Ambatovy – Delivering Sustainable Value to Madagascar

Ambatovy is one of the most ambitious industrial undertakings in the history of Madagascar & the Indian Ocean, aiming not only at profits but also at developing local communities & contributing to the national economy in a sustainable manner.

Set in Madagascar, in an area with a poetic local name ‘Ambatovy’ meaning ‘the place where stones are iron’ in reference to the iron oxide layer that exists above the laterite deposit, is a large-scale nickel and cobalt mining enterprise that is changing lives on the island.

Over the remaining project life, Ambatovy expects to produce more than 1.1 million tonnes of refined nickel and more than 100,000 tonnes of refined cobalt. With an estimated remaining project life of 30 years, Ambatovy’s goal is to create lasting prosperity for all its stakeholders and to contribute significantly to sustainable development in Madagascar.

“Ambatovy is a joint venture of two shareholder companies: Japanese Sumitomo Corporation and South-Korean Korea Resources Corporation (Kores), with Sherritt International being a shareholder up until very recently.  However, while we have foreign shareholders, we are a Malagasy company and we are proud to be in Madagascar,” says Stuart Macnaughton, President of the joint venture.

After a five-year construction period in 2007-2011, the joint venture started commercial production in 2012. In 2015 financial completion was achieved, and in the same year, Ambatovy’s nickel was listed on the London Metal Exchange (LME).

High-quality product

At a total project cost of more than US$8 billion to date, Ambatovy is the largest-ever foreign investment in the country – and one of the biggest in sub-Saharan Africa and the Indian Ocean region. It ranks among the largest lateritic nickel mining entities in the world.

“Our investors chose Madagascar not only because of the proven nickel and cobalt reserves but also because they felt that Madagascar had the right attributes to permit a successful long-term win-win mining and industrial venture. The decision to do in-country refining was made with a view not only to creating a cost advantage but also to bringing important economic and social benefits to Madagascar,” says Stuart Macnaughton.

The mining enterprise is comprised of a lateritic mine near Moramanga, about 80 km east of the country’s capital, Antananarivo, and a processing and refining plant, occupying an area of 320 ha, located approximately 10 km south of the port of Toamasina, on the east coast of the country.

The ore body at the mine consists of two large, weathered lateritic nickel deposits located approximately 3 km apart (the “Ambatovy Deposit” and the “Analamay Deposit”). Combined, the Ambatovy and Analamay deposits cover an area of about 1,600 ha, with depths ranging between 20 and 100 m.

Due to the soft nature of the ore, no blasting is necessary. Ore is surface-mined by hydraulic excavators and delivered to the Ore Preparation Plant (OPP) in haulage trucks. There, the ore is processed with water to remove the rocks and become a slurry that is delivered by a 220 km pipeline to the processing plant and refinery. At the Plant site, the ore undergoes multi-stage hydrometallurgical processing which ultimately yields refined nickel and cobalt.

“We have a very complex operation that permits the production of high-quality nickel and cobalt, which is 99.9% pure. Only a few nickel and cobalt projects in the developing world produce such high-quality nickel and cobalt,” says Stuart Macnaughton, pointing out that the products are ideally suited for use in electric vehicle battery manufacturing, a rapidly growing global market.

“As the demand for electric cars increases, buyers will want to make sure that the nickel and cobalt have been responsibly sourced and sustainably produced. The Ambatovy joint venture is in a very good position to demonstrate that. Following a detailed review by one of the electric vehicle battery manufacturers last year, we have been endorsed as a responsibly sourced supplier. This is an exciting achievement that will create a market advantage for us, and proof that sustainability is one of our top priorities.”

Promoting local development

He affirms that being a producer of high-quality nickel and cobalt that creates lasting value for all stakeholders and contributes to sustainable development in Madagascar has been one of the company’s key goals. “We have developed strong relationships with all our stakeholders, in particular with our host communities. These relationships are critical for our social licence to operate and for our continued presence in Madagascar. We work closely with them on fulfilling our national and international obligations, as well as our voluntary commitments, to ensure we that we are in a win-win partnership for everyone’s mutual benefit and to leave a positive legacy well beyond the life of our operations.”

With approximately 9,000 employees and contractors working on-site the company is easily one of the largest employers in Madagascar. Mr Macnaughton points out that the company is very proud that 93% of its direct employees are Malagasy, in a country with a relatively young mining sector.

“To preparing the local workforce for the industrial skills required at Ambatovy, many of which could not be found in the country prior to our arrival, the company has made significant investments in training, skills development and leadership so that the company’s Malagasy employees can take on more and more responsibility,” he says. “To this end, in 2010 we established the Ambatovy Training Center. This training is contributing to a local labour pool for future mining and industrial projects that could come to Madagascar. So far, more than 8,000 people have been trained at the training centre.”

Local focus is also reflected in the ‘Buy locally hire locally’ philosophy that is behind the Ambatovy Local Business Initiative (ALBI), as Mr Macnaughton explains. “ALBI is leading our efforts to make sure that we maximize our economic impact and that we prioritise local purchasing and local employment, to the greatest extent possible.”

“In 2018, for example, this led to more than $250 million in local spending, with approximately 450 local companies from more than 40 business sectors providing goods and services. Through the ALBI programme, we also train and provide mentoring support to Small-and-Medium Enterprises (SMEs) for them to be able to meet high-quality standards and international norms, including in health and safety, human rights, and environmental stewardship.”

Positive impact

Ambatovy’s engagement in Madagascar has a society-wide impact. The company has introduced a significant Corporate Social Responsibility programme at the community level that ensures that its social and economic investments contribute to the development of nearby communities.  It includes active community engagement; promotion of livelihoods and income-generating activities for farmers’ associations and local cooperatives; support for education, community health and safety activities in its zones of intervention; compensation for any losses or damages that may have been incurred; and preservation of cultural heritage.

“In addition, with the Government, we established the Social Investment Fund (SIF), in which Ambatovy invested US$25 million. The SIF has supported a range of social and infrastructure projects, developed and implemented in collaboration with the local and national authorities.”

In 2018, Ambatovy paid a total of US$43.4 million in various taxes to the Malagasy Government (including royalties). “To ensure that our royalty payments have significant, lasting and positive impacts in Madagascar, we are working with a local NGO and with local authorities and communities to promote good governance and to provide communities with capacity building and project management support. This will ensure that our royalties contribute to real sustainable development,” Mr Macnaughton points out.

“We also collaborate with local and regional officials as well as communities on emergency preparedness and response planning for industrial risks and natural disasters, including support for relief efforts during the current Covid-19 pandemic,” he further affirms.

Ambatovy also participates in a number of voluntary initiatives, such as Towards Sustainable Mining (TSM), an initiative of the Mining Association of Canada to help companies improve their sustainability performance; Extractive Industries Transparency Initiative (EITI); and Voluntary Principles on Security and Human Rights (VPSHR). The company was a pilot project of the Business and Biodiversity Offsets Program that ran from 2004 to 2018 – a collaboration of approximately 50 companies, financial institutions, governments and civil society organizations, aimed to develop and test best practices for conservation and biodiversity offsets by following the mitigation hierarchy.

Sustaining bio-diversity

As a responsible mining enterprise, Ambatovy is committed to upholding stringent environmental standards including the Equator Principles and the World Bank Group’s International Finance Corporation Performance Standards. To meet and surpass these requirements and commitments, Ambatovy has developed a comprehensive approach to environmental management, which will ensure compliance, reduce residual impacts, and mitigate risks.

Ambatovy is set to restore a multifunctional forest on the Mine’s footprint through progressive revegetation with the original species, with an industrial-scale production nursery operating as part of the plan, as well as working with villages nurseries that were set up for this purpose. The company’s pipeline avoids native forests wherever possible and only passes through near-primary zonal forest within the first two km of the Mine Site. The focus for the Plant Site is the treatment of process wastewater through the neutralization process to meet national and international standards for discharge.

Mr Macnaughton insists that environmental protection and sustainability are a core part of the business. The company has a robust Environment Programme in place, with extensive activities in biodiversity, conservation efforts and offsets, and works closely with communities near its sites to ensure they are involved in the protection of the environment and conservation activities as well as in responsible ecosystems services management.

“Our mine is located within the biodiversity “hotspot” of Madagascar.  By employing the mitigation hierarchy put forward by the former Business and Biodiversity Offsets Program, we are committed to no net loss, and preferably a net gain, in biodiversity through our extensive offset programme that includes 18,000 ha of conservation areas. These areas have among the lowest rate of deforestation in the country and are being sustainably managed in collaboration with local communities and NGOs,” he explains.

“Despite the challenging times that we are currently facing, we remain committed to sustainability,” he further affirms. “Ambatovy is special in this respect. I have been working in the mining sector around the world for 30 years and I can truly say that this organisation has invested more in environmental management, sustainability and bio-diversity than any other project I have worked for. This reflects not only the special location in Madagascar but also the philosophy of the shareholders and the Ambatovy management.”

The most successful mining operation

Today, Ambatovy is already a major contributor to Madagascar’s national prosperity and a significant source of revenue for its people and government. During its lifetime, Ambatovy will generate important economic and social benefits through the payment of taxes and royalties, investment in infrastructure, job creation, local business development, and technology transfer as well as training, education, and health-related programmes.

Although there are no plans for immediate business expansion, the company invests US$80 million – US$100 million each year into its facilities to keep them in good condition. At the moment, efforts are focused on getting ready for the safe re-start in early 2021 after the operation was temporarily suspended due to Covid-19, says Mr Macnaughton.

“Restarting the mine and the plant is our priority right now. Still, time has not been lost. We have taken the opportunity to address a few technical issues in the plant and will be up and running early next year.”

Moving forward, he insists that it will be important for Ambatovy to maintain its social licence to operate with a robust environmental programme, strong community engagement and effective relations with authorities and stakeholders. “We will also continue to enhance the level of mutual understanding between Madagascar and Ambatovy, and to strengthen collaboration with partners to ensure significant, lasting and positive impacts in the communities where we work.”

But the company’s role is set to be more far-reaching, setting an example for other investors, affirms Mr Macnaughton. “We believe that we can play an important role for Madagascar as an ambassador for future foreign investment. The success of Ambatovy should be a strong endorsement for companies considering an investment in the country. For Madagascar, future foreign investment in the resources sector and other industries is one of the keys to sustainable economic development for the country.”

In the medium and long term, the company’s vision is for Ambatovy to be recognised as the most successful nickel laterite operation worldwide, in line with its mission ‘Together in Madagascar, we sustainably deliver value, producing high-quality nickel and cobalt’.

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