Document of The International Development Association Acting as Administrator of thie Interim Trust Fund Report No. 16165 BUR STAFF APPRAISAL REPORT BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT May 29, 1997 Africa Region CURRENCY EQUIVALENTS (as of December 1996) Currency Unit = CFA franc US$1 = 500 CFA franc I CFA franc = US$0.002 WEIGHTS AND MEASURES Metric, unless otherwise noted ABBREVIATIONS AND ACRONYMS BUMIGEB - Bureau of Mines and Geology of Burkina Faso CBMP - Comptoir Burkinabe des Metaux Precieux CE/MEM - Environmental Unit in Ministry of Energy and Mines CNM - National Commission of Mines CONAGESE - National Council for Environmental Management CS - Steering Committee DCMP - Central Directorate of Public Procurement DGCOOP - Directorate General of International Cooperation DG - Directorate of Geology DGEF - Directorate General of Water and Forests DGH - Directorate General of Hydrology DGI - Directorate General of Taxation DGMG - Directorate General of Mines and Geology DGPE - Directorate General of Environmental Preservation EC - European Commission EIS - Environmental Information System ENAREF - National School for Financial Administration FDM - Mining Development Fund MEF - Ministry of Economy and Finance MEW - Ministry of Environment and Water MEM - Ministry of Energy and Mines NEAP - National Environmental Action Plan SNIST - National System of Earth Science Information SOREMIB - Societe de Recherche et d'Exploitation Miniere du Burkina Faso SYSMIN - Mining Fund of the European Union FISCAL YEAR January 1 - December 31 Vice President: Jean-Louis Sarbib Country Director: Serge Michailof Technical Manager: Peter Van der Veen Task Team Leader: Craig Andrews BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. CREDIT AND PROJECT SUMMARY ........................................................................ i 1. INTRODUCTION .1 2. THE MINING SECTOR .4 Geological Potential and New Foreign Investment .4 Performance of the Sector .5 3. INSTITUTIONAL AND LEGISLATIVE ASPECTS .8 Mining Policy and Strategy .8 Legislative Framework Pertaining to Mining .9 Taxation and Mine Investment Code .10 Mining Sector Institutions .11 Environmental Management .12 4. THE BANK'S EXPERIENCE IN BURKINA FASO .14 IDA Lending to Burkina Faso .14 Lessons Learned from Other IDA Supported Projects .14 Bank Involvement in Mining in Burkina Faso and Other Countries.15 5. PROJECT DESCRIPTION .17 Project Objectives and Overview .17 Detailed Description of Project Components .18 Project Cost, Administration and Implementation .23 Implementation .24 6. BENEFITS, RISKS AND SUSTAINABILITY OF PROJECT .28 Benefits .28 Risks .31 Sustainability .32 7. AGREEMENTS AND CONDITIONALITIES .32 Performance Indicators .34 LIST OF TABLES 2.A Evolution of Burkina Faso Gold Production ........................................5 2.B Comparative Indicators of Gold Mining ........................................8 5.A Cost Estimates ....................................... 23 5.B Financing Plan ....................................... 24 5.C Summary of Proposed Procurement Arrangements ....................................... 26 5.D Allocation and Disbursement Categories ....................................... 27 6.A Projected Contribution of Mining ....................................... 31 ANNEXES A. Mining and Environment Institutional Structures B. Project Cost Estimates and Financing Plan C. Monitorable Performance Indicators D. Procurement Arrangements E. Estimated Schedule of Disbursements F. Table of Contents of Implementation Manual G. Supervision Plan H. Government Letter of Sector Development Policy I. Map of Mining Titles in Force J. Projections of Contribution to Economy from Mining K. Market Evolution for Gold, Zinc, and Manganese L. Artisanal Mining M. Review of Legislative Constraints in the Mining Sector N. Burkina Faso Mining Sector MAP IBRD NO. 28673 Thi report is based on thefindngs f a pre-appraisal mission to Burkina Faso in Dec. 1993, and an appraisal missIon In Ianh/Fb. 1996. The appraisal mission comprised of Messrs. Craig Andrews (k Manager, Senior Mining )IENIM Indu Hewawasam (Operations Officer) AFTI and Gotthard Walser (Geologist) IENI. Mr. Leo Maraboll aiNM acted as Lead Adviserfor the project and Mesirs. John Barton-Bridges, (MfD, andaRogerMercier,(AFTEI),actedaspeerreviewersfortheproec Secretarialand admb,inritive s wpport was provided by Lillana Cruz de Kostner, Sr. Staff Assistant, (IENIM). Mr Serge MIchaofIs the Count Director. iii BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of Burkina Faso Beneficiaries: Ministry of Energy and Mines, Ministry of the Envirornent and Water Resources Amount: SDR 14.8 million (US$21.4 million equivalent) Terms: Standard IDA with 40 years maturity Onlending Terms: Not applicable Project Objectives: The main objectives of the proposed project are to: (a) establish an enabling environment to both promote private investment in mining and to ensure real and sustainable contribution to economic growth; (b) strengthen public and private sector capacity to effectively administer regulations and monitor sector developments; and (c) establish capacity in the country for environmental management. Additionally, the project aims to: (i) stimulate private sector response to the growing need for a variety of mining and environment-related technical goods and services; and (ii) identify and adopt appropriate mechanisms to facilitate the development of small-scale mines, and to improve the social, welfare, health and environmental conditions of artisanal miners. Project Description: The project will comprise four main components: (a) Regulatory and Fiscal Framework and Training to help: (i) prepare mining and environmental regulations; (ii) strengthen legal skills and negotiating capabilities; (iii) improve administration of the fiscal regime applicable to mining; (iv) build sustainable capacity in mining law and environmental management as well as applied mining taxation. (b) Institutional Strengthening and Resources Management will help: (i) operationalize the roles and improve internal management procedures of key sector institutions: MEM, BUMIGEB, CBMP; (ii) restructure the geo-services currently offered by BUMIGEB; (iii) improve cadastre and mining management services at MEM; (iv) establish and sustain an environmental unit within MEM; (v) upgrade and improve earth science iv information database. (c) Environmental Management will help: (i) build capacity in the relevant institutions to review and formulate environmental policies, strategies and guidelines, and establish capacity to monitor compliance therewith; (ii) assist in the preparation of mining sector specific environmental regulations and monitoring procedures; (iii) establish a national environmental information system and database; (iv) design and implement an environmental education, information, and communication program; and (v) provide training in priority areas. (d) Small-Scale Mining will support activities to: (i) study the socio- economic, geology and technical specifics of small-scale mining; (ii) support the Directorate of Small-Scale Mining Promotion within the General Directorate of Geology and Mines to design and deliver technical advice, geology information, and extension services to small- scale miners; (iii) assess mechanisms to evaluate financing proposals of small scale mining operators; (iv) establish a pilot mining training center; (v) promote the identification, development and dissemination of small-scale mining equipment through private sector delivery mechanisms; and (vi) design and implement an environmental sensitization and awareness campaign targeted at artisanal miners. Benefits: The project will establish the regulations and strengthen government institutions to help attract and sustain a level of mining investment that could lead to yearly gold production of 10-15 tonnes of gold from 1 ton today, worth $1 10-170 million, over the next ten years. Expert technical assistance will help the Government to avoid mistakes in dealing with private companies which could result in costly litigation or forgone revenues at a later date. The project will help strengthen tax assessment and collection procedures for statutory royalties, license fees, income, dividend, and other direct and indirect taxes. These measures, together with the suppression of the monopoly on gold exports which currently leads to massive smuggling, could yield $25-30 million in fiscal receipts yearly, up from approximately $100,000 today. The project will help establish to put into place environmental regulations, procedures, and monitoring capacity to minimize damage to the environment and the health of rural Burkinabe from large, small and artisanal mining operations. The project provides training and extension services to support the development of small-scale mining as well as to help improve social, health, safety and environmental conditions in the artisanal mining community. Risks: Principal risks are: (a) backsliding by the Government on certain commitments to reform and, (b) limited absorptive capacity to implement the project in an effective manner. Care has been taken during project preparation, through extensive policy dialogue with and between government officials and the private sector, to build v commitment for sectoral reforms within the wider political and economic liberalization process. On the issue of backsliding, the Government's commitment to reform is evidenced through monitorable indicators which the Government itself has proposed. These indicators have been agreed to by IDA and will be part of the legal covenants pertaining to the Credit. With regard to absorptive capacity, one of the goals of the project is the development of human skills in both the public and private sectors. The technical assistance will be phased and prioritized so as not to overburden the relevant government departments, and the international consultants engaged will work alongside local counterparts. Estimated Project Cost: a Project Component Local (US$million) Total Foreign Legal Reform and Capacity Building 0.9 1.6 2.5 Mining Taxation and Fiscal Training 0.7 1.5 2.2 Institutional Strengthening 2.7 4.3 7.0 Environmental Management 1.4 1.6 3.0 Small Scale and Artisanal Mining 2.0 2.2 4.2 Project Coordination 0.6 0.2 0.8 Unallocated 0.8 1.2 2.0 PPF 0.3 0.5 0.8 Total 9.4 13.1 22.5 a/ All costs estimated inclusive of duties and taxes. Financing Plan: Local (US$million) Total Foreign IDA 8.3 13.1 21.4 Government 1.1 0.0 1.1 Total 9.4 13.1 22.5 vi Estimated Disbursements: IDA Fiscal Year (US$ million equivalent) 1998 1999 2000 2001 2002 Annual 3.7 7.5 4.7 2.7 2.0 Cumulative 4.5 12.0 16.7 19.4 21.4 Economic Rate of Return: Not applicable. Poverty Category: Program of Targeted Interventions. Project ID No.: 283 BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT 1. INTRODUCTION 1.1 Burkina Faso has a record of satisfactory adjustment under several IMF- and World Bank- supported programs. Since 1991, the Government has been implementing a wide range of policy, economic and sectoral reforms. After a period of modest economic expansion and following the 1994 devaluation of the CFA franc, real GDP growth picked up, reaching 5.5 percent in 1995 and an estimated 6.6 percent in 1996. Although inflation was slightly higher than expected at 6.1 percent in 1996, this was largely due to higher cereal prices that stemmed from the poor harvest in 1995. The most visible area of improvement has been the fiscal position. The primary fiscal balance, moved from a deficit of I percent of GDP in 1994 to surpluses of 1.1 percent of GDP in 1995 and an estimated 1.6 percent in 1996. The external account deficit has declined over the period 1990-96, but it widened since then to an estimated 15.2 percent of GDP in 1996, reflecting an increase in imports, mostly related to the rise in public and private investment. 1.2 Under a second three-year enhanced structural adjustment approved by the IMF in June 1996, the Government has started the implementation of an ambitious reform program. Good progress has been made in implementing public enterprise reform, reducing trade barriers, stabilizing domestic prices, reforming banking and business law, and privatizing the regional railway in support of private sector growth. Efforts have also been made to reallocate budgetary expenditures to critical social sectors--health and education. As results of its adjustment record, the country has benefited from a Paris Club stock-of-debt reduction operation in 1996, involving a 67 percent reduction in net present value of its eligible debt (CFAF 35.7 billion). Burkina Faso is considered for assistance under the neew initiative for heavily Indebted Poor Countries (HIPC). A preliminary policy paper was discussed at Board meetings at the Bank and the Fund. The debt reconciliation process will take place over the next months. The final proposal is likely to be presented to the Boards for decision in early summer 1997. 1.3 Structural reforms have also helped to stimulate private sector activity. Yet, Burkina's medium-term growth prospects depend on the sustainability of the policy reforms. The greatest risk to reform stems from some Burkinabe officials' deep rooted belief that the State should be the predominant actor in the economy. Particular emphasis will have to be given to clearly distinguish the roles of the State and the private sector. This has already started to happen in the mining sector where the Government has moved forward on a number of very significant reforms. 1.4 Mining, if properly managed, can help alleviate poverty, especially in the rainfall scarce northern rural areas of Burkina Faso. Experience in other countries indicates that mining can produce beneficial development effects: increasing a country's yearly value added, tax receipts and foreign exchange earnings; creating local employment and economic spin-offs; contributing physical and social infrastructure; and transfering management and technical know-how. Since the mid-1980's, many governments have become aware that the capital and technology necessary 2 to develop their mining industries can only come from the private sector. Competitive regulatory and fiscal conditions, an adequate earth science database, and sound environmental management practices are critical not only for attracting and retaining investment, but also to ensure that mining makes a positive contribution to the economy. 1.5 At present, modem mining is little developed in Burkina Faso and oriented principally towards gold. Yet, exports of gold represent, after cotton, the country's largest foreign exchange earner. Official gold exports from artisanal exploitations were about 1 ton in 1996, valued at $13 million. In previous years, at the height of the artisanal mining boom, 13 metric tonnes of gold were exported through Lome, Togo, a good portion of which was smuggled from Burkina Faso. Productivity in artisanal mining camps has declined over the past two years as deeper depths are exploited and hence the clandestine exports through Lome have decreased. Nonetheless, the magnitude of past production is indicative of the potential. Burkina Faso is well endowed with geological formations known as Birrimean greenstone belts which, in other West African countries (e.g., Mali and Ghana), host major gold deposits. Due to this excellent geologic potential and availability of risk capital in the international equity markets, over 20 international companies--among which are some of the largest mining houses such as Broken Hill Proprietary (Australia), Anglo American (South Africa), Ashanti Gold Fields (Ghana), High River Gold Mines (Canada) and Echo Bay Mines (USA)--are investing approximately $30 million per year in exploration. Based on the geology potential, the level of exploration expenditures, and experience in other African countries, there is every reasonable expectation that mining companies will find and develop mines over the next ten years which could produce 10-15 tonnes per year of gold with a market value of $110-170 million. 1.6 The Government is aware of the need to sustain the current levels of investment and to maximize the contribution to the economy from mining development. With support from an advance under the project preparation facility (PPF), the Government has undertaken significant reforms during the past two years to remedy systemic deficiencies in the enabling environment for investment. A comprehensive policy dialogue among various stakeholders was conducted which resulted in the adoption by the Council of Ministers (January, 1996) of a letter of sector strategy. Based on this letter a new mining law, consistent with international best practices, has been approved. A new Ministry of Energy and Mines was created in June 1995, and a comprehensive study of the roles and mandates of the Ministry and agencies reporting to it has been conducted. Following an in-depth study of gold commercialization, the Government has abolished the monopoly of the state owned buying office [Comptoir Burkinabe des Metaux Precieux (CBMP)], and has issued detailed regulations for the establishment of private gold buying bureaux. It is now necessary for the Government to deepen and consolidate the reforms. Priority areas include: (a) adopting precise mining, fiscal and environmental regulations; (b) increasing the performance and efficiency of sector instititutions; (c) developing capacity for environmental management; (d) up-grading the availability and quality of earth science information; (e) coordinating various environmental initiatives relative to the sector; and (f) providing significant training to public and private sector officials to effectively monitor sector activities. The proposed project will fund technical assistance to the government to address these areas. 3 1.7 In addition to the current exploration activity by major mining companies, good potential exists for small-scale, semi-mechanized, locally-owned mining operations. The letter of sector development policy places emphasis on the rational development of small scale mining. Project fimds will be used to deliver technical assistance, training, extension and financial services to small-scale miners. Artisanal mining using simple hand tools is prevalent at over two hundred sites throughout the country and provides a livelihood for an estimated 75,000 migratory miners, Burkinabe and other nationalities. Health and safety conditions in and around the artisanal mining sites are dismal; children of miners have no educational facilities; itinerant young men away from home contribute to the spread of sexually transmitted diseases; and the artisanal mining process is highly destructive for the environment. Recognizing these serious problems, the Government of Burkina Faso has adopted a policy of attempting to improve living and working conditions in the camps. The proposed Interim Trust Fund project will significantly assist in this effort through an in-depth socio-economic study of artisanal mining and a sensitization campaign regarding environmental, health and safety dangers in the camps. 4 2. THE MINING SECTOR Geological Potential and New Foreign Investment 2.1 During the past two decades prospecting activities on a regional scale, funded by various donors, have succeeded in identifying promising mineralized zones in the country. Geologists reason by analogy, comparing known mineral producing zones with the same type of geology in other areas. It is known, for instance, that volcano-sedimentary formations in Burkina Faso 2 [known as the Birrimean greenstone belts (Proterozoic)] cover approximately 70,000 km . These geological formations host major gold deposits in Canada, Australia, Mali and Ghana (see comparative figures, Table 2.B, and Annex N). Thus, there is every reasonable expectation that if sufficient exploration funds from private sector mining companies can be attracted to Burkina Faso mines could be discovered and brought into production'. Considering Burkina Faso's fragile eco-systems, it is even more critical that the type of investors that are attracted are serious companies with technical and financial qualifications who will operate with due regard to environmental safety and health aspects. 2.2 It should be taken as a mark of confidence in the basic geology potential of Burkina Faso that, since 1993, over 20 international mining companies, large and small, have become active in exploration activities in the country. The companies include Anglo-American (South Africa), Broken Hill Proprietary (Australia), Billiton (Netherlands), Gencor (South Africa), Outokumpo (Finland), High River Gold Mines (Canada), Ashanti Gold Fields (Ghana), Channel Resources (Canada), Rand Gold (South Africa), Santa Fe (USA), Geomaque Resources (Canada), North Resources (Australia), and several others (see Annex I, map of exploration permits). Collectively, it is estimated that in 1995 these firms have spent over $30 million on exploration. The firms are at the "grass roots" stages of exploration (trenches, pits, shallow and deep drilling) to identify and test for orebodies. It is still too early for a discovery to have been made; however, preliminary indications are very encouraging. Several factors account for the new interest in Burkina Faso gold potential, including attention now being devoted to Africa in general in international mining circles, availability of good "virgin" exploration ground, liquidity in certain financial markets (Toronto, Vancouver, London, Johannesburg) for risk capital for exploration ventures, and removal of sanctions against South Africa, which allows the large South African mining houses to enter the market. 2.3 Mining, if properly managed, can contribute to economic development. Minerals production can increase a country's yearly value added, tax receipts and foreign exchange earnings. Moreover, mining operations typically spend 20-40 percent of capital and operating costs on local purchases, employ and train rural based workforces, and contribute to the transfer of industrial know-how and management expertise. Globally, extraction of mineral resources In Mali, for instance, exploration spending by mining companies began on a limited scale in 1987. The Syama gold mine (4 tonnes/year) was opened in 1990 and the Sadiola Hill gold mine (11 tonnes/year) was opened in 1997. 5 accounts for 3-5 percent of world GDP, 1/5 of world merchandise trade, and employs some 25 million persons. Many countries in Africa, Latin America, and Asia derive substantial portions of their foreign exchange earnings and tax revenues from the export of mineral products. There are very real dangers and concerns related to mining, however. Lack of proper environmental controls and trained personnel to enforce them can leave a bitter and costly legacy for future generations. Procedures and rules must be put into place for dealing with local communities which are affected by mining operations. Proper observance of the human rights of indigenous peoples is often a problem as is dealing with the impacts a modem industrial operation may have on local cultures and traditions. Performance of the Sector 2.4 Declared exports of gold represent one of the largest foreign exchange earners for Burkina Faso. Official gold exports were just over 1 ton in 1996, valued at $13 million, using current world market prices. In addition, even though the production has declined in recent years, undeclared exports from artisanal mines are believed to be substantial, (estimated at 2-3 tonnes per annum, worth approximately $24-36 million). The smuggled gold transits neighboring countries, particularly Mali, Togo, and COte d'Ivoire. The incentive to smuggle is a direct result of the government monopoly on gold exports and the fact that the State buying organization, Comptoir Burkinabe des Metaux Precieux (CBMP), pays the artisans only 55 percent of the fair market value of the gold produced. The monopoly on gold exports has been eliminated in July 1996, the role of CBMP is being restructured, and private gold buying offices will be authorized. TABLE 2.A: Evolution of Burkina Faso Gold Production 1986- 1994 Kilograms Fine Gold (declared) Industrial and Year Semi Industrial Artisanal Total 1986 1,193 246 2,159 1987 3,181 699 3,880 1988 2,558 805 3.363 1989 965 1,255 2,220 1990 1,229 2,295 3,524 1991 956 1,502 2,458 1992 853 1,365 2,218 1993 689 1,268 1,957 1994 523 906 1,429 1995 607 945 1,556 1996 294 769 1,063 Source: CBMP 6 2.5 The Poura Gold Mine, located 200 kms from Ouagadougou, is the only industrial scale mining operation presently in Burkina Faso. Production has declined in recent years and the operation has been in serious financial distress since the early 1990s. In 1994, the Government decided to privatize the Poura mine and seek an international company to take over operations. Ashanti Gold Fields has been selected to define ore reserves in the underground mine and the surrounding surface areas and, if the results are positive, to operate the mine. Current plans are to invest $20 million, of which $6 million will come from private partners and $14 million from the Government via the mining development and stabilization fund (SYSMIN) of the European Commission. Because of the involvement of other donors, the proposed project does not intend to be directly involved in the privatization of the Poura gold mine. 2.6 The Tambao manganese deposit is located in the Oudalan district, approximately 380 kilometers north east of Ouagadougou. The grades and characteristics of the manganese ore are excellent by international standards, although the reserves are modest in size. However, industrial development and operation of the deposit is hampered by lack of infrastructure, principally long and costly transportation routes to seaports. A pilot truck and shovel exploitation of the deposit was started in 1993 by a Burkinabe-Canadian company joint venture. Full commercial development of this deposit will depend on penetrating niche markets and, more importantly, finding an efficient and inexpensive means of transporting the manganese ores to port. 2.7 The Perkoa zinc deposit, located 135 km west of Ouagadougou and discovered in 1982, contains massive sulfides with excellent grades of zinc. The World Bank funded the Perkoa Mining Exploration and Technical Assistance Project in 1984-1991 for $7.4 million to assist in the delineation of the Perkoa orebody, to find a reputable foreign mining company, and to negotiate an investment agreement. Subsequently, Perkoa Minerals S.A. was formed, a joint venture in which Boliden (Sweden) owns 65 percent and the Government 35 percent. Exploration has proven good reserves; however, weakness in the prices of zinc on the world market, the financial condition of Boliden, and continuing uncertainties regarding rail transportation to the coast have delayed full development. Recently, Boliden has relenquished its rights to Perkoa and the surrounding areas, opening these zones for new exploration. 2.8 In addition to the current exploration activity by major mining companies, good potential exists for small-scale, locally-owned mining operations. A distinction should be made between small-scale and artisanal mining. Small-scale miners generally use motorized equipment (pumps, compressors, hoists, etc.) and other small power tools to extract and process mineral ores. Use of this equipment not only increases throughput and economies of scale but also allows the miner to reach depths required to mine hard-rock vein mineralization in addition to the alluvial deposits. However, use of such equipment requires at least rudimentary scientific, technical, and mechanical skills. In Burkina Faso such skills, though limited, are either available locally or could be recruited internationally. In many countries (Latin America and Zimbabwe) small-scale miners account for a significant degree of mineral production. It is also easier for the Government to monitor operations and to provide technical extension services to small-scale miners than it is to artisanal miners. 7 2.9 The letter of sector development policy places emphasis on the rational development of small-scale mining. Several reforms, supported by the PPF advance, are already underway or will be undertaken during the project. For instance, revisions to the mining legislation have strengthened the legal tenure of the small-scale miner allowing him to invest in motorized equipment, water wells, and other techniques to improve efficiency in operations. Removal of the government buying monopoly exercised through CBMP will allow the small-scale miner as well as the artisan to realize the fair market value for the extracted gold. Local private capital markets need to be analyzed and strengthened, particularly in respect of financial analysis and evaluation of small scale mining projects, in order to help local entrepreneurs mobilize finance. Finally, technical extension and training services could be provided by the Government and private entrepreneurs to support small-scale mining. 2.10 Artisanal mining, on the other hand, makes little or no use of power equipment. This activity is prevalent at over two hundred sites throughout the country and provides a livelihood for an estimated 75,000 migratory miners, Burkinabe and other nationalities. Artisanal miners extract gold bearing ores using simple hand tools, pulverize the material using mortar and pestle, and wash the powder using crude sluices to pick the flakes of gold from the concentrate. Women often play a key role in these mining camps both as workers and suppliers of food, retail and hospitality services. Artisanal mining is fundamentally a result of rural poverty, highlighting a number of interrelated issues. Health and safety conditions in and around the artisanal mining sites are dismal: children of miners have no educational facilities; itinerant young men away from home contribute to the spread of sexually transmitted diseases; and the artisanal mining process is highly destructive for the environment. 2.11 Experience in many other countries would indicate that resolving the problems of artisanal mining is not simply a matter of improving the technical proficiency of the artisans but rather of using an integrated approach to address the social, economic and environmental dimensions. Government programs to provide technical extension services may be marginally useful but the lack of scientific and technical skills limits the capacity of the artisanal miners to absorb modem small-scale mining technologies. Moreover, artisanal camps and mining sites appear to be organized in a manner appropriate to the nature of the alluvial deposits and the limited economies of scale which the working groups are able to achieve. Recognizing this, the Burkina Faso Government has adopted a policy of attempting to improve the living and working conditions in the camps. Sensitization and education programs need to be directly linked to the miner, and greater use must be made of the private sector and/or NGOs to deliver such programs. The proposed IDA project will significantly assist in this effort through an in-depth socio-economic study of artisanal mining, and a sensitization campaign regarding environmental, health and safety dangers in the camps. In this respect, considerable scope exists for cooperative efforts with Bank and other donor-funded projects, specifically the Populations and Aids Control Project, the Environmental Management Project, as well as Danish support for environmental sensitization for rural communities. 8 TABLE 2.B: Comparative Indicators of Gold Mining Burkina Faso and Other Countries Country Gold Production Export Value Est. No. Artisans Birrimean (kilograms, declared) US$ million Surface Area (kms2) Burkina Faso (1996) 1,063 US$13.0 50,000 - 100,000 70,000 Ghana (1993) 40,677 US$486.5 100,000 75,000 Cote d'lvoire (1993) 1,400 US$16.8 20,000 -40,000 102,000 Mali (1993) 7,000 US$84.0 50,000 - 100,000 43,500 Quebec (Canada) 42,000 US$497 N.A. 30,800 3. INSTITUTIONAL AND LEGISLATIVE ASPECTS Mining Policy and Strategy 3.1 As part of project preparation activities, the Government has instituted a number of reforms to modernize the enabling environment for mining investment. The reforms (new mining law, institutional restructuring, suppression of the gold buying monopoly, among others) flow from a comprehensive dialogue conducted among involved stakeholders on mining policy and strategy. The dialogue produced a Letter of Sector Development Policy which was endorsed by the Council of Ministers on 17 January 1996 (see Annex H). The letter recognizes the increased importance of mining for the economic development of the country. In order to foster development of the sector, particular emphasis is placed on creating an enabling environment that will attract and, above all, retain private sector investment in mining. The letter recognizes the responsibility of government institutions to support investment through the development of favorable investment the conditions, maintenance of a climate of confidence between investors and the Government, reinforcement of mining and geology information databases, development of human resources, and encouragement of local expertise. The central administration has already been reorganized through the newly established Ministry of Energy and Mines. The letter clarifies the regulatory mandates of other sector institutions such as the National Mines Commission, the Mining Development Fund, BUMIGEB, and CBMP (see paragraphs 3.8 - 3.11). With respect to the last two agencies, the letter calls for substantial changes to reinforce their roles as supporting the private sector rather than competing with it. The letter recognizes that tax revenues from mining should be increased while, at the same time, maintaining fiscal mechanisms that are competitive by international standards. The letter also states that procedures should be put into place to alleviate existing bottlenecks in clearance through customs of equipment and materials needed for mining operations. The letter recognizes the significant socio-economic impacts that small-scale mining has in Burkina Faso and the role of the State in supporting its rational development through programs of technical and/or financial assistance to 9 entrepreneurs. Because mining operations can cause severe damage to the environment, the letter emphasizes the role of the State in protecting and managing the environment. It recognizes the need to reinforce government services responsible for environmental protection, calls for the development of environmental regulations and standards, and requires companies to submit environmental impact statements detailing, among other matters, plans for site rehabilitation and mine closure. Finally, the letter puts emphasis on the requirements to train local personnel in both the public and private spheres. Legislative Framework Mining Law 3.2 The existing mining code of Burkina Faso is contained in articles 448 through 546 inclusive of the Law on Agrarian Reform - RAAF of June 4, 1991, as amended by Decree No. 93 of August 31, 1993. Even though the RAAF was passed in 1991 (amended in 1993) the mining code dispositions, in essence, are based on the old Upper Volta mining code of 1964. These dispositions reflect the political and economic options taken at that time which are no longer reflective of international best practices in mining legislation. Because of its critical importance, new mining law was drafted during project preparation and was approved by the Council of Ministers prior to negotiations. During project implementation, mining regulations and other enabling legislation will be drafted to complete the basic mining law. 3.3 The new mining law, to be introduced to the National Assembly within one year following credit effectiveness, has addressed several deficiencies in the previous mining legislation (see Annex M). The new law clearly exempts hydrocarbons from the mining code, which is consistent with international best practices. It has reduced the number of types of mining tenements, and strengthened the provisions of consultation to adjudicate disputes between occupants of the surface and title holders of sub-surface rights. The new law reduces excessive government discretionary authority, especially in the prerogatives of the mines administration to grant or withhold exploitation licenses. Greater emphasis is placed in the new law on monitoring compliance with requirements "ex-post" rather than screening mining title applicants "ex-ante". The new law limits government participation in mining ventures to 10 percent (consistent with other West African countries) where previously this had been a matter of negotiation. The new law also strengthens the security of tenure of small-scale and artisanal miners, although artisanal mining authorizations are for shorter duration than regular mining titles. Mining regulations which detail the application of the fundamental mining law, in particular with respect to title and cadastre management, are to be prepared during project implementation. In addition, numerous regulations on health, safety, environment and other matters need to be prepared. Ancillary legislation, such as commercial codes, occupational health and safety, labor agreements, and other legal and quasi-legal instruments, will be updated as these apply to mining operations. 10 Taxation and Mine Investment Code 3.4 Administration of the fiscal framework pertaining to mining investments in Burkina Faso is confused and ineffective. This has been identified as a serious impediment to investment, not only in the mining sector but other sectors as well. The fundamental deficiencies in the general fiscal regime concern excessively high rates of taxation of profits (45 percent corporate income tax, 25 percent dividend withholding tax), insufficiencies in depreciation schedules and depletion allowances, and the use of "forfeit" or lump sum payment methods of taxation. Given the pressing need to provide intemationally competitive conditions for mining investment, the government passed a Mining Investment Act in 1993. This act was amended in April 1995 to tighten certain fiscal dispositions, reflecting comments which had been offered to the Government by the Bank as well as other donors. 3.5 The Mining Investment Act, as amended, brings the investment conditions for the mining sector, by and large, in line with international best practice. Mining investments are subject to a 35 percent rate of income tax rather than the normal 45 percent. In addition, the dividend withholding tax is reduced from 25 percent to 12.5 percent. No tax holidays or exemptions from these taxes are permitted. Investments benefit from duty-free entry of equipment and materials during the exploration and development phases of the project, and through the third year of commercial production. Corporate registration and stamp duties are exempted as is the value- added tax on exported products. A decree adopted by the Council of Ministers in October 1996 establishes ad valorem royalties of 3-7 percent depending on the mineral, surface rents (charges per square kilometer of the area held under permit), and mining permit issuance fees. The ad valorem royalties are in line with international practice and the new decree increases the surface rents and permit issuance fees which were previously very low by international standards. 3.6 There are significant problems with the effective implementation of the Mining Investment Act. For instance, in spite of the exemptions, customs and excise taxes are still sometimes assessed on necessary imports for exploration projects. Fees and excise contributions are often arbitrarily assessed on operations as, for example, road taxes and unit charges on the transportation of goods, which have no basis in international practice. The customs service requires guarantees when admitting equipment under temporary admission. While the practice is a reasonable one, the banking system in Burkina Faso is not familiar with bond guarantees and hence the importing company must deposit with the bank the full value of customs due, effectively negating the intended benefit of the customs exemption. In the past the lack of coordination and communication between the MEM and the Directorates of Taxation and Customs of the Ministry of Finance has hindered effective application of the legislation. Improvements in coordination have been made recently. A substantial constraint remains the inexperience and inadequate training of government personnel responsible for taxes and customs with international methods of calculation, assessment, collection, and auditing of fiscal obligations. The proposed project places considerable emphasis on training in applied mining taxation and sets up programs within the National School for Financial Management for such training to be made on a continual basis. 11 Mining Sector Institutions 3.7 In the past the Bureau of Mines and Geology of Burkina Faso (BUMIGEB) was the state agency responsible for all policy, administrative, and geology functions with respect to the sector. This confusion of functions posed serious problems of conflict of interest between the role of the state as regulator and its role as direct participant in operations. Beginning in the early 1990s, the Government moved to distinguish these roles: a full-fledged Ministry of Energy and Mines was created in July 1995. The Letter of Sector Development Policy also establishes the primacy of the central administrative institutions and delineates the overall functions and mandates of the various sector institutions. The PPF advance has supported an institutional study to further clarify these roles and the preparation of an action plan to render them operational (see annex A). 3.8 Administration of the sector is vested in the Ministry of Energy and Mines (MEM). The Ministry is responsible for: (a) the policy functions--the definition of sectoral policy and strategy, preparation of different legal and fiscal documents, coordination among ministries; and, (b) the administrative functions -- the day-to-day management and application of the policies. The Directorate General of Mining and Geology (DGMG), within MEM, develops and coordinates mineral sector policies, promotes exploration and extraction activities, supervises the meetings of the National Commission for Mines, disseminates documentation, and monitors payments of surface rents and royalties by mining companies. The new organizational structure of DGMG, which includes sub-directorates for geology, mining and small scale mining, is in line with international standards. Also under direct administration of the Ministry are the Mining Development Fund and the National Commission of Mines. Other project offices, such as Perkoa Mineral and the National Office for the Tambao Manganese, are also attached to the Ministry. 3.9 While the new organizational structure of MEM is put into place, the new organizational structure and institutional mandates are the major challenges facing the Government. MEM personnel are mostly mid-level professionals lacking in practical experience. Attracting trained personnel to the directorate is difficult since the general civil service salary scales are grossly inferior to those of the private sector or BUMIGEB. Finally, MEM does not have sufficient infrastructure (vehicles, office equipment, survey devices, computers, etc.) to carry out its assigned tasks. 3.10 The Bureau of Mining and Geology of Burkina Faso (BUMIGEB) was created in 1978 as a quasi-autonomous public enterprise of an industrial and commercial character. BUMIGEB currently employs some 320 persons; its annual budget is around $4 million. In order to raise funds, BUMIGEB has concentrated on the sale of geo-services, to the detriment of basic geology, and earth system data collection and mapping. This means that Burkina Faso does not have complete geological maps which investors require in order to localize exploration research. The Letter of Mining Sector Development Policy more clearly defines the role of BUMIGEB. The agency's principal function will be to provide geological survey services (geology cartography, geophysics and geochemical surveys, hydrogeological reconnaissance), and mineral 12 potential inventories over the national territory. BUMIGEB will execute a "contrat plan" with the Government from time to time under guidance from MEM. Additionally, within the tasks given to it by the Ministry, BUMIGEB may assist in diversifying target commodities (other than gold) and assist in development of small scale mining initiatives. 3.11 The Burkina Faso Gold Marketing Board (CBMP) was created in 1986 and is the state- owned entity which previously held the monopoly on the export of all gold, for both small- and large scale operators. A study of CBMP operations and gold marketing in Burkina Faso revealed that since 1990 gold officially handled through CBMP had declined from 3.5 tonnes in 1990 to just over I tonne in 1996. The principal reason for the decline was that CBMP would pay the artisanal miners 55 to 60 percent of the world market price for gold. In 1996, CBMP handled 769 kilograms of artisanal gold; a reliable estimate of the amount clandestinely crossing the borders is at least 2 tonnes: The monopoly of CBMP was also viewed as a major constraint by potential private company investors, rendering difficult forward sales of gold and the use of gold loans, standard financing mechanisms for the development of new mines. The monopoly was rescinded by Decree No. 96-231 /PRES/PM/MEM of 3 July 1996. CBMP will be restructured to assist artisanal miners to improve working conditions and to monitor the artisanal mining camps. Rules and regulations for the authorization of private gold buying offices have been adopted. Environmental Management 3.12 The National Environmental Action Plan (NEAP), which was developed with Bank assistance, defines the policy framework for environmental management in the country and coordination of environmental activities across sectors. Implementation of the Plan has been hindered in the past by poorly organized and ineffectual government institutions. The Ministry of Environment and Water (MEW) was created in June, 1995 to replace the Ministry of Environment and Tourism. The reorganization of the ministry is an indication of the importance the government attaches to environmental and natural resource management. Of particular significance is the fact that the portfolios of environment and water have been merged to reflect the concerns of the Government with regard to the increasing scarcity of water for domestic, agricultural and industrial consumption. 3.13 To implement a cross-sectoral approach, a National Council for Environmental Management (CONAGESE) has been set up. The Council has the mandate for formulating policies and strategies for environmental management at the national level to integrate environmental concerns into the developmental agenda, and consolidation of data from sector environmental strategies and actions plans. Other departments within MEW include the Directorate General of Environmental Preservation (DGPE), responsible (in close coordination with CONAGESE and sector Ministries) for evaluation of environmental impact assessments (EIAs), Directorate General of Forests and Biodiversity, which is responsible for forests, ecosystems and biodiversity. 3.14 The government enacted an Environmental Code in January 1994. This Code replaced the articles pertaining to environmental matters of the Agrarian and Land Reform Act (RAF) of 1991, [Part VII Article, 547-582]. The Environment Code, however, requires some 13 modifications to take into account the changes that have taken place in the institutional framework and the new cross sectoral approach adopted by the Government. The Environmental Code also needs to be complemented with sector specific regulations. The Netherlands is considering funding technical assistance to prepare regulations, particularly with reference to EIAs. In addition, the UNDP, UNEP and FAO have selected Burkina Faso as a pilot to carry out a review of environmental legislation and formulate relevant regulations. 3.15 Given the speed with which industrial mining operations are expected to become operational, and the continuing environmental problems of the artisanal miners, the Burkina Faso government will be severely challenged to ensure proper environmental management of the mining sector. For instance, issues to be considered include site rehabilitation and decommissioning, disposal of tailings, handling and storage of toxic wastes, air and water pollution, dust suppression, impacts on flora and fauna, social and local community issues, indigenous peoples issues, resettlement and relocation, provision of social services, and many more. Considerable progress has been made in recent years on developing environmental protection and mitigation technologies and monitoring mechanisms involving public and private sector institutions. Modalities can be put into place for consultation with locally affected communities to identify processes for minimizing environmental damage and where necessary to develop compensation packages for the disturbances caused. Of special concern are the artisanal mining sites in many areas of Burkina Faso. These are virtually devoid of even the most rudimentary environmental protection techniques and are much more difficult to monitor and control. The fundamental problem in Burkina Faso is the critical lack of experience with modem environmental management and, while the Bank and other donors have been active in assisting the government with ad-hoc technical assistance, much remains to be done. The mining companies that are currently active in Burkina Faso have identified the lack of environmental regulations and government capacity to effectively enforce and monitor compliance as a major uncertainty effecting investment. 3.16 The letter of sector development policy recognizes the significant impacts that mining activities will have on the environment. It declares that the state should reinforce the agencies responsible for environmental protection, require companies to submit environmental impact statements, and make provisions for site rehabilitation. Accordingly, an officer of the DGMG has been designated responsible for day-to-day monitoring and supervision of health, safety, and environment aspects specific to mining operations. The officer will be assisted by a small cadre of professional civil servants to form an environmental unit in the MEM and draw upon the Burkina Faso private sector as well as BUMIGEB for specialized services such as laboratory analysis, data collection, and specialized studies including the development of environmental guidelines specific to the mining sector. The unit will be responsible for ensuring coordination with the CONAGESE and supplying sectoral information to CONAGESE as needed. 3.17 The environmental components of the proposed project are designed to increase and reinforce environmental management capacity at the national and the sector levels. Technical assistance, training, and logistical support will be directed towards the CONAGESE, and the directorates within MEW dealing with environmental protection and water management, and the environmental management unit within MEM. The activities to be funded are designed to 14 address five critical needs: (a) establish national and sector environmental norms and standards; (b) create national and sector environmental information systems; (c) increase needed skills and capacity to enforce and monitor compliance with environmental guidelines, norms and standards; (d) implement a national environmental awareness program; and (e) review the legal and institutional regimes pertaining to water use and discharge with particular reference to mining operations. Care has been taken to ensure coordination and complementarity of the proposed Bank activities with those of other donors, particularly those of the Netherlands. The division of responsibilities and activities to be undertaken by the different agencies are summarized in Annex A. 4. THE BANK'S EXPERIENCE IN BURKINA FASO IDA Lending to Burkina Faso 4.1 As of April 1997, IDA commitments to Burkina Faso amounted to US$778 million for 50 credits. Of the 12 operations currently under disbursement, 3 are in agriculture, 2 in primary health, 2 in education, and one each in institutional development, urban development, urban water supply, private sector, and transport. IFC has no current investments but is very interested in the potential of mining. In the mid- 1980's relations between the Government and IDA were strained due to disagreement on public investment program priorities, and new IDA commitments to Burkina Faso averaged US$17 million per annum; no new credits were approved in 1986 and 1987. Since the political changes of 1987, the Government has sought increased help from the donor community. In response, during the past eight years (1989-1996) IDA has approved 17 credits and quadrupled the size of its program. Lessons Learned from Other IDA Supported Projects 4.2 Because IDA has been involved in Burkina Faso with a significant lending program only since the early 1990s, experience with a variety of lending programs is not as extensive as with other countries of the region. Nonetheless, an assessment (Public Sector Management Review - July, 1995) of institutional development aspects of various projects suggests that the overall performance of these projects has been mixed. This is due to several factors and provides lessons for the design of new projects. The past decade has been one of considerable political effervescence in Burkina Faso. It is not surprising, therefore, that political instability is cited as a cause of poor implementation. Strong ownership and commitment at the highest political levels to the project's objectives, activities and implementation are therefore essential for success. Just as important as the top level political commitment is a broad consultative participatory process used in designing and preparing projects to build ownership of various constituencies. Institutional instability and unclear lines of authority between government departments are also cited as hindrances to effective implementation. It is thus essential that mandates and responsibilities of implementing organizations be clearly delineated. Frequent changes in project personnel, caused in part by the political turbulence as well as poor management skills, point to the necessity of retaining capable and dynamic project staff. Finally, procurement problems and lack of familiarity with Bank procedures are also cited as problems; these deficiencies are being 15 improved through project "launch" workshops, and early and effective association with disbursement, procurement and audit functions. 4.3 Care has been taken during project preparation to learn the lessons of previous projects. A broad based participatory approach has emphasized the role of a "working group" composed of senior representatives of relevant government departments and the private sector. The working group has been primarily responsible, with the assistance of external consultants, for the preparation of the letter of sector development policy, the study on gold commercialisation, the formulation of the new mine law, and the institutions study. The project has assisted and will continue to assist, in the definition and effective implementation of the roles and mandates of the sector institutions: the Ministry of Energy and Mines, BUMIGEB and CBMP. The project recognizes the limited personnel and skills available in the government institutions and for this reason emphasizes the use of local and foreign consultants to build necessary capacity. The project supervision plan provides for intensive and regularly scheduled visits to assist local staff in managing the project. A major concern regarding the delineation of responsibilities on environmental management between MEW and MEM has been addressed by ensuring that project activities reinforce the cross-sectoral approach recommended by the Bank and adopted by the government. Technical assistance will be targeted to the specific tasks required by each institution as outlined in Annex A. Finally, care has been taken to liase with other donors involved with the mining sector and/or environmental management. The project activities are complimentary to, and in many cases build upon, these efforts. Bank Involvement in Mining in Burkina Faso and Other Countries 4.4 During the late 1 970s and early 1 980s the government's strategy for development of mining emphasized direct State involvement in exploration, development and operations. A few projects were attempted during this period by State owned entities including the development of the Tambao manganese project by the General Office of the Tambao Project (OGPT), the development through SOREMIB of the gold mine at Poura, the operations of the Burkina Faso Gold Buying Office (CBMP) with respect to artisanal mining, and the regulatory and mineral exploration roles of BUMIGEB. These operations have been only marginally successful at stimulating development of the mining sector. 4.5 A break with this tradition of direct State intervention in the sector occurred in 1988 with the first IDA-supported mining project. Following discovery of zinc mineralization at Perkoa, IDA approved the Perkoa Mining Exploration and Technical Assistance Project (Cr. 1482) in 1984 in the amount of US$7.4 million (see paragraph 2.7). The credit closed in 1991 (3 1/2 years late), timely implementation having been hindered by lack of a counterpart team to carry out promotional work on the deposit. As a result of the Perkoa Mining Project, as well as the interest in the country's mineral potential evidenced in the past two years by private mining companies, the trend away from direct State intervention towards encouragement of private sector investment has accelerated. The number of firms interested, the magnitude of the sums in play, and the type and quality of multi-national companies concerned point to the urgent need to capitalize on the reform process. 16 4.6 Over the past 10 years, the Bank has funded mining technical assistance projects in many countries. These projects provide support to governments to reform legislative, fiscal and institutional aspects pertaining to mining, strengthen and build capacity within government supervisory instititutions, up-grade geological databases, put into place environmental regulations and capacity to monitor compliance, privatize state owned mining enterprises, assist small scale mining, and conduct other activities. These projects have demonstrated that with appropriate sector policies and with a sound regulatory environment, governments can attract and retain investments in the mining sector. In Ghana, for instance, reforms initiated in the mid- 1980s have resulted in a four-fold increase in gold production, the privatization of three previously state owned mining enterprises, and an increase in exploration and mining development undertaken by international mining companies. In Mali, private investors have brought two industrial gold mines into production since 1990. Argentina, which traditionally has never had a mining tradition, was recently ranked as the first choice by an international mining investment survey. IBRD approved a technical assistance project to Argentina in the amount of US$40 million in mid-1995. 4.7 Successful implementation of these technical assistance projects depends on strong government commitment and support, adequate supervision by Bank staff, dynamic local coordination, and the extensive use of qualified local and foreign consultants. The complimentarity of the Bank's technical assistance projects with the role of affiliated institutions such as the International Finance Corporation and the Multi Lateral Investment Guarantee Agency is critical. In the countries cited above both agencies are active in mobilizing financial and insurance guarantee resources for private sector led mining projects. In Burkina Faso, even though mining projects are not sufficiently advanced to merit serious consideration, the IFC and MIGA have undertaken scouting missions to the country and have maintained close contacts with the companies involved. 4.8 IDA has supported numerous projects in Africa and other regions to formulate National Environmental Action Plans, and to set up the capacity in the countries to operationalize these plans. In West Africa, projects in the Gambia, Benin, Nigeria and Ghana support the setting up of enviromnental institutions, formulation of environmental regulations, guidelines, standards and norms; the setting up of national enviromnental information systems; human skills development to carry out the formulation of guidelines both national and sector specific as relates to environmental management; formulation of guidelines for preparation of EIAs and skills to review EIAs; formulation of environmental education programs and the development of technical skills for sample testing, laboratory analysis, monitoring and evaluation. 4.9 In Burkina Faso, previous efforts by IDA, to support the Government's initiatives in operationalizing the NEAP were thwarted due to ineffective institutions and lack of awareness of international best practices. As indicated in paragraphs 3.12-3.14, the situation has since changed and the Government has instituted reforms that are in accordance with international practices. The next stage is to support these initiatives by provision of necessary technical assistance and training to establish capacity for operationalizing the reformns. The proposed project provides an opportunity for IDA to collaborate with other donors to provice the assistance needed to initiate the reforms. 17 5. PROJECT DESCRIPTION Project Objectives and Overview 5.1 The main objectives of the proposed project are to help: (a) establish an enabling environment to both promote private investment in mining and to ensure real and sustainable contribution to economic growth; (b) strengthen public and private sector capacity to effectively administer regulations and to monitor sector developments; and (c) establish capacity in the country for environmental management. Additionally, the project aims to: (i) stimulate private sector response to the growing need for a variety of mining and environment related technical goods and services; and (ii) identify and adopt appropriate mechanisms to facilitate the development of small scale mines and to improve the social, health and environmental conditions of artisanal miners. 5.2 Consistent with these objectives, the project will comprise four main components: (a) Regulatory and Fiscal Framework and Training component will support the following activities: (i) prepare mining regulations; (ii) strengthen legal skills and negotiating capabilities; (iii) improve administration of the fiscal regime applicable to mining; (iv) build sustainable capacity in applied mining taxation through special training modules at the National School of Finance Management; and (v) provide continued training in mining law and environment through twinning arrangements with foreign universities. (b) Institutional Strengthening and Resources Management component will support the following activities: (i) operationalize the roles and improve internal management procedures of key sector institutions: MEM, BUMIGEB, CBMP; (ii) restructure the geo-services currently offered by BUMIGEB; (iii) improve cadastre and mining title management services at MEM; (iv) establish and sustain an environmental unit within MEM; (v) up-grade and improve the geology database, including the creation of a National System of Earth Science Information (SNIST); and (iv) reinforce the technical capacities of BUMIGEB to assay and test minerals. (c) Environmental Management component will help: (i) establish capacity for monitoring compliance with regulations by strengthening the relevant institutions; (ii) assist in the preparation of mining sector specific environmental regulations and monitoring procedures; (iii) establish a national environmental information system and database (EIS); (iv) design and implement a national environmental sensitization and awareness campaign; and (v) provide training in areas of environmental policy formulation, monitoring, and management. (d) Small Scale and Artisanal Mining Component will support programs to: (i) study the socio-economic, geology and environmental specifics of artisanal and small scale mining with a view to determining a strategy, including appropriate delivery mechanisms, for providing extension services; (ii) establish a pilot training center for small scale miners, with the possibility to expand to two additional centers in the event the pilot program is successful; (iii) support the 18 Directorate of Small Scale Mining Promotion within the MEM to design and deliver technical advice, geology information, and extension services to small-scale miners; (iv) assess mechanisms to evaluate financing proposals of small-scale mining operators; (v) promote the identification, development and dissemination of small-scale mining equipment through private sector delivery mechanisms; (vi) implement in coordination with the MEM, an environmental sensitization and awareness campaign in the artisanal mining communities. Detailed Description of Project Components A. Regulatory and Fiscal Framework and Training: ($4.7 million; Duration:five years) 5.3 Based on the statement of sector development policy, as well as the new mining law, this component will fund technical assistance to carry out the following activities: (a) Mining Regulations and Negotiations Capacity: This sub-component will provide assistance to: (i) prepare enabling regulations under the new Mining Code to cover, in particular, health, safety and environmental aspects; (ii) reinforce the capacity through technical assistance and training of the Ministry responsible for mines to administer and implement mining legislation, including negotiations skills for dealing with the private sector; (iii) fund the participation of Burkinabe public and private officials in studies, seminars, conferences, and other training related activities outside of Burkina Faso; (iv) acquire information on minerals legislation and establish a library for such information; (v) provide for the services of an independent internationally respected mining attorney to assist in negotiations as may be required from time to time by the government; and (vi) fund English language training for negotiators and key government officials. (b) Training Program in Mining and Environmental Regulation. In order to ensure that the government is able to sustain the improvements in administration of the mining sector over the long term, this sub-component will finance an extensive and continuous training program in applied mining and environmental law in-country training, seminars, and workshops will be conducted at least once a year and special short term training courses will be funded. A training arrangement with a foreign university (University of Quebec, Abitibi) is envisaged to assist in the establishment of this program. (c) Mining Taxation: This sub-component will: (i) assist in the preparation of internationally acceptable applications texts and manuals in respect of mining related taxes; (ii) provide in depth training to and upgrade the capacities of government officials in financial and tax analysis, calculation of tax base, asset valuation, assessment and collection of taxes, and general application of the fiscal regime; (iii) fund the participation of public and private sector Burkinabe officials in studies, seminars, visits and conferences concerning mining taxation; and (iv) provide for the auditing services of an internationally recognized mining auditing firm in the event it becomes necessary for the government to engage their services during the course of the project. 19 (d) Training Program in Applied Mining Taxation. Building capacity and training for the long term in the application of the mining tax regime is essential if Burkina is to receive an internationally acceptable level of fiscal revenues from the mining sector. This sub-component is designed to provide in-depth training in applied mining taxation, accounting, and finance through the National School for Finance Management. The School, established with the assistance of the UNDP in 1988, provides professional training to approximately 500 students drawn principally from public sector institutions. The sub-component will provide short term technical assistance to train local professors as well as to provide instruction in mining related fiscal training for the student tax inspectors and technical specialists. In addition to long term training within the existing curriculum, one or two special seminars will be organized each year around specific themes. The principal objectives of these seminars is to not only provide refresher training for civil servants but also a means to train private sector consultants and professional specialists. B. Institutional Strengthening and Resources Management: (US$7.0 million; Duration - Five Years) 5.4 Institutional Strengthening. The sub-component will provide technical assistance to MEM and the sector institutions (BUMIGEB, CBMP, CNM) to: (a) operationalize the roles, functions and mandates of each of the institutions as defined in the institutional studies currently underway and the letter of sector development policy; (b) reinforce institutional capacity and, in particular, prepare manuals of operations and internal procedures, simplify organizational lines of authority and relationships, assess staffing needs and prepare descriptions of required skills and work procedures; (c) develop human resources and provide exposure to international best practices through participation at international conferences and seminars; (d) strengthen capacity in the Ministry responsible for mines to effectively monitor safety, health and environmental conditions at mining sites, including artisanal and small scale mining; (e) conduct a country-wide study in high potential areas of requirements for mining related infrastructure (power, water, transport); (f) reinforce the logistical and material capacities of the public institutions to execute their duties; and (g) subject to positive feasibility studies, to reinforce within BUMIGEB the laboratory and the pilot mineral processing unit. 5.5 Mining Cadastre and Permit Management. This program will build and reinforce capacity for the mining title administration within the General Directorate of Mines and Geology to: (a) prepare diagnostic studies, manuals of internal procedures and operational directives relative to mine title and land management administration; (b) design and implement a computerized mining titles cadastre to identify existing titles and potential areas for exploration and to monitor the obligations of title holders (para 7.2 (i)); and (c), finance visits and study tours for relevant and responsible Burkina Faso officials in the application of title procedures and land management. Under this sub-component, suitable data processing equipment, software and equipment required for the cadastre system will be acquired. 5.6 Environmental Protection Unit. This sub-component will provide technical assistance to the environmental protection unit within the General Directorate of Mining and Geology. This unit will complement the environmental monitoring and control functions of MEW which has the 20 mandate for overall environmental monitoring of activities in all sectors. Technical assistance to this unit will: (a) build capacity in the relevant institutions to review and formulate environmental policies, strategies and guidelines, and to establish capacity to monitor compliance with the standards and guidelines; (b) strengthen linkages and coordination with other sectoral agencies through the establishment of sectoral networks, meetings, seminars and workshops; (c) formulate procedures and guidelines for issuance of operating permits and licenses; (d) establish and implement a continuous and comprehensive program of environmental monitoring of mining operations; (e) provide training in the mitigation and control of specific mining environmental problems, including site rehabilitation, disposal of toxic wastes, air/water pollution, consultation with local communities; (f) reinforce capacity to assess environmental impact statements; (g) provide training in reviews of plans for mine closure and site rehabilitation; (h) fund the participation of relevant officials in overseas seminars, conferences, and courses related to mining and the environment; and (i) prepare sector specific environmental regulations, norms, technical specifications, and guidelines, in collaboration with the Directorate General of Pollution Prevention. In close liaison with MEW (DGPE, DGFBD), training will be provided under this sub-component on evaluating of environmental impacts, formulating of regulations, and in laboratory skills and trend analysis, sample collection and analysis. 5.7 Mining and Environmental Information Database. Sector specific environmental baseline data do not exist for many parts of the country and, where they do exist, they are poorly organized and not integrated into the land management system. Such data, if available, would also assist the Government and mining companies to design and execute environmentally responsible operations. In order to carry out efficient monitoring of mining operations and to develop environmental norms and standards, the sectoral agencies as well as the MEW need to have ready access to environmental baseline data. Under this sub-component, a data base would be set up in BUMIGEB through an environmental geology service to provide: (a) compilation of hazardous materials including mine wastes, effluents and emissions generated by mining operations; (b) general baseline data, information and statistics such as wind patterns, hydrogeology, flora/fauna, bio-diversity, air, soils and water quality, etc. in and around mining areas; (c) description and status of internationally acceptable technologies for pollution control and abatement; (d) details and status of treatment of contaminated water sources; (e) status of mitigation and land reclamation with regard to artisanal sites; and (f) the collection and investigation of basic environmental information, including hydrogeological assessments of major mining districts. The data base will also list details of environmental action plans, mitigation plans, environmental audits and de-commissioning plans of ongoing mining operations to provide references and monitoring indicators. This database will be closely integrated with the National Environmental Information System to be set up at MEW. Apart from the development of the data banks themselves, the program would result in two main products: (a) a sectoral environmental assessment, and (b) a mining and environment management plan, as fundamental tools to orientate the development of sectoral environmental policies. 5.8 National System of Earth Science Information System (SNIST). This sub-component will upgrade and improve the current geology and mining database developed with the assistance of the UNDP. It will assist BUMIGEB to establish an efficient organization to develop 21 consistent data banks and to store, retrieve and disseminate geological information. In particular, the sub-component will: (a) define, install, and put into operation a National System of Earth Science Information (SNIST), responsible for the overall sectoral coordination of data banks and dissemination of information; and (b) coordinate the development of mineral data banks and a system to analyze and produce thematic sets of information based on satellite imagery and available data. C Environmental Management Component: ($3.0 million; Duration: Five Years) 5.9 In addition to support of the project for the environmental unit within the MEM, this component will provide technical assistance, training and equipment to the MEW (CONAGES and the Directorates of Water and Forests, Hydrology, and Environmental Protection) to operationalize the NEAP and to establish capacity in key agencies for environmental management. The component will comprise four sub-components as described below: (a) Establishment of a National Environmental Information System (EIS). The sub- component will provide technical assistance, training and equipment to assist CONAGES in setting up a national environment information system (EIS). The objective will be to increase availability of core databases, the accessibility and exchange of existing environmental information held or produced by Burkinabe institutions, and to ensure compatibility of different types of data. Technical assistance will target the establishment of an environmental information exchange network, including government services, the private sector and NGOs, the preparation and distribution of a catalogue of existing data, the harmonization of data held by different institutions, the development of in-country capacity to constitute and maintain key databases, and the development of capabilities to analyze environmental information. The EIS will support key activities of CONAGES, including environmental policy formulation, monitoring of sectoral policies, programs and projects, supervision of the EIA process, and the design of environmental education and awareness programs. The EIS will be set up in close coordination with the information gathering and processing activities undertaken by sectoral agencies. (b) Design and Implementation of an Environmental Education, Information and Communication program (EIC). Generating awareness of environmental concerns in the general population is critical to the pursuit of environmental protection and natural resource conservation. To this end, this sub-component will provide technical assistance, training and equipment to CONAGES to: (i) integrate environrental education into the curricula of the primary and secondary schools in coordination with the Ministry of Education; (ii) integrate environmental education into adult literacy programs through the preparation of teachers manuals and training courses; and (iii) design and implement an environmental awareness program for communities, the media, grass roots organizations, local NGOs, women's organizations and special interest groups. The design and implementation of the EIC should be carried out in close liaison and consultation with IUCN and other partners such as the Danish Red Cross, as well as the DGFBD and DGPE of MEW, which have experience in working with communities and with the 22 dissemination of environmental education. The sub-component will fund workshops, seminars, and the production of audio and video materials, and promotional materials to be disseminated through outreach programs. (c) Annual Environment Report, Inventory, Hydrology Evaluation, and Industrial Pollution. Technical assistance, training and equipment will be provided to: (i) prepare an annual State of the Environment report; (ii) compile an inventory of ongoing projects and programs in the country and categorize them by potential environmental impact; (iii) conduct a study on environmental economy and analysis of ongoing projects in the country; (iv) support the development of an indigenous goods and services industry with respect to environmental protection through encouraging local consultancy contracts; (v) conduct studies and/or audits of selected operations as a method of "on-the-job" training; (vi) conduct a study on economic valuation of natural resources and biodiversity (DGFBD); (vii) conduct a study on hydrology and availability of water systems in specific areas towards the development of a program of sound management of water use, with particular reference to mining activities (DGH); and (viii) evaluate the situation with respect to industrial pollution and toxic wastes, with recommendations concerning the management thereof (DGPE). (d) Training. This sub-component will provide training, both overseas and in-country, to officials in the relevant departments of MEW and MEM in the following areas: (i) environmental policy, education and economics, and valuation of natural resources and biodiversity; (ii) environmental impact assessments of projects; (iii) screening of policies and programs for possible environmental impact; (iv) formulation of environmental guidelines, standards, and norms; and (iv) environmental accounting. D. Smal Scale and Artisanal Mining Component: ($4.2 million; Duration: Five Years) 5.10 The possibility of developing small-scale, semi-mechanized mines in Burkina Faso is considered excellent. These could, in time, offer an alternative to the extensive artisanal mining in the country which is highly detrimental to the environment and the health and safety of the artisanal miners. Accordingly, this sub-component will support the sector institutions in the following activities: (a) conduct technical, socio-economic and environmental studies of small- scale and artisanal mining areas to determine delivery mechanisms for providing extension services; (b) subject to positive feasibility studies acceptable to IDA, establish one pilot training center in order to promote small scale mining -- a mid-term review of the project will be carried out on the performance of the pilot center; upon favorable evaluation, two additional centers would be funded under this sub-component; (c) review the capacity of local financial institutions to assess proposals of small-scale mining operators with a view to identifying local private financing mechanisms; (d) subject to positive feasibility studies, fund the pilot testing of small- scale mining equipment and dissemination thereof through private sector delivery mechanisms; (e) design and implement, in coordination with the environmental sensitization programs of MEW, an educational campaign directed towards small-scale and artisanal miners in matters such as environmentally responsible mining practices, disposal and use of toxic chemicals, environmental protection and site reclamation/rehabilitation, health (including AIDS prevention 23 in association with the Bank-funded program on Population and Aids Prevention), sanitation and safety. Project Cost, Administration and Implementation 5.11 Project Cost Estimates and Financing. The estimated cost of the project is $22.5 million, including local duties and taxes, physical and price contingencies, with a foreign component of $13.1 million, equivalent to 57 percent of total project costs. Costs were estimated on the basis of 1995 prices, and included six percent yearly escalation for consultant services and equipment. 5.12 IDA would finance the consultant services, equipment and supplies, and training associated with the project for a total of $21.4 million, or 95 percent of the total project costs. The Government would finance incremental operating and some other local costs for $1.1 million equal to five percent of total project costs, plus any duties and taxes payable on items procured for the project (estimated at $750,000) through a Project Account. Deposits would be made for this purpose on a periodic basis (para. 5.23). TABLE 5.A: Cost Estimates (Inclusive of Local Duties and Taxes) US$ million) Project Component Local Foreign Total Legal Reform and Capacity Building 0.9 1.6 2.5 Mining Taxation and Fiscal Training 0.7 1.5 2.2 Institutional Strengthening and 2.7 4.3 7.0 Resources Management Environmental Management 1.4 1.6 3.0 Small-Scale and Artisanal Mining 2.0 2.2 4.2 Project Coordination 0.6 0.2 0.8 Unallocated 0.8 1.2 2.0 PPF 0.3 0.5 0.8 Total 9.4 13.1 22.5 24 5.13 The proposed financing plan is as follows: TABLE 5.B: Financing Plan (Inclusive of Local Duties and Taxes) (US$ Million) Local Foreign Total IDA 8.3 13.1 21.4 Government 1.1 0.0 1.1 Total 9.4 13.1 22.5 Implementation 5.14 Project Coordination. The Director General of Mines and Geology has been named Project Supervisor (SP) responsible for the supervision of the project for the Ministry. A local Project Chief (CP) possessing experience and qualifications acceptable to IDA will be recruited for the day-to-day management of the project as a condition for effectiveness (para 7.3 (d)). The CP reports to the Ministry concerning the management of the project and is responsible, inter alia for: (a) coordination of the different components of the project; (b) liaison with the Bank, various departments of the Government, consultants and other vendors, and third parties; (c) organizing various studies, workshops, seminars and conferences; (d) management of project finances, accounts, and audits; (e) procurement of goods and recruitment of consultants. Officials within MEW and the MEF have been appointed to liaise with the CP on implementation matters pertaining to environmental and fiscal components. A Steering Committee (SC) will be established prior to credit effectiveness (para 7.3(b)). This Committee will be responsible for the overall supervision of the project, and will pay particular attention to the progress made in achieving the project objectives. Under the presidency of the representative from the Ministry of Energy and Mines, the Committee will be composed of senior level repesentatives of MEM, MEW, MEF, and possibly other ministries involved with the project. The SC will meet twice a year to examine the implementation of the project and submit to IDA a report of its findings. 5.15 Project Startup. The Project Supervisor and Project Chief would organize a project launch workshop at about credit effectiveness time to bring together all of the participating agencies. The workshop would clarify responsibilities and assist in initiating Project activities, as agreed in the TORs and schedules described in detail in the Project Implementation Manual, including the key performance indicators which have been agreed to during negotiations [paras 7.1 (c)]. 5.16 Annual Work Program and Budget. Annual work programs will be prepared by the Project Chief, with the collaboration of all participating agencies, by December 31 of each calendar year for the duration of the project. The first year's program has been finalized in consultation with IDA during negotiations. Subsequent annual work programs will be based on 25 an evaluation of the previous year's experience [para 7.2 (b)]. These reviews will be carried out during supervision activities during the first quarter of each year. 5.17 Mid-Term Review. A comprehensive mid-term review would take place, not earlier than two years, and not later than 2 1/2 years, after effectiveness of the credit. The review would be carried out jointly by the MEM and IDA. Annex C contains a detailed list of project performance indicators; Annex G contains details of the elements to be reviewed at mid-term. 5.18 Procurement. Procurement of goods and services will be in accordance with Bank Procurement Guidelines. Consultants to be financed by the Credit will be selected in accordance with the "Guidelines for the Use of Consultants by World Bank Borrowers" (1996). The main terms of reference for work included in the Project were drafted during preparation and were reviewed during the appraisal (see Annex F, Contents of Implementation Manual). Draft contracts for consultants and consultancy services will follow IBRD Standard Form of Contracts, as applicable. To facilitate management of the various consultants, component activities will be grouped into convenient packages. The Government has been exposed to the Bank's Guidelines and Procedures through PPF implementation. The CP will collaborate closely with the Central Directorate of Public Procurement (DCM) and the Directorate General of International Cooperation (DGCOOP) whose personnel are experienced in Bank procurement methods and procedures. 5.19 Procurement of goods, at an estimated cost of $4.3 million equivalent, includes the purchase of computerwares, furniture, instruments, field and office equipment, and vehicles. The acquisition of small-scale mining equipment, laboratory and mineral testing equipment is conditional subjet to feasibility studies acceptable to IDA related to the pilot mining centers and mineral testing facilities. Specialized informatics and computer equipment, instruments and technical equipment, and small-scale mining equipment would be procured through ICB procedures in packages costing over $250,000. Appropriate after-sales service, maintenance arrangements and spare parts will be procured jointly with such packages. NCB will be used for packages of amounts less than $250,000 whenever local suppliers ensure sufficient competition and foreign firms would not be interested, up to an aggregate amount of $1.4 million. Goods and materials which need to be purchased in packages smaller than $25,000, up to an aggregate amount of $250,000 would be purchased through national shopping procedures acceptable to the Bank, requiring the comparison of price quotations from at least three eligible suppliers. All ICB procurement will be done using the Bank's Standard Bidding Documents. For NCB, standard bidding documents will be developed and cleared with the Bank before use. 5.20 Consultancy. In order to simplify project management and to achieve cost reductions, the various consultancy services to be engaged by the Government will be grouped into packages corresponding to the activities of the various components of the project (see Annex D). Internationally recruited consultants will be responsible for providing workplans, local and foreign personnel, and some logistical support, in accordance with the terms of reference prepared for the component activities. Budgets for recruitment of local consultants have in general been provided under a single arrangement within each component, except as otherwise noted. The proposals will be invited in a phased manner over the lifetime of the project to reflect 26 the priorities established by the Government and IDA. 5.21 Training. Establishing capacity in the country for effective project implementation and sustainability are major priorities in Burkina Faso. Towards this end, the project has a major focus on training and skills development in both the public and private sector. The training will include overseas as well as in-country training in areas ranging from mining legislation, mining taxation, environmental regulation, and monitoring, mining and environmental information systems, geological data collection, retrieval and dissemination, environmental economy and quantitative analysis and environmental education. The Government and IDA will review training proposals every six months of project implementation, and provide non-objection. The proposals will indicate candidates of training, where and when the training is to take place, the costs involved and what responsibilities the candidates will assume after the training. The training program for the first year of the project is detailed in the implementation manual. TABLE 5.C: Summary of Proposed Procurement Arrangements (US$ million, inclusive of all local taxes and duties) Project Element ICB NCB Other Total Goods and Equipment 2.5 1.8 4.3 (2.5) (1.4) (3.9) Consulting Services Technical Assistance 14.4 14.4 (14.4) (14.4) Training 2.7 2.7 (2.3) (2.3) Miscellaneous 0 & M 0.3 0.3 PPF 0.8 0.8 (0.8) (0.8) Total 2.5 1.8 18.2 22.5 (2.5) (1.4) (17.5) (21.4) Note: Amounts in (parenthesis) are to be financed by the Interim Trust Fund. 5.22 Procurement Decisions. All contracts for goods and equipment under ICB and contracts with consulting firms expected to cost $100,000 or more, and consulting contracts of $50,000 or more for individual consultants, will be subject to prior review by the Bank. The proposed review procedures will result in a prior review of over 90 percent of total contract value under the project, which is satisfactory. Procurement arrangements for consulting services are summarized in Annex D. The eligibility of certain countries to bid on consultancy and goods contracts under this project, as well as other restrictions, may apply under rules governing procurement for Interim Trust Fund projects. 27 5.23 Project Account. The Government will establish a Project Account in CFA francs in a commercial bank for local matching funds. It will make semestrial deposits in advance on the basis of an agreed budget for the project, proposed by the Government and accepted by IDA by October 31 of each year. The first contribution of 125,000,000 CFA will be deposited in the account as a condition of credit effectiveness. [para 7.3 (a)] 5.24 Disbursement. To facilitate project implementation and reduce the volume of withdrawal applications, a Special Account will be opened in CFA francs in a commercial bank on terms and conditions acceptable to IDA. The authorized allocation amounts to 250,000,000 CFA francs and covers about four months of eligible expenditures. Upon effectiveness, an amount of 125,000,000 CFA francs representing 50 percent of the authorized allocation will be deposited in the Special Account. The remaining balance will be made available when the total amount withdrawn from the credit account and/or special commitments issued amount to the equivalent of $ 10 million. The Special Account will be used for all payments below CFA franc equivalent to $100,000. Requests for replenishments will be submitted monthly. All replenishments should be fully documented except for: (a) contracts of less than $100,000 for equipment and consulting firms; and (b) contracts of less than $50,000 for individual consultants and training, which will be claimed on the basis of Statement of Expenditures (SOEs). All supporting documentation for SOEs will be retained for review by periodic Bank supervision missions and external auditors. TABLE 5.D: Allocation and Disbursement Categories (Expenditure Inclusive of all local taxes and duties) Category Credit Percentage of Expenditure Allocation to be Financed (US$ million) 1. Consultancy Services 12.5 100% of foreign and local expenditures 2. Equipment * 3.9 100% of foreign and 80% local expenditures 3. Training 2.2 100% of foreign and 90% local expenditures 4. Unallocated 2.0 5. PPF 0.8 Total 21.4 (*) Includes an amount of US$1.4 million to be disbursed following enactment of Mining Code and satisfactory outcome of feasibility studies concerning a pilot mineral treatment test unit at BUMIGEB and a pilot small-scale mining training center. 28 5.25 Project Implementation and Reporting. The Government of Burkina Faso will be the Borrower, represented by the Ministry of Economy and Finance. The implementing agency will be the Ministry of Energy and Mines (MEM). 5.26 Project implementation will be assisted by a Project Supervisor (SP) and a Project Chief (CP) within MEM. Not later than 45 days after each quarter, the CP will submit quarterly progress reports to the Bank. A first project review to be carried out 12 months after effectiveness, and subsequent ones yearly thereafter, will provide a detailed analysis of progress in implementation. 5.27 Accounts and Audits. The CP will engage a private accounting firm to maintain accounts and process payments pertaining to project activities. The recruitment of a private accounting firm, and the setting up of an accounting system satisfactory to IDA, are conditions of credit effectiveness [para 7.3 (c)]. The accounting system will be maintained throughout implementation of the project. In addition, the CP will recruit such professional assistance as may be required to adequately manage project accounts and financial records. Among other specifications, the accounting system should include an integrated database for management of consultancy contracts, integrated budgeting and budget monitoring systems, multiple currency capabilities, and reconciliation of accounts with Bank disbursement categories. The Project Account, the Special Account and all procurement, including Statements of Expenditure, will be audited annually by independent auditors satisfactory to the Bank and appointed for at least three years. Audit reports will be submitted to the Bank no later than six months after the end of the Government's fiscal year. Appointment of an auditing firm acceptable to IDA is a condition of effectiveness [para 7.3 (c)]. All supporting documentation for SOEs will be retained for review by periodic Bank supervision missions and external auditors. 6. BENEFITS, RISKS AND SUSTAINABILITY OF PROJECT Benefits 6.1 Burkina Faso has significant potential to establish competitive industrial scale gold production. Currently, officially declared gold production is just over 1 tonne, contributing $13 million to GDP. Using internationally acceptable parameters and the experience to date in other African countries, production of industrially mined gold in Burkina Faso could reach 10-15 tonnes per year within 10 years, contributing a value added to GDP of $110-$170 million. In recognition of this potential, the Government has declared 1995-2005 as the decade of mining development, and the CAS has identified mining as one of the engines of growth for the economy. An initial interest has been shown in the country's potential by mining investors. However, because Burkina Faso does not have a mining tradition, regulatory and institutional frameworks need to be put into place, and government personnel trained to administer the sector in order to sustain the present levels of private sector investment, and to derive the maximum economic benefits from mining operations. 29 6.2 The project supports the establishment of a new mining law and regulations, as well as the building of capacity to administer the regulations which are essential for sustained investment. For instance, a properly designed and administered mining title system and cadastre registry will help to ensure that current levels of exploration expenditure (around $30 million per year) are sustained and that exploration acreage is effectively worked over time by turning the ground over to successive companies. Orderly and transparent mining title issuance is an immediate and pressing need. For this reason, expert technical assistance is being provided early in the project to help the Government avoid mistakes in dealing with private companies which could result in costly litigation or forgone revenues at a later date. 6.3 The project will establish needed skills for monitoring, control and audit of mine operations to ensure satisfactory compliance with financial and fiscal reporting requirements. Assuming strengthened tax assessment and collection functions, total tax receipts (royalties, license fees, income, dividend, and other direct and indirect taxes) on the order of $20-30 million could be anticipated at the 15 tonnes/year level of production. 6.4 The project will put into place regulations, procedures, and monitoring capacity to ensure that industrial pollution (air, water, soil, disposal of toxic wastes) from mining operations is kept within internationally accepted standards. Skills will also be developed to ensure that mine operations are carried out in a responsible manner with due regard to the health and safety of workers and local communities. The project will put into place regulations for adequate technical and financial provisions during mining operations to ensure that mines, once closed and decommissioned, do not leave a bitter and costly legacy for future generations. The project will develop national and sector environmental management databases, establish norms and standards, and increase awareness of environmental issues within the general public. The costs associated with failure to take into account environmental protection during the early stages of growth of the mining industry are difficult to quantify but could easily reach the tens of millions of dollars. 6.5 The project seeks to encourage the local private sector to respond to the requirements of the growing industry for the supply of local goods and services. Based on experience in other countries, assuming the 15 tonnes/year level of production, a reasonable estimate of purchases by industrial operations of local goods and services is $15-25 million/year. These purchases would include reagents and chemicals, construction materials, fuel and lubricants, spare parts, hardware, small equipment, food stuffs, and other materials. Many of these goods would be produced or manufactured locally, adding value to the economy and creating jobs. Even when the materials are imported, they are typically purchased through local distributors, whose profit margins generate value. Estimated wages paid to the largely rural-based work force is $10 million/year. While modern industrial mines are not labor intensive operations, the substantial and regular wages received by a mine worker will typically provide for a large extended farnily in rural areas. In addition, the communities and region where mine operations are located would benefit from social and physical infrastructure which ordinarily is associated with medium- to large-scale mine operations. 30 6.6 The project directly supports the development of small-scale mining through the provision of technical extension services and the encouragement of manufacturing of elementary mining equipment. Small-scale mining, ideally suited for local entrepreneurs, will provide substantial benefits to employment and the rural economy. Over a ten-year time horizon, a reasonable estimate is the development of seven small-scale mines, each producing 100 kilograms/year of gold for an aggregate value of production of $8.4 million. 6.7 Finally, by suppressing the monopoly of CBMP on gold exports, artisanal miners will receive a fair market price for their production and clandestine exports of gold will be curtailed. While it is impossible to completely eliminate smuggling of gold, a reasonable estimate is that 70 percent of the currently smuggled gold (believed to be around 3 tonnes annually) would be declared and subject to royalties. The project will also help to improve social and economic conditions in the artisanal mining community. 6.8 Two questions need to be asked when assessing the benefits of the project. First, will the reforms and the improvements in the enabling environment continue anyway without the project? Second, if not, then is project design the most effective use of the funds to deepen the reform process and thereby stimulate investment in the sector? In response to the first question, the reforms would probably continue but would not be complete or strong enough to sustain investment nor would they necessarily be consistent with international best practice. The presence of Bank support, suggestions, and guidance on best practices in the sector during preparation was instrumental in keeping the reform process moving and on-track. Access to international expertise through the project is necessary to continue the reforms and to build human capacity to effectively administer the sector. With respect to the second question, international technical assistance, if properly managed and twinned with local expertise, will be cost effective to assist the Government to effectively administer the sector. The Government's ability to respond quickly to the requirements of private sector developers is becoming more urgent as these companies approach feasibility stage. Important decisions in respect of significant financial commitments and environmental impacts must be made over the next few years. Thus, foreign technical expertise in the project is "front-end loaded". Getting started on the right foot with mining companies, and applying international best practices from the beginning, can avoid mistakes which could prove very costly in the long run. 6.9 Based on experience in other West African countries, reasonable assumptions regarding development of viable projects, and models of hypothetical mining operations based on international parameters, it is possible to estimate high, medium and low case scenarios of the contribution of mining to the national economy. These scenarios are summarized in Table 6.A (see also Annex G). 31 TABLE 6.A: Projected Contribution of Mining (US$ million) Scenario Specification Yearly Export Yearly Fiscal Yearly Earnings Revenues Local Expenditures Low 1 medium gold mine 45 7 10 Medium 1 medium and 1 large gold 168 28 35 mine High 1 medium + 1 large gold 246 45 53 mine, Perkoa zinc mine, Tambao manganese mine Risks 6.10 The project seeks to build capacity in a modest cadre of government officials, and encourage the Burkinabe private sector to supply goods and services which have in the past been supplied by the Government. A principal risk to this approach is the ingrained attitudes that perpetuate direct state intervention in all activities, compounded by fears that the Burkinabe private sector will not or cannot respond. Care has been taken during project preparation, through extensive policy dialogue among government officials, to build commitment for the private sector oriented approach. The use of local consultants and training activities for both the public and private sector are key features during project implementation. 6.11 Another risk is excessive government discretionary control over the sector. Care has been taken during project preparation to build ownership for reforms to liberalize the sector. This is evidenced in the letter of sector development policy which is acceptable. Furthermore, the new mining code, the drafting of which was funded by the PPF advance, is in line with internationally acceptable practices. The new mining code has been approved by the Council of Ministers. 6.12 A further risk to the project is confusion as to the roles of the government supervisory institutions, principally BUMIGEB and CBMP. While project preparation activities have funded studies on the mandates and roles of these institutions, care must be exercised during implementation to vigorously pursue the recommendations for restructuring. 6.13 Finally, there is a risk that the on-going UNDP mining sector program, the support proposed by UNDP, UNEP, FAO, The Netherlands and Denmark for environmental capacity building, and the support provided by the European Commission to carry out geological mapping programs will overlap with the program supported by the Bank. Care has been taken during project preparation to maintain close contacts with all organizations to ensure that activities are complementary and do not overlap. 32 Sustainability 6.14 The extensive dialogue with the Government, private sector stakeholders and the Bank undertaken during project preparation and through implementation of the PPF has assisted in building Burkinabe ownership for the project. Furthermore, the project places strong emphasis on institution building, training, human capital development and environmental awareness. The effect of this emphasis will be to increase the efficiency of the sector, improve capacity and effectiveness of both the mining as well as environmental sector organizations, increase fiscal revenues and enhance the basis for revenue generation. 6.15 Specific actions to be undertaken during project preparation and implementation include the formulation of a new mining law, enhanced institutional capacity to administer the sector, and close coordination between MEM and MEW. In addition, the project will be managed through existing government bodies rather than a separate project coordination unit. 6.16 Capacity building will be through on-the-job training and technical assistance delivered directly to the line supervisory institutions. Several mining projects are nearing the feasibility study stage and it is, therefore, urgent that internationally skilled technical assistance be quickly made available to the Government in order to ensure that they conform to international standards. It is for this reason that technical assistance in legal, fiscal, institutional and environmental components has been "front-end-loaded" to take place early in project implementation. Technical assistance will also be programmed on a "back-stopping" basis later in project implementation, to ensure sustainability. The consultants' terms of reference will encourage foreign consultants to work closely with local counterparts, and will include precise and specific measurements of the transfer of know-how and local capacity building. Experience in other countries would suggest that these technical assistance programs are sustainable if they are underpinned by a vibrant private sector and community involvement. Once mining companies establish operations, a critical mass is formed among companies, trade associations, ancillary industries, financial institutions, vendors and suppliers, labor unions, community associations and other segments of civil society. The constituencies thus formed articulate demands for a sustained response on the part of the Government and, in certain instances, directly assist in the effort. 7. AGREEMENTS AND CONDITIONALITIES 7.1 During negotiations, agreement was reached in the following: a) adoption of an Implementation Manual incorporating a detailed training plan, and terms of reference for consultancy services consistent with the activities outlined in the preceding chapters; b) terms of reference for project auditors; and c) direct and indirect indicators of project performance, as appended in Annex C 33 7.2 During negotiations, agreement was reached on the following project milestones to be achieved during project implementation: a) maintain, project coordination arrangements, as established at effectiveness; b) prepare in consultation with IDA, annual work programs and budgets no later than December 31 of each year; (para 5.16); c) carry out, not earlier than two years nor later than two and one-half years after project effectiveness, a comprehensive mid-term review jointly by MEM and IDA (para 5.17). The review would evaluate the key activities as outlined in Annex G; d) no later than.the beginning of the second year after credit effectiveness, and subsequently at the beginning of each year thereafter, prepare and submit to IDA a report on the progress of the project with particular reference to achieving the project objectives and conditionalities (para 5.26); e) no later than June 30 after the end of each calendar year, prepare and submit to IDA an audit, acceptable to IDA, of the project accounts (para 5.27); f) no later than one year after credit effectiveness, submit to the Assembly of Peoples Deputies (para 3.3), for deliberation and adoption, the new mining code and model investment agreement; g) no later than one year after credit effectiveness, formulate and approve the various application decrees to be prepared under the legal reform components of the project [para 5.3 (a)]; h) no later than one year after credit effectiveness, render operational the institutional structure outlined in the Letter of Sector Development Policy and prepare internal procedures and manuals for the institutions (paras 3.7 - 3.11 and 5.4 - 5.8); i) no later than two years after credit effectiveness, render operational a computerized mining title and land management system (para 5.5); j) no later than two years after credit effectiveness: (i) render operational an environmental unit within the DGMG; and (ii) promulgate and put into operation mining regulations, guidelines and standards pertaining to environmental protection and consultation with local communities [paras 5.6 and 5.9 (a)]; and k) no later than two years after credit effectiveness, design and initiate implementation of an Environmental Education, Information and Communication (EIC) programs [para 5.9 (b)]; 1) no later than three years after credit effectiveness, establish the National Environmental Information System (EIS) [para 5.9 (a)]; and 34 m) no later than four years after credit effectiveness, put into operation the National System of Earth Science Information (para 5.8); 7.3 Prior to credit effectiveness, the Government will provide evidence to IDA of the following: a) confirmation of: (i) establishment of the Project Account (para 5.23 and 5.27); (ii) deposit of the first installment of counterpart funds of CFAF 125 million (para 5.23); and (iii) appointment of auditors for the project acceptable to IDA (para 5.27); b) setting up of a Steering Committee for the project under the auspices of the Ministry of Energy and Mines (paragraph 5.14). c) recruitment of a private accounting firm and the setting up of an automated accounting system satisfactory to IDA (para 5.27); d) recruitment of a Project Chief, possessing experience and qualifications acceptable to IDA (para 5.14) Performance Indicators 7.5 Several direct and indirect indicators of achievement of project objectives have been discussed and agreed between the Government and IDA. The indicators are linked directly to the economic benefits to be derived from the project. The indicators are phased during the implementation of the project and will be reported on a regular basis to IDA. The indicators are summarized in Annex C. 35 ANNEX A Page 1 of 9 MINING AND ENVIRONMENT INSTITUTIONAL STRUCTURES BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT MINISTRY OF ENERGY AND MINES Ministry of Energy and Mines |Mirwster Permarnt nSeretry DIreoaeo nr Attced Servics t 1loatGl of Cand Mt F. - Clnra Swv Direeioiate of SORE.'.18 Drrord Mln Dkkf of _ Planning _Poura Gold Mir_ (DM) _ Studi" wnd Direcrftorates of S UMIGEB Dwedond of Geology Dirdw of Povwer |Gsokogical Survey (DG) Ad _nWo _ : 1 ~~~~~~~~~~Geo-Servkces end I CBMP Diredtorde of |Gold Buying Office alr Mnirng Promobon _(DPPM) OGPT Tambao Mangano PERKOA Perkoa Zrnc Projer 36 ANNEX A Page 2 of 9 MINING AND ENVIRONMENT INSTITUTIONAL STRUCTURES BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT MINISTRY OF ENVIRONMENT AND WATER Minister Permanent Secretary Delegate Minister CONAGES (Water Affairs) Directorate General Directorate General Directorate General Of Of Of Water and Forests Environmental Hydrology Preservation Directorate of Directorate of Directorate of - Village Forest - Pollution Prevention - Potable Water Directorate of Directorate of Directorate of _ Wildlife and - Urban Improvement - Agro-hydrology Hunting Directorate of Directorate of _ Fisheries - Water Inventory Regional Regional _ Directorates Directorates 37 ANNEX A Page 3 of 9 MINING AND ENVIRONMENT INSTITUTIONAL STRUCTURES BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT NATIONAL COUNCIL FOR ENVIRONMENT MANAGEMENT Ministry of Environment and Water Minister Permanent Secretary National Council for Environment Management CONAGES Sitting Consultative Interministerial Technical Permanent Court Council Committee Secretariat (consultative) (decision making) (follow-up) (implemention) Division of Technical and Administrative Coordination Division of Legislation, Regulation and Impact Assessment Division of Training Division of Policy and Planning 38 ANNEX A Page 4 of 9 Mining Sector Institutions 1. In the past,the Bureau of Mines and Geology of Burkina Faso (BUMIGEB) was the state agency responsible for all policy, administrative, and geology functions with respect to the sector. This confusion of functions posed serious problems of conflict of interest between the role of the state as regulator and its role as direct participant in operations. Beginning in the early 1 990s, a secretariat of mines was established to more clearly distinguish the regulatory from the operational functions. This reform has been reinforced with the creation in July 1995 of a full-fledged Ministry of Energy and Mines. The letter of sector development policy further establishes the primacy of the central administrative institutions and delineates the overall functions and mandates of the various sector institutions. The PPF advance has supported an institutional study to further clarify these roles and the preparation of an action plan to render them operational. 2. Administration of the sector is vested in the Ministry of Energy and Mines (MEM). The Ministry is responsible for: (a) the policy functions - the definition of sectoral policy and strategy, preparation of different legal and fiscal documents, coordination among ministries; and, (b) the administrative functions - the day-to-day management and application of the policies. BUMIGEB, reporting to the Ministry (Directorate of Geology), is responsible for the geological functions - the generation and dissemination of geology and environment database. The Comptoir Burkinabe des Metaux Precieux (CBMP), also reporting to the Ministry, no longer has the monopoly on gold export operations. Henceforth, it will concentrate on providing technical assistance to artisanal miners. In addition to these principal entities, autonomous project offices, such as Perkoa Mineral and the National Office for the Tambao Manganese Project, are attached to the Ministry. 3. The new organizational structure of MEM is in line with international practices. However, the operationalizing of the new organizational structure and institutional mandates is the major challenge facing the Government. MEM personnel are mostly mid-level professionals lacking in practical experience. Attracting trained personnel to the directorate is difficult since the general civil service salary scales are grossly inferior to those of the private sector or BUMIGEB. Finally, MEM does not have sufficient infrastructure (vehicles, office equipment, survey devices, computers, etc.) to carry out its assigned tasks. Central Administrative Institutions The Directorate General of Mining and Geology, within the Ministry of Energy and Mines, has overall responsibility for sector administration and management. The DGMG develops and coordinates mineral sector policies, promotes exploration and extraction activities, supervises the meetings of the National Commission for Mines, disseminates documentation, and 39 ANNEX A Page 5 of 9 monitors payments of surface rents and royalties by mining companies. The new organizational structure of DGMG is in line with international standards. The DGMG is sub-divided into three directorates: (a) Directorate of Geology (DG), responsible for overall direction of mineral inventory and geology exploration work, including monitoring compliance with work commitments and expenditure minima of mine title holders; (b) Directorate of Mines (DM), responsible for preparation and application of mine health and safety aspects, monitoring exploitation activities, and overseeing the protection of the environment in collaboration with other relevant ministries, and maintaining files on exploitation activities in the country; (c) Directorate of Small Mining Promotion (DPPM), responsible for preparation and implementation of strategies to promote small-scale mining, training of small-mine operators, assistance in setting up fabrication of local mining tools and equipment, and legal assistance to small-scale miners. 5. A mining development fund (FDM) has been established under DGMG, as is the practice in many countries relying on mining revenues. The fund will receive a portion of permit issuance fees, surface rents, and ad valorem royalties. These funds will be used to finance promotional activities, research programs, purchase of control and monitoring equipment, and general costs associated with the exercise of the surveillance function. 6. The National Commission of Mines (CNM) is a consultative organ under the Ministry of Energy and Mines. Its role is to analyze the economic and regulatory context pertaining to the mining sector, establish sector priorities with respect to the national economy, and review investment applications. The commission is headed by the Minister responsible for mines and includes representatives of the ministries of finance, transport, environment, industry and commerce, health, and labor. Bureau of Mines and Geology of Burkina Faso (BUMIGEB) 7. BUMIGEB was created in 1978 as a public enterprise of an industrial and commercial character. This allows it a certain management autonomy and, in theory, releases it from the normal complex civil service procedures as well as the applicable civil service salary scales. As originally conceived, the role of BUMIGEB was to be the all-encompassing state agency responsible for the sector to: issue mining permits, collect and disseminate geology information, and sell geo-services, such as drilling and laboratory analysis. BUMIGEB currently employs some 320 persons; its annual budget is around $4 million. BUMIGEB is expected to be self- funding but in reality has shown financial losses (approximately $700,000) in recent years. 40 ANNEX A Page 6 of 9 8. As a result of its financial difficulties, BUMIGEG has in recent years concentrated almost exclusively on the sale of geo-services, to the detriment of basic geology and earth system data collection and mapping. In order to attract mining companies with the technical expertise and risk capital they can devote to detailed exploration, governments typically supply earth system data and maps on a regional scale. These maps should include information on topography, hydrology, physical infrastructure, agriculture and pastoral features, cadastral and land tenure records, human and animal populations, background levels of pollution and other forms of information necessary for proper land management and environmental control. 9. In spite of funding from internal and external sources, basic earth system maps and information in Burkina Faso are insufficient. For instance, only slightly more than half of the country (13 mapping sheets out of a total of 2 1) is covered by geology cartography at a scale of 1/200,000, the international norm. Tectonic and general geology maps at a scale of 1/1,000,000 need to be updated, using modern techniques and recent information and interpretation theories. Geophysical and geo-chemical surveys have only covered one-half of promising Birrimean zones. During the course of their operations artisanal miners uncover basic geology but, as yet, no systematic effort has been made to map these areas. Geographical information systems currently being implemented in other Government agencies, principally the National Burkinabe Institute of Geography, only treat a portion of the required datasets. The earth system work of BUMIGEB not only needs to be enhanced but also made compatible with, and integrated into, the national environmental information system at the MEW. 10. The letter of mining sector development policy more clearly defines the role of BUMIGEB. The agency's principal function will be to provide geological survey services (geology cartography, geophysics and geochemical surveys, and hydrogeological reconnaissance), and mineral potential inventories over the national territory. BUMIGEB will execute a "contrat plan" with the Government from time to time under guidance from MEM. Additionally, within the tasks given to it by the Ministry, BUMIGEB may assist in diversifying target commodities (other than gold) and assist in development of small-scale mining initiatives. Comptoir Burkinabe des Metaux Precieux (CBMP) 11. CBMP, created in 1986, is the state-owned entity which previously held the monopoly on the export of all gold, for both small and large-scale operators. Faced with the phenomenal expansion of artisanal mining activities partly as a result of the Sahelian droughts, its original objectives were primarily to control fraud and generate income for the Government through royalty payments and taxes. A secondary objective was to organize the artisanal miners. A study of CBMP operations and gold marketing in Burkina Faso, recently conducted by the Government as part of the PPF advance, reveals that, after some initial success, CBMP is now having problems meeting its objectives. Since 1990, the gold officially handled through CBMP from the Poura industrial mine and artisanal workings has declined from 3.5 tonnes in 1990 to just over I ton in 1996. 41 ANNEXA Page 7 of 9 CBMP employs 69 persons, and has a network of buying agents at the principal artisanal mining sites in the country. The posted price for gold purchased by CBMP is set periodically in relation to the London Bullion Market. However, because of high overhead charges and numerous intermediaries, the artisanal miners only receive 55 to 60 percent of the fair market value of the gold they extract. It is not surprising that, in spite of policing efforts, a considerable quantity of gold is smuggled to neighboring countries. In 1995, CBMP handled 950 kilograms of artisanal gold; a reliable estimate of the amount clandestinely crossing the borders is at least 2 tonnes. The monopoly of CBMP was also viewed as a major constraint by potential private company investors, rendering difficult forward sales of gold and the use of gold loans, which are standard financing mechanisms for the development of new mines. 12. The letter of sector development policy stated the intention of the Government to rescind CBMP's monopoly on the export of gold. Accordingly, the monopoly was rescinded by Decree No. 96-23 I/PRES/PM/MEM of 3 July 1996, allowing the Government to meet a key condition of negotiations. The decree stipulates that, after a transitional period of one year, during which time CBMP will continue to purchase artisanal gold and assist in the shipment of industrial gold, commercialisation of gold will be done by authorized entities. CBMP will be restructured to assist artisanal miners to improve working conditions and to monitor the artisanal mining camps. A further condition of negotiations was the preparation of detailed rules and regulations for the authorization of private gold buying offices. These regulations have been adopted. Environmental Institutions 13. The environmental components of the proposed project are designed to increase and reinforce the capacity of national and sector institutions in environmental management. The Government recognizes that the adequacy of the institutions in this respect has been lacking in the past and has undertaken a number of reforms and reorganizations to remedy the deficiencies. The principal reform has been the reorganized Ministry of Environment and Water. The new ministerial organization includes the portfolio of water affairs which previously was a separate ministry. Functions of the Permanent Secretariat of the the CONA GES: (a) analysis of current or future environmental policies and the periodic up-dating thereof; (b) preparation and implementation of environmental strategies of sector institutions and non-governmental organizations; (c) coordination of the implementation of various environmental agreements; (d) implementation of the National Action Plan for the Environment (NEAP); 42 ANNEXA Page 8 of 9 (e) supervision of the coherence of various environmental legislative and regulatory texts; (f) application of the Environment Code; (g) preparation and application of strategies concerning environmental education and communication; (h) periodic reports and inventories of environmental projects and programs;and (i) dissemination of environmental information. 14. The secretariat is organized into four divisions for: (a) technical and administrative matters; (b) policy and planning; (c) legislation, regulations and environmental impact statements; and (d) development of human capacity and aptitudes for environmental management. 15. A "delegate minister" within the Ministry of Environment and Water is responsible for implementation of the national water policy, the general directorate of hydrology, various services concerned with water and water management, and inter- African secretariat for water. The General Directorate of Hydrology prepares inventories and evaluations of water resources, prepares plans for hydro-agriculture and potable water schemes, executes various water supply and management projects, and supervises the application of water legislation. The General Directorate is composed of: a Directorate of Potable Water, a Directorate of Agriculture Hydrology, a Directorate of Water Resources, an administrative and financial service, a water documentation center, and ten regional hydrology offices. 16. The environmental management unit within the Ministry of Energy and Mines has been created as a condition of negotiations of the proposed Interim Trust Fund credit. This unit will be responsible for the day-to-day management of environmental questions related to the mining industry. These duties include, but are not limited to: (a) advising the permanent secretariat of CONAGES relative to sector environmental policy and strategy; (b) preparing mining specific environmental regulations, norms, standards, and control procedures; (c) analysing and recommending environmental impact statements submitted by proposed mine developments; (d) inspecting and monitoring compliance with environmental regulations at mining operations; (e) developing and collecting environmental baseline data and information related to mining operations to be integrated into the National System of Geology and Earth Science Information (SNIGST); and (f) assisting in the preparation and implementation of sector specific environmental education and sensitization campaigns. 43 ANNEX A Page 9 of 9 DONOR ASSISTANCE AND DIVISION OF ENVIRONMENTAL RESPONSABILITIES Ministry of Ministry of Environment Energy and ___ _ _ _ _Mines Item Actions Donor Item Actions Donor National environmental NEAP Bank (1993) Sector Develop action plans Bank policy environment _____ ___ policy Legislation and Complete UNDP/ Sector specific Develop sector regs, Bank regulations environment code UNEP/FAO/ regulations standards, norms Prepare environment Bank/lUCN/ regulations Dutch Impact assessments Develop capacity to Dutch Sector and site Develop guidelines Bank evaluate env. impact impact for mining assessments statements environment impact assessments National environmental Design and Bank Sector Design and implement Bank information system implement national environmental sector EIS and GIS EIS and geology information systems Decentralization and Strengthen local Denmark Local Put into place and Bank local consultation consultation process consultation strengthen capacity to explain for local consultation environment code on mining projects Capacity building Strengthen skills in Bank Sector capacity Strengthen skills in Bank MEW, CONAGES, building environment unit in DGPE MEM Environment education Design and conduct IUCN, Artisanal mining Design and conduct Bank national Bank environment environmental, health, environmental education safety training in education awareness artisanal mining areas campaign National water use Capacity building Bank Mining water Develop guidelines Bank and study on water use: sources and and standards for management discharge water usage and discharge by mining operations Training Skills development Bank Training in Train public and Bank on national level mining specific private sector in environment environment analysis and management skills Ik M:\LK\BURKINA\ANNEXA.DOC 05/22/97 9:15 am 44 ANNEX B (7 pags) PROJECT COST ESTIMATES AND FINANCING PLAN (Inclusive of all Local Duties and Taxes) BURKINA FASO MINING SECTOR CAPACITY BUILDING AND ENVIRONMENTAL MANAGEMENT PROJECT Sheet6 4 fev 97 _ _ _ - -_ _ _ rcmounMpcflaIoaSneftllaries Bid Package Intl Mo-nta -Local Mo-nths -Coat Year IYr2Yr34 " L Raoom Component Ss 422 -1 PFPvaratlOn ofLol eds _ _ MEMOGMG lCB-Cons 1 ApWlcallon Des Td- - MEMODGMG 1CS-Cons *SeniDr Resident Mining Attoniey - ME MIGM lCe-cons -- 1533.70 __ -Junior Atorney MEMIDGMG lCe-cons 1 - 12 38,W X X - -Regulatory SpecialS _ MEM,VGMG ICB-Conks 1 2 _ _ 6 67.500 ______ P Ip,wen nverfwdVvw MEM.DGMG [CS-Cons 1 0 -- 0 0 *Senior SheEt Tenn Attomney _ MEMJDGMG lCD-Cons 1 0 0 ___0 __ *Junior Attore _____ __ MEIfGMG lCD-Cons 1 ____ la__ 1 57.16-0 ______ *Regulaor Speclelt ______ MEMIEOGMG - CD-Cons I __ 0 0 ___0_ _ LCunel ,Aft ~ MEM42GMG lCD-Cons I -0 - a 0 T a*VinAApkelionof Low MEMIOGMG lCD-Cons I __ 0-- _ _ 0 ___0 _ Huronin Resource Developmnent Speclaant MEMiVDGMG ICS-Cons I -_ _-2 a 54,750 __x *Minin Regulaio Apicton Spec MEMCVGMG TCS-Co-ns I_ 4 0 1f31,3927 __ xx -Local Reglaory speciahi MEMIGGMG Ica-Cons I _ __0 10 76.543 MeoilooCqieClN ___ MELt/DGMG lC-osa __ 0 0 _ _0__ -Negocletkon SpesaiNi MSIGM CB-Conks 1 2 0 60.200 __x *Local Neotalon Splhst- iMEMO3GMG _ CD-Cons 1 -0 ____0 _ _ 0 LOCa Legal Co,etoe to AinisOY __ MEMOA,(MG_ NCD-Cons 1 0 _ 0 227.93 X X X S S x _ _ - -~~~~~~~~~~~~~~ - _ ralnno i Mineend E4 nviomnt Lmw M-7EM-MGMQ C-Cn 0 0 a -Guest lecurers MEMIDGMG jj I z - 7 0 220,048 *Local Conoulafto MEMA)GMG NCB-Cons 4 0 ~ j_55.469 5 51xX In-Courtry SentnrmkwCost MEMIDGMG Othier O!-oT0 50,0001 - Lega Reference USrary (6$10,0=0yr 4 yrs) MEM - CS-Cons 1 0 0 40.0001 EhLngugLampTreining(yseamnSO,0/) MM Tain 'O10000 _ X - - __- iternlational etai k!r MEM ICS-Cons 2 6 0 167,D000x Vehlmlde(2 4,o4) MEM ICB-Gonos I 0 ___ 0 147,000 X Cornputemn, soltare (1-0 untsjVtS~ 50 ah E4lDGos20 0.5 iTrainingarndStudyVtsts- MEMii -Truei- - 0 10o- -- S X- S-- X __i toncrenrnenal nratin Costs -MEM Other 0 _ 0 100,000 X Page 1 Sheelt - ~ ~~~~~~~~~2Sp9,Burkina aso: Project Sch dube _________ ~~~~~~~~~~~Mining and Envrnmna Manag Moit j Eownponent/Specifiesons B-n-fiiarie Sidt Paclkage Intl MontisLcl MotsCs er1- Ya 4Year 4 --Ye ------____ __7 __ 101 02 03 04J _01[02 03- C4 f01 02. 3 0 Q1 02 03 041 01 02 03 024 -MininV Tax Specialist end Mhrnrai EcnI it MMIG CECn 4 1 0 _17,250 X -Senior Mining Accountant IMEMWDGI ICE-on 4 -1 0 18.250 X Financial Ann"____ EMIIDGI ICE-o ns 4 -1 _____0 10,250 X -Local Tax Consultants MEM/OGI IC-onr. _ 0- 4 13.000 _ 2 21- - PIeparnion ofAchnihskativ InstrctiOns MEM/OGI lCS-Cons 4 _ ___ 0 0 L Mining Tax SpecialIs and Mireral Econoist MEMitGI ICE-Cons 4 1 5 24,500 21 *Senior Mhlhtg Acoountant MEMIDGI ICB-Cons 4 I 0 28,500 21 Financial__________ MEM/DGI ICE-Consl 4 __ 22,500D ~ 1 -- *Local Tax Consultants MEM/DGI ICE-Cons 4 0 28.000 _ _ X S- ___ InfftfonlsbK"MEM/DGI ICS-Comt 4 0 -- 0 0 -MiningTa-SopnIan anld Mineral Economis MM2G ICE-Cons A I__ 1 24.500 21- X- -FIscal InStUtuions Specialist __ MM/G CE-Cons 4 _ 1 ___ 0 _27,500 X - - Financial MEliA/OGI ICB-Cons 4 0 ____ 5 0_ _ _ -Loal TaitandlnstftutionalCostutants _ MEMt/DGI __ICB-Cons4 --- S a 5 29002 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ EM/OGI _ CE---nI4 - 0-o S0 _ _ _ S Mrining Tee/nTasg - - E/G _ ICE-Cons 4 5 0 0 _ 1 -Humnan Ransourc Deveiopnmnnnt Specialist !MEM,1DGI C-Cn 2 0 43.750 __ 5 21- -Local Mine Taxation Cnn aosMEMWDGI ICE-o04 -_ 0 20 72,887 __ 2 SX X 21 21x Mine Acconedatancy Troenn - -_MEM/DGI ICE-ConS4_ 0 0 5 - -_iigTX Specialist anid Mimeral Econostot IMEMWDGI C Co4T_ C -Senior Mining Accountant MMOI0 107,108 -x x 21X1 FinanciaMEMAnG" ICE-Cons 4 I__ 22,415 X 1- - -Local Mine Tanution Consuftants MMGI ICE-Cost 4 8 20,220 X 21_-< ____________________ MEM/OGI ~~~~~~~ICB-Cons 4 S _ _ _ 0_ -- -Mining Tax Specialist and Mionral Economist iMEM/OGI ICE-Cn 4 14 -Senior Mining ACCOUntant :MEM/DGl - ICE-Cost 4 1 0X553.2 x~- - ________Ala_rs MWEM/DGI 9374ICCE-Cons 4 ___ 3 a I----- 1 - xl x __ - -Local Mine Tasalon Consutants .MMGI __ ICE-Cons 4 0 --s 7 720 220 VNtWi Salscoofr Tax Trainnkg (ENAREF) .0 0 0 __ V----- *Senior TnFPnfessor EllAR-EF I CB-Coms 5- 0- 17000 X -Vnting Lecturers ENAREF ICE-Cons 5 4 0 13-1 7-43 2 -x , ----- -Local Tax Specialists and Consuotants 'ENAREF -NCE-Cons 5 '-- 247 037 -743i - -Professional Seminars ENAREF -Trin 0 0; 40,000 [ 1 21x 2 --Equipeent didoiqonu (ordinaleurs a.do-raisuni ENARE-F ICE-Goods 2 0 0 11 0 1 -- -Special Studiesand Twinning Fond - ,AE ri 0 0 120000 -operating costs -EIrAREF - Other o 00 F - -- ---- 0' 0 ~~~~0 intlAuditktainer hiMEM/GI ICE-Conse 6 170602 1 StudyVisits and Training MwiEM/OGI Train 0 0, 210,000 x 7 xx x x Yehicules (1 04) ~MEMWDGI ICB-GoodsI 0 0i78.0002 Computemrwosftwarn __ MEMJDGI ICE-Goods 2 0 0 _108,250, ._ X 21 , 1 InrmtlOetn ot $000y MEMAOGI Ohr0 o 100,000F _ Page 2 SheetO _____ ~~~~~~~~2-Se-8________- __-___ an.Fc: ProetSCdu __ _____ - _________ ____ - ______ ~~~~~~~~~~~~~~~Mining and EnvironetlMng nt Prjwc - - Comnponent/Spectficatlons ____ Beeficiarie-s Bi akg It mta Lcal Mo-nts Coat -Year Iea Year 3 - Year 4 - 5Ya _______ ______ ______ ~ i 2 03 04 01 02 03 04 01 0203 04 0102 3 04 01 02 03 04 __ns ____n __l_Component 43 T,049U118 * nstlutional specialistitesm leader ME-M/DGMG ICS-Consl1i __ 390,958 - S x I S- -Mining edrrnnstntion specialist MEMIDGMOG ICS-Cont; I -- 2 _ 0 -54000 __ __ T7 - *Sp iost in geolal sursy mnanagement MMGM iCCos13 - 0 7.70- X xF - - - pciehlh geenenenaaee MEMADGMG iCE-Coon I 3_ __ 0 740X _________ M~~~~~~__ EMfDGMG ICE-Consi 5 0 144992 - X x --x -Locaiconsatants ~~~~~~MEMIDGOG ICE-Cons I _ 0 _ 54 195,20 8 X X X x S S S S X X S Mkrhs TAle a-id Cadentf Administration MEMIDGMG ICS-Cons 1 5 ___ 0 0 -Sr. morink tItle spegelist MEMIOGM.G ICS-Cons I - 8___ 0 228,742 5 X xXX- - - - -Sr. GIS - Database rmanagement specelest _ ME~MIGMG -CS-Consl 0 79.700 X -Jr. CedWsre andGIS specialists MEMWtDGMG ICSmC-Ct a - 0 200,429 __ X S S X X S *nisffonntics techeicians MEM/DGMG ]CS-Cons 1 ' 0 23 039837 - -- -- 04nk En4eonwnentaiMnagement MEMWCEM -ICB-Cons 5 0 0 S S X X XL-X X- *MhinkVgeinfwntmeal menagement specialist MEMICEM ICS-Corns 5 10 25 370.807 - *Mining envirnmental enigineer - MEMICEM ICE-Cons 5 ___ 5 ____ i 170,323 X S S S Natural renouronen manageet elFt EILMGE CS--Cots501 24 4881,212 X S S Sx xitii 0-d-nist )~~~~~~~~~~~~~~~~~~~~EMBMIE CE-Cons 5 3 24 1740082
World Bank Group · Staff Appraisal Report
Burkina Faso - Mining Sector Capacity Building and Environmental Management Project
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World Bank Group
Document type
Staff Appraisal Report
Country
Burkina Faso
Source
World Bank