Announcement of Sixty-Four Million Five Hundred Thousand US Dollars Loan to Guinea on September 18, 1968

....'(~'t'- ,<>oN~.: js-J "'-t ~ ~ 0.,. (iN6RLD BA.~ i • 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 68/51 Subject: $64.5 million loan to Guinea September 18, 1968 The development of high-grade bauxite near Boke in northwest Guinea, one of the richest ·deposits in the world, will go forward as a result of agreements which have been signed in Washington by the World Bank, the Government of Guinea, the U.S. Agency for International Development and Halco (Mining) Inc., a corporation owned by seven of the world's leading aluminum producers. The Boke project will make an important contribution to the economic develop- ment of Guinea. It will create employment, generate foreign exchange earnings, in- crease the Government's tax revenues, and advance the technological skills and ad- • ministrative experience of Guinean nationals. The Boke project consists of two interrelated elements: the construction of an 85-mile railway fr~m the mine site at Sangaredi in the Boke area to the coast which will be used principally for the transport of bauxite, together with the construction of the port and township of Kamsar; and the construction of mining installations and a township at Sangaredi, together with related facilities. The World Bank loan amounting to $64.5 million -- one of the largest it has ever m.~d~ to an African country -- will finance the foreign exchange costs of the railway, the. port and township of Kamsar. The> railway and port will be able to handle up to about 8 million tons of bauxite annually. The loan wil'.i--'also refund a $1.7 million Bank loan made in March 1966 for an engineering study of the railway and port. The local currency costs of the railway, port and township will be • covered by a loan, equivalent to about $21 million in Guinea francs from the U.S • Agency for International Developm~rit .. which will use local counterpart funds de- rived from sales of agricultural products under the PL 480 program. /more  • Bank 68/51 - Guinea - 2 - The bauxite mine will be constructed and operated by Compagnie des Bauxites de Guinee l_(\.CBG), owued jointly by the Guinea ·Government (49%) and Halco (Mining) Inc. (51%). Halco is in turn owned by .Alcan Aluminium Limited, Aluminum Company ot America, Harvey Aluminum (Incorporated), Compagnie Pechiney, Ugine Kuhlmann, Vereinigte Aluminium-Werke AG and Montecatini Edison S.p.A. CBG 1 s in 1restmEnt is expected to be equivalent to about $100 million. It will cover the cost of the mine and township at Sangaredi, certain handling, processing and storage facili- ties and part of the township at Kamsar, and ore-carrying trains. CBG will oper- ate its own bauxite trains on the Goveniment-owned railway. The aluminum companies have entered into contracts with CBG for the purchase of bauxite, initially 4.7 million tons a year, and 5.1 million tons a year from the 6th year: of operation. CBG expects to sell some 1.5 million additional tons in the future. The Bank loan was made to the Republic of Guinea for a period of 24 years, including a five-year grace period, with interest at 6-1/2%. Special arrange- ments have been made for servicing the Bank loan. CBG will make payments to a Truste9 bank in the United States in the currencies required to service the loan, and the amount of these payments will be credited against the taxes payable by CBG to Guinea. In the event CBG or Halco does not make the paymE11ts, the Trustee can call upon the aluminum companies that are the owners of Halco to make the re- quired payments in proportion to their stockholding in Halco. The Government will receive 65% of the net taxable profits of CBG and it is in effect from these revenues that the World Bank loan will be serviced. The net in- crease in income to the Govemment after debt service is expected to be substantial~ • The country's foreign exchange earnings will be even hj_gher because of the use or for- eign exchange generated by bauxite sales to pay local wages and salaries and other costs. Construction of the railway, port and Kamsar township is the responsibility of a Govermnent igency, Office d'Amenagement de Boke (OFAB), which will be assisted by engineering consultants. Halco will designate personnel to assist OFAB in running the railway and port and to train Guinean employees. OFAB will recover from CBG all operation and maintenance costs incurred in. providing the ra~lroad, township and loading jetty and wharf for the transp~rt and loading of bauxite. Cost of operating and maintaining the harbor facilities ·will be recovered from port users. Detailed design work for the railway, port and township has been completed, and prequalification procedures for screening prospectiv·e contractors are well advanced. Procurement for all contracts financed in whc,le or in:. part out of the proceeds of the Bank loan will be subject to internatiolilal competitive bidding. To ins.ure maximum economy, OFAB and CBG will where possf.ble combine contracts for identical or similar facilities and will employ the same consulting engineerso To ensure proper coordination and completion of the construction of the whole project, the Government and Halco have agreed to set up a Construction Coordina- tion Committee. This Committee will reconunend the approval of contracts, certify applications for withdrawals of loan funds, coordinate the work of the consulting • engineers, ensure progress of the works and maintain di~·ect liaison with the Bank. The costs of the Committee and of the consulting engineE!rS will be met by OFAB and CBG. - 0 -