Jordan - Integrated Phosphate Project

Document of The World Bank FOR OFFICIA L- USE ONLY AM/ 3/7Z-JO Report No. 8190-JO STAFF APPRAISAL REPORT HASHEMITE KINGDOM OF JORDAN INTEGRATED PHOSPHATE PROJECT JANUARY 8, 1990 Industry and Energy Operations Division Country Department III Europe, Middle East and North Africa Region This document has a resticed disibution and may be used by recpints only In the performance of their offiiul dutHs Its conteus may not otherwise be dicosed without Wodd Bank authorizaton.  HASHEMITE KINGDOM OF JORDAN INTEGRATED PHOSPHATE PROJECT CURRENCY EQUIVALENTS Currency Unit - Jordan Dinar (JD) JD 1.00 - US$1.54 JD 0.65 - US$1.00 FISCAL YA January 1 - December 31 WEIGHTS AND MEASURES 1 cubic meter (m3) - 1.308 cubic yards 1 metric tonne (t) - 2204.6 pounds 1 metric tonne (t) - 1,000 kilograms (kg) 1 kilometer (km) - 0.62 miles ABBREVIATIONS AND ACRONYMS ARC - Aqaba Railways Corporation BCM - Bank Cubic Meter DAP - Di-ammonium Phosphate JEA - Jordan Electricity Authority JFI - Jordan Fertilizer Industries JPMC - Jordan Phosphate Mines Company, Ltd. MIS - Management Information System mt - million metric tonnes mtpy - million metric tonnes per year ROM - Run-of-Mine t - Metric Tonne TCP - Tricalcium Phosphate TPC - The Aqaba Port Corporation tpy - Tonnes per Year  FOR OMCIAL USE ONLY HASHEMITE KINGDOk OF JORDAN INTEGRATED PHOSPHATE PROJECT STAFF APPRAISAL REPORT TABLE OF CONUENTS I. INTRODUCTION .................................... 1 A. Background 1 B. Bank Role and Sector Lending Strategy .1 C. Rationale for Bank Involvement. 2 II. THE JORDAN PHOSPHATE MINES COMPANY, LTD. (JPMC). 3 A. History. 3 B. Organization and Management. 3 C. Manpower and Training. 4 D. Current Operations. 5 E. Markets and Marketing. 8 F. Sector Development ........................................ 12 G Accounting Arrangements and Audit ......................... 13 III. THE MARKET FOR PHOSPHATE ROCK AND PHOSPHATE FERTILIZERS ....... 13 A. Phosphate Fertilizer World Demand/Supply .................. 14 B. World Phosphate Rock Demand/Supply and World Trade ........ 15 C. Phosphate Rock and Fertilizer Prices ...................... 17 D. The Market for Jordanian Phosphate Rock and Fertilizer .... 18 IV. THE PROJECT - INTEGRATED PHOSPHATE PROJECT . . 20 A. Project Objectives .. 20 B. Phasing of Shidiya Development and Sector Strategy .. 20 C. Project Description .. 21 D. Detailed Features .. 22 1. Beneficiation Plant .................................. 22 2. Fertilizer Plant Rehabilitation ...................... 25 3. Infrastructure Development at Shidiya ................ 25 4. Manpower ............................................. 27 5. Environmental Impacts ........... .................... 28 6. Tuchnical Assistance ........... .................... 30 7. Project Costs ........................................ 30 8. Financing Plan ............................. 32 9. Procurement & Disbursement ........................... 33 10. Project Management & Implementation .................. 35 This report was prepared by Messrs. C. Wardell (ASTEG) and R. A. Mertz (EM3IE), with the assistance of Messrs. L. Borin and M. A. Pearson (EMTIE), L. Pritchett (CECTP) and J. Cape (Consultant), and word processing assistance was provided by Ms. M. Cuffley (ASTEG). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  V. TRANSPORT AND PORT INFRASTRUCTURE .. 37 A. Land Transport Arrangements ............................... 37 B. Aqaba Port ................................................ 38 VI. FINANCI ANALYSIS ............................................ 39 A. Past and Present Financial Performance .................... 39 B. Financial Projections .. 42 1. Mining Unit ..................... 43 2. Fertilizer Unit ..................... 47 3. JPMC Consolidated Financial Position ................. 52 C. Financial Rates of Return and Sensitivity Analysis .. 55 1. Beneficiation Plant Component ........................ 55 2. Fertilizer Plant Rehabilitation Compouent ............ 57 D. Project Risks ............................................. 59 VII. ECONOMIC ANALYSIS ............................................. 60 A. Economic Rat.e of Return and Sensitivity Analysis .. 60 1. Beneficiation Plant Component ........................ 60 2. Fertilizer Plant Rehabilitation Component ............ 62 B. Foreign Exchange Balance and Employment . . 63 VIII. AGREEMENTS TO BE REACHED ...................................... 63 Recommendation ............................................ 64 ANNEXES 2-1 JPMC Organization Chart .65 2-2 JPMC Rock Export Sales .66 3-1 Phosphate Fertilizer Long-Term Supply/Demand .67 3-2 Pliosphate Rock Future Demand .68 3-3 Phosphate Rock Production Forecasts .69 3-4 Phosphate Rock and DAP - Price History and Forecasts .70 3-5 Phosphate Rock Import and Export Levels .72 3-6 Phosphate Rock Export Shares and Regional Rock Imports .73 4-1 JPMC Tentative Production/Export Plan .74 4-2 Beneficiation Plant - TCP Weight Balance .75 4-3 Beneficiation Plant - Water Solids Balance .76 4-4 Beneficiation Plant - Flow Diagram .77 4-5 Beneficiation Plant - Arrangement Drawing .78 4-6 Procurement Schedule .79 4-7 Disbursement Schedule .80 4-8 JPMC - Construction Organization Chart .81 4-9 Implementation Schedule .82 6-1 JPMC Historical Financial Statements .83 6-2 Connolidated Financial Projections .87 6-3 Beneficiation Plant - Financial Rate of Return Analyss .90 6-4 Fertilizer Plant - Financial Rate of Return Analysis .93  -iii- ANNEXES (Cont'db 7-1 Beneficiatlon Plant - Economic Rate of Return Analysis ........ 94 7-2 Fertilizer Plant - Economic Rate of Return Analysis . . 97 7-3 Beneficiation Plant - Foreign Currency Balance . . 98 7-4 Fertilizer Plant - Foreign Currency Balance . . 99 8-1 Documents Available ln the Project File . ............. 100 IBRD 21619 IBRD 21620 Industry and Energy Operations Division Country Department III Eurcpe, Middle East and North Africa Region January, 1990  viv- HASHEKITE KINGDON OF JORDAN INTEGRATED PHOSPHATE PROJECT IOAN AND PROJECT SUMNARY aorrow4Fr: Jordan Phosphate Mines Company, Ltd. (JPHC) Amount: US$25 million equivalent. 'lerms: 17 years, including 5 years of grace, at standard variable interest rate. JPMC will bear the foreign exchange and interest risk. Project Description: The Project is an important second step in the development of the Shidiya phosphate deposit, which will enable Jordan to increase its export of phosphate rock and to increase foreign exchange earnings. It will also rehabilitate the fertilizer plant at Aqaba. The project will finance beneficiation plant equipment, including a washing and flotation plant; phosphate ore and product handling, storage, reclaim and loading facilities; townsite expansion; industrial infrastructure, including power distribution and water supply; and fertilizer plant equipment. The Project's technical assistance component will ensure effective project management of the fertilizer plant rehabilitation. Estimated Costs: Local Foreigzn Total ---------(US$ million)-------- Millsite Equipment 7.1 39.6 46.7 Support Equipment 1.1 4.8 5.9 Fert. Plant Equipment 3.7 21.1 24.8 Civil Works & Infrastructure 10.4 12.8 23.2 Dust Control Equipment 0.3 2.2 2.5 Engineering & Tech. Assist LZ 1.2 Base Cost (October 1989 Prices) 24.8 8.5 106.3 Physical Contingencies 1.4 9.2 10.6 Price Contingencies 6.2 10.3 16.5 Installed Cost 32.5 101.0 133.5 Incremental Working Capital 0.7 15.5 16.2 Project Cos !/ 332116.5 149.7 Interest During Construction 0.0 12.0 12.0 Total Financing Required 128.5 161.7 / The Project is exempt from import duties and taxes.  -V FinancpiD Plan LQ