594slworldbank mining study

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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 59466-SL

PROJECT PAPER

ON A

PROPOSED ADDITIONAL GRANTAND

PROPOSED RESTRUCTURING OF ORIGINAL PROJECT

IN THE AMOUNT OF SDR 2.6 MILLION(US$ 4.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF SIERRA LEONE

FOR AN

EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT

(ORIGINAL PROJECT NAME: MINING TECHNICAL ASSISTANCE PROJECT)

March 29, 2011

Sustainable Energy DepartmentOil, Gas and MiningWest Africa Country Cluster 2Africa Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed without WorldBank authorization.



CURRENCY EQUIVALENTS

(Exchange Rate Effective March 1, 2011)

Currency Unit = Sierra Leone Leone4,275 Leone = US$1

US$1 = SDR 0.6357077

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMSAF Additional FinancingASM Artisanal and Small Scale MiningAWP Annual Work PlanCPPR Country Performance Portfolio ReviewDfID Department for International Development of UK GovernmentEIA/SIA Environmental Impact Assessment / Social Impact AssessmentEITAP Extractive Industries Technical Assistance ProjectEITI Extractive Industries Transparency InitiativeFA Financing AgreementFM Financial ManagementGBP British Pound SterlingGDP Gross Domestic ProductGoSL Government of Sierra LeoneIDA International Development AssociationISDS Integrated Safeguards Data SheetM&E Monitoring and EvaluationMMR Ministry of Mineral ResourcesMTAP Mining Technical Assistance ProjectNMA National Minerals AgencyORAF Operational Risk Assessment Framework PDO Project Developmental ObjectivePOM Project Operations ManualPRU Petroleum Resource UnitPST Project Support TeamSDR Special Drawing RightsSESA Strategic Environmental and Social AssessmentSLEPA Sierra Leone Environmental Protection AgencySPU Strategy and Policy Unit under the President’s Office TA Technical AssistanceUNDP United Nations Development Program

USAID United States Agency for International DevelopmentWAMGP West Africa Mining Governance ProjectWAMSSA West Africa Mineral Sector Strategic Assessment

Vice President: Obiageli Katryn EzekwesiliCountry Director: Ishac DiwanCountry Manager: Vijay Pillai

Sector Manager: Paulo de SaTask Team Leader: Ekaterina Mikhaylova



SIERRA LEONE

EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECTADDITIONAL FINANCING

CONTENTS

Project Paper Data Sheet………………………………………………………… i

Project Paper

I. Introduction..................................................................................... 1II. Background and Rationale for Additional Financing and

Restructuring of Original Project…………………........................ 2III. Proposed Changes……………………………............................... 7IV. Appraisal Summary……………………….................................... 11

Annexes

1. Revised Results Framework and Monitoring Indicators................ 142. Operational Risk Assessment Framework………………………. 193. Detailed Description of Modified and New Project Activities 22

1. Updated Project Description2. Amendment to National Competitive Bidding Exceptions3. Project Processing

4. Map……………………………………………………………... 27



REPUBLIC OF SIERRA LEONE


ADDITIONAL FINANCING DATA SHEET

Basic Information - Additional Financing (AF)Country Director: Ishac Diwan

Sector Manager/Director: Paulo de SaTeam Leader: Ekaterina MikhaylovaProject ID: P124633Expected Effectiveness Date: June 2011Lending Instrument: Technical AssistanceAdditional Financing Type: Scale upactivities and cost overrun

Sectors: Energy and Mining

Themes:Environmental category: B-PartialAssessmentExpected Closing Date: June 30, 2016Joint IFC: NoJoint Level: No

Basic Information - Original ProjectProject ID: P099357 Environmental category: B-Partial

AssessmentProject Name: Mining Technical

Assistance Project

Expected Closing Date: December 31,

2013Lending Instrument: Technical Assistance Joint IFC: No

Joint Level: No

AF Project Financing Data[ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:Proposed terms: Standard IDA Grant Terms

AF Financing Plan (US$m)Source Total Amount (US $m)

Total Project Cost:Cofinancing:Borrower:

Total Bank Financing:IBRD

IDA

New

Recommitted

7.43.4-

4.0-

4.04.0-

Client Information

Responsible Agency: Ministry of Mineral ResourcesContact Person: Emmanuel Komba, Project Coordinator Telephone No.: 232 76 387 252Fax No.:Email: [email protected]

AF Estimated Disbursements (Bank FY/US$m) FY 11 12 13 14 15 16Annual 1.0 1.0 1.0 0.8 0.2

Cumulative 1.0 2.0 3.0 3.8 4.0

mailto:[email protected]





Project Development Objective and DescriptionOriginal Project Development Objective: build the capacity of the Government to improvemanagement and regulation of the mining sector

Revised Project Development Objective: build the capacity of the Government tomanage and regulate the extractive industries sector

Project Description: (A) Overarching regulatory frameworks for extractive industries

sector: to close regulatory gaps in the mining and oil and gas sector through developmentof technical regulations, and updating related legal acts. (B) Institutional Strengthening:provision of capacity building, equipment and geological surveying to ensure good sectorgovernance guided by the principles of transparent non-discretionary and efficientminerals and oil and gas administration and regulation and monitoring. (C) ProjectManagement

Safeguard and Exception to PoliciesSafeguard policies triggered:Environmental Assessment (OP/BP 4.01)Natural Habitats (OP/BP 4.04)Forests (OP/BP 4.36)

Pest Management (OP 4.09)Physical Cultural Resources (OP/BP 4.11)Indigenous Peoples (OP/BP 4.10)Involuntary Resettlement (OP/BP 4.12)Safety of Dams (OP/BP 4.37)Projects on International Waters (OP/BP 7.50)Projects in Disputed Areas (OP/BP 7.60)

[X]Yes [ ] No[ ]Yes [X] No[ ]Yes [X] No

[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X ] No[ ]Yes [X] No[ ]Yes [X] No[ ]Yes [X] No

Does the project require any exceptions from Bank policies?Have these been approved by Bank management?

[ ]Yes [X] No[ ]Yes [ ] No

Conditions and Legal Covenants:Financing Agreement

ReferenceDescription of

Condition/CovenantDate Due

5.01 Effectiveness of Co-financingAgreement

Upon Effectiveness

Schedule 2, Section IV,

B. 1 (a)

Disbursement Category 2conditions: (i) the MMR adopts apolicy for the development of sustainable human resourcecapacity within MMR/NMA; (ii)the staff to be financed is includedinto the MMR/ NMA organogram;and (iii) the government provides asatisfactory to IDA implementationand financing plan for each fiscalyear in which salaries are to befinanced under the project.

Disbursement Condition to becomplied with on an annualbasis



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I. Introduction

1. This Project Paper seeks the approval of the Executive Directors to provide an additionalgrant in an amount of SDR 2,600,000 (US$4.0 million equivalent) to the Republic of SierraLeone for the Mining Technical Assistance Project (MTAP), Grant Number H532-SL. Following

the approval, the project name will change to Extractive Industries Technical Assistance Project(EITAP). The Project Paper also includes restructuring of the Original Project in line with theadditional financing.

2. The proposed additional financing would help finance the costs of scaling up activities tomeet the current challenges of the extractive industries sector. In addition, procurement for twomajor activities in the Original Project (development of regulations for mining sector andgeochemical surveying, but selected under competitive procedures) went above the budget byUS$1.02 million in total. Although the Original Project has been effective for only one year, theadditional financing is in line with OP 13.20 and is justified due to the following: (i) the OriginalProject finances only the most urgent basic sector reforms due to the IDA funding constraints at

the time of preparation

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; (ii) the recent mining agreements entered into by the Government of Sierra Leone (GoSL) amplified the need for in-depth technical assistance to build capacity forplanning and negotiations of mining agreements and monitoring their implementation andregulatory compliance going forward, as well as to strengthen government’s capacity for revenue

collection (not originally included under the project due to IDA constraints); and (iii) 2009discovery of oil in Sierra Leone and 2010 confirmation of the find resulted in GoSL urgentrequest to the Bank to assist with developing sustainable sector strategy and requisiteframeworks. The GoSL is committed to use its natural resources for the best national interestand emphasizes the need to take an integrated approach to the build capacity and developsustainable frameworks for the extractive industries sector, which includes the country’s mineral

resources and oil and gas. The top level championship on the Government side is expected to bemaintained to ensure sustainability of the reforms going forward.

3. Additional financing instrument is highly appropriate given that the Government has nowbuilt requisite capacity to implement the project in an efficient manner and all major activitiesplanned under the Original Project are now either under implementation or in the final stages of procurement. The additional financing activities will, therefore, proceed in parallel under thesame arrangements and will not bear additional overhead in terms of project management.

4. The Original Project is financed by an International Development Association (IDA)Grant in the amount of SDR 2,600,000 (US$4.0 million equivalent). There are no co-financingarrangements for the Original Project, but the additional financing grant will be co-financed by agrant from the United Kingdom’s Department for International Development (DfID) in the

1 It is noted that the Original Project was scaled down from the US$7 million to US$4 million per request from theMinistry of Finance in view of constraints with IDA allocation to focus only on the most urgent sector reform needs(as documented in the Decision Package for SL MTAP dated September 3, 2009). This decision was also reinforcedby the preparation of the West Africa Regional Mining Governance Project which was expected to include some of the proposed activities on a regional scale. However, the regional operations has been delayed and has been scaleddown to geo-data collection and mapping only – see Project Paper para 21.



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amount of GBP 2.23 million (of which GBP 2.1 million – about US$3.4 million equivalent -Recipient-executed).

II. Background and Rationale for Additional Financing in the amount of US$4 Million andRestructuring of Original Project

Country and Strategic Context

5. Sierra Leone is well endowed with natural resources and is classified as a resource-richcountry. If in the past Sierra Leone was largely associated with mining (diamonds were firstdiscovered in 1930), the 2009 discovery of oil off-shore of Sierra Leone has also put the countryon the map as a potential future oil producer. Extractive industries, as a term, in the case of Sierra Leone now include both mineral resources and oil and gas. The sections below providemore detailed background by each sub-sector separately given their peculiarities, however, it isemphasized that extractive industries reform will need to have an integrated approach – a ValueChain approach

2(otherwise known as EITI++

3) – in order to achieve the GoSL’s ultimate

objective towards developing Sierra Leone’s natural resources in the best interests of the nation.

The issues that are highlighted for the purposes of the Project Paper are: (i) the core cause for thecivil war of 1990s – early 2000s was the way the extractives were managed; the risk of continuedconflict remains until the sector reform takes root; (ii) the extractive industries sector has atremendous potential to transform the economic structure of the country and with proper sectorgovernance can maximize domestic revenue collections and thus help to meet the variousdevelopment and infrastructure spending requirements in the country; and (iii) the improvedinvestment climate that is targeted under the project will help attracting reputed privatecompanies into the sector.

6. Mining Sector . Sierra Leone is well endowed with mineral resources and is a leadingproducer of diamonds, rutile, and bauxite. During the 1960s and 1970s, the mining sector

accounted for more than 70 percent of the country’s export earnings, 20 percent of GDP, and 15percent of fiscal revenue. The sector experienced a decline in the 1980s and came to a standstillduring the 1990s due to the decade-long civil war (1991-2001). The mining sector has threemajor segments: (a) large-scale production of diamonds (companies include Koidu Holdings Ltd.and African Minerals Ltd.); (b) large-scale production of bulk minerals (Sierra Rutile Ltd., SierraMinerals Ltd., London Mining Ltd and African Minerals Ltd); and (c) artisanal and small-scaleproduction of diamonds, and to a much lesser extent gold. During 2010, the Government of Sierra Leone (GoSL) signed two large-scale mining development agreements for iron oredevelopment in Marampa and Tonkolili with London Mining and African Minerals Ltd,respectively. More companies are exploring in the country, and several investment projects areexpected in the foreseeable future, including a large-scale gold mine. The main thrust of EITAP

2 Extractive Industries Value Chain analysis of Sierra Leone mining sector is included in the Original ProjectAppraisal Document for Sierra Leone Mining Technical Assistance Project, dated November 3, 2009 (Report No:43233-SL)

3 Extractive Industries Value Chain - An Integrated and Comprehensive Approach to Developing Extractive Industries – a 2009 publication by the World Bank Oil, Gas and Mining Policy Division.



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is to address bottlenecks towards efficient and sustainable development of industrial scalemining.

7. Petroleum Sector . In September 2009, an offshore well drilled by Anadarko PetroleumCorporation encountered petroleum, confirming the existence of an active petroleum system

within the Sierra Leone-Liberia basin and de-risking exploration throughout the basin. InNovember 2010, Anadarko announced an apparently significant deepwater discovery at theMercury exploration well. The company will drill delineation wells in 2011 before making acommercialization decision. Although the Mercury well looks encouraging, Anadarko’s drilling

program still carries high risk and commerciality is unlikely to be declared until 2012 at theearliest. Thereafter, the time line to first production would be at least four years.

Sector Reform Framework

8. Mining Sector . Following a World Bank Sector Review of mining in Sierra Leone in2005, several donors (including DfID, EU, USAID, and UNDP) supported reforms in the legal,

regulatory, fiscal, and institutional arrangements of mining. Over the past few years, SierraLeone has passed some important laws and regulations and provided an enabling policyframework for the growth of the mining sector. These reforms led to a recovery of the sector,particularly diamond mining and rutile production from early to mid- 2000s, and moreimportantly, they opened potential for new development.

9. Notwithstanding progress made to-date, the institutional capacity to manage sector,negotiate agreements, enforce regulations, and monitor compliance remains weak. Theresponsibilities for mineral sector management, negotiation, and monitoring remain not clearlydefined between the Ministry of Mineral Resources (MMR)4, National Mineral Agency (NMA5

– new entity expected to be formally established in 2011), the Mining Advisory Board (responsiblefor approving licenses), and the Strategy and Policy Unit (SPU) at the President’s Office(responsible for negotiating investment agreements). The government has recently set up aninter-ministerial committee to handle all negotiations relating to the mining sector. The teamcomprises a member of the SPU, the Attorney General, the Director of Geology, the Director of Mines, the Law Officer’s Department, and the Ministry of Finance and Economic Development.The need remains to clarify roles and responsibilities going forward in a sustainable manner.

10. Petroleum Sector . The reforms are still fairly new and evolving. Upstream oil and gasactivities are governed by the Petroleum Exploration and Production Act of 2001. A Model

4 It is noted that until early 2011 MMR was called Ministry of Mineral Resources and Political Affairs (MMRPA) as

also referenced in the Original Project PAD and financing agreement. In early 2011, the ministry was returned to itsoriginal name of Ministry of Mineral Resources (MMR).

5 In 2009, the Cabinet Sub-Committee has approved the “Transformation Plan for the National Minerals Agency,

March 2009 by MMRPA”. The establishing NMA Act is currently under preparation with the assistance of DfIDfunding and is expected to be submitted for legislative approval by early spring 2011. The proposed NMA wouldwork alongside the MMR as a technical regulatory organization and would assume responsibility for the technicaland operational management of geological information, regulated precious minerals trading, and for the consistentapplication of a transparent mineral rights licensing system.



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Petroleum Agreement implementing the terms of the Petroleum Act formed the basis of negotiation for the individual Petroleum Agreements with investors. Fiscal conditions aredetermined through the Petroleum Agreements and by the Income Tax Act of 2000. ThePetroleum Resources Unit (PRU), in operation since 2004, was established as the regulator of thesector as per the terms of the Petroleum Act. During the licensing phase, PRU’s role consisted

mainly of providing technical input to the negotiating teams, but more recently, PRU has beenattempting to move towards its long-term enforcement and monitoring role.

11. After the Venus discovery in 2009, the President appointed a petroleum task force headedby the secretary to the President and with roughly 30 members drawn from a wide spectrum of government agencies. Under the leadership of the Task Force, a new petroleum policy has beendrafted, adopted by cabinet and submitted to parliament. The task force is also overseeing thepreparation of a new petroleum law. Assistance in developing the policy and the law has beenreceived from an Advisory Group made up of representatives from Norad, the CommonwealthSecretariat, Revenue Watch Institute, and the African Center for Economic Transformation, anAccra-based NGO.

12. Overall. Sierra Leone has been an Extractive Industries Transparency Initiative (EITI)candidate country since 2007. After a difficult start, the first reconciliation report was producedin 2010 and the validation process is underway for the first year audit to comply with thebenchmarks set forth by the EITI Committee in Oslo. With the EITI framework and baselinesnow in place, the country will greatly benefit from stronger capacity to monitor extractiveindustries revenues to ensure sustainable and transparent sector governance and revenuemanagement. The GoSL emphasizes the need to substantially improve its negotiations andregulatory capacity in the extractive industries sector.

13. The proposed scaled-up project remains aligned with the World Bank, InternationalFinance Corporation and African Development Bank Joint Assistance Strategy for Sierra Leone(for FY10-13) and with the GoSL’s Poverty Reduction and Strategy Paper (PRSP, 2009), whichidentify mining as one of the priority sectors to be developed in the country. The OriginalProject focuses primarily on the Regulations and Monitoring link of the Extractive IndustriesValue Chain, while the additional financing will widen and deepen this support by scaling uplegal and regulatory reform and by also including activities to support two additional ValueChain links – Award of Contracts and Licenses, and Collection of Taxes and Royalties.

14. EITAP forms a nexus of ongoing complementary activities by: (a) being coordinated withthe broader reform framework in the country on macro and strategic level (private sectordevelopment, budget support operations and analytical work); (b) continuing to build upon andalign with other donors’ efforts, most notably in the implementation of an institutional reformand capacity building plan developed with DfID’s support and UNDP support for thedevelopment of the computerized mining cadastre system and assistance with mining contractsrenegotiations; (c) reinforcing, through better transparency and monitoring and understanding of environmental and social impacts management requirements, support provided through theBank-administered Japanese grant to support artisanal mining communities; and (d) ensuring thatextractive industries sector reform fits within the regional context and is aligned with regional



5

objectives (such as Mano River Union, and, on a broader scale, the Economic Community of West African States (ECOWAS), and the new Africa regional strategy.

The Original Project and Project Objectives

15. MTAP was approved by the Board in December 2009 for total Bank financing of SDR2.6 million (US$4.0 million equivalent) and became effective in February 2010. The ProjectDevelopment Objective (PDO) of the Original Project is to build government’s capacity to

manage and regulate the minerals sector; the PDO will be updated in line with the AdditionalFinancing to “build government’s capacity to manage and regulate the extractive industries

sector ” with the scale-up; the project name is proposed to be revised accordingly: Extractive Industries Technical Assistance Project (EITAP). The project implementation is makingsatisfactory progress. MTAP/EITAP in conjunction with other donor activities in the sector isproviding support in two high-priority areas – improvement of sector regulations, andimprovement of sector governance and administration – by providing support to Ministry of Mineral Resources (MMR) and the prospective National Minerals Agency

6(NMA). Updates to

the Original Project provisions are included in the Proposed Changes where applicable.

Project Performance and Status of Implementation

16. The Project became effective in February 2010 and has consistently been ratedsatisfactory. Procurement activities are being carried out in line with the Bank’s Guidelines:Procurement under IBRD Loans and IDA Credits dated May 2004, revised October 2006; andSelection and Employment of Consultants by World Bank Borrowers" dated May 2004, revisedOctober 2006. Financial management has been satisfactory. The project is in compliance withlegal covenants and there are no outstanding audit reports. MTAP/EITAP is the only Bank-financed project under implementation by the MMR. The project is classified as EnvironmentalCategory “B” for monitoring purposes and no safeguard issues have been noted to this date.

17. The project has to this date completed the following activities: the restructuring of theaccounting and internal control system and configuration of new software system for accountingand financial management of MMR in line with international good practice, training of a diversegroup of the MMR staff on procurement and financial management, and procurement of urgentlyrequired equipment and field vehicles for the MMR and the Geological Survey Department.Capacity building support to MMR (on operations support, procurement, and financialmanagement) is on-going. Selection of consultants for the remaining major activities has beenalso completed: (i) to assist with improving legal / regulator frameworks for mining, includingdevelopment of sector specific environmental and social regulations, and (ii) to carry out targetedgeochemical surveying and mapping of selected nine areas.

18. The two major activities under the project referred to in paragraph above: strengtheningof legal/regulatory framework for mining sector and geochemical surveying of selected areaswent above the budget by US$372,000 and US$655,377 respectively (US$1.02 million in total).Both procurement followed competitive selection process – Quality and Cost Based selection –

6 Until formal establishment of the NMA, support is being provided to the departments of the MMR which areexpected to transfer to the NMA structure.



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and the winning proposals resulted in the considerably higher bids than expected. The additionalfinancing will cover this budget overrun.

19. Disbursements as of March 2011 reached US$1.1 million (27% of total). The currentclosing date of the original project (Grant No H532-SL) is June 30, 2013; no extension of this

original Grant is requested at this time.

Proposed Additional Financing

20. The proposed Additional Financing in the amount of US$4.0 million equivalent (to bepooled with the DfID co-financing of GBP 2.1 million) will follow the Original Projectcomponents, which are: (i) Overarching Regulatory Frameworks for Extractive Industries Sector;(ii) Institutional Strengthening for Extractive Industries Sector; and (iii) Project Management.The additional financing will cover cost overrun under the Original Project and will add thethrust to improve the government’s capacity to structure, negotiate, and monitor extractiveindustry development agreements going forward. To achieve these objectives, the additionalfinancing would scale up activities to:

Clarify the responsibilities and institutional structure for mining sector management,negotiation and monitoring (to be clearly captured in legal and regulatory framework);

Scale up support for establishment and making operational the NMA;

Undertake geochemical surveying of at least two additional areas to support promotion of Sierra Leone’s mineral potential;

Set up a policy and strategy unit within MMR to provide technical advice for thenegotiation of mineral agreements;

Strengthen the Petroleum Resources Unit (PRU) at the President’s Office to regulate theoil and gas sector; and

Review and strengthen the monitoring functions of the Government’s diamond office to

ensure full compliance with the Kimberly Process7

.

21. It is noted, that in parallel with preparation of this additional financing project, a separateregional West Africa Mineral Governance Project (WAMGP) is under preparation, with whichthis scaled-up operations is aligned. The regional operation, tentatively scheduled for FY12-13,will have its primary objective to improve understanding of the resource potential in the sub-region and assist with its promotion and mineral development planning. The WAMGP willfinance regional airborne geophysical and geochemical surveys and compilation of integratedregional geological, geophysical and geochemical maps of West Africa. WAMGP is expected toinclude Sierra Leone and will reinforce outcomes of the EITAP through provision of modernquality geodata to promote sector investment in the long-run. The geodata collection proposed

under EITAP is limited to prospect level geochemical surveying targeting specific commodities,which in conjunction with governance level reforms is expected to assist with attracting newinvestment into the sector in the short- to medium- run.

7 The Kimberley Process Certification Scheme (Kimberley Process) is an international governmental certificationscheme that was set up to prevent the trade in diamonds that fund conflict. Launched in January 2003, the schemerequires governments to certify that shipments of rough diamonds are conflict-free.



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III. Proposed Changes

22. The Project Development Objective (PDO) for the additional financing will be updated toreflect additional activities to support oil and gas sector governance reform: “to build

government’s capacity to manage and regulate the extractive industries sector.” The Projectname will also be revised accordingly: Extractive Industries Technical Assistance Project . ThePDO for the Original Project will be updated accordingly through an amendment that will be apart of the additional Financing Agreement. Closing date of the original grant will remainunchanged (June 30, 2013), but if needed at a later date will be extended to match the additionalfinancing.

23. The Results Framework has been updated (see Annex 1) to increase some target valuesand adding new indicators. The new results indicator to reflect incorporation of additionalactivities are:

- Functions and governance structure for the Petroleum Resources Unit (PRU) are

formalized through regulations; and - Future petroleum exploration licenses issued in compliance with revised laws and regulations adopted by the Government.

Additional Financing Project Components

24. A separate Financing Agreement (FA) will govern the additional financing grant and willinclude an Amendment to the original Financing Agreement (H532-SL). Terms and conditionsfor the original IDA grant will remain unchanged, except as stated in the Amendment, whichincludes (i) update of the PDO and the project description (Schedule 1 to the FA), and (iii)update of procurement procedures, reporting and the Anticorruption Guidelines (Schedule 2 of the FA). The DfID co-financing will be provided under a Co-Financing Agreement betweenIDA (on behalf of DfID) and the Recipient. Table 1 below provides costs breakdown bycomponent between the Original Project and the additional financing through IDA, as well as thegrant by DfID. Table 2, provides narrative description of original components and additionalactivities. A detailed description of additional financing activities is provided in Annex 3.

Table 1: Costs by component (in US$ million)

Project Cost By ComponentOriginalProject

AdditionalFinancing(IDA)

TotalRevisedCost (IDA)

DfID Co-Financing

TotalProjectCost

Component A: Overarching RegulatoryFrameworks for Extractive Industries Sector 0.29 0.37 0.66 0.31 0.97

Component B: Institutional Strengtheningfor Extractive Industries Sector 2.85 3.52 6.37 2.95 9.32

Component C. Project Management 0.26 0.11 0.37 0.09 0.46

PPF refinancing 0.40 - 0.40 - 0.40

Total Baseline Cost 3.80 4.00 7.80 3.35 11.15

Physical and Price contingencies 0.20 0.20 0.20

Total Project Cost 4.00 4.00 8.00 3.35 11.35



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Table 2. Project Components- Original Project and Additional FinancingOriginal Project (No changes) Additional Financing (separate Financing Agreement)

Component A: Overarching Regulatory Frameworks for Extractive Industries SectorDevelopment of environmental andsocial regulations for large-scale andmechanized small-scale mines;

preparation of a mining sector Codeof Practice; preparation of underground mining regulations;preparation of trading licenseregulations

Covering cost overrun for the preparation of regulations under theoriginal component.

Completing mining implementing regulations of the Mines andMinerals Act

Finalizing enabling legal acts, regulations and operating guidelinesfor National Minerals Agency (NMA)

Support for updating petroleum laws and regulations and relatedconsultations and policy dialogue

Component B: Institutional Strengthening for Extractive Industries SectorSupport to the MMR and the NMA(when it is formally established)through capacity building andprovision of urgently requiredequipment – field vehicles,generators, and equipment forgeochemical surveying and mapping.

Provision of additional equipment and technical assistance to MMRand, upon its establishment, NMA for departments responsible formonitoring and inspection of mining operations and to geologicalsurvey department (until the NMA is formally established, assistancewill be provided to respective department of the MMR that areexpected to transfer under the NMA).

Geochemical surveying of selectedareas (9 blocks).

Covering cost overrun of the Original Project and carrying outtargeted geochemical surveying of up to 3 additional blocks andrelated capacity building to MMR (NMA upon its establishment) inmineral resource assessment and mapping.

NA Provision of capacity building to MMR, and, upon its establishment,NMA, and Ministry of Land, Country Planning and Environment,Sierra Leone Environmental Protection Agency and Civil SocietyOrganizations on implementation of environmental and socialregulations for the extractive industries sector, including monitoring

and evaluation tools, reporting, and consultation processes.NA Support to the Government’s Diamond Office, including training,

advisory services and capacity building

Mineral promotion throughdevelopment of materials andparticipation in major global andregional mining events

Setting up secure geodata management and information system(linked with mining cadastre system) in MMR (to be transferred toNMA upon its establishment), including development of web-basedtools and promotion materials to make geodata available to theinvestors.Promotion of mineral and oil and gas potential at global events

NA Building capacity of MMR, SPU and Government’s Negotiations

Committee for extractive industries contracts negotiations, includingfinancial and economic modeling, review of technical and feasibilityreports, updating model agreements for specific commodities, anddeveloping negotiations strategies.

NA Provision of capacity building to the Petroleum Resources Unit,through: (i) training courses for current and future PRU staff, (ii)purchases of software licenses (including annual support andmaintenance fees) and hardware (laptops, servers, plotters, etc.) toallow PRU to store and analyze geological and geophysical data;(iii) undertaking a functional management review for petroleumsector management to inform capacity building needs; (iv) financingan advisor to deliver hands-on training to PRU staff, establish



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capacity to perform core functions relating to licensing andexploration, and advise the PRU, the Petroleum Task Force andother officials on policy decisions as needed; and (v) workshops,training and study tours.

Temporary salary support for up tofour new staff to be hired by MMR,

and upon its establishment, NMA

Extend financing of up to two additional MMR and, upon itsestablishment, NMA staff required to make the new agency

operationalSupport for a post-miningrehabilitation program

NA

Strengthen the capacity of MMR tomanage donor-financed projects andday-to-day administration.

Extend the support through an additional year of implementation toensure sustainability

Developing a monitoring andevaluation system and benchmarkingprogress through over the life of theproject

Continue evaluation of and reporting on the sector developmentthrough the project implementation period

Component C: Project ManagementProject management arrangements will remain unchanged; additional funding will be provided for theduration of implementation (through 2016).

25. Civil servants salary support. The additional financing will expand temporary supportto MMR (and NMA when it becomes operational) for two civil servants positions. Thisadditional support is justified to ensure long-term sustainability (beyond the project life-time) of the new and scaled up government functions being supported under the Project. The newpositions are included in the NMA Transformation Plan (2009), and, as a condition fordisbursement under this expenditure category, they will be formally included in the MMR/NMAorganogram

8and into the financing plan to ensure their transition to the budget funding before

the project completion. Terms and conditions for temporary salary support financing under theadditional financing will remain unchanged from the Original Project (see disbursementconditions in para 31 below).

Implementation Arrangements

26. The implementation arrangements for the scaled-up project will remain unchanged.Project management responsibilities will continue to be handled by a Project Support Team(PST) within the MMR staffed with a project coordinator, a procurement specialist, and afinancial management specialist, all of which are civil servants. The PST is supported during theinitial two years of project implementation by a consultant’s team which is tasked to build

general capacity within the MMR (PST in particular) to manage donor projects and carry outprocurement and financial management; this implementation support is expected to be extendedby about one year. The government has agreed to undertake a number of HR measures to ensurethat the PST is stable and appropriately motivated. These measures include a waiver (orpostponement) of mandatory civil servants rotations for the PST staff for the duration of theirassignment with the PST, and possible financial incentives system to be developed by thegovernment and financed from its own budget (not eligible to be financed from IDA). It is notedthat these incentives will be carefully considered within (i) the portfolio-wide review of

8 To be approved by the Director General of the Human Resource Management Office



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integration of project implementation functions with the implementing agencies that is takingplace as part of Country Performance Portfolio Review (CPPR) exercise starting in calendar year2011, as well as (ii) the GoSL public sector reform which, inter alia, is developing a new payreform policy whereas all project-specific arrangements will be reviewed once the wider publicsector reform proposals have been developed and approved. Should these changes materially

affect project implementation arrangements for EITAP, the restructuring of implementationarrangements will be considered at the mid-term review.

27. For the oil sector technical assistance activities, the PST will provide procurement,financial management and disbursement support to the Petroleum Resources Unit (PRU). ThePRU, however, will be responsible for the technical aspects, including (i) developing Terms of Reference for consultants’ services under this component and participating in short-listing andconsultants’ selection process; (ii) monitoring of consultants’ performance and reporting on

progress; and (iii) keeping track of oil and gas related indicators. The PST will assist at allstages as needed and will prepare all procurement documentation and contracts, as well asprocess payments.

28. Project Operational Manual. The government has adopted a Project OperationalManual (POM) for the purposes of the implementation of the Original Project; the POM focuseson processes and procedures for the project implementation, monitoring, and reporting. ThePOM will continue to be used for the scaled up operation, and it was updated, prior tonegotiations of the additional financing, to reflect the scaled up activities. Annual Work Plan(AWP) and Budgets for each year of the project implementation are being developed by thegovernment, and this arrangement will remain without changes for the scaled-up project. Theupdated AWP for the current year and 18-months Procurement Plan for the additional financingwere reviewed and approved by the Bank prior to negotiations.

29. Disbursement. The additional financing will have the same disbursement categories asthe Original Project. Table 3 provides breakdown by disbursement category for the additionalIDA grant and DfID Co-financing Grant. Monitoring of expenditures by category and activitywill continue to be done through approval and monitoring of implementation of Annual Work Plans (procedure in place during the Original Project which will continue during additionalfinancing).

Table 3. Disbursement Categories for the Additional Financing Grant and DfID Grant

Categ Description

AdditionalFinancingAmount(in SDR)

AdditionalFinancingAmount(in US$)

DfIDFinancingAmount(in GBP)

Eligible FinancingPercentage

1

Consultants' services, goods,training, workshops and studytours, and operating costs 2,530,000 3,900,000 2,039,616 54% IDA; 46% DfID

2 Salary support under Part B(ii) 70,000 100,000 57,000

Such percentage as shall bespecified in the AnnualWork Plan and Budget forthe respective fiscal year

TOTAL 2,600,000 4,000,000 2,096,616



11

30. A new single designated account will be opened by the government; it will be pooled forIDA grant and DfID co-financing. Disbursements to the designated account will be made 54%from the IDA Grant and 46% from the DfID Co-financing Grant for Disbursement Category 1;for Disbursement Category 2, eligible financing percentages will be established each year of theproject implementation based on the Annual Work Plans and Budgets. Flow of funds

arrangements will remain the same. The project will use transaction based disbursements, thesame as in the original IDA grant.

31. The Disbursement Category 2 will have the following disbursement conditions (same asunder the original grant): (i) the MMR adopts a policy for the development of sustainable humanresource capacity within MMR/NMA; (ii) the staff proposed to be financed under the EITAP isincluded into the MMR/NMA organogram; and (iii) the MMR provides a satisfactory to IDAimplementation and financing plan for each fiscal year in which salaries are to be financed underthe project.

32. Financial Management. Financial management functions for the project will remain

unchanged from the Original Project and will continue to be managed through the PST in fullcoordination with the Treasury, the Accountant’s General office, and the Chief Financial Officerunder the supervision of the Ministry of Finance and Economic Development (MoFED) internalaudit department (for internal audit) and the Office of the Independent Auditor General (forexternal audit).

33. Procurement. Procurement arrangements for the project will remain unchanged, exceptfor the updated exceptions to the National Competitive Bidding Procedures (see para 34 below).The same procedures will apply to the original grant9, additional financing grant and the co-financing grant for consistency.

34. Exceptions to National Competitive Bidding Procedures. The procedures to be followedfor National Competitive Bidding shall be those set forth in The Public Procurement Act, 2004,of Sierra Leone (the “Act”). Details on the exceptions are provided in Annex 3.

IV. Appraisal Summary

Economic considerations

35. The additional financing is economically justifiable as it will improve chances of SierraLeone for new sustainable extractive industries sector investments and increasing sectorrevenues through (i) improving efficiency and transparency of licensing, management, andmonitoring of extractive industry operations; and (ii) scaled up targeted surveying and sector

promotion. Based on the experience of similar projects in resource-rich countries (see forexample project experience in Tanzania, Madagascar, Mozambique, Uganda, or Nigeria), reformmeasures proposed under EITAP are expected to yield highly positive economic results within afew years after the commencement of reforms (with full benefits to be reasonably expected 10+years after the commencement of reforms). The revenues generated through extractive industries

9 The procurement under the original grant that commenced prior to the effectiveness of the additional financinggrant, will be allowed to be completed in accordance with the original financing agreement provisions



12

exploration and exploitation projects can significantly change the economic structure of thecountry and bring in resources to meet various development and infrastructure spendingrequirements in the country.

36. The original financing estimated that, with appropriate reforms, subsequent mining sector

investment could bring the value of exports to US$1.2 billion per year by 2020. Achieving thislevel of investment - in addition to exploration results and behavior of the commodity marketswhich cannot be controlled by this project – will strongly depend on consistent application by theGovernment of updated sound legal and regulatory frameworks for extractive industries sectorand ability of the Government to monitor sector performance and collect revenues due – reformsthat are targeted in the proposed scaled-up operation. Level of oil and gas sector investment andrevenues will be hard to estimate in the next four to five years, but the importance of developingof the optimal sector regime and building capacity for its management and monitoring inadvance of the investment and actual production is recognized globally and within the country ascrucial.

Risks

37. The risk profile for the new financing is very similar to the Original Project. The projecthas a risk rating of Medium-Impact (MI). Among the key risks of the project areimplementation capacity risks, donor coordination risks, and reputational risks. The OperationalRisk Assessment Framework (ORAF) is included in the Annex 2. Main mitigation measuresinclude: (i) maintaining high level championship within the GoSL at all stages of the reform; (ii)maintaining strong focus on capacity building with the Government entities involved in sectormanagement and oversight throughout the project implementation; (iii) undertaking regularconsultations and information sharing on reforms financed by the project with stakeholders bothwithin country and international CSOs; (iv) ensuring that project outputs, including new geodata,are used in public interests and is publicly available; and (v) maintaining strong link with EITI.

Safeguards

38. By the way of background, a mining sector Strategic Environmental and SocialAssessment (SESA)

10for Sierra Leone was prepared in 2007 and its core recommendations were

incorporated into the original MTAP. In 2010, as part of preparation of the regional miningproject (WAMGP – see para 21 above), the Bank financed preparation of a West Africa MineralsSector Strategic Assessment (WAMSSA)

11. While most of the recommendations of WAMSSA

target regional level reforms, the scaled-up EITAP will, inter alia, contribute to the goals of (i)strengthening environmental governance; and (ii) improving social accountability and mineralsector governance.

39. The project will maintain safeguards category “B” triggering OP/BP 4.01. The scaled-upproject does not trigger any additional policies and remains a technical assistance project. TheIntegrated Safeguards Data Sheet (ISDS) for the additional financing has been updated and

10 Sierra Leone Mining Sector Reform: A Strategic Environmental and Social Assessment, World Bank, 2007.

11 West Africa Mineral Sector Strategic Assessment for the Development of the Mineral Sector in Mano RiverUnion, the World Bank, March 31, 2010.



13

disclosed prior to appraisal to confirm the category, safeguards management approach, and toreflect additional activities as noted in the paragraph below. The Terms of Reference forpreparation of environmental and social regulations for mining sector and related capacitybuilding that were disclosed prior to the Original Project appraisal (October 2009) remain valid.

40.

The additional financing will (i) scale-up capacity building activities to MMR, Ministryof Lands, Country Planning and Environment, Sierra Leone Environmental Protection Agency(SLEPA) and CSOs to monitor environmental and social compliance of the extractive industriesoperations (the sector specific regulations, as well as sector guidelines and code and practice formining, are being prepared with the support of the Original Project); and (ii) initiate and supportpolicy dialogue among the Government and stakeholders to foster the development of policyframeworks and strategies to support environmentally sustainable and socially equitabledevelopment of Sierra Leone’s oil and gas sector.

Policy Exceptions

41. There are no exceptions to Bank policies proposed under this additional financing. The

project implementation structure is fully in place and operational, all manuals are in compliancewith the Bank requirements, the Project Operations Manual has been updated prior tonegotiations, the 18 months procurement plan for the additional financing has been prepared andapproved by the Bank prior to negotiations.



14

Annex 1: Results Framework and Monitoring

Sierra Leone Extractive Industries Technical Assistance Project

Revisions to the Results Framework Comments/ Rationale for Change

PDO

Current (PAD) Proposed

To build capacity of theGovernment to improvemanagement and regulation of the mining sector

Revised: To build capacityof the Government toimprove management andregulation of the extractiveindustries sector

PDO indicators

Current (PAD) Proposed change*

Mining licenses issued in

compliance with revisedregulations adopted by MMR

Continued

MMR (NMA when it becomesoperational) implements its humanresource policy and trains andretains qualified staff

Continued

Geodata are easily available andaccessible through the web

Continued

NA New: New petroleumexploration licenses issued incompliance with PetroleumAct and supportingregulations

New indicator to reflectadditional activities

Intermediate Results indicatorsCurrent (PAD) Proposed change*

Regulations for environmental andsocial management for mining,underground mining and preciousminerals trading are developed andadopted by the MMR

Revised: Regulations forenvironmental and socialmanagement for mining,underground mining,precious minerals trading,and enabling act andregulations for NMA aredeveloped and adopted bythe MMR

Revised to reflectadditional law andregulations

MMR (NMA when it becomesoperational) monitor and reportannually on enforcement of

Continued



16

REVISED PROJECT RESULTS FRAMEWORK12

Project Development Objective (PDO):To build capacity of the Government to improve management and regulation of the extractive industries sector

PDO Level Results Indicators C o r e

UOM

BaselineOriginalProjectStart

(2009)

ProgressTo Date(2011)

Cumulative Target Values

Frequency

Data Source/ Methodology

Responsibilityfor Data

CollectionComments2011 2012 2013 2014

. Mining licenses issued inompliance with revisedegulations adopted by Ministryf Mineral Resources

% None

Consultant to

prepareregul-sselected

NewRegula-

tionsadopted

50% 100% AnnualProgressReports

MMR/NMA

Annual progresspercentage of licin compliance;For regulations sindicator 6 below

. MMR (National MineralsAgency when operational)mplements its human resourceolicy, and trains and retainsualified staff

Yes/No

NMATransformationplandrafted

NMAActunderpreparation

Yes Yes Yes Yes AnnualProgressReports

MMR/NMA

Target to engageleast 6 new qualistaff for NMA unpublic servantscontracts

. Geodata are accessiblehrough the web Yes/No

Somegeneraldataavailableon MMRweb-site

Not yetdue

No Yes Yes Yes AnnualProgressReports

MMR/NMA

Geodata = existigeological data (confidential) avaat geological surand geochemicalto be obtained byEITAP

New petroleum explorationcenses issued in compliance withetroleum Law and supportingegulations

Yes/No NA No No Yes Yes Yes AnnualProgressReports

PRU

Law will be largprepared under aNorad project; Ewill finance in pregulations, softwand application acapacity buildingimplement theregulations

12Because the main beneficiaries of this project are institutions, the project does not report on the otherwise mandatory core indicator “ Direct project beneficiaries

(number), of which female (%).”



17

ntermediate Results and Indicators

ntermediate Results Indicators

C o r e

UOM

BaselineOriginalProjectStart(2009)


Target Values Frequency

DataSource/ Methodo-logy

Responsi-bility forDataCollection

Commen

2012 2013 2014 2015

ntermediate Result 1: Increased compliance of mining and petroleum operations with regulations

. Regulations for environmentalnd social management for

mining, underground mining,recious minerals trading, andnabling act and regulations for

NMA are adopted by the MMR

Yes/ No

None/ basicWork commenced

Partially yes Yes Yes Yes AnnualProgressReports

MMR

. MMR (NMA when itecomes operational) monitornd report annually onnforcement of EIA/SIAegulations for industrial-scale

mining projects

Yes/ No

Basicrequirements

Not yet dueNo(developframework)

No(developfirst report)

Yes Yes AnnualProgressReports

MMR/ NMA

. MMR monitors and reportsnnually on production andevenue of the mining; and PRUeports on oil and gas sector

Yes/ No

None

First EITIreport of 2010 was

notcompliant

Achievecompliant

status

Set upframeworksfor oil

sectorreporting

First reporton oil andmining

sectorspublished

Annualreport onmining and

oil sectorrevenues

AnnualProgressreports

MMR andPRU

. Functions and governanceructure for the Petroleumesources Unit are formalized

hrough regulations

Yes/ No

NA

Law inplace;regulationsunderpreparation


PRU

ntermediate Result 2: Regional and central departments of MMR (NMA when it becomes operational) efficiently perform field work

. New equipment used for fieldwork

Yes/ No

0equipmentprocured


MMR/ NMA



18

ntermediate Results and Indicators

ntermediate Results Indicators

C o r e

UOM

BaselineOriginalProjectStart(2009)


Target Values Frequency

DataSource/ Methodo-logy

Responsi-bility forDataCollection

Commen

2012 2013 2014 2015

0. Field inspections to monitor

ompliance of mining operations

% and

num

Limited

ad hocNot yet due Not yet due

25% of industrial-scale mines

50% of industrial

scale minesand ASM

100% AnnualProgress

ReportsMMR

1. Geochemical surveying andmapping of selected areasompleted

Num 0Consultantengaged

Commencesurveying

9 areassurveyed

Publicationof 9 sheetsof maps

AnnualProgressreports

MMR/NMA

KangHillsMounShistLokoGreeBelt.

2. Based on geochemicalurveys and mapping of selectedreas, Government selectsandidate areas for sectorromotion

Num 0

Consultantsselected,surveyequipmentpurchases

Select atleast 4targetsforpromotion

AnnualProgressReports

MMR/ NMA

3. Government selects areas forurther actions to develop otherand use (outside the project)

Num 0 Not yet dueConceptPrepared

1 area 2 areas 3 areas AnnualProgressReports

MMRAnntarg

ntermediate Result 3: Targeted promotion of mineral and petroleum resources

4. Government presents SLmining and petroleum sectors to

otential investors at regionalnd global events

Num None 0 3 event 4 events 4 events 4 events AnnualProgressReports

MMR/ PRU

Annutarget



19

ANNEX 2

OPERATIONALR ISK ASSESSMENT FRAMEWORK (ORAF)


Project Development Objective(s)

Description:The Project Development Objective is to build capacity of the Government to improve management and regulation of the extractive industriessector

Key Results Indicators: 1. Mining licenses issued in compliance with revised regulations adopted by MMR

2. MMR/NMA implements its human resource policy, and trains and retains qualified staff

3. Geodata are easily available and accessible through the web

3. New petroleum exploration licenses issued in compliance with Petroleum Act and supporting regulations

Risk Category Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks M-I Consultations held during the preparation of the

Original Project indicated that stakeholders

strongly support sector reforms targeted to

improve the government’s capacity for policy

and strategy formulation, for monitoring

compliance with contractual obligations and

sector regulations, and promotion.

The project will continue to hold broad

consultations with stakeholders and civil society

and regular updates during implementation to

ensure coordination of efforts and better

exploitation of synergies to maximize the project

impact.

Implementing Agency Risks H Sierra Leone has a modern policy, legal and

regulatory framework in place for mining sector;

for petroleum sector the policy is place and thelaw and regulations are under development. The

institutional framework is currently being

reformed, but there is a severe shortage of specialist staff and technicians, adequate

The project is design to strengthen institutional

capacity and thus in itself represents mitigation

mechanism going forward. EITAP is targeted to (i)improve Government’s capacity to manage the

extractive industries sector; (ii) improve

knowledge of the mineral endowment; (iii) assist with set up and making operational the NMA,



20

equipment, and information resources.

The Government recognizes the crucial need for

institutional capacity building and is directing its

efforts to restructuring the MMR to better serve

the sector management and regulation needs. Onpetroleum side, the government is targeting

capacity building support for the Petroleum

Resource Unit to enable it to manage licensingand sector monitoring.

MMR will continue to manage the project and

carry out procurement and financial

management and disbursements functions - for

both mining sector and petroleum sector parts of the project. It has built some experience during

the preparation and implementation of the

Original Project, but the Project Support Team at

MMR does not yet have the full capacity toimplement projects independently (currently

supported by a team of consultants), but is

making progress on building the requiredexpertise. The Ministry has extended

consultants’ contract for six months to ensure a

proper transition to fully autonomous PST.

including builds its capacity to monitor mining

operations and ensure compliance with contractualcovenants and sector regulations; and (iv) build

capacity of the PRU to manage the new petroleum

sector.

The project will continue to include substantial

strengthening of staff and institution-wide

procurement, financial management, and project

management capabilities. MMR will also implement staff secondment program and request exception

to mandatory rotation of senior staff to ensure

stability and continuity within the PST.

Project Risks

Design L The design of this project has been tested in

other countries. The Original Project hascommenced the implementation and has been

progressing smoothly.

Joint needs assessment during preparation with

Government and donors indicated that project design was well accepted by the majority of

stakeholders.

Social andEnvironmental

M-L The project is rated environmental category Bfor monitoring purposes; OP 4.01 is triggered.

The risks are indirect and largely reputational.

The project will provide associated capacitybuilding. No works or investments will be

supported under the project.

The initial project is already assisting thegovernment to build adequate environmental and

social regulations for the mining sector.

The legal covenants of the project commitsGovernment to using good practices for env/ social

management of mining operations.

The project will support training and capacity

building to the CSOs on understanding the



21

implementation and monitoring of the

environmental and social regulations forextractives. This is supporting demand side

governance so CSOs can hold companies and

government more accountable.

Program and Donor L DFID is a co-financier under this project and has

been actively involved in project design.

The government has developed in 2009 a

comprehensive development needs matrix for

mining sector which takes into account support from various donors.

A Mining Working Group was established to meet

once a month to share information about donor

activities in the extractive sector

Delivery Quality M-L Lack of experience with donor-funded projects

and low in-house capacity for contract management and M&E at MMR could affect the

quality of delivery.

There have been two leadership changes in as

many years. The resulting high level of turnover

of critical staff could increase the quality of delivery.

Sustainability assessments will be conducted

periodically as part of project M&E, leading todesign modifications if needed.

The likely benefits of a better managed sector (interms of sector revenues and mining induced

broad-based growth) will provide an incentive to

sustain the reforms.

Overall Risk Rating at

Preparation

Overall Risk Rating During

ImplementationComments

M-I M-I

The package of reforms for the extractive industries sector has beenwell tested in many countries and is already under implementation in

Sierra Leone. Government’s commitment to sustainable sector

development is high and government and donor coordination has beenalso a success. Key risks evolve from the institutional capacity of the

government entities to implement the reform and consistently apply

good practices in the future.



22

ANNEX 3

Sierra Leone Extractive Industries Technical Assistance Project

1. Updated Project Description

The scaled-up Project consists of the following parts (additional activities are italicized , updatesof Original Project are underlined).

Part A: Overarching Regulatory Framework for Extractive Industries Sector

1. Provision of capacity building support to the Government to improve the regulation of the miningsector through the preparation of, and the carrying out of related consultations on, new or revisedmining regulatory instruments including inter alia: (i) legislation, regulations and model terms of reference for the preparation, disclosure, consultation and enforcement of environmental andsocial impact assessments, resettlement action plans, environmental and social management plansand mine closure plans for large-scale and mechanized small-scale mines, as well as mechanisms

and procedures for community information dissemination, consultation, dispute resolution andbenefit-sharing including improved linkages between large-scale mining and broader economicplanning; (ii) a mining sector code of practice; (iii) underground mining regulations; (iv) mineraltrading licenses regulations; and (v) the Mines and Minerals Act and supporting regulations.

2. Improve the regulatory framework governing the extractive industries sector, through support for the preparation, and carrying out, of related consultations on new or revised draft regulatory and other instruments, in view of: (i) developing a regulatory and administrative framework for the NMA; and (ii) reviewing and updating the Petroleum Act and preparing supporting petroleumand gas regulations.

3. Establishing and managing policy level dialogue to support formulation of a strategy for futureregulatory requirements and arrangements for environmental and social management of the oiland gas sector.

Part B. Institutional Strengthening

Strengthening oversight and governance of the extractive industries sector, in particular:

1. Provision of capacity building support to the Government to improve the management of themining sector through: (i) support to the MMR to carry out its functions and operations including,inter alia, collection and management of geological and geochemical data for selected sites,carrying out targeted geochemical surveying, mineral resource assessment, and mapping of selected sites; (ii) carrying out investment promotion activities including setting up and operatinga secure geodata management and information system and developing promotion materials ; (iii)carrying out mine inspections and regulatory enforcement ; (iv) provision of transitional salarysupport for selected civil servants in the MMR, for the carrying out of geological, datamanagement, monitoring, evaluation, and environmental functions; (v) development of a post-mining rehabilitation program for selected sites; (vi) support to MMR to manage donor-financedprojects including the building of skills for procurement, financial management and projectmanagement and monitoring; and (vii) support to MMR to develop a monitoring and evaluationsystem and benchmark progress towards the achievement of key governance-related indicatorsfor the mining sector.



23

2. Strengthening the technical and institutional capacities of MMR, Petroleum Resources Unit (PRU), the Ministry of Environment, Sierra Leone Environmental Protection Agency, and civilsociety organizations for implementing environmental and social regulations for the extractiveindustries sector including monitoring, evaluation, reporting and carrying out consultations.

3. Strengthening the technical, institutional, and management capacity of MMR, the Strategy and

Policy Unit, and the Negotiations Committee, for carrying out extractive industries’ contractsnegotiations, including financial and economic modeling, review of technical and feasibilityreports, updating model agreements for specific commodities, and developing negotiationsstrategies.

4. Strengthening the technical, institutional and management capacity of the PRU for managing and analyzing geological and geophysical data.

5. Strengthening the capacity of the Government Gold and Diamond Office.

6. Developing and strengthening the monitoring, evaluation, and reporting systems for theextractive industries sector.

Part C. Project Management

Provision of technical and financial support to the MMR for the management, procurement,financial management, monitoring, evaluation and audit of the Project.



24

2. Amended Exceptions to National Competitive Bidding Procedures

The procedures to be followed for National Competitive Bidding shall be those set forth in ThePublic Procurement Act, 2004, of Sierra Leone (the “Act”), subject to the following provisions:

(a) Procuring entities shall use appropriate standard bidding documents acceptable to theAssociation;

(b) The eligibility of bidders shall be as defined under Section I of the GuidelinesProcurement under IBRD Loans and IDA Credits (the “Procurement Guidelines”);

accordingly, no bidder or potential bidder shall be declared ineligible for contractsfinanced by the Association for reasons other than those provided in Section I of theProcurement Guidelines;

(c) No restrictions in respect of eligibility to participate in bidding for contracts shall be

placed on the basis of nationality of the bidder and/or the origin of goods other thanthose imposed by primary boycotts;

(d) Foreign bidders shall be allowed to participate in National Competitive Biddingprocedures;

(e) No domestic preference shall be given for domestic bidders and/or for domesticallymanufactured goods;

(f) Bidding shall not be restricted to pre-registered firms, and foreign bidders shall not berequired to be registered with local authorities as a prerequisite for submitting bids;

(g) Foreign firms shall not be required to associate with a local partner in order to bid as a joint venture, and joint venture or consortium partners shall be jointly and severallyliable for their obligations;

(h) Government-owned enterprises shall be eligible to participate in bidding only if they canestablish that they are legally and financially autonomous, operate under commercial lawand are not dependent agencies of the Recipient. Such enterprises shall be subject to thesame bid and performance security requirements as other bidders;

(i) Subject to these provisions, procurement shall be carried out in accordance with the

“Open Competitive Bidding” procedures set forth in the Act;

(j) Bidders shall be given at least thirty (30) days from the date of the invitation to bid or thedate of availability of bidding documents, whichever is later, to prepare and submit bids;

(k) Bids shall be submitted in a single envelope;



25

(l) An extension of bid validity, if justified by exceptional circumstances, may be requestedin writing from all bidders before the expiration date and for a minimum period requiredto complete the evaluation or award a contract, but not to exceed thirty (30) days. Nofurther extensions shall be requested without the prior concurrence of the Association;

(m) All bids (or the sole bid if only one bid is received) shall not be rejected, the procurementprocess shall not be cancelled, and new bids shall not be solicited without theAssociation’s prior concurrence;

(n) Qualification criteria shall be applied on a pass or fail basis;

(o) Bidders shall be given at least twenty-eight (28) days from the receipt of notification of award to submit performance securities;

(p) Each bidding document and contract financed out of the proceeds of the Financing shallinclude provisions on matters pertaining to fraud and corruption as defined in paragraph

1.16(a) of the Procurement Guidelines. The Association will sanction a firm or anindividual, at any time, in accordance with prevailing Association sanctions procedures,including by publicly declaring such firm or individual ineligible, either indefinitely orfor a stated period of time: (i) to be awarded an Association-financed contract; and (ii) tobe a nominated sub-contractor, consultant, manufacturer or supplier, or service providerof an otherwise eligible firm being awarded an Association-financed contract;

(q) In accordance with paragraph 1.16(e) of the Procurement Guidelines, each biddingdocument and contract financed out of the proceeds of the Financing shall provide that:(i) the bidders, suppliers, contractors and subcontractors shall permit the Association, atits request, to inspect their accounts and records relating to the bid submission andperformance of the contract, and to have said accounts and records audited by auditorsappointed by the Association; and (ii) the deliberate and material violation by the bidder,supplier, contractor or subcontractor of such provision may amount to an obstructivepractice as defined in paragraph 1.16(a)(v) of the Procurement Guidelines; and

(r) The Association may recognize, if requested by the Borrower, exclusion fromparticipation as a result of debarment under the national system, provided that thedebarment is for offenses involving fraud, corruption or similar misconduct, and furtherprovided that the Association confirms that the particular debarment procedure affordeddue process and the debarment decision is final.



26

3. Project Preparation

Project Schedule

Milestone Planned Actual

Concept Review December 15, 2010Appraisal February 22, 2011

Negotiations March 16, 2011

Board Approval April 21, 2011

Planned date of Effectiveness June 2011

Planned date of Mid-term Review July 2013

Planned Closing Date June 30, 2016

Bank staff and consultants who worked on the project include:

Name Title, Unit

Ekaterina Mikhaylova Task Team Leader, Sr Mining Specialist, SEGOM

Mamadou Barry Sr Mining Specialist, SEGOM

David Santley Sr Petroleum Specialist, SEGOM

Sylvia Kalley EITI Consultant, SEGOM

Cecilia Tan Team Assistant, SEGOM

Tsri Appronti Procurement Specialist, AFTPC

Joyce Agunbiade Financial Management Specialist, AFTFM

Luis Schwarz Sr Finance Officer, CTRFC

Christine Makori Counsel, LEGAFPeter Kristensen Sector Leader, AFTEN

Joseph Akpokodje Sr Environmental Specialist, AFTEN

Maria (Chona) Cruz Lead Social Development Specialist, AFTCS

Anders Jensen Monitoring and Evaluation Specialist, AFTDE

Key institutions responsible for preparation of the project: Ministry of Mineral Resources,

Ministry of Finance and Economic Development, Petroleum Resource Unit, Strategy and Policy

Unit



Bintimani (1948 m)

G o r i

Hi ll s

L o m a

M t s

.

Sherbro Island

W a r a

W a r aM t s

.

KAMBIAB O M B A L I

K O I N A D U G U

T O N K O L I L I

K O N O

KAILAHUN K E N E M AB O

P U J E H U N

B O N T H E

M O Y A M B A

P O R T L O K O

WESTERN AREA F.R.

G r e a t

S c a r c i e

s

L i t t l e S

c a r c i e

s

M o n g o

Bagbe

S e l i

P a m p a n a

R o k e l

J o n g

S e w a

K i t t a m

S h e r b r o M o a

Lake Mabesi

M a n

o

Pendembu

Lunsar

Mano

Rotifunk

SongoYonibana

Masiaka

Waterloo

Sembehun

Kamakwie

Fadugu

BumbunaAlikalia

Kayima

Gandorhun Koindu

Buedu

Kurubonla

Kamaron

Tefeya

Yengema

Panguma

Lago

Pendembu

Daru

Njaiama-Sewafe

Joru

Zimmi

Potoru

Kribundu

SumbuyaMatru

Blama

Momaligi

Bendugu

Falaba

Binkolo

Yana

Gbinti

Batkanu

Pepel Masingbi

Matotoka

Yele

Mongeri

Dambara

Mange

Madina Junction

Makeni

Bo

Kenema

Kambia

Port Loko

Moyamba

Bonthe

Pujehun

Kailahun

Sefadu

Magburaka

Kabala

L IBERIA

KAMBIAB O M B A L I

K O I N A D U G U

T O N K O L I L I

K O N O

KAILAHUN K E N E M AB O

P U J E H U N

B O N T H E

M O Y A M B A

P O R T L O K O

WESTERN AREA F.R.

Pendembu

Lunsar

Mano

Rotifunk

Songo

Shenge

Yonibana

Masiaka

Waterloo

Sembehun

Kamakwie

Fadugu

BumbunaAlikalia

Kayima

Gandorhun Koindu

Buedu

Kurubonla

Kamaron

Tefeya

Yengema

Panguma

Lago

Pendembu

Daru

Njaiama-Sewafe

Joru

Zimmi

Potoru

Kribundu

SumbuyaMatru

Blama

Momaligi

Bendugu

Falaba

Binkolo

Yana

Gbinti

Batkanu

Pepel Masingbi

Matotoka

Yele

Mongeri

Dambara

Mange

Lungi

Madina Junction

Makeni

Bo

Kenema

Kambia

Port Loko

Moyamba

Bonthe

Pujehun

Kailahun

Sefadu

Magburaka

Kabala

FREETOWN

L IBERIA

G U I N E A

G r e a t

S c a r c i e

s

L i t t l e S

c a r c i e

s

M o n g o

Bagbe

S e l i

P a m p a n a

R o k e l

J o n g

S e w a

K i t t a m

S h e r b r o M o a

M o a

Lake Mabesi

Yawri Bay

M a n

o

To Forecariah

To Kindia

To Ouré-Kaba

To Faranah

To Kolahun

G o r i

Hi ll s

L o m a

M t s

.

Sherbro Island

Turtle Islands

Banana Islands

W a r a

W a r aM t s

.

Bintimani (1948 m)

13°W

12°W 11°W

9°N

10°N

8°N

9°N

10°N

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other information

0 20 40

0 20 40 50 Miles

60 Kilometers

IBRD 38372

SIERRA LEONEMINING TECHNICAL ASSISTANCE PROJECT

Additional Financing

SELECTED CITIES AND TOWNS

DISTRICT CAPITALS

NATIONAL CAPITAL

RIVERSMAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES

ALGERIALIBYA

NIGER

NIGERIA

CHAD

S U D A N

CAMEROON

GABONSÃO TOMÉ AND PRÍNCIPE

EQUATORIAL GUINEA

CONGO

DEM.REP. OFCONGO

CENTRAL AFRICANREPUBLIC

MALICAPE VERDE

THE GAMBIASENEGAL

GUINEA-BISSAU

LIBERIA

SIERRA

LEONE

GUINEA

CÔTED’IVOIRE GHANA

T O G O B E N I N

BURKINAFASO

MAURITANIA

FORMER SPANISH

SAHARA

A T L A N T I C

O C E A N

SIERRALEONE

A

T

L

A

N T

I C

O C E

594slworldbank mining study

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