Bolivia - Mining Sector Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Ca- ZC~ / 3 7 Report No. 7630-BO STAFF APPRAISAL REPORT REPUBLIC OF BOLIVIA MINING SECTOR REHABILITATION PROJECT APRIL 17, 1989 Industry, Trade and Finance Operations Division Country Department III Latin America and the Caribbean Region This document has a resticted dsibuto0v and may be used by oenpienls oly In the perdonnanoe of their official duties. Its contents may - A otherwise be disclosed wt World Bank authorizatin  CURRENCY EQUIVALENTS Currency Name - Boliviano US$1.00 - Bolivianos 2.47 Bolivianos 1.00 - US$0.405 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES 1 meter (m) G 3.281 feet (ft) 1 kilometer (km) = 0.622 miles (mi) 1 kilogram (kg) 2.205 pounds (lb) 1 troy ounce (troy oz) - 31.: grams 1 gram (g) - .032 troy ox 1 metric tonne (mt) - S2,151 troy oz | 2.205 lbs 1 short ton (T) - 2,000 lbs PRINCIPAL ABBREVIATIONS AND ACRONYMS BAMIN - Banco Minero BCB - Banco Central de Bolivia SA - Banco Industrial SA . - Centro de Investigacion Minero Metalurgica IMITBOL - Corporacion Hinera de Bolivia -'D - Development Credit Department (Central Bank) ,TAW - Empresa Nacional de Fundiciones FCNEM - Fondo Nacional de Exploracion Minera FSE - Fondo Social de Emergencia FSTMN - Federacion Sindical de Trabajadores Mineros de Bolivia GEOBOL - Servicio Geologico de Bolivia IDB - Interamerican Developi*ent Bank IDM - Instituto de Desarrollo Minero INK - Instituto de Investigacion Minero Metalurgica MMK - Ministry of Mining and Metallurgy STCM - Servicio Tecnico del Cadastro Minero  FOR OMFCIL USE ONLY STAFF APPRAISAL REPORT BOLIVIA MINING SECTOR REHABILITATION PROJECT TABLE OF CONTENTS Page No. CREDIT AND PROJECT SUMMARY . .............. .... . ............ i I. THE MINING SECTOR ................... ............. 1 A. Background and Recent. Developments .... .......... 1 B. Mineral Resources and Reserves .................. 3 II. INSTITUTIONS, PRODUCERS, AND SECTORAL STRATEGY ...... 4 A. Government Institutions ........... ............. 4 B. Private Producers ................... . ... 6 C-. COMIBOL ... o.... ........... ..... ........ * ............ 7 D. Health, Safety and Environment .................. 10 E. Financing of Mining Investments ............. * ... 11 F. Sectoral Strategy ............................... 13 G. Outlook for the Sector .......................*...* 16 III. THE PROJECT ......................................... 17 A. Role of IDA ..................................... 17 B. Project Objectives .............................. 18 1. Promotion of Mining Investment .# .... ......... 18 2. Rehabilitation of COMIBOL ................... 19 C. Project Description ............ .................. 20 1. Institutional Strengthening ........... **O..# 20 2. Financing of Private Mines and Cooperatives . 21 3. COMIBOL .............................. 23 D. Project Implementation Arrangements and Schedule 27 1. Project Coordination ..... .................. 27 2. Financing of Private Mines ................. 28 3. COMIBOL .................................... 31 IV. PROJECT COST, FINANCING PLAN. PROCUREMENT AND DISBURSEMENT ............................ ................... 31 A. Project Cost ................................... 31 B. Financing Plan .................................. 33 C. Procurement ..................................... 35 D. Allocation and Disbursement of IDA Credit ...... . 37 l ~~~~This document has a festricted distribution and may be used by recipients only in the porformace of their official duties. Its contents may not otherwise be disclosed without Wofi et, authoroun.  -2- Page No. V. FINANCIAL ANALYSIS OF COMIBOL ....................... 38 A. Financial Projections ........ ................... 38 B. Breakeven Analysis . ............. . . 40 C. Sensitivity Analysis ...... .. 41 D. Financial Rate of Return and Sensitivity Tests .. 42 E. Financial Covenants .... .... .... 43 F. Auditing and Reporting Requirements ........ 43 VI. ECONOMIC ANALYSIS ..... . ..... 44 A. Economic Benefits of the Project ........ 44 B. Economic Rates of Return ........ 45 C. Risks ....... 46 V