Guinea - Boke Bauxite Project

R EST R I C T E D Report No. TO-672a This report was orepared,for use 'within the Bank a'nd its affilioted organizations. They do not accept responsibility for its accuracy or cdmpleteness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT. ASSOCIATION APPRAISALr OF THE BOKE BAUXITE PROJECT REPUBLIC OF GUINEA August. 30, 1968 Projects Department  CURRENCY EQUIVALENTS Currency Unit: GF US$1 - GF250 GFIOO = US$0. 4 GF1 billion = US$40. 0 million. FISCAL YEAR October 1 - September 30 Weight and Measures: Metric METRIC: BRITISH/U. S. EQUIVALENTS 1 Kilometer (Km) = 0. 62 miles (mi) 1 Meter (m) = 3.28 feet (ft) 1 Hectare (ha) = 2.47 acres (ac) 1 Liter (1) = 0.22 imperial gallons = 0. 26 gallons US 1 Metric ton (m. ton) = 2205 pounds (lb) ACRONYMS CBG - Compagnie des Bauxites de Guinee Bamidi - Bauxites du Midi OFAB - Office d'Amenagement de Boke  GUINEA APPRAISAL OF THE BOKE BAUXITE PROJECT TABLE OF CONTENTS Pages SUKNARY i - iii 1. INTRODUCTION 1 2. BACKGROUND 2 (i) General 2 (ii) Mining and Minerals 2 3. THE BOKE PROJECT 3 (i) Location of the Boke Project 3 (ii) The Bamidi Venture 3 (iii) The Halco Agreement of 1963 3 4. THE OFAB INFRASTRUCTURE 5 (i) Summary 5 (ii) The Railway 5 (iii) The Port 5 (iv) The Townsite, Housing and Buildings 6 (v) Engineering 6 (vi) Summary Cost Estimates OFAB Infrastructure 7 (vii) Construction Financing and Disbursement Procedures 9 (viii) Procurement 9 (ix) Construction Schedule and Management 10 (x) Management of Government Responsibilities (OFAB) 10 5. CBG I-HNINTG OPERATIONS AND 1NSTALLATIONS 14 (i) Ore Reserves 14 (ii) Sales 14 (iii) CBG Installations 15 (iv) Summary Cost Estimate CBG Installations 16 (v) CBG Technical Assistance and Training Agreement 16 This report has been prepared by members of the Working Party, Messrs. J. Brechot (Railway), F. Higginbottom (Ports and Townsite), J.M.R. Feige (Mining Operations), F. Sander (Finance), V. Wouters (Economics) and H. van Helden (Project Co-ordinator).  Table of Contents (Cont'd) - 2 - 6. FINANCIAL 17 (i) Investment 17 (ii) Financing 17 (iii) Forecast of Operating Results 19 (iv) Balance Sheet and Cash Flow 20 (v) Summary of Results 22 (vi) Rate of Return 23 (vii) Pay Back Period 24 (viii) Return to Government per ton of Bauxite 24 (ix) Harbor Costs and Dues 24 (x) Financial Advice and Audit of OFAB Accounts 25 7. ECONO1IC EVALUATION 25 8. DEBT SERVICE SECURITY AND OTHER IMPORT LEGAL ARRANGEMENTS 27 9. COMCLUSIONS AND RECOMI1ENDATIONS 29 APPENDIX A (i) Description of Boke Deposits and Summary of Scofield Report (ii) Bauxite Prospects (iii) Proposed FOB Selling Price of Bauxite APPENDIX B - Summary of the Basic 1963 Agreement Creating CBG APPENDIX C - Statutes of OFAB APPENDIX D - Detailed Description and Cost Estimates of the OFAB Infrastructure APPENDIX E - Contracts, Contractual Arrangement and Construction Schedule TABLE 1 - CBG - Equipment and Construction Cost Estimate 2 - CBG - Replacements and Additions to Equipment 3 - CBG - Income Statements 4 - CBG - Balance Sheets 5 - CBG - Source and Application of Funds 6 - OFAB- Cash Flow and Balance Sheet 7 - CBG - Estimated Advances to Government of Guinea - t'for Service of I.B.R.D. Loan 8 - Financial Rate of Return 9 - Guinea - Estimated Increase in National Income 10 - Guinea - Generation of Foreign Exchange MAP 1 - Guinea - Boke Bauxite Project 2 - General Layout of Kamsar Region 3 - Kamsar Townsite  GUriL;A APPRAISAL OF THE BOKE BAUXITE PROJECT SUMMARY i. As early as 1964 the Government of Guinea approached the Bank for participation in the financing of a bauxite mining project which was to make an important contribution to the development of the country's economy. At that time the Government had already entered into an agree- ment with a US aluminum producer, Hiarvey Aluminum Company (later Hlalco Mining, Inc. was established by this firm for the Guinean project) to create the Compagnie de8 Bauxit 4e Guinee (CBG) which would mine some l-1