Conformed Copy - C1921 - Mining Sector Rehabilitation Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1921 GH (Mining Sector Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and STATE GOLD MINING CORPORATION Dated July 14, 1988 PROJECT AGREEMENT AGREEMENT, dated July 14, 1988, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and STATE GOLD MINING CORPORATION (SGMC). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Ghana (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty- nine million three hundred thousand Special Drawing Rights (SDR 29,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SGMC agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and SGMC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to SGMC on the terms and conditions set forth in said Page 2 Subsidiary Loan Agreement; and WHEREAS SGMC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. SGMC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and mining practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. (a) SGMC shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement and Part A of the Project. (b) Without any limitation or restriction upon any of its obligations under paragraph (a) of this Section, SGMC shall furnish to the Association: (i) monthly progress reports within 21 days of the end of each month; and (ii) quarterly procurement reports within 45 days after the end of each quarter. Section 2.04. SGMC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SGMC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) SGMC shall, at the request of the Association, exchange views with the Association with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) SGMC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Credit, or the performance by SGMC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Page 3 Management and Operations of SGMC Section 3.01. SGMC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering, mining and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SGMC shall at all times operate and maintain its plant, machinery, equipment and other property and, from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and mining practices. Section 3.03. SGMC shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. SGMC shall: (a) furnish to the Association, not later than September 30, 1988, a plan acceptable to the Association, for the systematic monitoring of effluents produced by its mines; (b) commence, not later than June 30, 1989, the systematic monitoring of the effluent discharges in accordance with said plan; and (c) based on the data obtained, prepare and furnish to the Association, not later than March 31, 1990, a plan acceptable to the Association, for the control of effluents and mine dust and implement such plan thereafter. Section 3.05. SGMC shall, not later than December 31, 1988, fence the tailing ponds at the Tarkwa and Prestea mines and prohibit farming within their boundaries. ARTICLE IV Financial Covenants Section 4.01. (a) SGMC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SGMC shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. (a) Except as the Association shall otherwise agree, SGMC shall maintain for each of its fiscal years after its fiscal year ending on December 31, 1991 a ratio of current assets Page 4 to current liabilities of not less than 1.3. (b) Before September 30 in each of its fiscal years, starting in 1992, SGMC shall, on the basis of forecasts prepared by SGMC and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that SGMC would not meet the requirements set forth in paragraph (a) for SGMC's fiscal years covered by such review, SGMC shall promptly take all necessary measures in order to meet such requirements. (d) For the purposes of this Section: (i) The term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inven- tories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (ii) The term "current liabilities" means all liabili- ties which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service require- ments, taxes and payments in lieu of taxes, and dividends. (iii) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.03. (a) Except as the Association shall otherwise agree, SGMC shall not declare any dividend or make any other distribution with respect to its share capital, unless its ratio of debt to equity is at least 60 to 40. (b) For purposes of this Section: (i) The term "debt" means any indebtedness of SGMC maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "equity" means the sum of the total un- impaired paid-up capital, retained earnings and reserves of SGMC not allocated to cover specific liabilities. (iv) Whenever, for the purposes of this Section, it shall be necessary to value, in terms of the cur- Page 5 rency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valua- tion, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.04. SGMC shall: (a) not later than June 30, 1989, revalue its assets in accordance with a methodology acceptable to the Association; and (b) revalue the assets periodically, in particular whenever they become undervalued by more than 30% due to any decline in the value of the Cedi relative to the SDR. Section 4.05. For its financial statements, SGMC shall use a depreciation rate acceptable to the Association with respect to the goods acquired by SGMC under the Project. Section 4.06. Until the completion of the Project, SGMC shall not undertake any investment exceeding the equivalent of $2,000,000, not included in the Project, without the prior consent of the Association. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SGMC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SGMC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association Page 6 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For SGMC: State Gold Mining Corporation P.O. Box 3634 Accra, Ghana Cable address: Telex: MINCORP 974-2348 Accra Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SGMC, may be taken or executed by the Chief Executive or such other person or persons as the Chief Executive shall designate in writing, and SGMC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Caio Koch-Weser Acting Regional Vice President Africa STATE GOLD MINING CORPORATION By /s/ Eric K. Otoo Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Page 7 Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. To the extent practicable, contracts shall be grouped in bid packages estimated to cost the equivalent of $350,000 or more each. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Ghana may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Goods may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 2. Proprietary equipment may be purchased from the original manufacturer or authorized supplier on the basis of negotiated contracts on terms and conditions satisfactory to the Association; provided, however, that the aggregate cost of such contracts does not exceed the equivalent of $7,000,000. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) The procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply to: (i) all contracts until the aggregate costs of such contracts reach the equivalent of $18,000,000; provided, however, that at least ten contracts are subject to these procedures; and (ii) thereafter each contract estimated to cost the equivalent of $350,000 or more. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist SGMC in carrying out Part A of the Page 8 Project, SGMC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981.