Monterrico has formally proposed to each of the two principal local communities in the area of influence of its Rio Blanco project in northern Peru (IM, July 2007, p48) their participation in two $40 million private funds, to be established for the benefit of each of these communities. This initiative is part of the company’s ongoing Social Programme designed to strengthen links with the local communities surrounding its Rio Blanco project. The funds will be met from a combination of seed funding from Monterrico and from a share of the profits of the mining operation, and are expected to reach a total value of $80 million over the life of the project.
The funds represent a voluntary initiative by the new management of the company to share the benefits of the Rio Blanco project with the communities in the area of influence of the proposed mine. The funds will be in addition to the share of revenues that these communities will receive from taxes and royalties paid by the company and remitted to them by the National and Provincial governments once the mine comes into production.
The $80 million for these funds will be accumulated progressively, starting immediately upon acceptance of the proposed offer by the communities, and augmented at various stages during project development and over the projected 20 year life of the project. Each of the two peasant communities (Yanta and Secunda y Cajas) located within the area of influence of the proposed mine site, will have its own $40 million fund, which will be used for community projects of their choice. The funds will be managed by a recognized financial entity in Peru, specifically regulated by Peruvian legislation for this task. The beneficiary of each fund will be a non-profit entity created for each community, with its own management and a non-voting Advisory Board, composed of a non-governmental entity, financial and legal advisors and representatives from the local and national governments. This is an innovative legal structure which aims to facilitate the involvement of the community and the development of community selected projects.
To meet the initial financial requirements for these funds, Monterrico has entered into a loan facility agreement with Xiamen Zijin Tongguan Investment Development Co, (Zijin Consortium), the majority shareholder of the company. The loan facility is for an aggregate amount of up to $6 million at an interest rate of not greater than 1% above LIBOR. Additional finance for these funds will be met from shareholder loans, other forms of financing and profits from the mining operation.
Richard Ralph, Non-Executive Chairman of Monterrico Metals, commented: "I am delighted to announce the proposal of these funds. This initiative is part of our pro-active Social Programme which is designed to achieve Sustainable Development of this very poor area of Peru and to generate amicable and mutually productive working relationships with the local communities".
