Colombia - Coal Exploration Project

D_nat of The World Bank OFMCAL VUE oNy Rupat N 12341 PROJECT COUPLETON REPORT COLOMBLA COAL EXPLORATION PROJECT (LOAN 2349-CO) SEPTEMBER 23, 1993 MICROGRAPHICS Report No: 12341 Type: PCR Industry, Trade, Finance, Industry and Energy Operations Country Uepartment III Latin America and Caribbean Region Tkis document has a rtid dstributon aod may be used by rcipos only in te perfornceu of thdr offlicial duies. Its contes ay not othwwwse be dicosed without World Bank authorzation.  PRQ113aCOMPPIJL LOAN 24< ABBREYIAlQtS CARBOCOL Carbones de Colombia, S.A. DNP Departmeo Nacional de Planeaci6n ECOMINAS Empresa Colombiana de Minas ECOPETROL Empresa Colombiana de Petrdleos FNC Fondo Nacional de Carb6n (National Coal Fund) FONADE Foado Nacional de Proyects de Desarrollo (National Fund for Development Projects) INGEOMINAS Instituto Nacional de Investigaciones Geoldgico- Mineras ISA Interconexi6n Electriza, S.A. MME Ministerio de Minas y Energfa PR RePort and Recommendation of the President of the International Bank for Reconstruction and Development tpy metric tonnes per year UNDP United Nations Development Program CURRENEUALENTS At Proiect Appraisal (July 19831 US$1 = Col$ 78.61 Col$ I = US$ 0.10272 At Project Completion Report Preparation (MLarch 19931 US$1 = Col$ Col$1 = US$  FOR OFFICAL USE ONLY THE WOWLD BANK Washngh, D.C. 20433 USA OM" of DIr.otoi.em ' Op Evlon September 23, 1993 SUBJECT: !roject Completion Report on Colombia - Coa Exploratlo Yroject (Loan L11 Attached is the Project Completion Report on Colombia - Coal Exploration PzqJiect oan 2349- CO) prepared by the Latin America Regional Office. Pan H was prepared by the Borrower. ITe PCR is of satsfactoy quality. It ccludes that the original objecdve of establishing a solid basis for maldng investment decisions for coal use has been achieved. The institutional stngtnin of Carbones de Colombia SA (Carbocol) in the ateas of contractig for coal development, geological evaltion, coal marketing and financial planing, has also been substantially achieved. In the course of implementation Carbocol decided to focus exploratory work on only two of the six deposits envisaged in the project The resut was the delneation of two large deposits at Alto San Jorge and El Descanso. While the cost of extraction and the coal quality at Alto San Jorge make the mine suitable for mine-4ead electric power generation, the larger El Descanso deposit could be developed for expors. This latter deposit has already been offered to the private sector for development but the depressed stt of the international coal market and the problems with El Cerrejon project have worked against such an outcome. Nonetheless, El Descanso deposit remaim a likely candidate for development once international markets for coal improve. This project was prepared at a time when the Cano Limon petroleum field had not yet been discovered in Colombia and coal was, therefore, considered to be the preferred energy resource for the Colombian economy. Moreover, during the early 1980s, the world still expected a potentially near teWn petroleum shortage and coal exploration and development was very much the order of the day, especially for exports. Given the positive outcomes of the exploratory work and the technical assistance received by Carbocol, the benefits of the project are considered to be sustainable. An audit of this project is not planned. Attachment This documenthasa ticd ditibutionand may be used by recipients only in the performnof their official duties. be cents may no othewi be disclosed without Word athorza  FOR OMCLAL USE ONLY PROJEaCQMLEUQO REPORT COLOMBIA COAL EXPLORATIOQN PROECT LOAN 2349 C;0 Table cf Contet Preface ..................................... i Eva!uatlonSunmawy .................. .................. ii PART 1: Review from the Perspective of the Bank Proiject Identity ................................... 1 Background .................................... I Project Preparation, Design and Organization ................................. 3 Objectives and Description ................................... 5 P>rojectlinplementation ......................................... 5 Project Results .......... 7 Sustainabiity of Projet Beneflts .................... 10 ConsultingServices .................... I1 ProjectIDocumentation ....................... 11 rroject Relationsbips .................... . 11 Performance of the Borrower .................... 11 Performance of the Bank .................... 12 Perfornance of UNDP .................... 12 C onclusions and Lessons Learned. .L eare 12 PART I: Revlew from theP rPpecdveoftheBorrower ....................... 14 PARTIII: Statisticallnfornadon ................*...................... 23 Previous Related Bank Loam ....................................... 24 Project Timetable ...................................... 24 Cumulative Loan Disbursements ..................................... 25 Implementation Indicators ....................................... 26 Project Costs ..................................... 27 Project Financing . . . ..................................... 28 Project Results ..................................... 29 Status of Project Covenants ...................................... 32 Use of Bank Staff Resources ...................................... 35 This document has a restricted distribution and may be used by recipients only in the performance of their officia duties. Its contents may not otherwise be disclosed without World Bank authorization.  -i PROECT COMPLETIO REPORT COLOMBIA COAL EXPLORA=ION PROJECT LOAN NO, 23492C - ~~PREAa This is the Project Completion Report (PCR) for the Colombia Coal Exploration Project (Loan No. 2349- CO). The Board approved this project on October 11, 1983 for a loan amount of US$9.5 million. The ortginal closing date for the project was January 31, 1988 but after two extensions the loan account closed on January 15, 1992. The Bank disbursed a total of US$6.3 million and cancelled US$3.2 million, of which US$1.7 million were cancelled at an earlier date. The Industry, Trade, Finance and Energy Operations Division prepared the review of tie project from the Bank's perspective (Part 1) and basic statistical information on the project's execution (Part III). Carbones de Colombia, S.A. (CARBOCOL) prepared the review of the project from the perspective of the Borrower (Part II). The basis for Parts I and HI consists of the President's Report, the Loan Agreemc,nt, project files, discussions with Bank project supervisory staff, and corresponce and discussions with Carbocol.  ii- PROJECrT CQMPLEllQ REPOR COLOMBICOAL fl,AQ PROJECr LOAN N. 2349O EX&LUATION SUMMARY i. As part of the Colombia's Economic Plan for 1982-86, the Government had a two-fold objective for developing Colombia's abundant coal resources: (a) meeting part of Colombia's energy requirem with coal instead of oil, thus saving foreign exchange and (b) expanding the country's export earnings to generate foreign exchange for development programs. To achieve these objectives, the focus of the Government strategy was on attacting foreign risk capital for "ploration and, evenually, joint venwes for coal producdon with Carboco!, the national eoal company. The Goverment had fcussed on areas near the Adantic coast as a priority region for coal development. The rtionale for this was that because of their proximity to ocean transpor, coal production in these areas could serve both domestic and export markets. MTe Coal Exploration project (Loan No. 2349-CO) was part of this exploration strategy (pars 2.1). Ubiectives ii. The project had two fundamental objectives. The first was the establishment of a solid basis for making decisions on investment options for coal use. To this effect, the exploration component of the project was to evaluate coal reserves and deposits in sir. areas, well-situated for domestic use and expors. All areas were within a 250-Km distance of the Atlantic coast; therefore they had export potential and also were in a good position to serve the largest consumption centers in northern Colombia. Carbocol had exclusive rights to coal development in the selected areas: San Jacinto, San Jorge, San Pedro, La Loma, El Paso, and El Descanso. The second objective was to strengthen CaWocol institutionally, to handle its increasing responsibilities in the areas of contracting for coal development, geological evaluation, marketing and financial planning. The total cost of the project was estimated at US$17.8 million of which the Bank was to finance the foreign costs of US$9.5 million and Carbocol the remaining US$8.3 million. In Part 3, Tables 5 and 6 provide a breakdown of these costs and their financing. Project W=Mpeniofu and Results iii. According to the project implementation schedule shown in Part 3, Table 4, the project originally was to take about five years However, it actually took about eight and a half years to complete the project, from the date of Board approval (October 1983) to the project completion date (May 1992). The Bank extended the closing date for the project twice. There was an initia delay of eight months in the project's execution due to a four-month delay in loan signing and lengthy evaluation of proposals and negotiations with the exploration consultants. After preliminary geological work, Carbocol decided to focus on the exploration of two deposits - Alto San Jotge and El Descanso- istead of the six deposits as envisioned during project appraisal (para 5.4). Furthermore, the exploration work on the El Descanso deposit did not begin until 1987 because of unsuccessful, protracted discussions which Carbocol held with private companies in the hope of obtaining private funds for the prefeasibility work instead of using Bank funds (para 5.2). Also, major changes in Carbocol's management in 1984 and 1986 reportdly  -iii- contributed to the delay in the implementation of the technical assistance component. At project appraisal, total estimated project costs were US$17.8 million, supported by an original Bank loan amount of US$9.5 million. However, because of the reduction in the number of deposits on which exploration work was focused, actual project costs were US$13.2 million of which the Bank loan financed US$6.3 million and Carbocol financed the rest (Part 3, Tables 5 and 6). The project resulted in coal discoveries at both Alto San Jorge and El Descanso. Project fih. ings indicate that the development of Alto San Jorge would be feasible only to feed a minemouth powir plant, while the El Descanso deposit, which preliminary findings indicate to be among the largest coal deposits in the world, would be economically viable for exports. The technical assistance which the project provided was instrumental in: (a) helping Carbocol rationalize its organizational structure, (b) providing Carbocol with a range of options for improving Its coal marketing strategy, and (c) establishing a methodology for negotiating and contracting with third parties for coal development (paras 6.56.12). Sgstainability of Project AchievemoenI iv. On the exploration side, the major sustainable benefit is the acquisition of the technology and the training to do geological prefeasibility studies providing preliminary information on coal deposits. Carbocol has the prefeasibility studies of Alto San Jorge and El Descanso for reference, which the company can use in its decision making on coal development. Whether Carbocol decides to develop Alto San Jorge will depend on the decision of the national electric power company to build a minemouth coal- fired power plant. Carbocol will not develop the El Descanso coal deposit in the immediate future since they estimate that other coal development projects with considerable export potential, about 35 to 37 million of tons per annum by the end of the decade, are in a more advanced state of preparation. Given Carbocol's improved capability for geological work and current policy of contracting exploration work to private parties, it is unlikely that Carbocol will be requesting Bank finds for exploration in the fiture. Finally, it appears that technical assistance in strategic planning and marketing has had an impact on Carbocol's organizational structure and marketing strategy. Carbocol currently has plans to separate into two entities: (a) a commercial operation for the El Cerrejon production partnership and (b) an agency representing the state in exploration work, contract negotiation with private investors, technical support to small-scale miners, supervision of health and safety regulations, etc. Also, Carbocol is considering options which the marketing study recommended for low-cost expansion of coal production in areas that currently are producing. Conclusions and Lessons Learned v. In hindsight, neither the Bank, the Government, nor Carbocol had an adequate long-term view of their respective roles in the coal mining sector. The design of the project reflected an attempt of the Bank to maintain some involvement in all aspects of the coal sector - exploration, marketing, financial planning, etc., after it had become clear that the Bank would not be participating in the large El Cerrejon project. However, during the project's execution, Carbocol's philosophy, regarding state participation in the coal subsector evolved to limit the use of state funds and to use private sector funds as much as possible. Thus, Carbocol decided not to do the feasibility work on its own but leave it for the private sector, and limited the use of Bank funds to the prefeasibility level. The policy of encouraging the use of private sector risk capital, for preliminary exploratory work, reflects current Bank philosophy which was not necessarily the case at the time of the project's design. However, the exploration component  -iv- was successful and resulted in the discovery of a major, world class coal deposit. TMe methodology of phasing exploration work, with independent reviews at the end of each phase, worked well, preventing Carbocol from spending additional resources on areas without significant coal potential. The technical assistance component helped develop a capability within Carbocol to do preliminary geological work, which, combined with the assistance received in contracting for coal development, should help Carbocol promote private sector exploration work. Furthermore, assistance in stategic planning and marketing were instrumental in helping Carbocol rationalize its oiganization structare and explore new marketing options for the coal. In terms of technical assistance, the Bank learned the importance of developing clear, realistic objectives for individual project components, ensuring that project design supports these objectives. For example, the Bank included a financial planning study as part of the project because Carbocol had taken on a very large debt under the Cerrejon project and needed to develop a capitalization plan; also, the Bank seemed to have had some doubts about the projections which served as a basis for investment recovery. Carbocol never did the study and the Bank did not have sufficient financial leverage to insist on it, since the original loan amount was only for US$9.5 million and there was no loan conditionality specifying specific financial perfbrmance targets.  PROJECT CoMPLEiOaN REiPORT -CDLD_1IA- COAL BEWLORA31ON ,lRC)Wi n2349-CO 1. P1101M DNllw VProjec !'ante Coal Exploration Project anNmber; ;. 2349-CO eto.rs v:a:xIndustry and Energy Subsec_or i' ..'t' Mining Itetlonat Vice PresldVocy Latin America and the Caribbean 2. BACKGOUND 2.1 NatIonal Economic Plan (1982-86). Colombia's 1982-86 Economic Plan provided the macroeconomic context for the Coal Exploration Project. The major theme of this plan was 'growth with equity" - expanding economic growth, decentralizing economic activity and linking regional growth centers through improved infrastructure. The plan also stressed the development of the energy sector as a priority. As part of the Plan, the Government had a two-fold objective for developing Colombia's abundant coal resources: (a) meeting part of Colombia's energy requirements with coal instead of oil, thus saving foreign exchange and (b) expanding the country's export earnings to generate foreign exchange for development programs. To achieve these objectives, the focus of the Government straegy was on attracting foreign risk capital for exploration and, eventually, joint ventures for coal production with Carbones de Colombia, S.A. (CAPR30COL), the national coal company. The Government had targeted areas near the Atlantic coast as a prikrity region for coal development; the rationale was that because of their proximity to ocean transport, coal production in these areas could serve both domestic and export markets. 2.2 Coal Quality and Reserves. Most of Colombia's coal is bituminous (6,000 KcaUKg) with a low sulphur content, less than one percent. These properties make the coal particularly attractive for use as "steam coal", the type of coal used for producing thermal power to generate electricity. Also, some coal in the central part of Colombia has coking properties, which make it a useful feedstock for the production of steel. At the time of project appraisal, estimated coal resources were 16 billion tonnes of which only 20 percent were classified as measured reserves. 2.3 Coal Production and Consumption. Colombia, at the time of project appraisal, was producing about five million tonnes per year (tpy) from some 400 small and medium-scale mines, mines in central Colombia, operated by the private sector. More than half of all production and consumption was in the bighlands near Bogota. Industry was consuming about 60 percent of production with power generating facilities taking the rest.  2 2.4 Coal Pricing. Coal prices, set by the market, ranged between US$25 and US$35 per tonme delivered to large consumers in the industrial centers of Bogota, Medellin or Cali. Although these prices were well below international prices at the time, the coal was not competitive for export because of the high cost of transporting it to the coast. 2.5 - InstItutional Framework for Coal Development. 1*a Ministry of Mines and Energy (MME) was responsible for overseeing policies for the mining and energy sectors. It also regulated private sector involvement through granting exploration licenses and development concessions. MME shared this responsibility with the national planning agency (DNP). The Colombian Government establishrJ CARBOCOL, the national company for coal development, in 1976. While the Colombian Government is the sole owner of the company, both MME and the Superintendency of Corporations jointly supervise CARBOCOL. 2.6 Profile of CARBOCOL. CARBOCOL, the Borrower for the Project loan, is Colombia's state mining agency for coal. It has a variety of functions, including (a) coal exploration, production processing and marketing of coal, on its own or in conjunction with the private sector; (b) technical assistance to small mines; (c) control of health and safety; and (d) representation of the state in negotiating contracts with third parties for new projects. At the time of project appraisal (1982), CARBOCOL already had entered into a 50:50 joint venture with INTERCOR, a subsidiary of Exxon, for the development of the Cerrejon North project, the largest investment venture in the country, amounting to US$3.3 billion. Oriented entirely toward exports, the Cerrejon project was to develop a 15 million tonne per year (tpy) open-pit mine, which required a considerable amount of new infrastructure, including a railway, a port, two airports, two townships and several other related facilities. 2.7 CARBOCOL also was involved in several projects other than the Cerrejon project. The company was in the process of preparing the Cerrejon Central project scheduled to produce 1.5 million tonnes per year (tpy) upon completior The total investnent for this project was estimated at US$40 million. In addition to the projects in the Cerrejon region, the private sector, with IFC flnancing, was involved in the development of a project in the San Pedro Basin. About three years prior to the Coal Exploration Project, CARBOCOL had expanded its staff nearly threefold, to 300. This expansion was a response to CARBOCOL's partnership in the massive Cerrejon North Project, which outpaced the existing administrative structure and management information system in the company. Complementing the personnel expansion, CARBOCOL needed strengthening in its capabilities for project overall management, information systems for management, coal marketing, exploration, financial planning, and contracting for coal development. Since 1979, the Bank and the United Nations Development Programme (UNDP) had been providing CARBOCOL with technical assistance covering an evaluation of the Cerrejon North Project (1979-82) and strengthening project management and information systems. In addition, CARBOCOL had been receiving technical assistance from Germany on coal exploration in the Bogota highlands. 2.8 The Cerrejon project was a major financial involvement for CARBOCOL. According to the President's Report (PR) on the Coal Exploration Project, CARBOCCO's authorized capital at project appraisal was US$150 million of which US$109 million was paid-in. The company's net fixed assets were US$280 million and its total debt was US$210 million. The PR of the project noted that CARBOCOL's financial condition would be heavily influenced by its large financial contribution to the El Cerrejon North project. As a result of this participation, by 1988, CARBOCOL's long-term debt was  3 to increase to US$1.1 billion and its paid-in capital to some US$1 billion resulting from a capitalization program which the Government and CARBOCOL had apprtoved at appraisal. 2.9 Projected Coal Production and Consumption. The Government was planning a six-fold increase In coal production from 5 million tons in 1980 to 30 million tons in 1990, of which all the thermal coal produced (about 20 million tons) was designated for export. Domestic consumption of coal was expected to inc'ease at 6.7 percent annually, rising from 5 million tonnes in 1981 to 9 million tons in 1990. International trade in thermal coal was expected to increase substantially, from 90 million tonnes in 1980 to 200 million tonnes in 1990. 3. PROJECT PREPARA1ION, DESIGN AND QRGA3NZATIUN 3.1 Project Origins and Appraisal. The Project evolved originally from a coal engineering project which the CARBOCOL and the Bank had prepared in 1977, consisting of exploration and feasibility studies on two coal deposits. INGEOhMNAS, the Colombian geological survey agency, had done the basic geological work, which included field reconnaissance along with topographical and geological mapping. The appraisal of the earlier proposed coal project took place in 1979, but CARBOCOL's management requested the Bank not to process the project further until they could make arrangements to obtain the local financing required. The Bank continued to follow developments with CARBOCOL and expanded the scope of the project considerably in 1982. Originally, the Bank envisioned participation in the large Cerrejon coal exploration project but CARBOCOL instead entered into a joint venture agreement with !NTERCOR, an affiliate of Exxon Corporation. As a result, the Bank Instead concentrated on exploration of other areas and institutional strengthening of CARBOCOL. 3.2 CARBOCOL prepared the project, which the Bank appraised in October/November 1982. The Decision Memorandum of the project raised several issues concerning the project's implementation and scope. First, there was a need to establish a clear role for the private sector in mineral development. To do this, the project needed to focus on (i) increasing the knowledge of mineral reserves to assess the country's mining potential and (ii) define a legal framework which would promote private sector interest in the exploration and development of promising mining areas. Second, the Bank noted that CARBOCOL had prepared the project carefully and well but was concerned that the company required more experienced staff to implement the project. So the Bank agreed with CARBOCOL that it would establish a Project Unit within its Technical and Planning Department and staff it with experienced engineers and geologists. The project was to adopt a phased approach toward the exploration work, whereby the Bank would approve the move from the preliminary geology phase in a given area, to the prefeasibility stage, and, if warranted, to the feasibility stage. The purpose of this design was to ensure an independent review of the exploration consultant's recommendations at each stage before proceeding to the next one. As a result of a post-appraisal mission to Colombia in January 1983, there was agreement to substitute, among the various coal regions selected for investigation, the El Descanso region for the Canaga and La Jagua coal region. Second, there was agreement to drop the provision for CARBOCOL to do one feasibility study on its own since the Government expressed concern about minimizing costs, opting instead for the use of private sector funds to the maximum extent possible. 3.3 Negotiations and Board Approval. Project negotiations lasted longer than expected due to the need to reach agreement on arrang!ements for financing loc costs, the use of external auditors and permission for CARBOCOL to create liens in obtaining local financing. Regarding the financing of local  4 costs, the Bank originally had stipulated, as a condition of effectiveness, that CARBOCOL obtain a loan from FONADE and a grant from FNC for financing the local costs of the project. But subsequently the Bank was satisfied with provisions added to the Loan and Guarantee Agreements. For the auditing provisions under the project, the Bank agree to accept, temporarily, the National Controller's Officer as auditor of CARBOCOL, since this organization was responsible for auditing the accounts of alI public sector agencies. But beginning in 1984, CARBOCOL was to engage private auditors. Finally, the CARBOCOL requested that the Bank waive Its restrictions on creating liens in borrowing from domestic institutions, pointing out that most local financial institutions required liens when lending to an individual enterprise reached a certain level of exposure. The Bank did not agree to this waiver out of concern that CARBOCOL might acquire significant liens resulting from local funding requirements. 3.4 The Bank presented the project to the Board in October 1983. Discussions at Board presentation raised some concern about the adequacy of incentives in Colombia for private investment and CARBOCOL's heavy reliance on multilateral financing. However, Bank staff cited the El Cerrejon Project as evidence of a major joint venture with private foreign investment and the fact that CARBOCOL had begun to diversify its sources of financing, pointing to a recent loan from Chemical Bank. 3.5 The final design of the project included two components, an exploration component and a technical assistance component. The design of the exploration component, reflected a cautious, phased approach to minimize the exploration risk for CARBOCOL. The technical assistance component focussed on improvements in the following areas, where CARBOCOL needed institutional strengthening: (a) Coal Marketing. A plan was necessary to provide for the expected high volume of coal sales expected from CARBOCOL's projects, especially at El Cerrejon. (b) Coal Exploration. CARBOCOL needed assistance in economic geology and the design of a geological data base. (c) Financial Elanning. The company needed to develop a plan to raise substantial amounts of capital from a variety of sources. (t) Contracing for Coal Development. CARBOCOL needed to define more clearly the conditions governing foreign investment in Colombian coal in an internationally competitive setting, in order to make private sector investment more attractive. The Bank's Board of Directors approved the loan on October 11, 1983. 3.6 Project Organization and Administration. CARBOCOL established a Project Unit under its Technical and Planning Department to organize the technical work and cost control under the Project. This Unit, staffed with three geologists and three engineers, reported to the Manager of th- Technical and Planning Department. For the exploration component, the Unit was to be responsible for procurement and administration of consultant services. In supervising the Technical Assistance (TA) compon(cft, the Unit was to work with the line departments responsible for the specific areas receiving the assistance. These individual departments were to prepare short lists of consultants and terms of reference. The rationale for this arrangement was to provide CARBOCOL with a small, flexible set-up for project execution and an adequate mixture of staff not found in any other single unit in the company.  5 The set-up also allowed the flexibility to change the size and composition of the unit depending on the needs of the exploration work. The Bank made adequate staffing of the unit a condition of loan effectiveness. 4. PROJEC OBJECTIVES AND DESCRIPTION 4.1 The President's Report (PR) for the project cites two fundamental objectives and their related project components. The first objective was the establishmentof a solid basis for making decisions on investment options for coal use. To this effect, the exploration component of the project was to evaluate coal reserves and deposits in six areas, well-situated for domestic use and exports. All areas were within a 250-km distance of the Atlantic coast. Therefore, they had export potential and were in a good position to serve the largest consumption centers in northern Colombia. CARBOCOL had exclusive rights to coal development in the six selected areas: San Jacinto, San Jorge, San Pedro, La Loma, El Paso, and El Descanso. The exploration strategy for these priority areas called for staging the various activities in three phases to insure the implementation of costlier steps ordy after review of the previous phase and justification for the move to the next one. Phase I was to cover research and interpretation of available data, photogeological studies and some initial field work. Subsequently, using this data, Phase 2 was to consist of reconnaissance drilling and detailed geological mapping of selected zones. Fnally, given successful drilling ai4 mapping, Phase 3 was to follow, comprising prefeasibility studies to assess, in preliminary terms, whether mining operations would be viable from a technical, financial and economic point of view. The second objective was to strengthen CARBOCOL institutionally, to discharge its increasing responsibilities in the areas of contracting for coal development, geological evaluation, marketing and financial planning. The total cost of the pro) -..c was estimated at US$17.8 million, of which the Bank was to finance the foreign costs of US$ 9.5 million and CARBOCOL the remaining US$8.3 million. In Part 3, Tables 5 and 6 provide a breakdown of these costs and their financing. 5. PROJECT IMPLEMENTATION Project Timel_ine 5.1 According to the project implementation schedule (Part 3, Table 4), the project originally was to take about five years. However, it actually took about eight and a half years to complete the project, from the date of Board approval (October 1983) to the project completion date (May 1992). Supervision reports indicate that there was an initial delay of eight months in the project's execution d':e to a four-month delay in loan signing and lengthy evaluation of proposals and negotiations with the exploration consultants. Furthermore, the exploration work on one of the two deposits which the project had decided to investigate through the prefeasibility stage did not begin until 1987. The reason for this is that CARBOCOL held protracted discussions with private companies in the hope of obtaining private funds for the prefeasibility work instead of using Bank funds. Also, major changes in CARBOCOL's management in 1984 and 1986 reportedly delayed the implementation of the technical assistance component. 5.2 Reserve evaluation ard feasibility studies, originally scheduled for the period April 1984 to 1985, actually took place between November 1984 and December 1991. The exploration work of the  6 project ultimately focussed on two areas: Alto San Jorge and El Deebcanso, instead of six areas cited at project appraisal. CARBOCOL contracted for exploration work on Alto San Jorge first and the prefeasibility work was complete in 1987. But there was a major delay in the completion of the work on El Descanso. After the loan became effective in July 1984, CARBOCOL entered into negotiations with two private foreign groups interested in the exploration and exploitation of El Descanso: Charbonage de France and Agip Carbone of Italy. Both groups had shown interest in the development of coal in the El Descanso area and CARBOCOL's exploration strategy was to use external funds as much as possible for risky exploration work. However, these negotiations did not result in any exploration agreement. So, by the completion of the work in San Jorge (June 1987) the exploration work for El Descanso was still in the bidding stage. The Bank estimated that the work would take between 36 and 42 months to complete from this date and decided to grant an extension for two years, until 1990 with the intention of evaluating a second two-year extension depending on the progress of the work. In 1989, the Bank decided to grant another two-year extension, until January 1992, to proceed with prefeasibility work at El Descanso given the completion of successful exploratory work which indicated that the area could have one of the largest coal deposits in the world. 5.3 About three and a half years after loan effectiveness, at the end of 1987, the Bank bad disbursed only US$89,000 compared to planned technical assistance of US$1.0 million. Supervision reports attribute delays in the eady part of the project to changes In management. However, during 1988- 92, there was significant progress in the implementation of the TA which at project closing amounted to about US$0.9 million. Change in Proiect Sco 5.4 The PR had identified six project areas for the concentration of the work of the exploration component. But CARBOCOL decided to limit target areas to two - Alto San Jorge and El Descanso -- based on the results of preliminary geological work and on legal considerations. Another change took place in the scope of technical assistance for institutional strengthening. CARBOCOL decided not to do the financial planning study. Instead, CARBOCOL requested a Strategic Planning Study, which the Bank and CARBOCOL had not included in the original design of the project. Project Cost and Financing 5.5 At project appraisal, the estimate of total project costs was US$17.8 million and Bank financing of foreign costs was US$9.5 million. However, actual project costs were US$13.2 million of which the Bank loan financed US$6.3 million and CARBOCOL financed the rest (Part 3, Tables 5 and 6). At the request of the Borrower, the Bank cancelled the remaining US$3.2 million. Project costs were lower than originally planned mainly due to the decrease in the amount of the exploration component, given CARBOCOL's decision to focus the exploration component on two areas instead of six as originally planned. Parallel UNDP TA Proiect 5.6 During the implementation of the Project, the Bank also acted as executing agency for the UNDP Technical Assistance Project (COL-82-026) with CARBOCOL. This project complemented the TA under the Bank project by covering areas identified in the PR as requiring strengthening but not covered in the Bank project. Specifically, the UNDP TA project focussed on making CARBOCOL an  7 effective counterpart to INTERCOR, to ensure adequate attention to the interests of the State in the partnership. To this end, the project was to improve CARBOCOL's technical and managerial capabilities in: (a) project design, (b) cost estimation and scheduling, (c) programming and financial control, (d) the overall supervision of the operation and administration of the Cerrejon Complex and (e) the inclusion of provisions in design which would allow for the future expansion of the complex. The UNDP Terminal Report on the Project concluded that the TA project had accomplished its major objectives, making CARBOCOL a viable entity with sufficient competence to handle its part of the Cerrejon North project and take on partnerships with private operators for the development of other coal projects in the country. Environmental Concern 5.7 During project implementation, project supervision staff looked into the adequacy of environmental regulations for mining in Colombia. In this regard, the Bank noted that Colombia (a) had passed a mining law in December 1988 which set forth environmental obligations of mines and mining companies and (b) had prepared a number of environmental impact studies indicating a reasonably high level of public awareness for the environment. 6. PROJECT RESULTS Expected Achievements 6.1 As indicated in the PR, the project was to have two major direct benefits: (a) broader lnowledge of coal resources to assist decision making on Colombia's coal development potential and (b) improvement in CARBOCOL's capability to exercise its responsibilities in the coal sector and acquire the information and skills necessary to negotiate with potential investors. Furthermore, the PR identified three indirect benefits that also could be associated with the project if it discovered a commercially viable coal deposit: (a) estimated aggregate production of 15 nillion tonnes per year resulting from coal discoveries under the project; (b) improvement, over the long term, of the country's trade balance through expanded coal exports; and (c) foreign exchange savings through the substitution of ccal for imported oil. While the two direct objectives have been broadly achieved and the possible future exploitation of El Descanso could improve Colombia's trade balance, discoveries under the project have not yet resulted in any coal production. Details are presented below. Direct Benefits of the Exploration Compopent 6.2 Alto San Jorge. The study estimated coal reserves to be about 515 million tonnes. The main characteristics of the coal in the area selected for sampling are (a) a thermal value of 4,921 kilocalories (Kcal) per kilogram (Kg); (b) volatile matter of about 36 percent; ash content of 8.8 percent and sulphur content of 1.05 percent. Based on the project location, the quality of the coal, and the availability of hydro resources, it is likely that the development of a coal project for a mine-mouth power plant would be economically viable. The cost of coal delivered at the northern coast of Colombia, US$37.95 per tonne, would not be viable for export at present or in the foreseeab;e future. For the use of the coal in a minemouth power plant, the study recommended analyzing the economics of the project in more detail. The Government was to evaluate this option in the context of the national energy plan, for which the study recommended further work in the areas of geology, geotechnics, hyrology and environmental impact.  8 6.3 El Descanso. The prefeasibility study for this deposit focussed on one block with estimated reserves of 923 million tonnes, which the consultant selected for the mining study. A preliminary analysis of the coal showed low amounts of ash and sulphur, characteristics important for export quality steam coal for use in electric power plants. These characteristics are as follows: (a) thermal value of 6,324 Kcal per Kg; (b) volatile matter of 35.54 percent; (c) fixed carbon of 48.54 percent; (d) ash content of 5.29 percent; and (e) sulphur content of 0.59 percent. The study estimated that in order to produce an internal rate of return of 12 percent, based on the cash flow without taxes, the price at the port would have to be US$29.3 per tonne for a production level of 12.5 million tpy and US$32.84 per tonne for a production level of 10 million tpy. Based on cost estimates including port handling and royalties, the study estimated the FOB price of El Descanso coal to range between US$ 32.9-32.6 per tonne for 12.5 million tpy and US$35.3-40.3 per tonne for 10 million tonnes. Based on 1990 information, the study found that these prices would be commercially attractive for a 12.5 million tpy but less so for 10 million tpy. lThe prefeasibility study for El Descanso coal recommended the following work to complement the prefeasibility work: (a) additional coal sampling and analysis to conflrm coal characteristics critical to competitiveness on the international market; (b) better determination of the optimal design of the port and the coal price required to take account of an adequate retmn on port investment and establish the FOB price of the coal; (c) additional drill holes in the mining area to increase knowledge of coal reserves; (d) continued monitoring of rail transport options for the project; and (e) incorporation of criteria for conservation and compensation of forests in the designs of the mine as well as the tram route between the mine and the principal rail line. Direct Benefits of the lnittional Components 6.5 Contracting for Coal Development. This study took place in three phases. In the first phase, international and Colombian experts discussed potential modification of the Mining Code, past experience with coal contract negotiations and the perception of investment risk in Colombia. In the process, they updated a comparative study of the legal regime for coal mining investment in Colombia relative to that of other countries competing with Colombia for foreign investment. The second phase identified the most important risks for the Government in coal development, prepared a financial evaluation model and reviewed the perceptions of investors concerning coal development in Colombia, including political risk, and criteria for financial analysis. In 1988, Colombia enacted a new Mining Code which clarified and consolidated laws related to all mining activities in Colombia. The TA for coal contracting developed a model mining agreement for coal which, as a supplement to the new Mining Code, Colombia could use in its contract negotiations. The third phase of the contracting study focussed on the contract negotiation process and prepared a guide for negotiations with sufficient flexibility for adaptation to a variety of contractual situations. The study recommended that Colombia institutionalize the negotiating process by establishing and training interdisciplinary negotiating teams. These teams would act as mediators between the country's decision makers and the investors, encouraging objectivity in decision making and optimal use of the country's resources. The study produced several reference documents which provide the details on the methodology and process developed covering contract negotiation, coal mining legislation, potential foreign investors in Colombia, risk analysis and guidelines for negotiations. 6.6 Geological lNdelling. CARBOCOL, with funds from the project, acquired a computer and specialized software for constructing a geological data base and doing detailed geological analysis of areas with the potential for coal resource development. The contract for the software included training  9 in models for geological and mining analysis, data entry, generation of a grid model for selected deposits, data entry and verification. The technical assistance resulted in the creation of data bases for (a) the eastern sector of the Northern Zone; (b) the area adjacent to the Northern Zone; (c) the Western Patilla area; (d) the Central Area Zone; (e) the Oreganal/ Descanso Zone; (D the Cerrejon South Zone; and (f) the Marathon Zone. CARBOCOL plans to do geological modelling of various areas where coal exploration already has taken place, such as in the Northern Zone. The company also plans to assist in evaluations and optimnizations of large scale mining and lend support to medium and small-scale miners in the development of a data base. 6.7 Coal Marketing. A consultingfirm evaluated the corporate abjectives of CARBOCOL's Commercial Departnent in its marketing program. The focus of this assistance was on four major elements considered critical to the company's marketing program - expansion planning, the content of the customer portfolio, pricing policy and the mix of coal products marketed. Ite priority recommendation was for the company's expansion planning. The consultant found that for CARBOCOL to expand its revenues, it will need to concentrate on several incremental production expansion options given that large coal prices increases are not expected in the foreseeable future. These options are: (a) the set-up of an 800,000 tpy plant to wash 'interface' material not saleable as raw material but potentially saleable as a washed product; (b) improvements in the maintenance of existing equipment since its availability has been low by mining industry standards; (c) contract mining in the North Zone for an extra one to four million tpy annually; and (d) continued mining operations in the central zone at a level of one million tpy. According to rough estimates of incremental expansion costs, the most attractive option is the development of washing plants which would result a coal cost in the order of US$21 per tonne delivered to the port of export. This compares to the current selling price of US$27-32 per tonne and the long-term expected price of US$43 per tonne. 6.12 StrategIc Planming. The study on strategic planning found that because CARBOCOL lacked a clear definition of its corporate mission, the company's planning consisted of a collection of activities without a strong strategic linkage. As a result, the planning process tended to be an end in itself rather than a cohesive collection of strategic steps to achieve a corporate mission. Furthermore, the strategic plan that results from these activities was often separate from the budget and lacked the commitment of top management. Concurrently, there was insufficient information flow leading to the production of many reports but no feedback through the system. Finally, the role of the Office of Corporate Planning had been more that of 'plannerf rather than facilitator or coordinator of the planning process for the rest of the organization. The main recommendation for improving the strategic planning process was the introduction of the Strategic Management System stressing a unifying corporate objective, an appropriate process for translating the objective into actions, and an internal feedback network to maintain the necessary dialogue and flexibility to make the process responsive to the main users. The consultant recommended the gradual installation of the process with the Office of Corporate Planning taking the lead in documenting and presenting the methodology, emphasizing responsiveness to the users of the system in high and mid-level management. Moreover, the consultant emphasized the need to link the design of the plan with a specific time frame, i.e., over the short term, the medium term or the long term. The process also should allow some flexibility for reaction to domestic and international changes and receive support from a management information system geared specifically to the strategic planning process. As a top priority, the study recommended that CARBOCOL take action to improve its financial situation, including a possible financial restructuring, additional capitalization and cost reductions in all areas of the organization. At the same time, the study noted the importance of an increase the sales volume in order to reduce the relative importance of fixed costs. In terms of overall management, the  10 study recommended that the Joint Directorate of CARBOCOL establish the strategic lines of the company, including definition of the corporate mission and related strategies. In the process, the study recommended the need for CARBOCOL to modify corporate statutes to assure administrative and strategic continuity, determine corporate training needs, and improve the image of the company with an aggressive publicity campaign and improved internal communications. Potential Indirect ImRacts 6.14 The PR identified three possible indirect benefits from bringing coal deposits discovered into production: (a) production in the order of 15 million tonnes per annum, (b improvement in the country's trade balance through expanded coal exports and (c) foreign exchange savings through the substitution of coal for imported oil. Although the project led to the discovery of coal deposits with a production potential in the order of 12 - 16 million tonnes, whether the potential indirect benefits actually accrue to the country will depend on several factors including the economics of developing the coal deposits discovered through the project relative to other coal deposits, CARBOCOL's coal marketing strategy and Colombia's policies for private sector investment, coal exports and use of coal in domestic power generation and other uses. Risk Evaluatio-n 6.15 The PR also identified several risks that might prevent the project from achieving its intended benefits. The first risk is that the exploration work would not result in the location of a commercially and economically viable coal deposits. Tle project's design took steps to minimize this risk by cautiously phasing the exploration work. The second risk was that the project would identify viable coal deposits but Colombia might not be able to find a partner willing to share in their development. Also, the PR noted that at least one project might be required to meet domestic demand and its development would depend on Government initiative. Although there are no present plans to develop El Descanso, the deposit with export potential, the reason is not because of lack of interest but because there are other deposits in Colombia with more extensive preparation and greater export prospects that would be next in line for development. The development of Alto San Jorge, on the other hand, will require a Government decision to include it as part of the national energy plan since its viability appears to be only for mine mouth generation of electric power. 7. SUSTAINABILITY OF PROJECT BENEF1TS 7.1 On the exploration side, the major sustainable benefit Is the acquisition of the technology and the training to do geological prefeasibility studies providing preliminary information on coal deposits. CARBOCOL has the prefeasibility studies of Alto San Jorge and El Descanso for reference, which the company can use in its decision making on coal development. Whether CARBOCOL decides to develop Alto San Jorge will depend on the decision of the national electric power company to build a minemouth coal-fired power plant. CARBOCOL will not develop the El Descanso coal deposit in the immediate future since they estimate that other coal development projects are in a more advanced state of preparation which have an export potential of about 35 to 37 million of tons per annum by the end of the decade. Given CARBOCOL's improved capability for geological work and current policy of contracting exploration work to private parties, it is unlikely that CARBOCOL will be requesting Bank funds for  11 exploration in the future. Finally, it appears that technical assistance in strategic planning and marketing has had an impact on CARBOCOL's organizational structure and marketing strategy. CARBOCOL currently has plans to separate Into two entities: (a) a privatized commercial operation for the El Cerrejon production partnership and (b) an agency representing the state in exploration work, contract negotiation with private investors, provide technical support to small-scale mniners, supervise health and safety regulations, etc. Also, CARBOCOL is considering options which the marketing study recommended for low-cost expansion of coal production In areas that currently are producing. B. CONSUQ lUl SERVICES 8.1 According to project documentation and staff supevising the project, consultant services provided under the project were adequate and there were no major problems worth noting. 9. PROJECT DOCUMENTATION 9.1 Project documentation presented a minor problem in the preparation of this PCR since (a) central project files were not complete, (b) there was no summary information on actual project costs other than those financed by the Bank loan and (c) there was very limited information on the results of the technical assistance component of the project. These gaps are not surprising considering (a) the extremely long duration of the project (over eight years instead of the two and a half years estimated at appraisal) and changes in staff responsible for the project. However, the preparatory work for this PCR took the time to track down important documents from various parts of the Bank, outside consulting firms and CARBOCOL. These documents are now in the central project files for future reference. 10. PROJECT RELATIONSHIPS 10.1 Project documentation and staff supervising the project did not indicate any major problems with project relationships among the Bank, the Borrower, consultants and UNDP. 11. PERFORMANCE OF THE BORROWER 11.1 The project files indicate that CARBOCOL did a very good job preparing the project. CARBOCOL showed keen judgement and concern for its financial situation by opting not to take on costly feasibility work and in attempting to contract the exploratory work on El Descanso to a private company. The Project Unit seems to have worked well in coordinating exploration work and geological modelling. However, it does not seem to have given as much attention to the technical assistance components of the project outside the geological work. This is reflected in CARBOCOL's report on project execution. This report reviews the exploration component and the hardware and software for geological evaluation and modelling but does not provide information on total project costs and a review of the technical assistance in marketing, coal development contracting, financial planning and strategic planning. However during the preparation of the PCR, CARBOCOL staff were responsive in providing this information. CARBOCOL's compliance with project covenants was adequate except for some delays in providing audit reports.  12 12. PERFORMANCE Of THE BANK 12.1 The Bank's performance in the preparation of the PR was notable in the cautious, phased approach adopted -toward the exploration work. In the design and preparation phase of the project, the Bank could have focussed more on defining a long-term view of CARBOCOL and the Government In the coal sector and preparing an integrated technical assistance component to assist in this process. In addition, the Bank should have insisted that the Project Unit designate someone in charge of monitoring technical assistance. Instead, the project focussed onty on the coal exploration aspects of the project and responsibility for the components for institutional strengthening was dispersed in the various line departnents of the company. The supervision of the project showed responsiveness to CARBOCOL's needs and flexibility in permitting several extensions to the project's closing date in order complete geological work and technical assistance which ultimately proved to be very useful to CARBOCOL. 13. PERFORMANCE OF UNIP 13.1 The performance of the UNDP as the executing agency for the study on coal contracting was satisfactory. In November 1992, UNDP produced a summary report on the activities of the various consultants for this study and use of the study funds. 14. CQNCWSIONS AND LESONS LEARNED 14.1 In hindsight, neither the Bank, the Government, nor CARBOCOL had an adequate long- term view of their respective roles in the coal mining sector. The design of the project reflected an attempt of the Bank to maintain some involvement in all aspects of the coal sector - exploration, marketing, financial planning, etc., after had become clear that the Bank would not be participating in the large El Cerrejon project. However, during the project's execution, CARBOCOL's philosophy regarding state participation in the coal sector evolved to promote the use of private sector funds as much as possible and to limit state investment. Thus, CARBOCOL decided not to do the feasibility work on its own but leave it for the private sector, and to use Bank funds only for the prefeasibility studies. The policy of encouraging the use of private sector risk capital, for preliminary exploratory work reflects current Bank philosophy which was not necessarily the case at the time of the project's design. However, the exploration component was successful and resulted in the discovery of a major, world class coal deposit. The methodology of phasing exploration work, with independent reviews at the end of each phase, worked well, preventing CARBOCOL from spending additional resources on areas without signiflcant coal potential. ITe technical assistance component helped develop a capability within CARBOCOL to do preliminary geological work, which, combined with the assistance received in contracting for coal development, should help CARBOCOL promote private sector exploration work. Furthermore, assistance in strategic planning and mar.cring were instrumental in helping CARBOCOL rationalize its organizational structure and explore new marketing options for the coal. In terms of technical assistance, the Bank learned the importance of developing clear, realistic objectives for individual project components, ensuring that project design supports these objectives. For example, the Bank included a financial planning study as part of the project because CARBOCOL had taken on a very large debt under the Cerrejon project and needed to develop a capitalization plan; also, the Bank seemed to have had some doubts about the projections which served as a basis for investment recovery.  13 CARBOCOL never did the study and the Bank did not have sufficient financial leverage to insist on it, since the original loan amount was only lbr US$9.5 million and there was no loan conditionality specifying specific financial performance targets.  14 PROJE= COMLON REQR COLOMBIA CQAL EXPLORAQIN PROJgC LOAN NO. 2349-0 PART 2 REPORT OF THE BORROWER  15 FINANCIAL REPORT WORLD BANK LOAN NO. 2349 CO.T/ In accordance with the requirements of the World Bank for project completion report, following is the corresponding ffnancial report. The project in general consisted of several activities related to coal exploration, including: preliminary geological evaluation, verification of the stratification and structure of coal-bearing deposits, evaluation of the reserves, prefeasibility studies, financial planning, establishment of a sales network and contracting for coal development. I. LOAN CHARACTERISTICS CONTRACT DATE : FEBRUARY 9, t984 OBJECTIVE : THE FUNDS OF THE LOAN SHALL BE USED TO FINANCE PROGRAMS FOR COAL EXPLORATION AND TECHNICAL ASSISTANCE. LOAN AMOUNT : US$9,500,000.00 ON OCTOBER 1, 1990, CARBOCOL CANCELLED US$1.7 MILL. REDUCING THE TOTAL CREDIT TO US$7.8 MILL. ON JANUARY 15, 1992, THE BANK CANCELLED US$1.4 MILL. TOTAL AMOUNT UTILIZED : US$6,329,990.25 (SEE ANNEX) LIMIT DATE FOR THE AVAILABILITY OF CREDIT : JANUARY 15, 1992 NUMBER OF EXTENSIONS : TWO (2) - UNTL JANUARY 15, 1990 - UNTIL JANUARY 15, 1992 I/Unofficial edited translation of the original document which CARBOCOL submitted to the Bank in July 1992.  16 GUARANTOR GOVERNMENT OF COLOMBIA AMORTIZATION THE AMORTIZATION OF THE CAPITAL AND INTEREST OCCURS ON A SEMESTER BASI, DUE ON THE FIRST OF FEBRUARY AND THE FIRST OF AUGUST OF EACH YEAR STARTING FEBRUARY 1988 UNTIL AUGUST 2000. INTEREST RATE VARIABLE COMMITMENT FEE 0.75% PER ANNUM UNTILJULY 31, 1989 AND 0.25% THEREAFTER. SPECIAL ACCOUNT MANAGED BY THE BANK OF THE REPUBLIC FOR UP TO US$700,000.00. 2. PROJECTS FINANCED BY THE LOAN - SAN JORGE US$1,961,466.14 - EL DESCANSO US$3,437,298.23 - TEL ..IrCAL ASSISTANCE USS 93I.88 TOTAL 6,329,990.25 It is important to highlight that during the course of the loan, CARBOCOL presented withdrawa applications for receipt of the loan proceeds, which the World Bank disbursed on a timely basis.  17 REPORT ON THE PREFEASIBILrTY STUDY FOR COAL MINING IN THE EL DESCANSO AREA CONTRACT OBJECTIVE The objective of the contract was to make a detailed evaluation of specific coal-bearing deposits, evaluate mining geology and, based on this evaluation, do a technical and economic prefeasibility study for a mining project Signing of the Contract: December 16, 1987 Beginning of Studies: January 7, 1988 Completion of Studies: February 15, 1991 II. CONTRACT DEVELOPMENT 1. PHASE II DETAILED GEOLOGICAL STUDIES The studies of this Phase started on January 1988 and were completed on August 1989. The tasks accomplished in Phase II focused on identifying the fundamental aspects of the deposit and the characteristics of the surrounding area. These were programmed and executed utlizing traditional methods appropriate for this type of investigation. (Modem tools were used for connection to the electric services by using computeized equipment Compulog II of the Century Geophysical, conditioned with techniques that produced regisrs of good quafity), which is fundamental for making a good correlation of layers of the deposit followed by geological modeling, calculations of carbon reserves and volumes of overburden, utilizing the Miner-2 de Mincom program. Complementary studies within Phase 1}, covering hydrology, hydrogeology and geotechnical investigation, achieved their planned objectives, establishing the basic parameters for aspect of mine design. 2. PHASE m PREFEASIBILITY STUDY This Phase began with the work on planning and mining design for the three levels of production defined by CARBOCOL. The Consultant used a common procedure for this task, which allows for a sequential definition of each of the aspect considered in the mine planning and design. For El Descanso, the Consultant's analysis focused on three alternatives for annual production: 5, 10 and 12.5 million tonnes. The Consultant used a similar design in each case, varying the size of the development area and longitudinal orientation but keeping the same system of mining.  18 m. RESULTS AND CONCLUSIONS 1. The results produced several alternatives of infrastructure and levels of Investment to develop a coal mining project at El Descanso. 2. The results show that the block selected for mining within the El Descanso area could support annual production of 10 million tonnes or more per year. Projects with less production would be less economically attractive. This could be equally true for the rest of the areas explored. 3. CARBOCOL wUi not develop in the project in the Immediate future since they estimate that other projects under preparation could produce exports of 35 to 37 million of tons per annum, towards the end of the decade. In any case, CARBOCOL would take into account, in its decision making, any proposals that interested parties might submit.  19 REPORT ON THE UNDP TECHNICAL ASSISTANCE PROJECT COL\026\82 OBJECTIVE OF THE PROJECT To increase the managerial capacity of CARBOCOL's staff modify the traning structure of the Operator of the Cerrejon Zone B project, with the goal of strengthening technical, financial and mining supervision in the operation and commercialization of coal from the mine in the Cerrejon North Zone. In general, provide technical assistance during the period of construction and the initiation phase of the Cerrejon North Zone in the following areas: a. Execution and revision of the project design b. Cost control. c. Project achievements and CARBOCOL's goals. d. General administration of the project e. Optimization of the use of human and technical resources during the execution of the project. f. Other mining activities of CARBOCOL. g. Development of CARBOCOL's personnel. h. Planning and control of the environmental and ecological impacts resulting from project execution. II. PROJECT DEVELOPMENT a. CARBOCOL received assistance in the establishment and development of technical, administrative and financial information systems. b. CARBOCOL received assistance in the analysis and interpretation of all the data on the Cerrejon North project, as well as its other mining activities. c. CARBOCOL received advice based on independent criteria for the follow-up and the supervision of all aspects of the project. d. CARBOCOL received assistance on the establishment of a supervision program (in a similar type of environment).  20 m. PROJECT INIMIATION The UNDP Technical Assistance Project began in December 1983. IV, P JECT COMPLEQION The project ended in March 1992. V. RE[SULTS The project achieved its aforementioned objectives. VI. CONCLUSIONS The UNDP Technical Assistance Project (COL/026182) strengthened the organizational, technical and operational aspects of CARBOCOL in Cerrejon Zone B.  21 REPORT ON THE ACQUISITION OF EAGLE SOFTWARE FOR THE GEOLOGICAL MODELS I. JEC-T IV Establish the capability to evaluate, from a mining geology perspective, various coal-bearing areas under the contract of the North Zone Association as well as other projects contracted by CARBOCOL for large-scale mining. Provide support in the evaluation of mining geology for small- and medium-scale mining projects contracted. Provide technical support to CARBOCOL when requested. 11. DEVELOPMENT OF THE CONTRACT A. Training in geology modules. B. Training in mining modules. C. Data entry for sections of the Carboandes en la Jagua de Ibirico area. D. Generation of a grid model of Carboandes en la Jagua de Ibirico area (ceiling and floor of the structures and thi^kness); volumes were not calculated due to poor existing information. E. Data entry and information verification, in the Caribbean area (Integral I and 11) of la Jagua de Ibirico. Work was not completed due to the inconsistencies encountered in loading the information. The following data has been entered in the data base: * Eastern Sector of the North Zone - 100% of the structure * Annexed area of the North Zone - 100% of the structure * West Patilla - 50% of the structure * Central Community Zone Area - 50% of the structure o Oreganal - Descanso - 50% of the structure * Cerrejon Sur - available information * Marathon - only S wells available F. Support for the Tasajero study (topography and characteristics such as installations, mine mouth, etc.) G. Training (in sessions) for the Drafting group.  22 H. Initiation of the correlation work in Area N-60 of the Eastern sector of the North Zone. 1. Initiation of correlation work of correlation in the Oreganal area. It was necessary to suspend two of the nwdels started in the de la Jagua de Ibirico Area due to a lack of information. {The need to suspend the modelling became evident imnediately through the operation of the software and Inconsistencies detected in available information). The modelling of the Oreganal area was not completed due to the priority of other work (Expansion of the North Zone). (Expansion Zona Norte), 1. Model the various coal-bearing areas explored, through CARBOCOL or through a contract with a third party for exploration and development. 2. Include the information in the expansion plan or follow-up on the North Zone. 3. Follow-up on of the evaluations, optimizations and operations of the contracts for large- scale mining. 4. Provide support for small and medium-scale mining. 5. Provide support to the groups that manage quality. 6. Provide training to other areas of the company in the management of software.  23 PROJ=E COMPLEON REPORT CDOLOMBIA ,L XPORATION PROEci LOAN NO. 2349-CO PART 3 SITnTICALIEORMATION  24 PROJECTS99 = COPEISlEP-)RT