Lonmin Project The project is a multi-year expansion program of the operations of Lonmin Plc, the worlds third largest platinum producer.  The project consists of:   - the development, expansion, and mechanization of Lonmins South African mines; and - the development of a comprehensive, large-scale community and local economic development program (LEDP).     The financing will consist of a standby 10 year A loan of $100 million and an equity investment of $15-50 million. -  The Mining Industry in South Africa  In 2005 the mining industry generated 7% of South Africas GDP. The importance of the industry to overall GDP has decreased slightly over the last 3 years, largely due to the growth in the secondary and tertiary sectors and contraction in the gold-mining industry. However, if the gross value-added contribution of processed minerals (presently included in the manufacturing sectors figures) were added to mining, along the extensive economic linkages with other sectors, the impact on national accounts would be significantly higher.  During 2004, the mining industry employed 2.9% of South Africas economically active population. As the majority of South Africas mining operations are based in the rural areas of the country, the mining industry has spawned an extensive and efficient physical infrastructure and has contributed greatly to the establishment of secondary industries.  Recent legislation has tried to deepen the positive impacts of the mining industry on local communities and the national economy.  The South African Mineral Resource and Petroleum Bill was legislated in 2004 with the following objectives:   - to transfer custody of mineral rights from private holders to the Government;  - to implement mining license reforms; and - to develop social empowerment through changes in ownership of mining companies; and other measures.  As in other sectors, the legislation was aimed primarily at increasing participation of previously disadvantaged groups in the mining industry, both as shareholders and suppliers. This led to the creation of Black Economic Empowerment entities (BEEs), which are majority owned and managed by historically disadvantaged South Africans (HDSAs). The key element of this new charter was the requirement (beginning in 2004) for mining companies to sell 15% over 5 years to be further increased to 26% over 10 years to BEEs. In order to receive new order mining rights which reflect the companys compliance with the new legislation, all mining companies are expected to have met the 15% ownership requirement and completed a detailed Social and Labour Plan (among other requirements) by 2009.  Lonmins BEE partner is Incwala, which holds an 18% share in Lonmins two main South African subsidiaries. Lonmin, in turn, holds a 23% stake in Incwala.  Lonmin is on track to achieve the 26% BEE ownership goal by 2014.   Lonmin was recently notified of the successful conversion of their old order mining rights to new order mining rights for its Marikana operations.  Lonmin is the first major platinum company in South Africa to receive the new order mining licenses.  The Company will work with the Department of Mines and Energy to set a timetable for the fulfillment of the undertakings in the Social and Labour Plan portion of their conversion application.  Meeting these objectives will ensure that they are in compliance with the South Africa Mining Charter.      The project is expected to have the following development impacts through its positive impact on the sector in South Africa:    - Expansion of an internationally competitive mining operation:    Lonmins activities generate significant benefits to South Africa in terms of employment, linkages with suppliers and taxes and revenues paid to national government and royalties paid to local communities. In the latest fiscal year, for example, the company employed 25,000 people in South Africa, paid $313m in salaries and benefits, paid $80m to government and spent $361m for materials and services, with 37% of total procurement spend going to HDSA suppliers.  Additionally, Lonmin pays royalties to the Bapo Ba Mogale tribe in the Marikana area as well as Traditional Authorities in Limpopo.  The major part of its output of over 900,000 oz platinum was exported. It is expected that all of these benefits will increase as a result of the expansion program.    In addition, the government will receive indirectly payroll tax payments made by employees of Lonmin. Lonmin will disclose all material tax and royalty payments in its annual report and accounts as required by statutory reporting authorities.    - An Extensive Community and Local Economic Development Program:    A major component of Lonmins future plans is its community development activities. Lonmin currently has a robust community development framework in place comprising a newly invigorated development trust and a social and community based function within their corporate structure. Community development is a core component of Lonmins charter and corporate strategy.  Lonmin hopes to grow these programs beyond their current capacity and will supplement their in-house expertise with IFCs expertise in design and implementation.  This project component is expected to have measurable positive impacts in the areas of HIV/AIDs prevention, Municipal Development, Gender equality and Local Economic Development (See also discussion of IFC Contribution).   - Skills Development:   Lonmins skills development and worker training is an integral part of its planned expansion program and Local Economic Development Program (LEDP) that will encourage and facilitate the greater engagement of local businesses and will address the skills shortage in South Africas labour force through increased functional and leadership training.  The expansion project will result in enhanced mechanical and other skills and capability. The LEDP will impart business skills and education to the greater community and facilitate greater small and medium size business commercial engagement with Lonmin and others.  The key development indicators that are proposed to be monitored during the life of the IFC investment are:   - annual production of PGM ounces; - Lonmins financial performance; - successful implementation of community development programs  based on objective measures of success (that will be developed with the company); and  - fiscal payments accruing to the both the Federal and Municipal governments.