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Home › Dodgy Deals ›
Dodgy Deal
Dairi Prima Mineral zinc mineIndonesia

Project – Active

This profile is actively maintained
Lead organisation:
Inclusive Development International
Contact:

Coleen Scott, Legal and Policy Associate, Inclusive Development International

Last update: 2022-10-04 00:00:00
Storage facility constructed by Dairi Prima Mineral near Sipat sub-village. Photo: Inclusive Development International

Project – Active

This profile is actively maintained
Lead organisation:
Inclusive Development International
Contact:

Coleen Scott, Legal and Policy Associate, Inclusive Development International

Last update: 2022-10-04 00:00:00
Why this profile?

Why this profile?

The project poses unacceptable risk to human rights and the environment, including to the safety of at least eleven villages downstream of the project. The tailings dam—which will hold over one million tons of toxic waste from the mine—is on unstable ground in one of the most earthquake and flash flood-prone areas in the world. According to experts, the dam’s collapse is a “virtual certainty".

What must happen

Expert civil engineers and mine environmental scientists predict that the DPM mine and tailings dam will cause immitigable and irreversible catastrophic impacts, including deaths, and should therefore be cancelled. Environmental permit approvals for the project should be overturned, and no banks should finance the project. There is no possible way to mitigate or prevent the severe risks inherent to this project.

About
Sectors Mining
Location
Status
Planning
Design
Agreement
Construction
Operation
Closure
Decommission
Website https://www.ptdpm.co.id/

Dairi Prima Mineral (DPM) is an Indonesian company, majority owned (51%) by China Nonferrous Metal Industry’s Foreign Engineering and Construction (NFC), a subsidiary of the Chinese state-owned mining conglomerate China Nonferrous Metal Mining. Bumi Resources Minerals, a subsidiary of the Indonesian coal-mining giant Bumi Resources, holds 49% ownership of DPM.

The proposed DPM mine is located in Dairi Regency in North Sumatra, Indonesia. The company is in the construction stage of an underground mine for the extraction of zinc, lead, and silver ore, with a focus on zinc. The first phase of the project is expected to cost USD 453 million, with 80% raised via loans from banks and 20% from the project sponsors’ equity. According to NFC’s 2021 annual report, “the full amount of loans has been approved.” However, the status of funding and identity of financiers is unclear. The project appears to be moving ahead without the necessary approvals from the Indonesian Ministry of Environment and Forestry.

Impacts

Impact on human rights and communities

Health & safety The mine site and associated tailings dam are located in an area that is one of the most active earthquake zones in the world. An expert report by Dr. Richard Meehan, a Stanford University engineer specialising in dam stability and seismic risk, found that the mine is located in “one of the highest risk areas in the world”, close to the Sumatra subduction megathrust, which produced earthquakes of magnitude 9 and 8+ in 2004 and 2005, respectively. The site is also approximately 14 kilometres from the Great Sumatran Fault.

The area also experiences extremely heavy annual rainfall, and the topography of the area includes layers of volcanic ash known for their instability. Should the area experience a serious earthquake or significant rainfall, Meehan states there is an extremely high risk of tailings dam failure, sending “a wave of liquid mud downstream”, resulting in serious harm to eleven nearby and downstream villages. In an interview with Yale Environment 360 in 2021, Meehan said tailings dam failure is a ‘virtual certainty’ in the proposed location. In his review of the project’s updated EIA Addendum, Meeham concluded: “In summary, I believe that any approval of the DPM mine project as proposed would give a green light to a mine almost certain to result in a human and environmental disaster on the scale of the El Cobre, Aberfan, and Brumnidinho disasters.”

Dr. Steven Emerman, a geophysicist and mining hydrologist, has noted that the project clearly violates Chinese domestic safety policy on tailings dams. The policy, which the Chinese government adopted recently in response to tailings disasters around the world, prohibits the establishment of mine tailings dams within 400 meters upstream of a human settlement. DPM clearly fails to meet this standard and thus, would not be legal in China.

Lack of transparency, community consultation and consent, including with respect to Indigenous Peoples: Indigenous and other local communities downstream of the mine have not provided their free, prior, and informed consent for the project to go forward. Independent information about the mine and its possible impacts has been extremely limited. As detailed in the “Brief History” section of this Dodgy Deal, DPM undertook significant activities on the ground without proper approval, which local NGOs allege is illegal. The updated EIA has not been subject to genuine public consultation with affected stakeholders. The final approved EIA has not been disclosed.

Residents of Dairi have requested the Indonesian Ministry of Energy and Mineral Resources release the previous Contract of Work for DPM, but they have refused, despite a National Information Commission ruling to do so.


Impact on nature and environment

Acid mine drainage Lead-zinc mines are known to be high-risk with the potential for significant pollution. The mining process will extract sulfide ore which, when exposed to water and oxygen, can form sulfuric acid. This can lead to acid mine drainage, a process through which heavy metals become dissolved in water and then spread throughout the water system.

Dr. Steven Emerman, a geophysicist and mining hydrologist, reviewed the company’s 2021 draft EIA Addendum. Emerman found that DPM was designed to accommodate only a 100-year flood event, which is much less than the Probable Maximum Flood required by international standards and Indonesian guidelines (or the 10,000 year flood). In a video presentation of the findings from his technical review of the DPM EIA Addendum, Emerman stated, “I [can] say with confidence that I have never reviewed a proposed mining project that showed such callous disregard for human life as the proposed DPM mine.”

Other pollution In addition to the waste and water issues, the Dairi Prima Mineral mine is also likely to create impacts from dust and from an increase in heavy traffic passing through nearby residential and farming areas.

Biodiversity risks The DPM mine’s concession area is located in a tropical rainforest that is home to threatened animal species such as orangutans and Sumatran tigers. Acid mine drainage, pollution, and a potential tailings storage facility collapse all pose risks to the area’s ecosystem and ecology.


Other impacts

Issues of non-transparency to investors In  NFC's 2021 annual report, it is stated that the EIA Addendum of the DPM project “has been approved in principle” (for its changed mine plans). In June 2022, however, the Ministry of Environment and Forestry confirmed that no approvals have been issued and that the Ministry was still awaiting revised documents from DPM, while work continued on the ground. It was not until August 2022 that the permit was approved by the Ministry. The final approved EIA still has not been disclosed to stakeholders, including affected communities.

Financiers

Dairi Prima Mineral is said to raise 80% of the project cost (approximately USD 362 million), through loans from banks. NFC’s 2021 annual report states that the company “worked hard on project financing and the full amount of loans has been approved”.

Bank of China and the Industrial and Commercial Bank of China (ICBC) are likely to be involved, as is Chinese state-owned insurance provider, the China Export & Credit Insurance Corporation (Sinosure). These actors have been mentioned in company press releases and other announcements regarding the mine’s progress, and representatives from all three have attended Dairi Prima Mineral events.

Several commercial banks have provided general corporate finance for the two project sponsors: NFC and Bumi Resources. See below for more details on banks involved.

Institution type
Finance type
Year
Companies

Bumi Resources

Indonesia
Profile
Website
51% owner of Dairi Prima Mineral

China Nonferrous Metal Mining

China
Website
49% owner of Dairi Prima Mineral
No companies
News
BankTrack
Partners
Blog
External
BankTrack news BankTrack blog Partner news Partner blog

Dairi Prima Mineral case file

2022-08-01 | Business & Human Rights Resource Centre
BankTrack news BankTrack blog Partner news Partner blog

World Bank watchdog says North Sumatra mine poses “extreme” risks

2022-07-13 | IDI
BankTrack news BankTrack blog Partner news Partner blog

Proposed tailings dam for Indonesian zinc mine 'almost certain' to collapse

2021-06-02 | DW Akademie
BankTrack news BankTrack blog Partner news Partner blog

Why a big mining project could wipe out rural villages in Indonesia

2021-03-25 | Yale School of the Environment
BankTrack news BankTrack blog Partner news Partner blog

Indonesian community seeks World Bank mediation against Chinese-owned zinc mine

2021-03-22 | China Dialogue
BankTrack news BankTrack blog Partner news Partner blog

Disaster shadows Chinese mining ventures in southeast Asia

2021-01-28 | The Diplomat
BankTrack news BankTrack blog Partner news Partner blog

FC watchdog investigates Postal Savings Bank of China over loan for Indonesian mine

2020-07-27 | This Week in Asia
BankTrack news BankTrack blog Partner news Partner blog

World Bank watchdog accepts complaint regarding high-risk Indonesian zinc mine in earthquake zone

2020-07-21 | IDI
Resources
Documents
Videos
Links
2022-07-06 00:00:00

Compliance appraisal of a complaint regarding IFC’s exposure to the Dairi Prima Mineral mine in Indonesia through an investment in Postal Savings Bank of China

Other document
2022-07-06 00:00:00 | Compliance Advisor Ombudsman of the IFC

Presentation by Dr. Richard Meehan, dam stability expert, October 2021

2022-10-04 13:44:56

Presentation by Dr. Steve Emerman, mine hydrology expert, October 2021

2022-10-04 13:44:14

Indonesia: Preventing the looming Dairi Prima Mineral mine disaster

Campaign website by Bakumsu (Bantuan Hukum dan Advokasi Rakyat Sumatera Utara).

Updates

2022

2022-07-06 00:00:00 | Report of IFC's Compliance Advisor Ombudsman concludes Dairi Prima Mineral mine exposes 'extreme' risks to local communities and the environment

In January 2022 the Compliance Advisor Ombudsman (CAO) of the IFC announced that it would conduct an investigation into a complaint regarding IFC’s exposure to the Dairi Prima Mineral mine in Indonesia through an investment in Postal Savings Bank of China. In July 2022, the CAO produced a final compliance appraisal report, which concluded that the project poses “extreme” risks to local communities and the environment.

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