world bank documentdocuments.worldbank.org/curated/en/953331468774865584/... · 2016-08-05 ·...

Document ofThe World Bank

Report No. 19005 - MAU

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED CREDIT

IN THE AMOUNT OF 1 1.1 SDRIUS$ 15 MILLION EQUIVALENT

TO THE

ISLAMIC REPUBLIC OF MAURITANIA

FOR A

MINING SECTOR CAPACITY BUILDING PROJECT

APRIL 20, 1999

Mining and Industry Unit (EMTIM)Burkina Faso, Mali, Mauritania, Sao Tome & Principe (AFC15)Africa Region (AFR)

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CURRENCY EQUIVALENTS

(Exchange Rate Effective 03/04/99)

Currency Unit = Ouguiya (UM)UM 1,000 = US$ 4.838

US$ 1 = UM 206.7SDR 1 = US$ 1.336

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance StrategyDCA Development Credit AgreementDEAR Direction de l'Environnement et de l'Amenagement RuralDMG Directorate of Mines and GeologyEIS Environmental Impact StatementEMS Environmental Management SystemGIS Geographical Information SystemICR Implementation Completion reportMIS Minerals Information SystemMMI Ministry of Mines and IndustryNGO Non Governmental OrganizationOM1RG Office Mauritanien des Recherches GeologiquesPAD Project Appraisal DocumentPSDCB Private Sector Development and Capacity Building ProjectSNIM Societe Nationale Industrielle et MiniereTA Technical AssistanceUCPM Mining Project Coordinating Unit

Vice President: Mr. Jean Louis SarbibCountry Manager/Director: Mr. Hasan Tuluy

Sector Manager/Director: Mr. Peter van der VeenTask Team Leader/Task Manager: Mr. Paulo de Sa

Islamic Republic of MauritaniaMining Sector Capacity Building Project

CONTENTS Page

A. Project Development Objective .......................................................... 2

1. Background ................................................................ 2

2. Project development objective and key performance indicators ......... 3

B. Strategic Context ................................................................ 4

1. Sector-related CAS goal supported by the project ............................................ 42. Main sector issues and Government strategy .................................................. 53. Sector issues to be addressed by the project and strategic choices ......................... 6

C. Project Description Summary ................................................................ 8

1. Project components ................................................................ 82. Key policy and institutional reforms supported by the project ............................. 93. Benefits and target population ................................................................ 104. Institutional and implementation arrangements ............................................... 10

D. Project Rationale ................................................................ 12

1. Project alternatives considered and reasons for rejection .................................... 122. Major related projects financed by the Bank and/or other development agencies ........ 123. Lessons learned and reflected in proposed project design ................................... 134. Indications of borrower commitment and ownership ......................................... 135. Value added of Bank support in this project ................................................... 13

E. Summary Project Analyses ................................................................ 13

1. Economic ............................................................... 132. Financial ............................................................... 143. Technical ............................................................... 144. Institutional ............................................................... 145. Social ............................................................... 156. Environmental assessment ............................................................... 157. Participatory approach ............................................................... 15

F. Sustainability and Risks ................................................................... 16

1. Sustainability ................................................................... 162. Critical risks ................................................................... 163. Possible controversial aspects ................................................................... 17

G. Main Credit Conditions ................................................................... 17

1. Effectiveness conditions ................................................................... 172. Other ................................................................... 17

H. Readiness for Implementation .................................................................. 18

L. Compliance with Bank Policies .................................................................. 18

Annexes

Annex 1. Project Design Summary ............................................................ 20Annex 2. Detailed Project Description .. 22Annex 3. Estimated Project Costs .............................................................. 26Annex 4 Cost-Effectiveness Analysis Summary ................ ............................ 27Annex 5. Financial Summary ............................................................... 29Annex 6. Procurement and Disbursement Arrangements ................................... 31

Table A. Project Costs by Procurement Arrangements ................................ 33Table Al . Consultant Selection Arrangements------------------------------------------- 34

Table B. Tresholds for Procurement Methods and Prior Review ................... 35Table C. Allocation of Credit Proceeds .................................................. 36

Annex 7. Note on the Financial Management System ..................................... 37Annex 8. Project Processing Budget and Schedule .......................................... 41Annex 9. Documents in Project File ........................................................... 42Annex 10. Statement of Loans and Credits .......................... .......................... 43Annex 11. Country at a Glance ............................................................... 44Annex 12. Proposed organization for the Ministry of Mines and industry's mining agencies. 45

Map

Islamic Republic of MauritaniaMining Sector Capacity Building Project

Project Appraisal Document

Africa Vice-PresidencyBurkina Faso, Mali, Mauritania, Sao Tome & Principe (AFC 15)

Date: 04/10/99 Task Team Leader/Task Manager: Paulo de SaCountry Manager/Director: Hasan Tuluy Sector Manager/Director: Peter van der VeenProject ID: MR-PE-57875 Sector: Mining Program Objective Category: Private Sector DevelopmentLending Instrument: Technical Assistance Credit Program of Targeted Intervention: [ ] Yes [X] No

Project Financing Data [] Loan [XI Credit [I] Guarantee [ Other [Specify]

For Loans/Credits/Others:

Amount (US$m/SDRm): US$ 15 million/SDR I 1. lmillionProposed terms: standard IDA [X] Multicurrency [ ] Single currency, specify

Grace period (years): [] Standard Variable [ ] Fixed [] LIBOR-basedYears to maturity:Commitment fee: %

Service charge: %

Financing plan (US$m): US$ 15.5 millionSource Local Foreign Total

Government 0.5 0.5IDA 1.8 13.2 15.0

Total 2.3 13.2 15.5

Borrower: Islamic Republic of MauritaniaGuarantor:Responsible agency: Ministry of Mines and Industry

Estimated disbursements (Bank FY/US$M): 2000 2001 2002 2003 2004 2005 2006Annual 1.2 3.1 4.5 3.2 3.0

Cumulative 1.2 4.3 8.8 12.0 15.0

For Guarantees: [] Partial credit [ Partial risk

Proposed coverage:Project sponsor:Nature of underlying financing:Terms of financing:

Principal amount (US$)Final maturity

Amortization profileFinancing available without guarantee?: [] Yes [] NoIf yes, estimated cost or maturity:Estimated financing cost or maturity with guarantee:

Project implementation period: 5 years Expected effectiveness date: 07/31/1999 Expected closing date: 12/31/2004

OSD PAD Form: July 30,1997

A: Project Development Objective

1. Background

Mauritania has a favorable geologic environment but, apart from iron ore, there is little mineralproduction in the country. Exploration activities have rapidly increased since 1994 reflecting, amongothers: (i) the discovery of significant deposits in neighboring countries with similar geologicalconditions, especially Mali; and (ii) substantial improvements in the regulatory framework'sattractiveness to private investors over the last years. These improvements, reflected in the approval of anew Mining Law, were praised by both donors and the private sector during the Consultative Groupmeeting in Paris in March 1998.

The Government of Mauritania is actively seeking to attract private and foreign investment to promotegrowth in the sector and, so far, investors have shown positive interest in terms of exploration activities.Many other potential targets have been identified, but foreign investment in the mining sector has yet tomaterialize because of insufficient geological information available on the country, the lack ofinfrastructure, and the weakness of government institutions in key areas.

While investments in exploration have expanded considerably in recent years, they are still well belowwhat might be expected given Mauritania's mineral potential. There are three main reasons for thissituation:

(i) the geoscientific information presently available on the country is quite insufficient for investors.Mauritania does not have complete coverage of geological maps, and only limited geophysical, andgeochemical maps. Most of the existing geological information was produced in the 1970s and early1980s and is generally not accessible to private investors. There is urgent need to complete the geologicalcoverage and mineral resources assessment of the country and to compile all information into acomputerized minerals data base.

(ii) in spite of the progress achieved in mining sector reform, namely in the drafting of a new MiningCode and the enhancement of security of tenure of mining rights, weak Govermnent institutions andcumbersome regulations pose severe constraints to the enforcement of the new legal framework. There isa need to reorganize and streamline the mining institutions under the Ministry of Mines and Industry(MMI), redefine their mandates and provide them with the required resources to fulfill their newmandates.

(iii) the crisis in Asia (responsible for 50% of the growth in metals demand) and global instability in thefinancial markets have depressed commodity prices and led to a substantial reduction in the investmentbudget of most mining enterprises. While the major companies have scaled back their explorationexpenditures, it is virtually impossible to small and medium-sized mining companies to raise capitalunder the present conditions of the mining cycling.

Bank's assistance for mining sector reforrm in Mauritania started under the Private Sector Developmentand Capacity Building Project (Credit 2730-MAU) which provided technical assistance to the followingactivities: (i) Mining Sector Policy Declaration, clearly defining the respective roles of the State and ofthe private sector in mining development in Mauritania; (ii) Update of the Mining Code, with the draft ofa new Mining Law recently approved by the Council of Ministers, and its application decrees; (iii)Enhancement of security of tenure of mining rights, with the establishment of a registry system for thegranting and management of mining rights (Cadastre); (iv) Preparation for the reorganization of themining institutions under MMI, through an Institutional Audit of the Ministry of Mines and Industry,identifying the major constraints for an efficient performance of its mining agencies; (v) Preparation ofpromotional material to help attract foreign direct investment in mining in Mauritania; and (vi) Exposure

to international best practices of Government officials through the participation in field trips andseminars.

A PHRD/Japanese grant obtained to finance technical support required by Government to prepare theproposed project is assisting in the consolidation of the mentioned reforms in the areas of: (i) Institutionalstrengthening, developing a scope of work to create an integrated computerized information system insidethe Ministry available to private investors which would collect, store and treat all sector related data(geological, environmental, etc.), including identification of required human resources; (ii) MiningCadastre, implementing of a manual registry system and designing a computerized one, includingdefining criteria and non discretionary procedures for the granting and foreclosing of mining rights; and(iii) Environment, preparing satisfactory mining environmental regulations; satisfactory institutionalarrangements and capabilities for environmental protection; satisfactory procedures for environmentalassessments; and building capacity inside the Ministry of Mines in environmental-related issues.

The revised mining code and the reforms being supported by the proposed project will put Mauritania onthe path of the international best practices being introduced by the most advanced mining countries ofLatin America, and make the country a benchmark in mining sector reform for other countries in theRegion. It will help to position Mauritania to fully benefit from the next surge in minerals investmentbrought by the recovery in the cycle, expected in two years.

2. Project development objective and key performance indicators (see Annex 1):

The objective of the proposed project is to strengthen the Government's capacity to act as a facilitator andregulator of mining activities and significantly increase private investment in Mauritania's mining sector.The project will help the Government of Mauritania to address key needs (policy, institutional,environmental) in the mining sector, through a set of prerequisite steps that will lay the ground for futureprivate investment and whose implementation will provide a sound basis for Mauritania in exploiting,over the long term and in a developmentally sound manner, the significant potential of its naturalresources. The proposed project aims are : (a) to complete sector reforms in order to establish an enablingenvironment to attract foreign direct investment in mining, which would ensure a real and sustainablecontribution to economic growth; (b) to build institutional capacity to effectively enforce laws andregulations, administer mining titles, and monitor sector developments; (c) to strengthen theGovernment's capacity to make essential geological information available to potential investors,including a mining data bank and a geological map; and (d) to establish capacity in the country, by meansof pilot projects, to identify and address environmental as well as social impacts from mining.

The project has been designed to provide a learning experience for the country, the Bank, and investorswith respect to the mining sector but also for attracting private sector investment in other sectors.Learning will relate to the process of negotiating contracts, including interface between public and privatesectors and communities; dealing with foreign investors, meeting investor needs; understanding cross-sector dynamics in the context of regional development, and establishing effective inter-relationships withEnvironment agencies; and conducting baseline environmental studies and social assessments prior tointroducing mining operations in an area. Valuable lessons for other sectors, especially tourism andfisheries, are also expected from the project. Mining sector experience could be especially helpful inlearning how to administer the cadastre, with lessons for the administration on the land cadastre, themanagement of fishing rights, and overall investment promotion.

Key indicators:

1) Increase Private Investment, exports and fiscal revenues:(a) Increase in the number of private operators involved in the different stages of the mining cycle.(b) Increase in average annual investments in mining.(c) Increase in average annual minerals exports.(d) Increase fiscal revenues from mining.

2) Set the base for the creation of an Environmental and Social Management for Mining:(a) Preparation of detailed procedures for Environmental Impact Assessments.(b) Number of Environmental Impact Assessment appraised.

3) Improve Minerals Information System.(a) Number of maps published(b) Number of consultations to the MIS system

4) Improve the efficiency of the mining institutions under MM(a) Average number of days required for granting a mining title(b) Backlog and number of complaints of the Mining Cadastre

The performance of key indicators grouped under point (1) is expected to decline in the next couple ofyears as a result of the current downturn in the investment cycle for minerals and metals. However, as aresult of the project, Mauritania should be in a position to fully benefit from the next recovery and registera significant improvement in key indicators. The number of private operators actively involved inexploration, for example, is expected to increase from the current 10 to about 20-30 over the next fiveyears, resulting in an increase of annual investment expenditures from less than US$ 20 million today toUS$ 40-50 million. On the other hand, non-iron ore mineral exports could go from virtually nil to aboutUS$ 100-150 million over the next ten years (see project description).

B: Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1):

CAS document number: 16595 Date of latest CAS discussion: June 17, 1997Since 1992, the Government of Mauritania has been implementing a wide range of policy, economic andsector reforms under its structural adjustment program. In the course of the dialogue preceding the 1997Country Assistance Strategy (CAS), the Government has acknowledged that sound economicmanagement, conducted by dynamic and competent institutions, is crucial to its ability to act efficientlyboth as a promoter of economic development and as a regulator of economic activities.

The proposed project supports the following CAS objectives:

(i) Broad-based growth led by private sector development: the supply response to the major structuralreforms adopted by Government has been slow, and Mauritania continues to be highly dependent on twoexport products: fish and iron ore. In the 1992-96 period, direct private investment averaged about US$75 million per annum, of which foreign investment amounted to about US$ 8 million per year. Theseweak results are due mainly to the inconsistent application of a strong and clear private-sector regulatoryframework, a judiciary which is neither independent nor reliable, and the lack of a sound financialintermediation system. Moreover, the lack of a well developed and maintained transport infrastructure,the inadequate supply of skilled labor, high freight costs and high utility tariffs do not make Mauritania acompetitive environment for long-term private investment. The Government needs to aggressivelyaccelerate economic growth through policies and programs aimed at increasing the level of privateinvestment, thereby raising productivity, providing employment and generating income for the laborforce. Foreign-led private sector investment in mining could be instrumental in opening up the economyto investment and competition, effectively supporting macroeconomic stability and structural reform. Theproposed project will contribute to unlock the country's good geological potential through enhancedaccess to foreign technology and financing, while promoting the development of a sound regulatoryframework for private-led growth.

(ii) Restructuring and Modernizing the Public Sector: Government's institutional apparatus has not yetadapted to its new role of regulating economic activities and promoting poverty reduction in a market-oriented economy. The Government is aware that an inappropriate institutional framework, weak

administrative capacity, and a civil service that is reluctant to adopt up-to-date work practices and lacksaccountability, have contributed to inefficiencies and mismanagement of public resources, which in turnhas restrained the development of a dynamic private sector. The Government is convinced that its centralobjective of reducing poverty through accelerated growth can only be accomplished through institutionaland administrative reforms that refocus the role of the State, remove inefficient and arbitrary regulations,and build a strong partnership between the State and the civil society at large. Mining has been in thefrontline of sector legal reform and could also became a pilot sector for public institutions reform. Theproject will allocate most of the resources for institutional development to public mining institutions,including the environmental protection agencies, as a basis for the sound and sustainable development ofthe mining industry. This includes improved administration, and rationalization of staff. The project willhelp widen and deepen reform, and establish environmental safeguards in selected pilot areas and supportthe sustainable development of the sector. Environmental baseline studies would also help improvemanagement of renewable natural resources.

2. Main sector issues and Government strategy:

Mauritania is known to have a diverse composition of minerals, given that a part of its territoryrepresents a structural extension of the mineral provinces of Western Africa, namely Ghana, Burkina Fasoand Mali. Nevertheless, the country's geological potential can still be classified as vastly unknown due tothe paucity of high-quality exploration activity. Current mining activity is dominated by iron ore. Otherthan majority state-owned iron ore producer SNIM, there is currently a copper-gold project (also withsignificant State participation) whose development plans have been adversely affected by low metalprices. In parallel to these more traditional activities, the country has been experiencing in recent years asurge of exploration activities mainly financed by private foreign companies. Their work has resulted inthe recent discovery of promising gold and diamond deposits. Although their economic potential stillneeds to be evaluated, these discoveries confirm Mauritania's mineral potential and reinforceGovernment's commitment to attract more private investment to the sector.

Mauritania's Mining Policy Declaration approved by the Council of Ministers in 1997 states that one ofthe Government objectives is to increase revenues through the diversification of production in the miningsector. Government is therefore seeking to accelerate the growth of the mining sector by creatingfavorable conditions through the removal of obstacles which constraint private sector development.

The main sector issues to be addressed by the Government strategy under the proposed project are:

(i) Rationalizing the role of the State by reducing its involvement in mining exploration anddevelopment activities. Given the high-risk nature of exploration, the role of the State should be confinedto the administration of the sector and the provision of basic geologic information, leaving the high cost,risky exploratory activities to the private sector. Government's strategy is to reduce its involvement inmining exploration by reorienting the state-owned exploration unit, the Office Mauritanien desRecherches Geologiques (OMRG) to more upstream activities like geological reconnaissance andmapping.

(ii) Strengthening and modernizing MMI's agencies involved in monitoring and regulating miningactivities. Institutions such as the Directorate of Mines and Geology (DMG) and OMRG, which fulfill therole of the State as administrator - regulator of the mineral resources of the country, and whoseperformance in the discharge of their services and responsibilities (such as enforcement of laws andregulations, provision of reliable geological database, administration of mineral rights and monitoring ofenvironmental liabilities), are critical in the efficient operation of a private sector-led mining industry. Atpresent, these institutions are deficient in their level of expertise, capabilities, and do not have adequateequipment to undertake their activities. Furthermore, they are poorly funded and have limited experiencein dealing with the private sector. The project would provide technical assistance for consultancy servicesfor training and procurement of essential modern equipment for these institutions.

(iii) Developing Environmental baseline data and a monitoring system. Although Mauritania ispreparing legislative and a regulatory framework to address environmental impact assessment issues, theprocedures for the execution of these regulations are fragmented. Furthermore, the institutions lack thecapabilities to monitor and address the environmental problems efficiently and in a timely manner, and inparticular to implement rehabilitation measures with regard to mining. In order to assess the gravity of theproblem, there is a need to undertake environmental baseline studies in selected areas, which wouldprovide a basis for the environmental protection measures to be implemented in the mining areas. In thisregard, technical assistance would be- provided for upgrading the capabilities of the institutionsresponsible for monitoring and regulating environmental pollution including developing environmentimpact assessment procedures and appropriate monitoring procedures. The program will be conducted incooperation with the staff of the Ministry of Rural Development and Environment.

(iv) Promoting private sector investment in the mining sector. With regard to promotion of privatesector participation in exploration and mine development, a new mining law was recently approved by theGovernment. By reducing the discretionary power of Government, increasing transparency, andimproving security to potential investors, the new Mining Code is expected to provide the adequatelegislative framework for regulating and monitoring activities in the sector, and to make a majorcontribution to attract foreign investments into mining, namely of gold and diamonds. Of particularimportance to provide a sense of security for potential investors is the stabilization of the legal, fiscal, andinstitutional arrangements prevailing at the time of the investment, as well as setting-up a professionalsystem to manage the granting of mining rights. In addition to that, the new geological information thatwill be generated under the project will provide a new tool to guide the exploration efforts of privatemining companies in Mauritania, especially in remote areas of difficult access.

3. Sector issues to be addressed by the project and strategic choices:

The last 25 years have seen significant changes in the international mining industry, in large measurebecause of the liberalization of economic and mining policies of previously restrictive governments inmining countries. These reforms have had three broad objectives, to improve sector performance andgrowth and the contribution of mining to the national economies, to ensure the sustainability of themining industries in the developing countries, and to ensure that the host countries get a fair share fromthe benefits of growth of the sector.

In the context of a generally healthy metal commodity price scenario, the result has been an upsurge inmining investment in those countries which have adopted legal, institutional and taxation reforms.Between 1989 and 1997 Latin America, the region where the reform was implemented more thoroughly,saw a four-fold increase in investment in exploration (for the countries of the region with comprehensivereform programs the increase was twelve-fold) while the world total increased by 90%. Furthermore, thereforming countries have achieved progress in the economic, environmental and social aspects of mining,thus strengthening the sustainability of the sector.

Work Bank involvement in the reform process of successful mining countries shows that, for this tohappen, the enactment of the necessary legal, fiscal and environmental policies and the establishment ofstrong mining institutions to implement and administer them have proven to be the keys to success. Thisincludes: (i) a background of sensible economic policies and a coherent general legal framework; (ii) amining law providing security of tenure, clarity and transparency and access to land (including the releaseof reserved areas held up by the State and full transferability of concessions to remove all barriers to theentry of investors), and an investment framework providing access to foreign exchange and a stable andequitable fiscal regime; (iii) public mining institutions that apply properly the sectoral policies; (iv) asensible environmental management system, and (v) clear, economically efficient rules dealing withenterprise restructuring and privatization. Further progress will depend to a large extent on the continueddevelopment of institutional capabilities, in an environment of sensible macro-economic policies, toensure the sustainability of the progress achieved.

The main issues to be addressed by the proposed Project are:

a) Building Capacity of the MMI's mining agencies. The project would assist in: (i) strengthening thepolicy making, regulating development and sector monitoring capabilities in MMI; (ii) rationalizing therole of the State from being an owner and operator of mining assets to a regulator and administrator byreducing State involvement in exploration and mining by allowing and promoting private sectorparticipation; (iii) finalizing the implementation of an enabling legal and regulatory framework aimed atpromoting private mining enterprises; and (iv) restructuring and modernizing of the Directorate of Miningand Geology, based on the redefinition of its mandate and procedure, in order to transform it into a sectorpromotion tool providing a good base of sound geological information; (v) establishing proper computer-based cadastre and mine-reporting systems as well as explicit criteria and non-discretionary proceduresfor the granting and foreclosing of mining rights; and (vi) improving capacity at MMI to attract privatesector investment by allocating resources for promotional programs, and institutional development.Technical assistance would be provided through the preparation and implementation of a program whichwould provide for training of staff and for the procurement of equipment and materials to improve theadministration and regulatory role of these institutions, including, enforcement of the laws andregulations, administering of mining titles, and monitoring of sector development.

b) Developing the country's Geological Infrastructure. The project would: (i) provide for a completecoverage of geological maps for Mauritania at the 1:500,000 scale, as well as mapping of selected areas atthe 1:200,000 scale; (ii) carry-out geophysics airborne survey in selected promising areas; (iii) provideassistance in introducing new technologies, especially in GIS-based geological mapping, thematicmapping, mineral resource assessment, and environmental base line information; and (iv) provideassistance in the implementation of a Minerals Information System (MIS), a computer-based system tocompile and catalogue dispersed data, to facilitate the access to information (bibliography, technicalreports, statistics, legal documents, etc.) both for private users and public institutions.

c) Protecting and enhancing the environment. The project would lay the base for the preparation of asector environmental assessment, by establishing pilot environmental baseline data and a monitoringsystem for the environmental impacts of mining; implementing adequate procedures and guidelines forthe preparation of environmental impact studies in mining; defining sector specific environmentalregulations and standards, including the procedures for the rehabilitation of the area after mine closure;developing health and safety provisions, and enhance the Ministry of Mines and Industry monitoringcapacity. The capability of the Ministry of Mines and Industry to deal with environmental issues would bestrengthened through the training of its staff, in order to ensure that mining operations are conducted incompliance with sound environmental practices.

C: Project Description Summary

1. Project components (see Annex 2for a detailed description and Annex 3for a detailed costbreakdown):

Component Category Cost Incl. % of Bank- % ofContingencies Total financing Bank-

(US$M) (US$M) financing1. Capacity Building, including: Institution- 2.55 16.5 2.47 16.51.1. Institutional Reform: restructure building,and strengthen MMI's ability to Physicalenforce the mining law. Thisincludes: organization and staffing ofkey administrative units, setting-up ofefficient work procedures; training ofstaff; provision of adequate office andfield equipment; rehabilitation offacilities; participation in andorganization of seminars; andpromotional publications.1.2. Mining Titles Registry andManagement System (MiningCadastre): establish proper computerbased cadastre and mine reportingsystems as well as explicit criteria andnon discretionary procedures for thegranting and foreclosing of miningrights, and training officials toimplement and manage the system.2. Geologic Infrastructure, Institution- 10.45 67.4 10.02 67.1including: building,2.1. Geological Mapping/ Minerals PhysicalInformation System: preparation ofdigital geological maps covering theentire country, plus development of adata base, providing for compilation,treatment, and updating of geologicalinformation. This includes: fieldcampaigns, purchase of information,provision of hardware and software,internet connection, collection ofgeological data, training of staff.2.2. Geophysic Airborne Survey:aeromagnetic and radiometric surveyof two of the most promising mineralprovinces of Mauritania, over an areaof 200,000 km2, in support ofgeological mapping.2.3. Supervision and publication ofmaps: supervision and integration ofthe two previous sub-components;processing, and printing of thegeological maps produced on digitalform.

3. Environmental Management Institution- 1.50 9.7 1.50 10.0System (EMS): including capacity building,building at MMI for monitoring and Physicalenforcement of environmentalregulations; pilot environmental andsocio-economic baseline studies inselected mining areas as a basis fordevelopment of methodology andcapacity to assess and monitor social,cultural and economic impacts ofmining on local communities;development of consultation andparticipatory procedures, training forMMI and Ministry of Environment'sofficials.4. Project Coordination Unit Project 1.00 6.4 0.95 6.3(UCPM) Management

Total 15.50 100.0 15.00 100.0

2. Key policy and institutional reforms supported by the project:

Policy reform. The Project will help Government to: (i) consolidate key reforms attempting to create anenabling environment for an economically, socially and environmentally sound development of thesector; and (ii) strengthen its capacity as a regulator - in a transparent and non-discretionary manner - ofmining activities.

Institutional reform. The main mining agencies under MMI are the Minister's Cabinet, where the legalexpertise is located, the General Secretariat, in charge of planning, and administrative matters, and theDirectorate of Mines and Geology which currently includes five units: Strategic Planning and Studies;Minerals Promotion; Mining; Geology; and Hydrocarbons. The main state-owned companies or agenciesunder the Ministry are SNIM and its subsidiaries, SAMIN which is a shareholder of GEMAK, promoterof the Akjoujt project, and OMRG.

An audit of MMI conducted under the Private Sector Development and Capacity Building Projectidentified its major institutional constraints: (i) absolute lack of financial resources that prevents theMinistry from monitoring the real developments in the mining areas; (ii) extreme insufficiency ofqualified human resources and lack of technical skills; (iii) lax procedures, namely in the administrationof mining titles; (iv) very limited availability of geologic information, stored in poor physical conditionsand not available to the public; (v) excessive centralization at the manager's level and inefficientprocedures and flow of information; (vi) poor relations with other line ministries; (vii) lack of strategicvision; and (viii) lack of coordination with the private sector in the promotion of the private investment.

The audit proposed a new organization for MMI, including inter-institutional relationships and mandates,and an action plan for the establishment of new internal procedures, the definition of the skills profilesrequired, and correspondent training programs, as well as budget requirements. The institutionalreorganization proposed by the audit was introduced by Government Decree in March 1998. The neworganization is however far too ambitious with regards to the mandates and staffing of the Directorate ofMining and Geology (DMG), and is beyond MMI's current human and financial resources. Duringappraisal, a new functional organization for DMG was agreed with MMI, focusing its service units on thethree main components of the proposed project - Mining, Geology, and Environment - and creating aMining Cadastre inside MMI, as a separate unit from DMG (Annex 11). The capacity building measuresrequired to meet the project's objectives have also been identified and agreed upon. The publication of aDecree establishing the new organization agreed during appraisal is a condition for negotiations.

The institutional reform agreed during appraisal will be implemented in the context of this project. Animportant aspect of the reform will be the introduction in the Cadastre of a principle of cost recovery forthe services performed to users. The Mining Cadastre will charge fee for the registry, and renovation ofmining licenses and will be financed through a rental surface fee to be paid by title holders in accordancewith the extension of the areas requested. These revenues from will be deposited on an existing specialaccount called "Contribution of the Mining Operators to the Promotion of Mineral Exploration inMauritania", managed by the Minister of Mines and audited by the Minister of Finance. The moneyavailable in the account will be allocated to: (i) the operation of the Mining Cadastre; (ii) the supervisionof mining operations and enforcement of the Mining Law, including from the environmental point ofview; (iii) the acquisition of new geoscientific data; and (iv) training and seminars. A financial simulationmade during appraisal concluded that the proposed organization could be financed out of the cadastralfees resulting from 50% of the current area covered by mining pertnits. It should be noted that theGeological Service could be at least partially funded from the sale of geological data (on a cost-recoveryplus small margin basis).

3. Benefits and target population:

Benefits:The following benefits are expected:

(i) induced by the project: (a) Increased foreign and local direct investment in mining and increasedexport revenues; (b) development of capacity in private services to the mining industry, such asexploration and drilling services, environmental impact studies, laboratories, mining construction worksand earth removal, maintenance and others; (c) development of infrastructure related to mining and with aregional development impact (e.g. roads, energy); (d) increased income-generating opportunities inremote areas, increased education opportunities and reduced migration outflow; (e) contribution to abetter regional distribution of productive activities; and (f) sustainable development and fair distributionof benefits to local communities located around mining areas;

(ii) as a direct result of the project: (a) establishment of a modem, consistent and homogeneous mininglegal and regulatory framework; (b) better understanding of how Government, private sector,communities and donors can work together dealing with foreign investors, and the contract negotiationsprocess; (c) improved efficiency in MMI's mining agencies (e.g. faster and non-discretionaryadministration of mining rights and improved understanding of issues involved in managing such rights),and improved enforcement capacity of environmental, health and safety regulations; (d) improvedsecurity of tenure for mining rights through non-discretionary procedures and accurate geological locationof concessions; (e) improved knowledge of existing environmental and socio-economic conditions, as abasis for improved management and participation of local communities; (f) protection of the environmentfrom potential damage caused by mining and a better grasp of how to design future environmentalprotection measures in the sector; and (g) generation of baseline regional information that can be used byall sectors (e.g. water resources).

Target Populations and Sectors:- Private foreign and local mining investors;- National and provincial mining authorities; and- Local communities in mining districts.

4. Institutional and implementation arrangements:

Project implementation period: The Project would be implemented over a period of 5 years. The Projectcompletion date would be June 30, 2004 and the Credit closing date would be December 31, 2004.

Executing agency: The Ministry of Mines and Industry (MMI) would be responsible for theimplementation of the project.

1

Implementing agency: The Ministry of Mines and Industry, through an officially designated coordinator,will be responsible for the overall implementation of the project. MMI's line units will be establishedand/or strengthened to include a Mining Cadastre and Registry unit, an Environmental Affairs Unit and aMinerals Information System (MIS).

Project Administration: MMI will maintain and strengthen a Mining Project Coordination Unit (UCPM)to (i) coordinate project implementation, and (ii) manage (a) procurement - including all contracting forworks and purchases - and the hiring of consultants, (b) project monitoring, reporting and evaluation, (c)the contractual relationship with IDA, and (d) financial record keeping, the Special Account anddisbursements. The establishment of the UCPM is a condition of negotiations.

Accounting, financial reporting and audits: The UCPM will include a financial management expert tomaintain accounts and process payments, and monitor compliance with accounting, financial reporting,and auditing requirements. Terms of reference for the selection of a private accounting firm hired to setup the project financial and accounting system according to international standards have been prepared bythe Region's Financial Management expert to ensure adequate attention to financial management issues.The financial and accounting system for the proposed Project will be based on the one developed for thePrivate Sector Development and Capacity Building Project. During appraisal, the financial managementspecialist has identified weaknesses in the proposed financial system, and no-objection was given toselected firm. The Financial Management expert will certify UCPM's accountant and the proposedfinancial and accounting system before credit effectiveness. The review witl cover: (i) the project's chartof accounts and linkages to activities; (ii) selection of disbursement categories; (iii) ability to distinguishbetween sources of funds (IDA, Government, other donors); (iv) accounting standards; (v) reportingformats; (vi) recording of measurable outputs, and integration of accounting and budget information; (vii)contract management data; (viii) the budgetary process (preparation and monitoring); and (ix) internalcontrol arrangements (segregation of duties, documented procedures for purchase and expenseauthorizations). A summary financial report would be included in the quarterly progress reports. ProjectAccounts, the Special Account and all procurement, including Statements of Expenditure, would beaudited annually by independent auditors satisfactory to IDA and appointed for three years. Audit reportswould be submitted to IDA not later than six months after the end of each calendar year. The selection ofexternal auditors represents an effectiveness condition.

Project preparation ensured that the accounting system including the chart of accounts would be incompliance with LACI by Mid-Term Review. Specifically, this implies that it would be: (a) configuredand capable of preparing monthly/quarterly/semestrial and annual financial reports (including, a Sourcesand Application of Funds statement and a balance sheet, if deemed appropriate); and (b) able to producethe following quarterly reports/statements: (i) summary of Sources and Uses of Funds; (ii) ContractExpenditure Report- Goods and Works; (iii) Contract Expenditure Report- Consultants; (iv) ProcurementManagement Report- Goods and Works, and (v) Procurement Management Report- Consultants.

Monitoring and Evaluation. Not later than 45 days after each quarter, the UCPM will submit to the IDAquarterly progress reports covering all project activities, including procurement, and a financial summaryreport. A Mid-Term Review, 30 months after effectiveness, would provide detailed analysis ofimplementation progress towards development objectives, including performance to date on selectedindicators of project benefits (see 3-i and 3-ii above). Baseline data on these indicators will be gatheredprior to this mid-term review and used in the assessment. During the Mid-Term review, the mission willassess and review the project's financial management system and determine if the system is incompliance with LACI.

D: Project Rationale

1. Project alternatives considered and reasons for rejection:

When considering the most appropriate instrument to facilitate institutional capacity building toMauritania's public mining institutions, two main alternatives were examined: a Technical AssistanceCredit, and a Learning and Innovation Loan (LIL).

The proposed project would meet the criteria for LILs in two main aspects: (a) it includes work to developan understanding of and capacity to address social impacts of mining - for which solutions and examplesof good practice are not readily available elsewhere; and (b) it contains pilot projects for environmentalmanagement and social assessment which if successful are replicable. Given the country's limited abilityto absorb substantial amounts of money to finance sector reforms, the LIL would lay the foundation for afollow-up TA to broaden and deepen the reform effort once it is demonstrated that the first round ofreform is successfully absorbed.

This alternative was rejected because the proposed project will help to implement reforms that wereoriginally conceived under the Private Sector Development and Capacity Building Project, whichGovernment is now ready to implement. It includes institutional strengthening (for both mining andenvironmental functions of Government) to assist the institutions to cope with an anticipated largeprogram of exploration and development by private mining investors. Because foreign investment will notmaterialize unless MMI is able to efficiently administer and manage the sector, a strategic decision wastaken to use an integrated approach to sector reform while, at the same time, supporting the preparation ofpilot projects in selected areas, like environmental baseline studies and audits, and assessment of socialimpact of mining projects and participatory approaches.

Experience in other countries of the region like Mali, Burkina Faso and Guinea suggests that a single TAoperation can be an effective way to implement lasting mining sector reform. The reform agenda is quitecomprehensive and ambitious, considering the current state of the public mining institutions inMauritania. Mining could be a pioneer sector for further foreign investment in the country, and lessonslearned during the negotiating of contracts and in the process of creating an enabling environment forforeign investment could later serve as a catalyst for other sectors such as tourism and fisheries.

2. Major related projects financed by the Bank and/or other development agencies (completed, ongoingand planned):

Sector issue Project Latest Supervision (Form 590)Ratings

(Bank-financed projects only)Implementation Development

Progress (IP) Objective(DO)

Bank-financedCapacity building for Government Private Sector S SInstitutions and promotion of private Development andsector development Capacity Building Project

(Credit 2730-MAU)

Other development agencies

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Lessons have been learned from the ongoing activities being carried out under the PSDCB, as well asfrom other countries where the Bank has financed similar capacity building operations (e.g. Mali, BurkinaFaso, Guinea, Ghana, and Tanzania) and from a recent Bank review on mining sector reform in LatinAmerica (A Mining Strategy for Latin America and the Caribbean, 1996).

Experience in other countries indicates that improving the enabling environment increases the ability of acountry to attract and retain appropriate private investment. For instance, Ghana in the late 1980sundertook significant reforms, supported by the Bank and other donors, to improve the enablingenvironment for private sector investment in mining. The result has been a four-fold increase in goldproduction, a mining investment climate that is consistently ranked among the best in the world byinvestors, and the privatization of state-owned mining enterprises. Experience with establishing capacityfor environmental management in other countries, namely Latin America, indicates that the centralagency mandated with environmental responsibility needs to adopt an integrated approach and establishclose linkages with sector agencies in implementing environmental policies and regulations.

Experience in Mauritania with capacity building, for instance, the Private Sector Development andCapacity Building Project, suggests that emphasis on beneficiary participation in project preparation,intensive supervision, organization and coordination in the field are critical for timely and effectiveimplementation. Ownership and political commitment to project objectives are key to ensuring stronglocal leadership, availability of counterpart funds, and clear delineation of ministerial authority andresponsibilities.

4. Indications of borrower commitment and ownership:

Commitment of the Borrower is shown by the effort put into the preparation of a new Mining Code (withBank's assistance, under the Private Sector Development and Capacity Building Project), and on thepreparation of a mining session during the last Consultative Group Meeting in Paris.

Ownership: the Borrower took initiative in requesting the preparation of a stand-alone operation formining. Government ownership is indicated by the seriousness of its participation in the preparation ofthe project so far, including the realization of several workshops dealing with in-depth analysis of sectorreforms to be supported by the project.

5. Value added of Bank support in this project:

The Bank has been the leading provider of assistance to mining sector reform in African and LatinAmerican countries during the last decade and in this capacity has contributed to the present mining"boom" in both continents. Since 1992, Mauritania is making good use of the Bank's experience in sectorreform, particularly with respect to sector policy and modernization of its institutional and legalframeworks. Given its experience and established presence in the country, Bank involvement wouldfacilitate the implementation of the project in a timely and efficient manner and ensure that theGovernment maintains its focus on the objectives of the project. Bank involvement will also be catalyticin attracting additional funds and support from bilateral donors particularly for the implementation of thesocial mitigation measures, and in providing the environment for encouraging private sector investment.

E: Summary Project Analysis

1. Economic (supported by Annex 4):

[ ] Cost-Benefit Analysis: NPV=US$ million; ERR= % [ Cost Effectiveness Analysis:[X] Other:The Project is a capacity building operation and, as such, does not lend itself easily to quantitativeinvestment analysis. However, a number of economic indicators can be projected and compared, such asvalue of mineral exports, fiscal revenues coming from the sector, and amount of investments. The valueof iron ore production is about $216 million or almost 20 percent of Mauritania's 1997 GNP of US$1.1

billion. Mauritania's total exports in 1997 were about US$ 500 million, of which 40 percentcorresponded to a single mineral export. Most of the foreseeable expansion is in base and precious metals,as well as diamonds, and the majority of this production will be exported and generate foreign exchange.Mining investments other than SNIM are limited to exploration and estimated to average $10 million ayear in recent years. To test the robustness of the possible contribution of mining to the economy, twoscenarios (low and high case) have been constructed. The results of this analysis, projected to the year2005 and 2010 are:

Scenario Gross Production Gross Export Value Average AnnualValue Investment

1997 216 216 1 Low 2005 300 300 50Low 2010 340 310 50High 2005 385 380 120High 2010 440 430 150

2. Financial (see Annex 5): NPV=US$ million; FRR= %

Fiscal impact:

SNIM benefits from a special regime that limits its contribution to the budget to 10% of sales. The miningcode recently approved by the Council of Ministers introduces a fiscal regime for mining consistent withwhat is considered international good practice. The new law does not contemplate investment agreementsfor the large-scale project providing for rather generous tax exemptions and fiscal holidays. The impact ofthe additional production (outside SNIM) on fiscal revenue can be estimated to be in the range of US$5 to10 million per year, depending on the scenario.

3. Technical:

The project will establish an enabling institutional and regulatory environment to help attract and sustainmining investment. Expert technical assistance will help the Government to avoid mistakes in dealingwith private companies which could result in forgone revenues. The project will help strengthen taxassessment and collection procedures for statutory royalties, license fees, income, dividend, and otherdirect and indirect taxes. The project will also help put into place environmental regulations, procedures,and monitoring capacity to minimize damage to the environment from mining operations.

4. Institutional:

a. Executing agencies: The experience and implementation capacity of the sector unit is limited. Thereis a major need for capacity building at all levels, including project management. The institutional auditconducted under the Private Sector Development and Capacity Building Project identified a majorcapacity problem in terms of human resources to implement the planned reform and technical programs.As a consequence, the project design has incorporated a substantial provision for the hiring of externalconsultants (national) which will be in charge of the implementation of specific sub-components. Theproject cost estimate includes a budget for incremental operating costs in order to fund these expenses.

The institutional assessment of the project will be monitored through intermediate output indicators andimpact indicators. Intermediate output indicators are designed to track the implementation and theexpected outcomes of the project, and have to be assessed during the lifetime of the project. Impactindicators are designed to assess the achievement of the final objectives of the project, and theirassessment should be carried out after the closure of the operation.

The accomplishment of the final objectives will imply the achievement of a number of intermediateoutputs and conditions, including:* Number of months required to make the Mining Cadastre operational.

* Number of months required to make the MMI's Environmental Unit operational.* Average number of days required for granting a mining title.* Backlog and number of complains of the mining Cadastre.* Number of maps published.* Number of consultations to the MIS system.* Number of Environmental Impact Assessment appraised.* Number of pilot baseline studies prepared.

Impact indicators will refer to:* Increase in the number of private operators involved in the different stages of the mining cycle.* Increase in average annual investments in mining.* Increase in average annual minerals exports.* Increase fiscal revenues from mining.

b. Project management: The experience and implementation capacity of the sector unit derives from thefact that the Coordinator of the Project's Implementation Unit (UCPM) was previously the coordinator ofthe mining component of the Private Sector Development and Capacity Building Project. The UCPM willbe created as an extension of this work, which is being performed in a satisfactory manner. The UCPMwill be strengthened in terms of personnel, to respond to the increased volume of work. It will manageprocurement and supervision of works and consulting services.

5. Social:

Traditionally, assessment of the economic impact of a mining project has been at the level of the nationaleconomy, in terms of fiscal revenues, export earnings, GDP, gross capital investment, value added, andother parameters. These impacts can be measured using well-developed statistical and other techniques.However, the socio-cultural impacts of mining on local communities are receiving growing attention, andthe parameters, methodologies, and techniques used to assess these impacts are only now beingdeveloped, in contrast to macro-economic impact assessment. Fundamentally, social assessments involveidentifying for each group of stakeholders the balance of positive and negative impacts, devising numericor other objective indicators, and recommending measures to maximize positive outcomes and attenuatenegative effects. Experience has shown that consultation and involvement of local communities in theseassessments is critical and forms the basis for subsequent action programs. However, assessment of theimpacts and involvement of the local community in the consultation process is still at an early stage, dueprincipally to lack of familiarity with the techniques and practices of social assessment as well as aninadequate institutional and regulatory framework to provide for such assessments.

6. Environmental assessment: Environmental Category [ ] A [ ] B [X] C

The project is a capacity building operation that will not involve direct investment in mining activities. Itshould, therefore, be classified as category "C". The project is expected to have a positive impact on theenvironment by building capacity in the country for environmental management at the national level andwithin the mining sector. A comprehensive Sector Environmental Assessment (SEA) will be carried outas part of the project, including the: (i) review of the present status of the environmental legal, regulatoryand institutional frameworks; (ii) evolution of the mining sector, including a description of most of themining projects in operation or under development; (iii) potential physical and socio-economic impacts ofsector activities on the environment and on the communities, including indigenous populations; (iv)preparation of environmental baseline studies, to assess natural, social and sector background data inselected areas of each of the participating Provinces; (v) preparation of pilot socio-economic baselinestudies aiming at the definition and implementation of consultation procedures, training requirements andprograms, ad hoc institutional strengthening and other related measures.

7. Participatory approach [key stakeholders, how involved, and what they have influenced; ifparticipatory approach not used, describe why not applicable]:

a. Primary beneficiaries and other affected groups:

The Federation of Industrial and Mining Companies as well as all mining companies active in Mauritaniahave been consulted and are active members of fora and committees set up under the Private SectorDevelopment and Capacity Building Project to reflect on the future orientations of mining policy. Theimplementation of the PHRD grant being used for project preparation will allow to bring on board NGO'sand affected communities.

b. Other key stakeholders.

F: Sustainability and Risks

1. Sustainability:

Mauritania has good geological potential as is evidenced by the interest major intemational miningcompanies are showing in the country. However, the Government will encounter difficulty in sustainingthis interest and in ensuring the maximum contribution to economic development unless the majorreforms which have already begun are completed and deepened. If proper regulations and enforcementmechanisms as well as a competitive environment are put into place, minerals exploration anddevelopment of mines will become self-sustaining to provide a continual revenue stream and othereconomic benefits to the country. In addition, the project will attempt to implement a full cost-recoverysystem in the Mining Cadastre, and partial recovery at the Minerals Information System and theGeophysic Airborne Survey. Sustainability will be enhanced through the project's strong emphasis oninstitution building, training, human capital development and environmental awareness in the public aswell as private sectors.

2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):

Risk Risk Rating Risk Minimization Measure

Annex 1, cell "from Outputs to Objective"

Government continued commitment to sector reform M Government's program for mining sectorreform is on schedule and was confirmedand reinforced during the ConsultativeGroup meeting.

Condensed timing to build-up capacity to manage M Preparatory work funded by PHRD grant.cadastral data by Mining Cadastre Office Institutional strengthening will be phased

and prioritizedReasonably stable world minerals market conditions M Although the general trend in mineraland prices prices will continue to be flat or down over

the long term, it is expected that as a resultof the project potential investors will findpromising targets that will allow them toposition themselves favorably in the nextminerals investment cycle.

Commitment to honor the provisions of the new M Stability clauses in the new code,Mining Code international arbitrage, guarantees and

insurance.Continued staff ownership regarding project M Provision of necessary staff, resources andobjectives conditions to effectively implement the

reform to be defined by InstitutionalAudit.

Political interference M Project implementation guidelines to beincluded in the General Agreement willaim at minimizing political interference.

Overall Risk Rating M I

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects:

None.

G: Main Credit Conditions

1. Effectiveness Conditions:

A. Ensure that the following three positions at UCPM are staffed by suitably qualified andexperienced personnel, satisfactory to the Association, namely: (i) the project coordinator; (ii) theprocurement specialist; and (iii) the accountant and financial analyst.

B. Opening of an account in UM in a commercial bank in Mauritania acceptable to the Association(the Project Account), and deposit into the Project Account an initial amount equivalent to $50,000, tofinance the Borrower's contribution for expenditures under the Project not financed out of the proceeds ofthe Credit;

C. Establishment of an appropriate financial management system, certified by the Region's FinancialManagement expert, and selection of external auditors for the project acceptable to the Association.

2. Other: Implementation Program

A. Implementation of the Project in accordance with the procedures, guidelines, timetables andcriteria set forth in the Project Implementation Manual adopted by the Ministry of Mines and Industry.

B. Project Monitoring and evaluation: The Borrower shall: (a) maintain policies and proceduresadequate to enable it to monitor and evaluate on an ongoing basis the carrying out of the Project and theachievement of its objectives; (b) prepare, under terms of reference satisfactory to the Association, andfurnish to the Association, during the twelfth month following Effectiveness, or such later date as theborrower and the Association shall agree upon, and thereafter in regular intervals of twelve months untilthe completion of the Project, a report integrating the results of the monitoring and evaluation activitiesperformed pursuant to paragraph (A) above, on the progress achieved in the carrying out of the Projectduring the period preceding the date of said report and setting out the measures recommended to ensurethe efficient carrying out of the Project and the achievement of the objectives thereof during the periodfollowing such date; and (c) review in a meeting with the Association, 45 days following the submissionof the report referred to in subparagraph (b) of this paragraph, or such later date as the Association shallrequest, said report, and, thereafter, take all measures required to ensure the efficient completion of theProject and the achievement of the objectives thereof, based on the conclusions and recommendations ofthe said report and the Association views on the matter.

C. Mid-term review: UCPM will include in the report for the third review meeting referred to inparagraph B (c), to be referred to as midterm review, in addition to the information furnished as set forthin subparagraph B (b), a detailed description of progress made towards: (i) the increase of foreigninvestments in the mining sector; (ii) the increase of fiscal revenues from the mining sector; (iii) theimplementation of environmental protection activities; (iv) the performance of the mining title registrationsystem; and (v) the quality and timeliness of the reports furnished.

D. Environmental studies: The Borrower shall: (a) by April 30, 2002, carry out the studies plannedin the Project; (b) promptly upon completion of the said studies, submit their results to the Association forits review and comments; (c) take into account the comments and recommendations made by theAssociation; and (d) implement the recommendations of the said studies, as agreed and in accordancewith the timetable agreed upon with the Association.

E. Financial Covenants : (a) the Borrower shall maintain or cause to be maintained records andaccounts adequate to reflect in accordance with sound accounting practices the operations, resources andexpenditures in respect of the Project of the departments or agencies of the Borrower responsible forcarrying out the Project; (b) the Borrower shall: (i) have the records and accounts referred above,including those for the Special Account for each fiscal year audited, in accordance with appropriateauditing principles consistently applied, by independent auditors acceptable to the Association; (ii)furnish to the Association as soon as available, but in any case not later than six months after the end ofeach such year, the report of such audit by said auditors, of such scope and in such detail as theAssociation shall have reasonably requested; and (iii) furnish to the Association such other informationconcerning said records and accounts and the audit thereof as the Association shall from time to timereasonably request; (c) For all expenditures with respect to which withdrawals from the Credit Accountwere made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to bemaintained, in accordance with paragraph (a) of this Section, records and accounts reflecting suchexpenditures; (ii) retain, until at least one year after the Association has received the audit report for thefiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders,invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association'srepresentatives to examine such records; and (iv) ensure that such records and accounts are included inthe annual audit referred to in paragraph (b) of this Section and that the report of such audit contains aseparate opinion by said auditors as to whether the statements of expenditure submitted during such fiscalyear, together with the procedures and internal controls involved in their preparation, can be relied uponto support the related withdrawals.

F. Financial management system and the LACI Initiative: The Borrower shall carry out a time-bound action plan acceptable to the Association designed to: (a) strengthen its financial managementsystem for the Project; and (b) develop, not later than thirty months following the Effective Date, or suchlater date as the Association shall agree, a system acceptable to the Association for the preparation ofquarterly Project Management Reports, each of which: (i) sets forth actual sources and applications offunds for the Project, both cumulatively and for the period covered by said report, and projected sourcesand applications of funds for the Project for the six-month period following the period covered by saidreport; (ii) describes physical progress in Project implementation, both cumulatively and for the periodcovered by said report, and explains variances between the actual and previously forecast implementationtargets; and (iii) sets forth the status of procurement under the Project and expenditures under contractsfinanced out of the proceeds of the Credit, as at the end of the period covered by said report. Upon thecompletion of the action plan referred above, the Borrower shall prepare, in accordance with guidelinesacceptable to the Association, and furnish to the Association, not later than 45 days after the end of eachcalendar quarter, a Project Management Report for such period.

G. Plan for the future administration of the sector: The Borrower shall prepare, on the basis ofguidelines acceptable to the Association and furnish to the Association not later than six (6) months afterthe Closing Date or such later date as may be agreed for this purpose between the Borrower and theAssociation, a plan for the future administration of the Borrower's mining sector; and afford theAssociation a reasonable opportunity to exchange views with the Borrower on said plan.

H. Readiness for Implementation[ ] The engineering design documents for the first year's activities are complete and ready for the start ofproject implementation. [X] Not applicable.[X] The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.[X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.[X] The following items are lacking and are discussed under Credit conditions (Section G):Accounting Procedures Manual for the financial management of the project.

I. Compliance with Bank Policies[X] This project complies with all applicable Bank policies.[ ] [The following exceptions to Bank policies are recommended for approval: . The project

complies with all other applicable Bank policies.]

[signature]Task Team Leader/Task Manar: Paulo de Sa

[signature]Sector Manager/Director: Pete V een

[signature]Country Manager/Director: Hasan Tuluy

Annex 1

Project Design Summary

Mauritania: Mining Sector Capacity Building Sector

Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions

Sector-related CAS Goal: (Goal to Bank Mission)I. Broad-based growth led by - Approval of at least one mining Midterm evaluation, Continued neutralprivate, foreign investment investment by a foreign investor. Implementation Completion macroeconomic and sector2. Improve the performance and - No backlog of unprocessed Report (ICR) and continued policy environmentinstitutional capacity of concession applications monitoring; statistical dataGovernment to deliver key social, - Systematic application of EIAand environmental servicesProject Development Objective: (Objective to Goal)1. Encourage Private Investment in - Increase average annual - Midterm evaluation and ICR - Stable, long-term politicallyMining investments in mining - Statistical data. neutral macroeconomic and

- Increase average annual minerals - Continued monitoring by MMI. sector policy environment2. Increase Fiscal Revenues exports - Baseline and monitoring reports. - Reasonably stable world

- Increase fiscal revenues from - Continued monitoring by MMI's minerals market3. Develop Environmental and mining Environmental Group. conditions/pricesSocial Management for Mining - Define procedures for EIA for - Environmental control

mining. procedures are enforceable and4. Improve Capacity of - Systematic application of community consultativeGovernment Institutions consultative processes processes are applicable.

- Improve geological mappingcoverage of the country

Outputs: (Outputs to Objective)1. Government institutions in - Environmental monitoring - Midterm evaluation and ICR - Continued commitment tocapacity to provide timely, reliable system operational 36 months AE. - Quarterly and annual technical reformand transparent administrative - Baseline data in selected areas performance reviews - Timing to build-up Miningservices to the sector. available 36 months AE. - Baseline studies reports Cadastre Office's capacity to2. Establishment of a modern, - Cadastral management system - Mining Cadastre data base. manage cadastral dataupdated and accurate Mining operational 24 months AE. - Annual social assessment reports. according to schedule.Cadastre. - Pilot baseline studies available - Commitment to honor the3. Improved social awareness, 36 months AE. provisions of the new Miningconditions for consultative - Consultative procedures Code.processes and community implemented at end of project. - Reasonably stable worldparticipation in new mining - MIS in place 24 months AE. minerals marketprojects. conditions/prices4. Minerals Information System(MIS)

Project Components/Sub- Inputs: (budget for each (Components to Outputs)components: (see Annex 2 for component)project description)I. Capacity Building, including 1. Capacity Building: US$2.55 Contracts, procurement records, - Line staff continued1. 1. Institutional Reform: million monitoring reports, technical and environmental/social awarenesImplementation of the new 1.1. Institutional Reform: US$2.12 training performance evaluation related to mininginstitutional model: staffing, million reports, manuals, maps. - Continued commitment toorganization, procedures, financial reformresources; equipment and works: Quarterly and annual reports, - Staff stabilityupgrading of facilities; seminars, contracts and procurement records, - Continued project ownershippromotional publications. financial reports and audits. - No political interference

- Satisfactory performance by1.2. Mining Cadastre and contracted consultants.Registry System: equipment, 1.2. Mining Cadastre and Registryupgrading of facilities; System: US$ 0.43 millionimplementation of the Cadastre.

2. Geologic Infrastructure, Contracts, procurement records,including: 2. Geologic Infrastructure: US$ monitoring reports, technical and2.1. Geological Mapping: 10.45 million training performance evaluation - Line staff continuedpreparation of a complete 2.1. Geological Mapping/MIS: reports, manuals, maps. environmental/social awarenes

coverage of the country with US$6.50 million related to miningdigitalized maps, and setting up of Quarterly and annual reports, - Continued commitment toMinerals Information System: contracts and procurement records, reformupgrading of the information financial reports and audits. - Staff stabilitysystem; upgrading of facilities; - Continued project ownershiptraining; and documentation. -No political interference2.2. Geophysic Airborne Survey: - Satisfactory performance byaeromagnetic and radiometric contracted consultants.survey of two of the most 2.2. Geophysic Airborne Survey:promising mineral provinces of US$2.85 millionMauritania, over an area of200,000 km2, in preparation forgeological mapping.2.3. Supervision and publicationof maps: contract supervision;printing of maps.

2.3. Supervision/Publication: US$3. Environmental Management 1.10 million Contracts, procurement records,System-EMS/ Environmental monitoring reports, technical andControl and Assessment, including training performance evaluationenvironmental and socio-economic 3. Environmental Management reports, manuals, maps.baseline studies, development of System-EMS: US$1.50 million -Line staff continuedconsultative procedures and Quarterly and annual reports, environmental/social awarenesassessment criteria, environmental contracts and procurement records, related to miningmanagement capacity building and financial reports and audits. - Continued commitment totraining; reformand implementation of the EMS. - Staff stability

- Continued project ownership4. Project Coordination, Contracts, procurement records, -No political interferenceMonitoring and Evaluation monitoring reports, technical and - Satisfactory performance by- Hire and supervise staff training performance evaluation contracted consultants.- Manage procurement reports, manuals, maps.- Contract accounting and auditing- Prepare quarterly and annual 4. Project Coordination: US$1.00 Quarterly and annual reports,reports and annual operation plans million contracts and procurement records, - Line staff continued- Monitor progress and evaluate financial reports and audits. environmentaUsocial awarenesresults. related to mining

- Continued commitment toreform- Staff stability- Continued project ownership- No political interference- Satisfactory performance bycontracted consultants.

AE = after effectiveness

Annex 2

Mining Sector Capacity Building ProjectProject Description

Project Component 1 - Capacity Building of MMI's mining agencies - US$ 2.55 million(16.5% of total Project costs).

The broad capacity building program was designed in the context of an institutional audit carriedout under the Private sector Development and Capacity Building project, as part of the policy toreduce the role of the State and to adapt MMI to better-defined functions, eliminating widespreadoverlapping of functions and modemizing its capacity to administer the sector. Therecommendations of the audit were reviewed during appraisal and resulted in a new organizationwhere the mandates of the institutions have been redefined to take into account the clarification ofthe respective roles of such agencies, of the private sector, and their inter-relationships. Theinstitutional model and a detailed action program, also reviewed during appraisal, will beimplemented under the proposed Project. Two sub-components are included:

1.1. Institutional Reform - US$2.12 million (13.7% of totalTProject costs). This program aims atspecifically adjusting the institutional model defined under the Private Sector Development andCapacity Building project, as reviewed during appraisal, to take into account sector reform andthe skills required for a smooth implementation of the project. The new organization will beimplemented through a participative process (workshops and seminars) and on-the-job training.Work will include the detailed and ad hoc design of the institutional model, includingorganization, staffing, budget and identification of long-term financial sources for coreresponsibilities; the setting up and implementation of efficient work procedures; and on-the-jobtraining of staff in policy, legal and management matters; participation in Seminars abroad andorganization of seminars and roundtables; in the country; and preparation of promotional materialon the mining sector in Mauritania. Provisions include the financing of international and localconsultants, of incremental operating costs related to travels and to training, of officerehabilitation, of purchase of basic core office equipment, of vehicles and of legal and technicalliterature, and of publication of information and legal and administrative procedures.

1.2. Mining Cadastre and Registry System - US$0.43 million (2.8% of total Project costs). Apriority objective of the Government's mining sector policy is to establish a well-informed, andinteractive cadastral system. Based on the audit carried out under Private sector Development andCapacity Building project, the proposed Project will finance the creation of a proper miningcadastre as an autonomous institution under the Ministry of Mines. The cadastre will providereliable information about the precise location of mining rights in the territory. The proceduresrequired in order to apply the cadastre process will be transparent, public, of general applicationand non-discretionary. In addition, the cadastre will cover both the mining rights requested andgranted after it becomes effective, and already existing ones as well as the ones that have beensimply requested. Hence the cadastral procedure will have stages, instances and resources toallow owners of acquired mining rights to adequately defend their rights in accordance with theprovisions of the Mining Code. Older rights which are not inserted into the new cadastre must belegally canceled in order for the information resulting from the cadastre to be correct and usefulin practice. Work under the sub-component includes the purchase of modem hardware andsoftware, vehicles, the provision of adequate facilities for the cadastre and registry functions, the

implementation of the computerized Mining Cadastre System, and on-the-job and externaltraining.

Project Component 2 - Upgrade of Geologic Infrastructure - US$ 10.45 million (67.4% oftotal Project costs)

2. 1. Geological Mapping of MauritanialMinerals Information System - US$6.5 million (41.9% oftotal Project costs). The main goal of this sub-component is to provide the basic and reliablegeological information necessary to attract investments and plan sectoral and cross-sectoralactivities. In order to achieve this goal, the sub-component would support the systematicgeological mapping of previously unmapped or inadequately mapped areas, and publishprofessional quality packages of new as well as existing, but previously unavailable, data andmaps. It would strengthen and modernize MMI's geological map production through thedevelopment of remote sensing data processing and digitalized map processing and editingcapacity, and train geologists on-the-job in dynamic and modern field mapping and mapproduction techniques. The sub-component would also support the creation at the DMG of anintegrated information data bank, the Minerals Information System (MIS), which wouldsystematize the collection and interpretation of sector information into a data base, making use ofstate of the art technology to gather, store and provide the information to interested parties in atimely fashion. The work would aim at the digitized production and publishing of maps coveringthe entire territory at the 1:500,000 scale, plus about fifteen 1:200,000 scale maps, covering thepromising but remote Northern area of Mauritania, and another 15 covering priority areas in therest of the country, representing about 35% of the total area. The bulk of the work will be carriedout by MMI's permanent staff, under the guidance of international consultants and the support ofspecialized national consultants. This sub-component includes the following activites: (i)financing of international and local consultants, installation of the LAN and connection toInternet, communications fees; (ii) provision of equipment and software, including, i.a., hardwareand software specifically dedicated to data treatment and map processing equipment,communications devices and accessories; (iii) some rehabilitation work, in particular networkcabling and connections, up-grading of electrical supply and computer security in governmentoffices will be provided; (iv) purchase of geological documentation and data and satellite images;and (v) a training program focused on information, data bases and network management, and onthe implementation and use of the MIS. Specific on-the-job training is also included. The Projectwill finance incremental operating costs and subscriptions to various local and provincialelectronic databases, and Internet.

2.2. Geophysics Airborne Survey - US$2.85 million (18.4% of total Project costs). Moreinformation than basic geology is required to develop a specific data base for use by the privatemining enterprises. The objective of the Geophysics Airborne Survey is to efficiently furnishessential geological information of public domain to private investors. This is an importantservice customarily maintained by the responsible Government agencies in most countries, toallow them to keep a register of the country's mineral resources and to attend the needs of theprivate sector. There is ample evidence that mining investors prefer to work in countries with welldeveloped geological data systems than in countries with poor geological data. The Bank hasbeen supporting the acquisition of geological and mining data in other countries , includingArgentina, Bolivia, Ecuador, Guinea and Tanzania. The specific objective of the sub-componentwould be to support the mineral resource assessment of regions where mining potential is deemedto be high, bur poorly defined. In view of the high costs of such surveys, several alternatives havebeen considered, including reduction of the geographical area to be covered, the density of thedata and the scope of the field work. This activity would provide valuable information for thegeological mapping component (with which resources such as satellite images, remote sensing

processing and digitalization and interpretation facilities would be shared), although the later canbe executed separately. The sub-component would provide about 200,000 line-km of airbornesunrey (magnometry and radiometry) over the Northern area.

2.3. Sub-component supervision and publication of maps - US$1.10 million (7.1 % of totalProject costs). This sub-component includes the following activities: (i) financing of internationalconsultants, for the supervision and the integration of the two previous sub-components; (ii)processing, and printing of the geological maps produced on digital form under sub-component2.1.

Project Component 3 - Environment Management System (EMS) - US$ 1.5 million (9.7%of total project cost)

The general objective of this Component is to set up a preventive environmental protectionsystem for mining activities. This system should bring together the mining administration unitwith other public and private environment entities, namely the Ministry of Rural Developmentand the Environment. The Component will: (i) carry out pilot environmental baseline studies andsocio-economic baseline studies over selected areas as a basis for development of methodologyand capacity to assess and monitor social, cultural and economic impacts of mining on localcommunities, and develop consultation and participatory procedures; (ii) support the creation andstrengthen the capacity of an Environment Unit at DMG for the monitoring and enforcement ofenvironmental regulations, and the setting up of procedures for the processing of EnvironmentalImpact Statements in mining; and (iii) develop a data basis for the Environmental ManagementSystem (EMS). It includes: training of staff in environmental and socio-economic managementrelated to mining; provision of infrastructure, field and data processing (hardware and software)equipment. Major activities are as follows:

(i) Environmental Baseline Studies and Assessment of Socio-Economic Impacts of MiningInvestments: Baseline studies will be carried out to obtain comprehensive information regardingthe existing natural and social conditions of a given area, while assessing, at the same time, thelikely socio-economic impacts of potential mining developments on the local community. ThisProgram will: (i) provide the specific information and data for the formulation, establishment andadaptation of realistic environmental norms and standards, and to support decision-makingregarding the location of infrastructure, mining and processing facilities; (ii) developmultidisciplinary research methodologies to be applied in environmental analysis; (iii) strengthenthe research capacity and human resources in environmental issues related to mining activities;and (iv) develop methodologies for the assessment of the socio-economic impacts of mining onthe local community, through the development of participatory approaches. Work will makeselective use of existing data from available sources, through field and source compilation,revision, update, and comprehensive interpretation of such data. Such work will include, i.a., (i)the study and determination of water resources: watershed areas, rain statistics, resourcemodeling, and water sampling and analysis (results will also be documented in and be compatiblewith Geographical Information System (GIS) being strengthened in the MIS); (ii) evaluation ofthe areas' environmental vulnerability; and (iii), determination of mining impacts regardingexisting or past operations; (iv) identification of the likely social, cultural, macro and microeconomic, financial, fiscal, and other impacts of mining; (v) identification of main groups of localand regional stakeholders in the development of a mining project; (vi) selection of statistical andother performance indicators to objectively assess the costs and benefits of the impacts for eachstakeholder; and (vii) evaluation and assessment of the key questions and issues to be addressed.These studies will serve as templates for subsequent work in other areas. A series of trainingprograms and seminars will be conducted locally, for public and private sector participants. This

training will focus on consultation procedures and continual monitoring and evaluation of socio-financing of international and local consultancy services contracts.

(ii) Creation of an Environmental Unit at DMG: This Program aims at supporting the creation andstrengthening of the capacity of a mining Environmental Unit at DMG as a coordinating unitresponsible for the development of an adequate and consistent environmental regulatory andmonitoring framework, in the context of the country's Environmental Charter. This Unit wouldalso deal with the supervision of the base line and socio-economic studies to be carried out underthe Project. Provisions include the financing of international and local consultants, administrativesupport, training and minor purchases of equipment (office equipment, hardware and software).

(iii) Environmental Management System data base: This Program is specifically directed at theimplementation of a mining environmental information system, a data base inter-related to thoseexisting in other line ministries to help administer environment licensing procedures as well ascompile and process base line and monitoring data . The subcomponent includes equipmentwhich will upgrade office facilities, and consultant services to implement the system and providetraining.

Project Component 4 - Project Implementation Unit (UCPM) - US$ 1.0 million (6.4% oftotal project cost)

The Project was prepared with the strongly committed support of the coordinating team of themining component of the Private Sector Development and Capacity Building which will bestrengthened and continue to operate throughout the implementation of the Mining SectorCapacity Building Project as the Project Implementation Unit (UCPM). The UCPM will link withMMI's line agencies, and during implementation will monitor, supervise and providemanagement control, by Components and Sub-components, and for the Project as a whole. TheUCPM will be strengthened accordingly, and will manage procurement - including all contractingworks and purchases - and the hiring of consultants, the contractual relationship with the Bankand the Project's overall administration and financial management - which includes accounting,reporting, managing the Project's Credit Account and its other funding. UCPM staff will attendBank training seminars. The UCPM will be responsible for preparing and submitting to the Bankquarterly reports dealing with Project implementation, and for contracting under Terms ofReference acceptable to the Bank, the yearly audits of the Project including the timely submissionof such audit reports to the Bank. The Project will finance the contracting within the UCPM of aGeneral Coordinator, a procurement expert, an accountant/financial expert, and administrativesupport staff. Funding is provided for the unit's operating costs, as well as some minor additionaloffice equipment.

Annex 3Mining Sector Capacity Building Project

Estimated Project Costs

Project Component Local Foreign Total-----------------US $ thousand--------------

1. Capacity Building of MMI's Mining Agencies 1250 1120 23701.1. Institutional Reform 1005 975 1980

Works 205 205Equipment and consumables 105 250 355Consultant services 360 280 640Training and seminars 205 445 650Incremental operating costs 130 130

1.2. Mining Cadastre 245 145 390Equipment and consumables 85 85Consultant Services 150 110 260Training and seminars 10 35 45

2. Geologic Infrastructure 0 9735 97352.1. Cartography / MIS 0 6060 6060

Consultant Services- Northern area 1860 1860Consultant Services - Southern area 4200 4200

2.2. Airborne Geophysics 0 2650 2650Works 2650 2650

2.3. Supervision and publication 0 1025 1025Consultant services 0 840 840Works (publication) 185 185

3. Environment Information System (EIS) 95 1300 1395Consultant Services 95 1300 1395

4. Mining Project Implementation Unit (UCPM) 800 130 930Works (rehabilitation) 45 0 75Equipment and consumables 55 85 140Consultant services 455 455Training and seminars 45 45Incremental operating costs 245 215

Total Baseline Costs 2145 12285 14430

Physical Contingencies 115 690 805Price Contingencies 225 265

Total Project Cost 2300 13200 15500

Annex 4Mining Sector Capacity Building ProjectCost Effectiveness Analysis Summary

Summary of benefits and costs:

Mining in Mauritania has consisted essentially of two main products, iron ore (for whichproduction started in 1961) and copper (1970). The gross value of minerals production inMauritania is extremely dependent on iron ore, exploited by the state-owned enterprise SNIM,that has traditionally accounted for one-third to one-half of the country's exports. Gold recoveryfrom the Akjoujt copper mine tailings was drawn to a close in 1996 as the tailings stockpile wasdepleted. Plans to restart mining of the deposit on a large-scale basis have been adversely affectedby the fall in metal prices. Gypsum and salt are also produced in the country. Other than iron oreand the Akjoujt copper/gold project, there are two major short-term exploration targets inMauritania: (i) gold, where principal activities by companies like Australia's General Gold andFrance's LaSource, have been focused on the Tassiast, Tijirit, and Inchiri regions; and (ii)diamonds, where Australia's Ashton Mining and Canada's Rex Diamonds have obtained severalpermits in the Tassiat and R'Gueibat shield. In addition, an increasing number of foreigncompanies have established or are considering to develop exploration programs in the countrywhich could result in the discovery of new major deposits.

Mauritania's total exports in 1997 were about US$ 500 million, of which more than 40%corresponded to iron ore exports (equivalent to US$216 million). Most of the foreseeableexpansion is in metallic minerals (gold and base metals) and diamonds, and the majority of thisproduction will be exported and generate foreign exchange. Average annual investments inmining outside SNIM are essentially limited to exploration, and can be estimated to have beenabout US$ 10 million in 1997. While investments in exploration have expanded considerably inrecent years, they are still well bellow what might be expected given Mauritania's mineralpotential. The project will establish an enabling institutional and regulatory environment to helpattract and sustain mining investment and increase exports. It will help to position Mauritania tofully benefit from the next surge in minerals investment brought by the recovery in the cycle,expected in two years.

The revised mining code and the reforms being supported by the proposed project will putMauritania on the path of the intemational best practices being introduced by the most advancedmining countries of Latin America, and make the country a benchmark in mining sector reformfor other countries in the Region. The fiscal reform will aim at introducing a fiscal regime formining consistent with what is considered international good practice. The project will helpstrengthen tax assessment and collection procedures for statutory royalties, license fees, income,dividend, and other direct and indirect taxes. The impact of the project on fiscal revenue can beestimated to be in the range of US$15 to 30 million per year, depending on the scenario.

The following projections were prepared to test the robustness of the possible contributions ofmining to the economy to the year 2010.

Table A.4 - 1: Mauritania Mineral Production and Export Projections by 2010 (US$ million)

Scenario Gross Production Gross Export Value Average AnnualValue Investment

1997 216 216 10Low 205 300 300 5 0Low2010 340 310 50

........................ ..... . ............ . ......... ....... .......... .... .. _. _. ......... ... . __. __..._ ...... ...

High 2005 385 380 120High 2010 440 430 150

Other economic benefits of mining include the development of support industries (manufacture ofmining equipment, provision of consulting services, development of capital and commercialmarkets), transfer of technology and management know-how, and limited direct job creation.These benefits have not been quantified. The project will also help put into place environmentalregulations, procedures, and monitoring capacity to minimize damage to the environment frommining operations.

Main Assumptions:

Low Case Scenario. SNIM's iron ore exports decrease to around US$ 150 million per year, as acombined effect of lower prices and progressive depletion of high grade ore. Akjoujt project'scomissioning delayed until 2005. A small gold mine begins production by 2005 and another oneby 2010; a diamond mine is commissioned by 2008.

High Case Scenario. SNIM's iron ore exports remain at the US$ 200 million per year level, as aresult of a new pellet plant. Akjoujt is commissioned by 2003. A small gold mine beginsproduction by 2005, a second one by 2005, and a third one by 2010; a diamond mine iscommissioned in 2005, and another one in 2010. Industrial minerals production for the domesticmarket reaches about US$ 5 million by 2010.

1. Iron Ore- Current reported production: 11.5 million tons (1998). Low Case Scenario: averageiron ore prices decreasing to about US$ 17.5 per ton (i.e. 1996's levels) by 2001, and remainingat that level until 2010; High Case Scenario: average iron ore prices decreasing to about US$ 17.5per ton by 2003, and increasing to US$ 23 per ton between 2005 and 2010; pellet plantcommissioned by 2005, with an annual capacity of 4 million tons per year.

2. Copper- Current reported production: none. Low Case Scenario: Akjoujt delayed 4 years;copper prices at today's levels (US$ 0.80 per pound); High Case Scenario: Akjoujt delayed 4years; copper prices recovering to about US$ 1.00 per pound.

3. Gold- Current reported production: none. Low Case Scenario: Average annual investment: $10million (2000-2010); Annual Exports: $ 5 million in 2005, and $ 10 million by 2010;High CaseScenario: Average annual investment: $20 million (2000-2010); Annual Exports: $ 10 million in2005, $ 25 million by 2010.

4. Diamonds - Current reported production: none; Low Case Scenario: Average annualinvestment: $ 15 million (2000-2010); Annual Exports: $ 10 million in 2007, and $ 20 million by2010; High Case Scenario: Average annual investment: $ 40 million (2000-2010); AnnualExports: $ 10 million in 2005, and $ 50 million by 2010.

Annex 5

Mining Sector Capacity Building Project

Financial Summary

Years Ending December 31(US$ thousands, 1999 base year)

Implementation Period Operational Period1999 2000 2001 2002 2003

Project CostsInvestment Costs 300 2100 6000 4500 2200Recurrent Costs 30 95 95 90 90Total 330 2195 6095 4590 2290

Financing Sources (% of totalproject costs)IBRD/IDA 94 96 98 97 95Government 6 4 2 3 5Total 100 100 100 100 100

Main assumptions:

Annex 6

Mining Sector Capacity Building ProjectProcurement and Disbursement Arrangements

Procurement

A. General

Goods and works financed by IDA will be procured in accordance with IDA Guidelinesfor Procurement under IBRD and IDA Credits dated January 1995 and revised in January 1996,August 1996, September 1997, and January 1999. Consultancy services financed by IDA will beprocured in accordance with IDA Guidelines for the Selection of Consultants by World BankBorrowers dated January 1997, revised in September 1997 and January 1999. The ProjectCoordination Unit of the Ministry of Mines and Industry, the executing unit for the project, willbe responsible for procurement. This unit will be reinforced to ensure that it is adequately staffedto manage the procurement arrangements. A capacity assessment will be carried out by theprocurement specialist of the Resident Mission under the supervision of AFTS2, beforenegotiations, an action plan addressing deficiencies in the implementing unit's capacity toadminister procurement in an efficient and transparent way will be addressed as necessary and itsimplementation would be a condition of credit effectiveness. At negotiations, assurances will beobtained from the Government that the agreed action plan will be implemented and the followingprocurement arrangements will apply for the implementation of the project. In addition, a GeneralProcurement Notice (GPN) has been transmitted to IDA for publication in the United NationsDevelopment Business to advertise for major consulting assignments and goods contracts. Thisnotice is to be updated every year during the execution of the project until all the contracts havebeen procured. Procurement methods and prior review arrangements are indicated in Tables Aand B of this Annex.

B. Works and Goods

Works. An airbome geophysical survey at an estimated cost of US$2,850,000 will beprocured according to International Competitive Bidding (ICB), after a pre-qualification process.Other works to be carried out under the project consist of (i) the printing of maps, notices andpromotion brochures and (ii) the rehabilitation of small office and buildings. In view of the smallcost of each of these contracts, they will be procured under National Competitive Bidding (NCB)procedures for an aggregate amount of US$500,000.

Goods. Goods consisting of vehicles, instrumentation, field and office equipment andfurniture as well as smaller quantities of office equipment costing US$30,000 or more but lessthan US$100,000 for an aggregate amount US$380,000 will be procured under NCB procedures.Other smaller items of office equipment, furniture, training materials, and office supplies anddocumentation purchase costing less than US$30,000 per contract for an aggregate ofUS$240,000 will be procured on the basis of national or international shopping procedures(minimum of 3 quotations from eligible suppliers).

Prior Review Arrangements. Goods and works contracts costing more than US$100,000per contract will be subject to prior review by IDA. All other contracts will be subjected to postreview.

C. Consultancy Services and Training

Recruitment offirms. Consultancy services for studies, technical assistance and trainingrequiring the recruitment of firms will be procured in accordance with Bank Guidelines. Most ofthese services, including (i) one package for the preparation of a geological synthesis, mineralresources assessments and development of a related geographic information system; (ii) thetechnical supervision of larger geological and geophysical contracts; (iii) the contracting ofassistance in institutional capacity building; and (iv) environmental and socio-economic baselinestudies, will be recruited on the basis of the Quality and Cost Based Selection (QCBS) method foran estimated aggregate amount of US$7,500,000. Exceptions to the QCBS method will includethe use of single sourcing for the second package for the preparation of a geological synthesis,and mineral resources assessments, for an estimated aggregate amount of US$1,800,000. Thereason for accepting single source is based on the fact that the task represents a naturalcontinuation of previous work carried out by French scientific institutions. BRGM has access toprevious works carried out by them during decades, which will result in substantial savings ofmoney compared with a situation where a similar task would have to be performed bycompetitors from other countries. It would also help to generate a grant from the Frenchassistance program which will also contribute for the Government of Mauritania to a substantialreduction of the total amount of borrowed money. For contracts based on a shortlist ofconsultants estimated to cost US$ 50,000 or less per contract, the shortlist may consist entirely ofnational consultants if a minimum of three qualified ones are available.

Recruitment of Individuals. Individuals will be recruited in cases where a firm is notneeded. Such individuals will be selected and recruited on the basis of qualification andexperience in accordance with Bank Guidelines.

Prior Review Arrangements. All procurement documents for consulting contracts withfirms for amounts exceeding US$100,000 per contract selected on the basis of a shortlist and anycontract involving individual consultants exceeding US$50,000 per contract will be subject toprior review by IDA. In addition, for consultant contracts with firms exceeding US$100,000 percontract, the technical evaluation report will also be required by IDA for prior review. All othercontracts will be subjected to post-review.

Disbursement

Allocation of credit proceeds (Table C). The credit would be disbursed over a period of60 months (the Project completion date would be June 30, 2004 and the Credit closing date isDecember 31, 2004), as follows: (i) 100 percent of foreign and 85 percent for contract works; (ii)100 percent of foreign and 85 percent of local expenditures for goods; (iii) 100 percent forconsultancies; (iv) 100 percent for training and seminars; and (v) 70 percent for incrementaloperating costs. Disbursement of Credit proceeds would be made against five categories (basecosts): (i) contract works (US$2.70 million); (ii) goods (US$0.55 million); (iii) consultingcontracts (US$9.65 million); (iv) training (US$ 0.75); and (v) incremental operating costs(US$0.30 million). Unallocated contingency allowances amount to about 7 percent of totalproject base costs.

Retroactive Financing. Eligible expenditures incurred four months before the actualsignature of the Credit Agreement would be retroactively financed up to a maximum equivalentof US$0.5 million, about 3% of the Credit value. Retroactive finance would reimburse start-up

activities that are essential for timely project implementation, namely office rehabilitation atDMG and essential equipment and software for the Cadastre and the Minerals InformationSystem.

Use of statements of expenses (SOEs): Disbursements will be made against Statement ofExpenses (SOEs) for contracts and goods not requiring the Bank's prior review. Thereforedisbursements for all contracts for: goods and civil works of less than US$150,000; consultingservices, by firms and individuals of less than US$100,000 and US$50,000 respectively; and allincremental operating expenses and training, would be made on the basis of SOEs and certifiedby the UCPM. SOE statements will be audited annually by independent auditors acceptable to theBank.

Special account: Payments from the Credit proceeds would be administered by theUCPM from a Special Account. The Special Account would be maintained in US dollars in acommercial bank selected by the Borrower and acceptable to the World Bank. The authorizedallocation, sufficient for about four months of financeable expenditures, would be US$ 1 million;however, the initial allocation would be limited to US$0.5 million until the aggregate amount ofwithdrawals from the Credit Account plus the total amount of all outstanding specialcommitments entered into the Bank shall be equal to or exceed SDR 1 million. The SpecialAccount would be managed by the UCPM which would be responsible for preparingdisbursement requests. These requests would be submitted monthly or when the Special Accounthas been drawn down by a third of the initial deposit, whichever occurs first. Replenishment ofthe Special Account would follow Bank procedures. Disbursements will be made under theauthorized signature from a designated representative of the Borrower. The Special Accountwould be audited annually by independent auditors acceptable to the Bank.

Annex 6, Table A: Project Costs by Procurement Arrangements'

(in US$ thousands equivalent)

Expenditure Category Procurement Method Total Cost(including

contingencies)ICB NCB Other N.B.F

1. Works 2,850 500 3,350(IDA) (2,460) (450) (2,910)

2. Goods 380 240 620(IDA) (380) (220) (600)

3. Consultancy services 10,360 10,360(IDA) (10,360) (10,360)

4. Training 805 805(IDA) (805) (805)

5. Incremental operating cost 365 365(IDA) (325) (325)

Total 2,850 880 11,770 15,500(2,460) (830) (11,710) (15,000)

Note: Figures in parenthesis are the amounts to be financed by the Bank Credit/IDAcredit

For details on presentation of Procurement Methods refer to OD 11.02, "Procurement Arrangements for InvestmentOperations." Details on Consultant Services can be shown more easily in the Table Al format (additional to TableA, where applicable).

Annex 6, Table Al: Consultant Selection Arrangements (optional)

(in US$ thousands equivalent)

Selection Method Total CostConsultant Services (including

Expenditure Category contingencies)QCBS QBS SFB LCS CQ Other N.B1.F.

A. Firms 7,420 1,800 9,220(7,420) (1,800) (9,220)

B. Individuals 1,140 1,140

(1,140) (1,140)Total 7,420 1,140 1,800 10,360

(7,420) (1,140) (1,800) (10,360)

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of ConsultantsGuidelines), Commercial Practices, etc.

N.B.F. = Not Bank-financed.Figures in parenthesis are the amounts to be financed by the Bank Credit.

Annex 6, Table B: Thresholds for Procurement Methods and Prior Review'

Expenditure Contract Value Procurement Contracts Subject toCategory (Threshold) Method Prior Review /

Estimated Total ValueSubject to Prior

ReviewUS $ thousands US $ millions

1. Works> 100 ICB All/2.8

30-100 NCB None<30 Price quotations None

(shopping)

2. Goods>100 ICB n.a.

30-100 NCB None<30 Shopping None

3. ServicesFirms > 100 All/10.4

< 100 NoneIndividuals > 50 All/0.8

< 50 None

Total value of contracts subject to prior review: 14.0

Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation"and contact the Regional Procurement Adviser for guidance.

Annex 6, Table C: Allocation of Credit Proceeds

Amount of the CreditAllocated

Category (Expressed in SDR % of Expenditures to beequivalent) financed

1. Geophysical and civil works 2,.000,000 100% of foreignexpenditures and85% of localexpenditures

2. Equipment 400,000 100% of foreignExpenditures and85% of localexpenditures

3. Consultant's services 7,100,000 100%

4. Training 550,000 100%

5. Incremental operating costs 250.000 70%

6. Unallocated 800,000

Total 11,100,000

Annex 7

Note Technique sur la Gestion Financiere du Projet

1. Pendant 1'evaluation du projet, la mission a procedd A une appreciation du systeme degestion financiere qui est en train d'etre mis en place par l'Unite de Coordination du ProjetMinier (UCPM): budget, comptabilite, contr6le interne, audit et etablissement de rapportsfinanciers. Le systeme defini s'inspire de celui en place au Projet de Renforcement des Capacitesde Developpement du Secteur Priv6 (PRCDSD) qui a A son sein une composante de renforcementdu secteur minier.

2. Enseignements du PRCDSD. La gestion administrative, comptable et financiere duPRCDSP est assuree par un agent comptable. Le systeme comptable est un systeme du typeentreprise, le traitement des donnees comptables est informatise (logiciel comptable SAARI), etle traitement de la paie est realise sur le logiciel de paie du meme fournisseur SAARI. Les autresoperations sont rdalisees sur le Tableur EXCEL. II s'agit notamment de l'Ptablissements des etatscertifi6s de depenses et de la preparation des tableaux des immobilisations et du suivi descategories budgetaires. Le plan comptable utilise pr6voit une codification generale et unecodification analytique. Le dernier rapport de l'auditeur sur les procedures a conclu que lesoperations courantes sont correctement effectuees, et que les pieces justificatives presentent lecaractere de documents probants.

3. Recommandations pour Pamnlioration de ce systm _. La mission estime que le systemedu PRCDSP est un bon exemple que le PRISM peut adopter. La mission a fait les observationssuivantes afin de rendre ce systeme plus performant:

* le choix definitif du logiciel ne devrait 8tre fait qu'apres l'6tude a realiser par le cabinetd'expertise qui fait la mise en place du systeme. L'UCPM peut par contre informer lecabinet des avantages comparatifs du logiciel SAARI, notamment en lui demandantd'avoir des rencontres avec le PRCDSP dans le cadre de son etude.

• La mission a note dans d'autres projets de la Banque Mondiale que le systeme SAARIpresente quelques faiblesses, qu'il faut attenuer. En effet, le systeme conduit l'equipe dela comptabilite A effectuer de nombreuses operations sur tableurs pour le suivi du comptecredit en DTS ainsi que les engagements et depenses par composantes. II est parconsequent indispensable au niveau du parametrage du logiciel, qu'une attention particu-liere soit accordee sur ce point. L'UCPM doit s'assurer que la codification analytiquepermet d'obtenir le suivi par categorie budgetaire et par composante. Le logiciel doitegalement 8tre mis au point de maniere a obtenir automatiquement les etats financiers.

* La Banque a mis en place l'Initiative pour l'Amenagement de l'Administration des Pr8ts(Loan Administration Change Initiative, LACI). Cette initiative vise a integrer tout ce quise rapporte au projet - comptabilite, passation des marches, gestion des contrats,decaissement et audit, aussi bien qu'avancement physique - dans en seul document : leRapport de Gestion du Proj et. Afin de prdparer le passage futur du projet a ce systeme,comme c'est le souhait de la Banque Mondiale, le parametrage du logiciel doit prevoir lapreparation de situations trimestrielles qui fournissent ce genre d'information.L'Emprunteur et l'IDA se sont accordes sur le calendrier pour la mise en place de tous leelements necessaires A la mise en place 6ventuelle du systeme LACI (Annexe 7.A). Cecalendrier prevoit sa mise en place A compter du 3 1eme mois suivant la mise en vigueur ducredit. Le nouveau mode de decaissement necessitera la remise des rapports trimestriels

suivants: (i) rapport financier; (ii) rapport de contr6le des resultats physiques; et (iii)rapport de contr6le des procedures de passation de marche.

Enfin le systeme A mettre en place doit permettre un passage adequat a l'an 2000.

4. Selection de la firme pour la mise en place des capacites durables de programmationbudgetaire, de gestion du personnel, de gestion du patrimoine, de gestion comptable et financiereet de la gestion des marches. La mission a fait connaitre sa non-objection aux termes de reference,au projet de lettre d'invitation et A la liste restreinte. La Societe Mauritanienne d'Etudes et deComptabilite SOMECOMPT a ete retenue pour cette prestation. Ce bureau mettra en place:

* Un systeme informatise qui comportera des modules de: (i) comptabilite generale; (ii)comptabilite budgetaire; (iii) gestion du personnel; (iv) gestion du patrimoine(immobilisations et stocks); et (v) gestion de marche.

* Un manuel de procedures administratives, comptables et financieres qui comportera: (i)les procedures comptables; (ii) les procedures de gestion du personnel; (iii) lesprocedures d'achat; (iv) les procedures de gestion et de suivi des marches; (v) lesprocedures de gestion de patrimoine (immobilisations et stocks); (vi) les proceduresd'elaboration et de suivi du budget; et (vii) les procedures de gestion des financements.

* un programme de formation sur l'outil informatique et sur le manuel de procedures. Lebureau assurera la formation apres avis du gouvernement et de la Banque sur le manuel etle programme de formation. Toutes ces activites doivent etre realisees en fonction duchronogramme presente en Annexe 7.A. L'Emprunteur s'assurera du respect de cesdelais, la presentation du manuel de procedures qui garantisse un systeme comptable etfinancier etant une des conditions necessaires pour la negociation du credit.

* Des prestations supplementaires par rapport A la proposition technique et financiere duConsultant s'averent indispensables et donc feront l'objet d'un avenant. Cette missionconsiste a superviser I'agent comptable de l'UCPM dans la preparation des etatsbudgetaires et financiers trimestriels (r6vision de comptes et etablissements des etats).L'objectif etant qu'a la fin de la premiere annee d'assistance, donc de formation de la partdu consultant, le comptable soit entierement autonome pour l'ensemble de ses fonctions.La mission estime le budget de cette mission a environ une semaine/homme par trimestre.

5. Selection de l'auditeur financier. La mission a fait connaitre sa non-objection aux termesde reference. Par contre, elle a souhaite qu'on relance la procedure de selection, car dans la listerestreinte proposee, seulement un cabinet sur les trois remplissait les exigences de l'IDA enmatiere d'audit. En effet, I'audit doit etre effectues par "les cabinets qui ont des liens directs avecdes grands cabinets intemationaux (qui font notamment l'objet de contr6le de qualite du groupe)ou qui sont membres A part entiere d'organisations professionnelles internationales d'audit." Afinde respecter l'ech6ance prevue pour les negociations, la nouvelle consultation doit suivre lecalendrier presente en Annexe 7.B. La selection des auditeurs du projet est une condition de miseen vigueur du projet.

6. Specialiste de passation de marches et agent comptable. Conformement Al'organigramme propose, ces deux personnes doivent etre recrutees dans les meilleurs delais, afinqu'ils puissent suivre les formations que va assurer le cabinet charge de la mise en place dusysteme administratif, comptable et financier. La mission a fait des propositions des termes dereferences.

Annexe 7.A - Plan d'action pour la Gestion Financiere du Projet

1- Manuel de Procedures administratives, comptables et financieres

Actions Dates ObservationsTransmission par le cabinet du draft du 15 avril 99 A suivre par le CoordinateurmanuelTransmission du Manuel de Procedures 15 avril 99 La Coordinateur s'assurera en liaison avecpar le Coordinateur au differents les autorites competentes nationales de lapartenaires: bonne mise en forme du document, etIDA/Ministere/Composantes procedera a la reproduction et a la

distribution du document aux partenaires.- Commentaires des differents 22 avril 99 Le coordinateur formalisera lespartenaires: commentaires des differents partenaires et

UCPM/Ministere/Composantes/IDA reagira aupres du Consultant pourincorporer les revisions qui s'avereraientnecessaires.

Transmission de la version finale apres 30 avril 99prise en compte par le Consultant desdifferents commentaires, le cas echeant.Programme de formation sur le manuel 30 avril 99de proceduresFormation de 1'ensemble du personnel 15 mai 99sur le manuel de proceduresEvaluation des capacit_s de gestion 30 mois IDAfinanciere, de passation de marche et apres mised'execution physique du projet. en vigueur.Mise en place 6ventuelle du LACI 33 mois Emprunteur/IDA

apres miseen vigueur.

2 - Systeme informatique

Actions Dates Observations

Transmission de la proposition technique et 31 mars 99financiere du consultant pour le choix dulogiciel

Avis de l'UCPM (l'UCPM demendera au 05 avril 99prealable l'avis de l'IDA )Installation du logiciel 30 avril 99

Transmission du programme de formation sur 31 mai 99le logicielFormation sur le logiciel 15 juin 99

ANNEXE 7.B - Plan d'action pour la Selection du Cabinet charge de I'Audit Financier du projet

Examen par Ouverture Non-objectionAccord IDA Lancement Ouverture I'IDA du des offres IDA sursur Lettre de la des offres rapport financieres propositioninvitation et consultation techniques d'evaluation (apres attributionliste des offres accord de contrat etrestreinte techniques I'IDA) Signature du

contrat

Audit j22/02/99 25 99 26/03/99 01/04/99 05/04/99 26/04/99financi r I 22 L

Annex 8Mining Sector Capacity Building

Project Processing Budget and Schedule

A. Project Budget (US$000) Planned Actual(At final PCD stage)

$ 49,800

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (months) 6 months 6 monthsFirst Bank mission (identification) 10/15/1998 10/15/1998Appraisal mission departure 02/05/1999 02/10/1999Negotiations 04/09/1999 04/09/1999Board Presentation 05/13/1999 / /19Planned Date of Effectiveness 07/31/1999 _I_/19=

Prepared by: Ministry of Mines and Industry

Preparation assistance: PHRD/Japanese Grant

Bank staff who worked on the project included:Name Specialty

Paulo de Sa Task Team LeaderGotthard Walser Senior Mining Specialist

Hans Wabnitz LegalT. Mpoy-Kamulayi LegalWolfgang Chadab DisbursementSiaka Bakayoko Financial Management

Abdoulaye Coulibaly Financial ManagementBernard Abeille Procurement

Claude Ginet (Consultant) Mining T.A.

Annex 9Mining Sector Capacity Building Project

Documents in the Project File*

A. Project Implementation PlanManuel d'Implementation du Proj et (Draft)

B. Bank Staff Assessments

C. OtherPrivate Sector Development Capacity Building Project Memorandum of the President, StaffAppraisal Report, Aide-memoires and BTOs9tll year PFP MatrixMining Sector Policy DeclarationMining Law

*Including electronic files.

CAS Annex B8Generated: 01/30/99

Status of Bank Group Operations in MauritaniaOperations Portfolio

Difference Betweenexpected

Original Amount in USS' Millions and actual Last PSR

Fiscal disbursements a/ Supervision Rating b/

Project ID Year Borrower PurposeIBRD IDA Cancel. Undisb. Orig Frm Rev'd Dev Obi Imp Prog

Number of Closed Projects: 33

Active Projects ..MR-PE-1872 1993 GOVERNMENT TECItNICAL/VOCATIONAL 0.00 12.50 0.00 6.62 6.51 0.00 S S

MR-PE-1864 1994 GOVERNMENT AGRIC SERVICES 0.00 18.20 0.00 6.75 3.28 0.00 S HU

MR-PE-38661 1995 - FIN/PRIV.SCTR.CAPACI 0.00 7.20 0.00 2.39 2.93 2.73 S S

MR-PE-1857 1995 GOVT OF MAURITANIA GENERAL EDUCATION PR 0.00 35.00 0.00 19.40 16.73 0.00 S S

MR-PE-34106 1996 ISL. REP. OF MTA INFRAST & PILOT DEC. 0.00 14.00 0.00 9.81 9.16 0.00 S S

MR-PE-1874 1996 MINISTRY OF PLAN PUBLIC RESOURCE MGMT 0.00 21.00 0.00 3.89 -.10 -2.97 HS S

MR-PE-46650 1997 OMVS REGIONAL POWER 0.00 11.10 0.00 9.13 5.63 0.00 S S

MR-PE-1875 1997 GOVERNMENT RAINFED NAT RES MGT 0.00 18.00 0.00 16.14 .67 0.00 S S

MR-PE-35689 1998 MINISTRY OF HEALTH & SOCI HEALTH SECTOR INVEST 0.00 24.00 0.00 24.12 2.45 0.00 HS HS

Total 0.00 161.00 0.00 98.25 47.26 -.24 0(D

Active Pro1ects Closed Proiects Total

Total Disbursed (IBRD and IDA): 61.67 497.64 559.31 1

of which has been repaid: 0.00 161.54 161.54

Total now held by IBRD and IDA: 161.00 323.27 484.27Amount sold : 0.00 63.35 63.35

Of which repaid : 0.00 63.35 63.35

Total Undisbursed : 98.25 3.14 101.39

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (IS - highly Satisfactory, S - satisfactory, U - unsatisfactory,

)IU - highly unsatisfactory): see proposed Improvements in Project and Portfolio Perforasance Rating Methodology (SecM94-901), August 23, 1994.

Note:Disbursement data is updated at the end of the first week of the month.

G

Generated by the Operations Information System (OIS) PageI

Annex 10

- Page 44 - CAS Annex B8

MauritaniaSTATEMENT OF IFC's

Committed and Disbursed PortfolioAs of 3 1-Dec-98

(In US Dollar Millions)

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1996 AEF Mayo Fish 0.00 0.00 .27 0.00 0.00 0.00 .27 0.001996 GBM 4.00 .20 0.00 0.00 4.00 .14 0.00 0.001997 AEF Codipal 0.00 0.00 .47 0.00 0.00 0.00 .47 0.001997 AEF STEP .75 0.00 0.00 0.00 .75 0.00 0.00 0.001997 BMCI 14.00 0.00 0.00 0.00 14.00 0.00 0.00 0.00

Total Portfolio: 18.75 .20 .74 0.00 18.75 .14 .74 0.00

Approvals Pending Commitment

Loan Equity Quasi Partic

Total Pending Commitnent: 0.00 0.00 0.00 0.00

Generated by the Operations Information System (OIS) on 02125199

Annex 11

Maunrtania at a glance 10,1,9aSub-

POVERTY and SOCIAL Saharan Low-Mauritania Africa Income Development diamond'

1997Population, mid-year(millions) 2.4 614 2,048 Life expectancyGNP per capita (Alas metho4 US$) 450 500 350GNP (Atlas method, USS bilons) 1.1 309 722

Average annual growth, 1991-97

Population (X) 2.5 2.7 2.1Labor force (%/6) 2.7 2.6 2.3 GNP - Gross

per F primaryMost recent estimate (latest year available, 1991-97) capita N / enrollment

Poverty (% of population below national poverty line) 50Urban populabtion (% of total populaton) 54 32 28Life expectancy at birth (years) 53 52 59Infant mortality (per 1.000 live births) 92 90 78Child mainutrition (% of children under S) 48 61 Access to safe waterAccess to safe water (% of population) 76 44 71Illiteracy (% of populabon age 15+) 62 43 47Gross primary enrollmdnt (% of school-age populaton) 78 75 91 Mauntania

Maie 85 82 100 - Low-income groupFemale 72 67 81

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996: 1997Economic ratloas

GDP (US$blfions) 0.52 0.80 1.1 1.1Gross domestcinvestmenVGDP 42.4 30.6 221 19.0 TradeExports of goods and services/GOP 38.5 56.4 53.6 4U3Gross domestc savings/GOP 2.9 7.7 13.9 13.2Gross national savings/GOP 20.2 3.2 17.3 15.6

Current account balance/GOP -27.4 -4.7 -3.4 DomestcInterest payments/GOP 1.5 3.9 2.7 30 Savi0 InvestmentTotal debt/GOP 77.6 217.8 220.7 21615 Sa nTotal debt servicelexports 12.5 20.6 17.7 17.2IPresentvalue of debtWGDP 145.1Present value of debt/exports 248.0

Indebtedness197646 1987-97 1996 1997 199-420

(average annual growth)GOP 1.6 3.3 4.7 5.1 4.6S Ma untaniaGNP percapita -1.1 1.0 1.9 Z9 2.1 Lowincome groupExports ofgoods and services 7.8 -0.9 7.3 -15 6. 0.3 ____

STRUCTURE of the ECONOMY1976 1986 1996 1S97 Grwth stasofoutputandlnvestm nt(%.)

(% of GDP) 4Agriculture 28.5 26.6 24.8 25.5 rIndustry 33.9 31.1 31.8 29.0 ,_

Manufacturing 13.1 12.0 9.7Services 37.7 42.2 43.6 45.5 20 ' SR u\a4f 95 go

Private consumpbon 65.2 80.5 72.2 74. 6 40

Generai govemment consumption 31.8 11.8 13.9 12.2 Go -GCwImports of goods and services 77.9 79.3 61.8 51.0

(average annual growth) 197646 1987-97 1996 1997 Growth rtes of export and Imports l.)

Agriculture 3.2 3.2 3.3 9.8 40

Industry 2.6 2.6 2.9 -1.8Manufacturing 0.1 9.4 -15.3 20.

Services -0.1 3.8 7.2 7.5

Private consumpbon 3.1 3.3 -3.1 13.4General govemment consumpton -9.9 6.6 3.1 4.0Gross domestic investment -2.0 0.0 27.5 -9.5 2

Imports of goods and services 1.6 -0.9 3.0 -11.4 - Export - mportsGross national product 1.5 3.6 4.5 5.5

Note: 1997 data are preliminary estimates.

* The diamonds show fbur key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete..

Annex 1 1Page 46

Mauritania

PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 Inflation (%l

Domestic prices(M change) TConsumer prices .. 7.4 4.7 5.0 10 Implicit GOP deflator 6.0 7.3 3.5 5.7 s

Govemment finance(% of GDO includes current grants)Current revenue . 24.8 30.5 26.4 92 93 94 95 96 97Current budget balance .. .0.9 12.8 9.6 - GOP deflator OCPtOverall surplus/deficit .. -8.3 6.6 4.2 .

TRAOE1976 1986 1996 1997 Export and import levelsa(US$ millions)

(USS millions)Total exports (fob) .. 418 485 cj13 300

Iron .. 142 207 - 216Fish a c 274 277 197 400Manufactures

Total imports (Of .. 400 9 43 380 oFood .. 91 97 85 Fuel and energy .. 27 109 95Capital goods .. 161 85 68 c *

91 9z 92 94 99 96 97Export pnce index (1995=100) .. 83 100 101Import price index (1995=100) .. 83 102 96 a*Exports simportsTerms of trade (1995=100) 100 97 105

BALANCE of PAYMENTS ________________

1976 1986 1996 1997 Current account balance to GDP ratio I%)(US$ millions)Exports of goods and services 201 453 586 497 9Imports of goods and services 353 637 676 560Resource balance -152 -184 -89 -63

Net income -59 -70 -56 -52 i .Net current transfers .. 34 94 78

Current account balance .. -220 -52 -37 10j.

Financing items (net) .. 21a 101 92Changes in net reserves -13 10 -50 -55 -1S-

Memo:Reserves including gold (USS millions) 82 53 145 204Conversion rate (DEC, locaLnJSS) 45.0 74.4 137.2 151.9

EXTERNAL DEBT and RESOURCE FLOWS _______98__199____9_1976 1986 199i6 1997

(USS millions) Composition of total debt, 1997 (US$ millions)Total debt outstanding and disbursed 407 1,749 2,415 2,376

IBRD 0 69 8 6 G: 217IDA 19 77 359 372 F: 24:372

Total debtservice 26 94 113 96IBRD 0 10 3 2 : 119IDA 0 1 4 5

Compositon of net resource flowsOfficial grants 115 71 176 140Official creditors 113 130 58 33Private creditors 53 3 24 -2 8: 1,07 s62Foreign direct investrnent 2 5 5 3Portfolio equity 0 0 0 0

World Bank programCommitments 3 29 35 29 A - IBRO E -BilteralDisbursements 5 23 36 34 8 - IDA 0 - Other Mutltateral F -PrivatePrncipal repayments 0 6 4 4 C - IMF G -Short-teraNet flows 5 16 32 30Interest payments C 5 3 3Net transfers 1 29 27

Development Economics t011198

MRTCAAGB

PROPOSED ORGANIZATION OF MMI'S MINING AGENCIES

Ministry of Mines and IndustrySector Policy and Promotion

I ~ ~~~~~~~~~~ Hea...

Mining Directorate I Director Mining Cadastre Unit I HeadSector monitoring and supervision I Sr. Conlsit (Intranel) Management of mini ig permits I DeputyManagement of sector data bases 2 Jr. Coij~~~ Graphic Register 1 ReceptionistInformation to InvestorsSupport to the definition of sector policy

Mining Service I HeadMonitoring and supervision of operations (health, safety, environment) 2 Jr. Consits.Mining promotion and data m

Technical and Financial evaluation of applications for permits X

Environmental Service I HeadEvaluation of Environmental studies (Impact Studies and Audits) I senior StaffEnvironmental Management and Information System I Sr. Conslt.Coordination with Ministry of Environment I Yr. ConsYt

Geological Service I I-leadCoordination of the Mapping Program 2 Staff DocumentationManagement of the Geological Information System (SIG) I Sr. Conslt.Information gathering and diffusion I Jr. Consit.

,--- - -- - -- - -- ................................... ......... ............ ............. _._..... . ..

L------------------Servie Conslt:consultant, non-permanent (fr the Project)Servic _of H_ydrocarbonsu ltnt "p the Proect)

------------------ Consit: consultant, "permanent", to be hired later by DMG

MAP SECTION

IBRD 25935

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