. In 2005, Antares Minerals Inc. (“Antares”) (ANM-TSX.V) and Minera Phelps Dodge del Peru S.A.C. (“Phelps Dodge”), a wholly owned subsidiary of Phelps Dodge Corporation (PD-NYSE), executed an option agreement whereby Antares could acquire a 100% interest in the Haquira SX-EW copper project. On July 25, 2003, Minera Phelps-Dodge filed a Category C Environmental Evaluation for the development of an exploration program consisting of the construction of 92 drill pads. The area disturbed by this exploration program was estimated to be 11.8 hectares. Phelps Dodge agreed to sell the Haquira project concessions to Antares when Xstrata Copper won the privatization bid for the adjacent Las Bambas property.

The project shows potential for an open-pit copper mine operation as well as an opportunity for a potential future underground mining operation in due course.

Step out drilling and various geophysical and geological work indicates that there is considerable potential for the mineralization to continue significantly beyond the area that is the basis for the current resource estimate. At least one satellite deposit (Cristos los Andes) has been discovered some 10 km to the south and there may well be others. Any mining at Cristos los Andes would likely be processed at a central plant at Haquira.

Haquira currently has an interim resource estimate (inferred and indicated, utilizing a 0.3% Cu cut-off) of 450MT sulphide ores @ 0.6-0.7% CuEQ and 175MT leachable oxide ores @ 0.5% CuEQ grade, which equals 8.6 billion lbs CuEq in ground. A pre-feasibility study of the shallow oxide ores is now underway and due for completion in 2010. There have been four separate drilling campaigns (some 275 holes) since the start of Phelps Dodge involvement. The majority of the holes were in the upper secondary copper ore zone. The “discovery hole” of the underlying primary porphyry at Haquira East (drill hole AHAD-097, after approximately 210 previous holes) was completed on 23 December 2006. The hiatus between these campaigns has caused some confusion in local communities between raised expectations when drilling was taking place and feelings that they had been abandoned when drilling stopped. Haquira has been working with local communities to explain the exploration process.

Haquira is located south of and adjacent to Xstrata’s Las Bambas project, a large copper project which will require construction of significant infrastructure to the area.

Antares also has a copper exploration project in the province of Salta (50/50 JV with Mansfield Minerals Inc.), northwestern Argentina, but the project has been put on hold and there are currently limited plans for continued exploration activities.

In light of the decreased copper price, the company’s strategy is to conserve the cash on hand to cost-efficiently advance scoping studies, prefeasibility and feasibility studies and continue work with the local communities to plan and prepare for future development of the project. The Company has $10 million in cash at hand, which together with the proposed IFC investment of $5 million is expected to carry the Company to completion of the pre-feasibility study for the upper secondary copper mineralization and also significantly advance the definition of the underlying primary sulphide mineralization.

IFC has identified Peru as a primary target for mining investment, given the substantial mineral resources, positive environment for private investment, and potential to contribute to economic development. Peru’s mining sector is of vital importance to the country as it represents over 6% of GDP and last year contributed nearly 30% of the Government’s tax revenues. Mining revenues have recently been growing at more than 6% annually and are by far the country’s main export revenue source, representing 62% of the country’s total exports in 2006 ($14.7 billion). In addition, during 2007, $1.7 billion in royalties were returned to municipalities in the mining areas, most of which are otherwise extremely poor rural areas characterized by economic stagnation, lack of government capacity, low employment opportunities and weak, underdeveloped social capital. President Garcia has brought a change in Peru's political and investment climate, and since mid-2007, the administration has been urging mining companies to implement sustainable mine development.

The proposed investment addresses the relevant lessons learned from other mining projects, in particular the need for a strong sponsor with proven track record and good understanding of the industry; a sponsor striving to employ environmental and social best practice; and a sponsor willing to address key HSEC issues already at exploration stage. This project is also in line with recent IFC experience in the mining sector that has identified the value of IFC engaging early to help the sponsor manage potential environmental and social effects.


The project is located in a remote frontier region of Apurimac, in a rural area of the Andes highlands with little access to basic services, widespread poverty, and almost no formal employment opportunities. Approximately 37% of the population of Apurimac is illiterate, a situation that is even more extreme in the project area. The 18 ‘Comunidades Campesinas’ (Rural Andean Communities) identified by Antares as being located within the area of direct and indirect influence of the project are still very traditional in their customs and practices, and for the most part they rely on a subsistence economy, combining herding (cattle, sheep and some horses) and limited agriculture (mostly potatoes) on communally held land. The four communities that are more directly impacted by the exploration activities are Huanacopampa, where the exploration camp is located, Ccahuanhire, Pararani, and Lahuani.


Although there will be limited benefits during the exploration phase, there are potentially significant economic development benefits during any future construction and production phases, including tax revenues/foreign exchange contribution to the national and local economy as well as development of vital transportation infrastructure that will improve possibilities for other economic activities.


The proposed project directly supports the WB/IFC Strategy for Peru, namely: directly improve opportunities in rural areas; invest in sectors in which Peru has a competitive advantage; and enhance the community benefits of exploitation of non-renewable natural resources. Peru has signed EITI.


Antares has expressed its ambition to follow best practice. At the exploration stage, for a junior company it has already achieved a considerable amount in the form of community outreach programs.
IFC will assist Antares in preparing a Health, Safety, Environment & Community Policy which will contain management plans through the exploration stage and commitments for any future development of a mine.

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