Zambia - Maamba Coal Engineering Project

Document of The World Bank ; V FOR OFFICIAL USE ONLY Report No. P-3431-ZA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO US$4.3 MILLION TO THE REPUBLIC OF ZAMBIA FOR A MAAMBA COAL ENGINEERING PROJECT February 18, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit Zambian Kwacha (K) SDR 1.00 K 1.28 US$ 1.00 K 1.20 K 1.00 US$ 0.83 (As the Zambian Kwacha is officially valued in terms of the SDR, the US Dollar/Zambian Kwacha exchange rate is subject to change. The US Dollar/Kwacha Rate expressed above was the rate prevailing in mid-February 1983). FISCAL YEAR Government: January 1 to December 31 MCL April 1 to March 31 ABBREVIATIONS HFO - heavy fuel oil MCL - Maamba Collieries Ltd. mtoe - million tonne of oil equivalent MW - Megawatt tpy - tonne per year UDI - Unilateral Declaration of Independence ZCCM - Zambia Consolidated Copper Mines, Ltd. ZESCO - Zambia Electricity Supply Corporation ZIMCO - Zambia Industrial & Mining Corporation, Ltd.  FOR OFFICIAL USE ONLY REPUBLIC OF ZAMBIA MAAMBA COAL ENGINEERING PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Zambia. Beneficiaries: Zambia Industrial and Mining Corporation Limited (ZIMCO) and Maamba Collieries Limited (MCL). Amount: SDR 4.0 million (US$4.3 million equivalent). Terms: Standard. Relending Terms: The proceeds of the Credit would be onlent by the Borrower to ZIMCO repayable in 15 years, including three years of grace, at a fixed interest rate equal to the IBRD rate at the time of Credit signing. ZIMCO would pass on to MCL as a contribution to equity those portions of the Credit directed to finance the feasibility study and training (US$ 1.3 million). The remainder of the Credit directed to finance the cost of critical spare parts and components and quality control equipment (US$3.0 million) would be onlent by ZIMCO to MCL for a period of seven years, including two years of grace, without addition of any service charge by ZIMCO. The Borrower will bear the foreign exchange risk. The Association would reserve the right to refinance the Credit under any subsequent credit or loan the Bank Group may provide to finance a coal mine rehabilitation project. Project Description: The Project would support the Government's efforts to diversify Zambia's energy consumption away from high cost petroleum fuels by determining the technical and economic viability of rehabilitating the Maamba coal mining operation in southern Zambia. The Project would consist of the following components: (i) technical and economic feasibility study for reorganizing and rehabilitating the Maamba mining complex, including an examination of coal pricing and marketing and a review of Maamba Collieries' technical and managerial constraints and personnel training needs; (ii) procurement of critical spare parts and components needed to keep the mining complex operating during the study period and quality control equipment for the coal preparation plant; and (iii) training of key technical personnel for the implementation of the repair and maintenance program. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii- The Project would help the Zambian authorities to determine if additional investment for a major rehabilitation of the colliery is economically and technically justified, while providing spare parts to ensure that the mining complex continues to operate during the study period. Special Risks: The risks facing the Project relate to the weak and inexperienced management of MCL and the possibility of non-availability of foreign exchange resources to match IDA financing for spare parts. The technical assistance and other implementation arrangements included in the Project address these risks. Estimated Cost: The estimated cost of the Project, exclusive of taxes and duties from which the Project is exempt, is as follow: Foreign Local Total