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Report No: 59466-SL

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PROJECT PAPER ON A PROPOSED ADDITIONAL GRANT AND PROPOSED RESTRUCTURING OF ORIGINAL PROJECT IN THE AMOUNT OF SDR 2.6 MILLION (US$ 4.0 MILLION EQUIVALENT) TO THE REPUBLIC OF SIERRA LEONE FOR AN EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT (ORIGINAL PROJECT NAME: MINING TECHNICAL ASSISTANCE PROJECT)

Public Disclosure Authorized

Public Disclosure Authorized

March 29, 2011

Sustainable Energy Department Oil, Gas and Mining West Africa Country Cluster 2 Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS (Exchange Rate Effective March 1, 2011) Currency Unit = Sierra Leone Leone 4,275 Leone = US$1 US$1 = SDR 0.6357077 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS Additional Financing Artisanal and Small Scale Mining Annual Work Plan Country Performance Portfolio Review Department for International Development of UK Government Environmental Impact Assessment / Social Impact Assessment Extractive Industries Technical Assistance Project Extractive Industries Transparency Initiative Financing Agreement Financial Management British Pound Sterling Gross Domestic Product Government of Sierra Leone International Development Association Integrated Safeguards Data Sheet Monitoring and Evaluation Ministry of Mineral Resources Mining Technical Assistance Project National Minerals Agency Operational Risk Assessment Framework Project Developmental Objective Project Operations Manual Petroleum Resource Unit Project Support Team Special Drawing Rights Strategic Environmental and Social Assessment Sierra Leone Environmental Protection Agency Strategy and Policy Unit under the Presidents Office Technical Assistance United Nations Development Program United States Agency for International Development West Africa Mining Governance Project West Africa Mineral Sector Strategic Assessment Vice President: Country Director: Country Manager: Sector Manager: Task Team Leader: Obiageli Katryn Ezekwesili Ishac Diwan Vijay Pillai Paulo de Sa Ekaterina Mikhaylova

AF ASM AWP CPPR DfID EIA/SIA EITAP EITI FA FM GBP GDP GoSL IDA ISDS M&E MMR MTAP NMA ORAF PDO POM PRU PST SDR SESA SLEPA SPU TA UNDP USAID WAMGP WAMSSA

SIERRA LEONE EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT ADDITIONAL FINANCING CONTENTS

Project Paper Data Sheet Project Paper I. II. III. IV. Annexes 1. 2. 3. Revised Results Framework and Monitoring Indicators................ Operational Risk Assessment Framework. Detailed Description of Modified and New Project Activities 1. Updated Project Description 2. Amendment to National Competitive Bidding Exceptions 3. Project Processing Map... Introduction..................................................................................... Background and Rationale for Additional Financing and Restructuring of Original Project........................ Proposed Changes............................... Appraisal Summary....................................

1 2 7 11

14 19 22

4.

27

REPUBLIC OF SIERRA LEONE EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT ADDITIONAL FINANCING DATA SHEET Basic Information - Additional Financing (AF) Country Director: Ishac Diwan Sectors: Energy and Mining Sector Manager/Director: Paulo de Sa Themes: Team Leader: Ekaterina Mikhaylova Environmental category: B-Partial Project ID: P124633 Assessment Expected Effectiveness Date: June 2011 Expected Closing Date: June 30, 2016 Lending Instrument: Technical Assistance Joint IFC: No Additional Financing Type: Scale up Joint Level: No activities and cost overrun Basic Information - Original Project Project ID: P099357 Environmental category: B-Partial Assessment Project Name: Mining Technical Expected Closing Date: December 31, Assistance Project 2013 Lending Instrument: Technical Assistance Joint IFC: No Joint Level: No AF Project Financing Data [ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other: Proposed terms: Standard IDA Grant Terms AF Financing Plan (US$m) Source Total Amount (US $m) Total Project Cost: 7.4 Cofinancing: 3.4 Borrower: 4.0 Total Bank Financing: IBRD 4.0 IDA 4.0 New Recommitted Client Information Responsible Agency: Ministry of Mineral Resources Contact Person: Emmanuel Komba, Project Coordinator Telephone No.: 232 76 387 252 Fax No.: Email: komba_emmanuel@yahoo.co.uk AF Estimated Disbursements (Bank FY/US$m) FY 11 12 13 14 Annual 1.0 1.0 1.0 Cumulative 1.0 2.0 3.0

15 0.8 3.8

16 0.2 4.0

Project Development Objective and Description Original Project Development Objective: build the capacity of the Government to improve
management and regulation of the mining sector

Revised Project Development Objective: build the capacity of the Government to manage and regulate the extractive industries sector Project Description: (A) Overarching regulatory frameworks for extractive industries sector: to close regulatory gaps in the mining and oil and gas sector through development of technical regulations, and updating related legal acts. (B) Institutional Strengthening: provision of capacity building, equipment and geological surveying to ensure good sector governance guided by the principles of transparent non-discretionary and efficient minerals and oil and gas administration and regulation and monitoring. (C) Project Management Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) [X]Yes [ ] No Natural Habitats (OP/BP 4.04) [ ]Yes [X] No Forests (OP/BP 4.36) [ ]Yes [X] No Pest Management (OP 4.09) [ ]Yes [X] No Physical Cultural Resources (OP/BP 4.11) [ ]Yes [X] No Indigenous Peoples (OP/BP 4.10) [ ]Yes [X] No Involuntary Resettlement (OP/BP 4.12) [ ]Yes [X ] No Safety of Dams (OP/BP 4.37) [ ]Yes [X] No Projects on International Waters (OP/BP 7.50) [ ]Yes [X] No Projects in Disputed Areas (OP/BP 7.60) [ ]Yes [X] No Does the project require any exceptions from Bank policies? Have these been approved by Bank management? [ ]Yes [X] No [ ]Yes [ ] No

Financing Agreement Reference 5.01 Schedule 2, Section IV, B. 1 (a)

Conditions and Legal Covenants: Description of Date Due Condition/Covenant Effectiveness of Co-financing Upon Effectiveness Agreement Disbursement Category 2 Disbursement Condition to be conditions: (i) the MMR adopts a complied with on an annual policy for the development of basis sustainable human resource capacity within MMR/NMA; (ii) the staff to be financed is included into the MMR/ NMA organogram; and (iii) the government provides a satisfactory to IDA implementation and financing plan for each fiscal year in which salaries are to be financed under the project.

1 I. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide an additional grant in an amount of SDR 2,600,000 (US$4.0 million equivalent) to the Republic of Sierra Leone for the Mining Technical Assistance Project (MTAP), Grant Number H532-SL. Following the approval, the project name will change to Extractive Industries Technical Assistance Project (EITAP). The Project Paper also includes restructuring of the Original Project in line with the additional financing. 2. The proposed additional financing would help finance the costs of scaling up activities to meet the current challenges of the extractive industries sector. In addition, procurement for two major activities in the Original Project (development of regulations for mining sector and geochemical surveying, but selected under competitive procedures) went above the budget by US$1.02 million in total. Although the Original Project has been effective for only one year, the additional financing is in line with OP 13.20 and is justified due to the following: (i) the Original Project finances only the most urgent basic sector reforms due to the IDA funding constraints at the time of preparation1; (ii) the recent mining agreements entered into by the Government of Sierra Leone (GoSL) amplified the need for in-depth technical assistance to build capacity for planning and negotiations of mining agreements and monitoring their implementation and regulatory compliance going forward, as well as to strengthen governments capacity for revenue collection (not originally included under the project due to IDA constraints); and (iii) 2009 discovery of oil in Sierra Leone and 2010 confirmation of the find resulted in GoSL urgent request to the Bank to assist with developing sustainable sector strategy and requisite frameworks. The GoSL is committed to use its natural resources for the best national interest and emphasizes the need to take an integrated approach to the build capacity and develop sustainable frameworks for the extractive industries sector, which includes the countrys mineral resources and oil and gas. The top level championship on the Government side is expected to be maintained to ensure sustainability of the reforms going forward. 3. Additional financing instrument is highly appropriate given that the Government has now built requisite capacity to implement the project in an efficient manner and all major activities planned under the Original Project are now either under implementation or in the final stages of procurement. The additional financing activities will, therefore, proceed in parallel under the same arrangements and will not bear additional overhead in terms of project management. 4. The Original Project is financed by an International Development Association (IDA) Grant in the amount of SDR 2,600,000 (US$4.0 million equivalent). There are no co-financing arrangements for the Original Project, but the additional financing grant will be co-financed by a grant from the United Kingdoms Department for International Development (DfID) in the

It is noted that the Original Project was scaled down from the US$7 million to US$4 million per request from the Ministry of Finance in view of constraints with IDA allocation to focus only on the most urgent sector reform needs (as documented in the Decision Package for SL MTAP dated September 3, 2009). This decision was also reinforced by the preparation of the West Africa Regional Mining Governance Project which was expected to include some of the proposed activities on a regional scale. However, the regional operations has been delayed and has been scaled down to geo-data collection and mapping only see Project Paper para 21.

2 amount of GBP 2.23 million (of which GBP 2.1 million about US$3.4 million equivalent Recipient-executed). II. Background and Rationale for Additional Financing in the amount of US$4 Million and Restructuring of Original Project Country and Strategic Context 5. Sierra Leone is well endowed with natural resources and is classified as a resource-rich country. If in the past Sierra Leone was largely associated with mining (diamonds were first discovered in 1930), the 2009 discovery of oil off-shore of Sierra Leone has also put the country on the map as a potential future oil producer. Extractive industries, as a term, in the case of Sierra Leone now include both mineral resources and oil and gas. The sections below provide more detailed background by each sub-sector separately given their peculiarities, however, it is emphasized that extractive industries reform will need to have an integrated approach a Value Chain approach 2 (otherwise known as EITI++3) in order to achieve the GoSLs ultimate objective towards developing Sierra Leones natural resources in the best interests of the nation. The issues that are highlighted for the purposes of the Project Paper are: (i) the core cause for the civil war of 1990s early 2000s was the way the extractives were managed; the risk of continued conflict remains until the sector reform takes root; (ii) the extractive industries sector has a tremendous potential to transform the economic structure of the country and with proper sector governance can maximize domestic revenue collections and thus help to meet the various development and infrastructure spending requirements in the country; and (iii) the improved investment climate that is targeted under the project will help attracting reputed private companies into the sector. 6. Mining Sector. Sierra Leone is well endowed with mineral resources and is a leading producer of diamonds, rutile, and bauxite. During the 1960s and 1970s, the mining sector accounted for more than 70 percent of the countrys export earnings, 20 percent of GDP, and 15 percent of fiscal revenue. The sector experienced a decline in the 1980s and came to a standstill during the 1990s due to the decade-long civil war (1991-2001). The mining sector has three major segments: (a) large-scale production of diamonds (companies include Koidu Holdings Ltd. and African Minerals Ltd.); (b) large-scale production of bulk minerals (Sierra Rutile Ltd., Sierra Minerals Ltd., London Mining Ltd and African Minerals Ltd); and (c) artisanal and small-scale production of diamonds, and to a much lesser extent gold. During 2010, the Government of Sierra Leone (GoSL) signed two large-scale mining development agreements for iron ore development in Marampa and Tonkolili with London Mining and African Minerals Ltd, respectively. More companies are exploring in the country, and several investment projects are expected in the foreseeable future, including a large-scale gold mine. The main thrust of EITAP

Extractive Industries Value Chain analysis of Sierra Leone mining sector is included in the Original Project Appraisal Document for Sierra Leone Mining Technical Assistance Project, dated November 3, 2009 (Report No: 43233-SL)
3

Extractive Industries Value Chain - An Integrated and Comprehensive Approach to Developing Extractive Industries a 2009 publication by the World Bank Oil, Gas and Mining Policy Division.

3 is to address bottlenecks towards efficient and sustainable development of industrial scale mining. 7. Petroleum Sector. In September 2009, an offshore well drilled by Anadarko Petroleum Corporation encountered petroleum, confirming the existence of an active petroleum system within the Sierra Leone-Liberia basin and de-risking exploration throughout the basin. In November 2010, Anadarko announced an apparently significant deepwater discovery at the Mercury exploration well. The company will drill delineation wells in 2011 before making a commercialization decision. Although the Mercury well looks encouraging, Anadarkos drilling program still carries high risk and commerciality is unlikely to be declared until 2012 at the earliest. Thereafter, the time line to first production would be at least four years. Sector Reform Framework 8. Mining Sector. Following a World Bank Sector Review of mining in Sierra Leone in 2005, several donors (including DfID, EU, USAID, and UNDP) supported reforms in the legal, regulatory, fiscal, and institutional arrangements of mining. Over the past few years, Sierra Leone has passed some important laws and regulations and provided an enabling policy framework for the growth of the mining sector. These reforms led to a recovery of the sector, particularly diamond mining and rutile production from early to mid- 2000s, and more importantly, they opened potential for new development. 9. Notwithstanding progress made to-date, the institutional capacity to manage sector, negotiate agreements, enforce regulations, and monitor compliance remains weak. The responsibilities for mineral sector management, negotiation, and monitoring remain not clearly defined between the Ministry of Mineral Resources (MMR)4, National Mineral Agency (NMA5 new entity expected to be formally established in 2011), the Mining Advisory Board (responsible for approving licenses), and the Strategy and Policy Unit (SPU) at the Presidents Office (responsible for negotiating investment agreements). The government has recently set up an inter-ministerial committee to handle all negotiations relating to the mining sector. The team comprises a member of the SPU, the Attorney General, the Director of Geology, the Director of Mines, the Law Officers Department, and the Ministry of Finance and Economic Development. The need remains to clarify roles and responsibilities going forward in a sustainable manner. 10. Petroleum Sector. The reforms are still fairly new and evolving. Upstream oil and gas activities are governed by the Petroleum Exploration and Production Act of 2001. A Model
4

It is noted that until early 2011 MMR was called Ministry of Mineral Resources and Political Affairs (MMRPA) as also referenced in the Original Project PAD and financing agreement. In early 2011, the ministry was returned to its original name of Ministry of Mineral Resources (MMR).
5

In 2009, the Cabinet Sub-Committee has approved the Transformation Plan for the National Minerals Agency, March 2009 by MMRPA. The establishing NMA Act is currently under preparation with the assistance of DfID funding and is expected to be submitted for legislative approval by early spring 2011. The proposed NMA would work alongside the MMR as a technical regulatory organization and would assume responsibility for the technical and operational management of geological information, regulated precious minerals trading, and for the consistent application of a transparent mineral rights licensing system.

4 Petroleum Agreement implementing the terms of the Petroleum Act formed the basis of negotiation for the individual Petroleum Agreements with investors. Fiscal conditions are determined through the Petroleum Agreements and by the Income Tax Act of 2000. The Petroleum Resources Unit (PRU), in operation since 2004, was established as the regulator of the sector as per the terms of the Petroleum Act. During the licensing phase, PRUs role consisted mainly of providing technical input to the negotiating teams, but more recently, PRU has been attempting to move towards its long-term enforcement and monitoring role. 11. After the Venus discovery in 2009, the President appointed a petroleum task force headed by the secretary to the President and with roughly 30 members drawn from a wide spectrum of government agencies. Under the leadership of the Task Force, a new petroleum policy has been drafted, adopted by cabinet and submitted to parliament. The task force is also overseeing the preparation of a new petroleum law. Assistance in developing the policy and the law has been received from an Advisory Group made up of representatives from Norad, the Commonwealth Secretariat, Revenue Watch Institute, and the African Center for Economic Transformation, an Accra-based NGO. 12. Overall. Sierra Leone has been an Extractive Industries Transparency Initiative (EITI) candidate country since 2007. After a difficult start, the first reconciliation report was produced in 2010 and the validation process is underway for the first year audit to comply with the benchmarks set forth by the EITI Committee in Oslo. With the EITI framework and baselines now in place, the country will greatly benefit from stronger capacity to monitor extractive industries revenues to ensure sustainable and transparent sector governance and revenue management. The GoSL emphasizes the need to substantially improve its negotiations and regulatory capacity in the extractive industries sector. 13. The proposed scaled-up project remains aligned with the World Bank, International Finance Corporation and African Development Bank Joint Assistance Strategy for Sierra Leone (for FY10-13) and with the GoSLs Poverty Reduction and Strategy Paper (PRSP, 2009), which identify mining as one of the priority sectors to be developed in the country. The Original Project focuses primarily on the Regulations and Monitoring link of the Extractive Industries Value Chain, while the additional financing will widen and deepen this support by scaling up legal and regulatory reform and by also including activities to support two additional Value Chain links Award of Contracts and Licenses, and Collection of Taxes and Royalties. 14. EITAP forms a nexus of ongoing complementary activities by: (a) being coordinated with the broader reform framework in the country on macro and strategic level (private sector development, budget support operations and analytical work); (b) continuing to build upon and align with other donors efforts, most notably in the implementation of an institutional reform and capacity building plan developed with DfIDs support and UNDP support for the development of the computerized mining cadastre system and assistance with mining contracts renegotiations; (c) reinforcing, through better transparency and monitoring and understanding of environmental and social impacts management requirements, support provided through the Bank-administered Japanese grant to support artisanal mining communities; and (d) ensuring that extractive industries sector reform fits within the regional context and is aligned with regional

5 objectives (such as Mano River Union, and, on a broader scale, the Economic Community of West African States (ECOWAS), and the new Africa regional strategy. The Original Project and Project Objectives 15. MTAP was approved by the Board in December 2009 for total Bank financing of SDR 2.6 million (US$4.0 million equivalent) and became effective in February 2010. The Project Development Objective (PDO) of the Original Project is to build governments capacity to manage and regulate the minerals sector; the PDO will be updated in line with the Additional Financing to build governments capacity to manage and regulate the extractive industries sector with the scale-up; the project name is proposed to be revised accordingly: Extractive Industries Technical Assistance Project (EITAP). The project implementation is making satisfactory progress. MTAP/EITAP in conjunction with other donor activities in the sector is providing support in two high-priority areas improvement of sector regulations, and improvement of sector governance and administration by providing support to Ministry of Mineral Resources (MMR) and the prospective National Minerals Agency6(NMA). Updates to the Original Project provisions are included in the Proposed Changes where applicable. Project Performance and Status of Implementation 16. The Project became effective in February 2010 and has consistently been rated satisfactory. Procurement activities are being carried out in line with the Banks Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004, revised October 2006; and Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006. Financial management has been satisfactory. The project is in compliance with legal covenants and there are no outstanding audit reports. MTAP/EITAP is the only Bankfinanced project under implementation by the MMR. The project is classified as Environmental Category B for monitoring purposes and no safeguard issues have been noted to this date. 17. The project has to this date completed the following activities: the restructuring of the accounting and internal control system and configuration of new software system for accounting and financial management of MMR in line with international good practice, training of a diverse group of the MMR staff on procurement and financial management, and procurement of urgently required equipment and field vehicles for the MMR and the Geological Survey Department. Capacity building support to MMR (on operations support, procurement, and financial management) is on-going. Selection of consultants for the remaining major activities has been also completed: (i) to assist with improving legal / regulator frameworks for mining, including development of sector specific environmental and social regulations, and (ii) to carry out targeted geochemical surveying and mapping of selected nine areas. 18. The two major activities under the project referred to in paragraph above: strengthening of legal/regulatory framework for mining sector and geochemical surveying of selected areas went above the budget by US$372,000 and US$655,377 respectively (US$1.02 million in total). Both procurement followed competitive selection process Quality and Cost Based selection
6

Until formal establishment of the NMA, support is being provided to the departments of the MMR which are expected to transfer to the NMA structure.

6 and the winning proposals resulted in the considerably higher bids than expected. The additional financing will cover this budget overrun. 19. Disbursements as of March 2011 reached US$1.1 million (27% of total). The current closing date of the original project (Grant No H532-SL) is June 30, 2013; no extension of this original Grant is requested at this time. Proposed Additional Financing 20. The proposed Additional Financing in the amount of US$4.0 million equivalent (to be pooled with the DfID co-financing of GBP 2.1 million) will follow the Original Project components, which are: (i) Overarching Regulatory Frameworks for Extractive Industries Sector; (ii) Institutional Strengthening for Extractive Industries Sector; and (iii) Project Management. The additional financing will cover cost overrun under the Original Project and will add the thrust to improve the governments capacity to structure, negotiate, and monitor extractive industry development agreements going forward. To achieve these objectives, the additional financing would scale up activities to: Clarify the responsibilities and institutional structure for mining sector management, negotiation and monitoring (to be clearly captured in legal and regulatory framework); Scale up support for establishment and making operational the NMA; Undertake geochemical surveying of at least two additional areas to support promotion of Sierra Leones mineral potential; Set up a policy and strategy unit within MMR to provide technical advice for the negotiation of mineral agreements; Strengthen the Petroleum Resources Unit (PRU) at the Presidents Office to regulate the oil and gas sector; and Review and strengthen the monitoring functions of the Governments diamond office to ensure full compliance with the Kimberly Process7. 21. It is noted, that in parallel with preparation of this additional financing project, a separate regional West Africa Mineral Governance Project (WAMGP) is under preparation, with which this scaled-up operations is aligned. The regional operation, tentatively scheduled for FY12-13, will have its primary objective to improve understanding of the resource potential in the subregion and assist with its promotion and mineral development planning. The WAMGP will finance regional airborne geophysical and geochemical surveys and compilation of integrated regional geological, geophysical and geochemical maps of West Africa. WAMGP is expected to include Sierra Leone and will reinforce outcomes of the EITAP through provision of modern quality geodata to promote sector investment in the long-run. The geodata collection proposed under EITAP is limited to prospect level geochemical surveying targeting specific commodities, which in conjunction with governance level reforms is expected to assist with attracting new investment into the sector in the short- to medium- run.

The Kimberley Process Certification Scheme (Kimberley Process) is an international governmental certification scheme that was set up to prevent the trade in diamonds that fund conflict. Launched in January 2003, the scheme requires governments to certify that shipments of rough diamonds are conflict-free.

III. Proposed Changes 22. The Project Development Objective (PDO) for the additional financing will be updated to reflect additional activities to support oil and gas sector governance reform: to build governments capacity to manage and regulate the extractive industries sector. The Project name will also be revised accordingly: Extractive Industries Technical Assistance Project. The PDO for the Original Project will be updated accordingly through an amendment that will be a part of the additional Financing Agreement. Closing date of the original grant will remain unchanged (June 30, 2013), but if needed at a later date will be extended to match the additional financing. 23. The Results Framework has been updated (see Annex 1) to increase some target values and adding new indicators. The new results indicator to reflect incorporation of additional activities are: - Functions and governance structure for the Petroleum Resources Unit (PRU) are formalized through regulations; and - Future petroleum exploration licenses issued in compliance with revised laws and regulations adopted by the Government. Additional Financing Project Components 24. A separate Financing Agreement (FA) will govern the additional financing grant and will include an Amendment to the original Financing Agreement (H532-SL). Terms and conditions for the original IDA grant will remain unchanged, except as stated in the Amendment, which includes (i) update of the PDO and the project description (Schedule 1 to the FA), and (iii) update of procurement procedures, reporting and the Anticorruption Guidelines (Schedule 2 of the FA). The DfID co-financing will be provided under a Co-Financing Agreement between IDA (on behalf of DfID) and the Recipient. Table 1 below provides costs breakdown by component between the Original Project and the additional financing through IDA, as well as the grant by DfID. Table 2, provides narrative description of original components and additional activities. A detailed description of additional financing activities is provided in Annex 3. Table 1: Costs by component (in US$ million)
Project Cost By Component Component A: Overarching Regulatory Frameworks for Extractive Industries Sector Component B: Institutional Strengthening for Extractive Industries Sector Component C. Project Management PPF refinancing Total Baseline Cost Physical and Price contingencies Total Project Cost Original Project 0.29 2.85 0.26 0.40 3.80 0.20 4.00 Additional Financing (IDA) 0.37 3.52 0.11 4.00 4.00 Total Revised Cost (IDA) 0.66 6.37 0.37 0.40 7.80 0.20 8.00 DfID CoFinancing 0.31 2.95 0.09 3.35 3.35 Total Project Cost 0.97 9.32 0.46 0.40 11.15 0.20 11.35

8 Table 2. Project Components- Original Project and Additional Financing

Original Project (No changes) Additional Financing (separate Financing Agreement) Component A: Overarching Regulatory Frameworks for Extractive Industries Sector Development of environmental and Covering cost overrun for the preparation of regulations under the social regulations for large-scale and original component. mechanized small-scale mines; preparation of a mining sector Code Completing mining implementing regulations of the Mines and of Practice; preparation of Minerals Act underground mining regulations; preparation of trading license Finalizing enabling legal acts, regulations and operating guidelines regulations for National Minerals Agency (NMA) Support for updating petroleum laws and regulations and related consultations and policy dialogue Component B: Institutional Strengthening for Extractive Industries Sector Support to the MMR and the NMA Provision of additional equipment and technical assistance to MMR (when it is formally established) and, upon its establishment, NMA for departments responsible for through capacity building and monitoring and inspection of mining operations and to geological provision of urgently required survey department (until the NMA is formally established, assistance equipment field vehicles, will be provided to respective department of the MMR that are generators, and equipment for expected to transfer under the NMA). geochemical surveying and mapping. Geochemical surveying of selected Covering cost overrun of the Original Project and carrying out areas (9 blocks). targeted geochemical surveying of up to 3 additional blocks and related capacity building to MMR (NMA upon its establishment) in mineral resource assessment and mapping. NA Provision of capacity building to MMR, and, upon its establishment, NMA, and Ministry of Land, Country Planning and Environment, Sierra Leone Environmental Protection Agency and Civil Society Organizations on implementation of environmental and social regulations for the extractive industries sector, including monitoring and evaluation tools, reporting, and consultation processes. NA Support to the Governments Diamond Office, including training, advisory services and capacity building Mineral promotion through Setting up secure geodata management and information system development of materials and (linked with mining cadastre system) in MMR (to be transferred to participation in major global and NMA upon its establishment), including development of web-based regional mining events tools and promotion materials to make geodata available to the investors. Promotion of mineral and oil and gas potential at global events NA Building capacity of MMR, SPU and Governments Negotiations Committee for extractive industries contracts negotiations, including financial and economic modeling, review of technical and feasibility reports, updating model agreements for specific commodities, and developing negotiations strategies. NA Provision of capacity building to the Petroleum Resources Unit, through: (i) training courses for current and future PRU staff, (ii) purchases of software licenses (including annual support and maintenance fees) and hardware (laptops, servers, plotters, etc.) to allow PRU to store and analyze geological and geophysical data; (iii) undertaking a functional management review for petroleum sector management to inform capacity building needs; (iv) financing an advisor to deliver hands-on training to PRU staff, establish

9
capacity to perform core functions relating to licensing and exploration, and advise the PRU, the Petroleum Task Force and other officials on policy decisions as needed; and (v) workshops, training and study tours. Extend financing of up to two additional MMR and, upon its establishment, NMA staff required to make the new agency operational NA

Temporary salary support for up to four new staff to be hired by MMR, and upon its establishment, NMA Support for a post-mining rehabilitation program Strengthen the capacity of MMR to Extend the support through an additional year of implementation to manage donor-financed projects and ensure sustainability day-to-day administration. Developing a monitoring and Continue evaluation of and reporting on the sector development evaluation system and benchmarking through the project implementation period progress through over the life of the project Component C: Project Management Project management arrangements will remain unchanged; additional funding will be provided for the duration of implementation (through 2016).

25. Civil servants salary support. The additional financing will expand temporary support to MMR (and NMA when it becomes operational) for two civil servants positions. This additional support is justified to ensure long-term sustainability (beyond the project life-time) of the new and scaled up government functions being supported under the Project. The new positions are included in the NMA Transformation Plan (2009), and, as a condition for disbursement under this expenditure category, they will be formally included in the MMR/NMA organogram8 and into the financing plan to ensure their transition to the budget funding before the project completion. Terms and conditions for temporary salary support financing under the additional financing will remain unchanged from the Original Project (see disbursement conditions in para 31 below). Implementation Arrangements 26. The implementation arrangements for the scaled-up project will remain unchanged. Project management responsibilities will continue to be handled by a Project Support Team (PST) within the MMR staffed with a project coordinator, a procurement specialist, and a financial management specialist, all of which are civil servants. The PST is supported during the initial two years of project implementation by a consultants team which is tasked to build general capacity within the MMR (PST in particular) to manage donor projects and carry out procurement and financial management; this implementation support is expected to be extended by about one year. The government has agreed to undertake a number of HR measures to ensure that the PST is stable and appropriately motivated. These measures include a waiver (or postponement) of mandatory civil servants rotations for the PST staff for the duration of their assignment with the PST, and possible financial incentives system to be developed by the government and financed from its own budget (not eligible to be financed from IDA). It is noted that these incentives will be carefully considered within (i) the portfolio-wide review of
8

To be approved by the Director General of the Human Resource Management Office

10 integration of project implementation functions with the implementing agencies that is taking place as part of Country Performance Portfolio Review (CPPR) exercise starting in calendar year 2011, as well as (ii) the GoSL public sector reform which, inter alia, is developing a new pay reform policy whereas all project-specific arrangements will be reviewed once the wider public sector reform proposals have been developed and approved. Should these changes materially affect project implementation arrangements for EITAP, the restructuring of implementation arrangements will be considered at the mid-term review. 27. For the oil sector technical assistance activities, the PST will provide procurement, financial management and disbursement support to the Petroleum Resources Unit (PRU). The PRU, however, will be responsible for the technical aspects, including (i) developing Terms of Reference for consultants services under this component and participating in short-listing and consultants selection process; (ii) monitoring of consultants performance and reporting on progress; and (iii) keeping track of oil and gas related indicators. The PST will assist at all stages as needed and will prepare all procurement documentation and contracts, as well as process payments. 28. Project Operational Manual. The government has adopted a Project Operational Manual (POM) for the purposes of the implementation of the Original Project; the POM focuses on processes and procedures for the project implementation, monitoring, and reporting. The POM will continue to be used for the scaled up operation, and it was updated, prior to negotiations of the additional financing, to reflect the scaled up activities. Annual Work Plan (AWP) and Budgets for each year of the project implementation are being developed by the government, and this arrangement will remain without changes for the scaled-up project. The updated AWP for the current year and 18-months Procurement Plan for the additional financing were reviewed and approved by the Bank prior to negotiations. 29. Disbursement. The additional financing will have the same disbursement categories as the Original Project. Table 3 provides breakdown by disbursement category for the additional IDA grant and DfID Co-financing Grant. Monitoring of expenditures by category and activity will continue to be done through approval and monitoring of implementation of Annual Work Plans (procedure in place during the Original Project which will continue during additional financing). Table 3. Disbursement Categories for the Additional Financing Grant and DfID Grant
Additional Financing Amount (in SDR) Additional Financing Amount (in US$) DfID Financing Amount (in GBP) Eligible Financing Percentage

Categ

Description Consultants' services, goods, training, workshops and study tours, and operating costs

2,530,000

3,900,000

2,039,616

Salary support under Part B(ii) TOTAL

70,000 2,600,000

100,000 4,000,000

57,000 2,096,616

54% IDA; 46% DfID Such percentage as shall be specified in the Annual Work Plan and Budget for the respective fiscal year

11 30. A new single designated account will be opened by the government; it will be pooled for IDA grant and DfID co-financing. Disbursements to the designated account will be made 54% from the IDA Grant and 46% from the DfID Co-financing Grant for Disbursement Category 1; for Disbursement Category 2, eligible financing percentages will be established each year of the project implementation based on the Annual Work Plans and Budgets. Flow of funds arrangements will remain the same. The project will use transaction based disbursements, the same as in the original IDA grant. 31. The Disbursement Category 2 will have the following disbursement conditions (same as under the original grant): (i) the MMR adopts a policy for the development of sustainable human resource capacity within MMR/NMA; (ii) the staff proposed to be financed under the EITAP is included into the MMR/NMA organogram; and (iii) the MMR provides a satisfactory to IDA implementation and financing plan for each fiscal year in which salaries are to be financed under the project. 32. Financial Management. Financial management functions for the project will remain unchanged from the Original Project and will continue to be managed through the PST in full coordination with the Treasury, the Accountants General office, and the Chief Financial Officer under the supervision of the Ministry of Finance and Economic Development (MoFED) internal audit department (for internal audit) and the Office of the Independent Auditor General (for external audit). 33. Procurement. Procurement arrangements for the project will remain unchanged, except for the updated exceptions to the National Competitive Bidding Procedures (see para 34 below). The same procedures will apply to the original grant9, additional financing grant and the cofinancing grant for consistency. 34. Exceptions to National Competitive Bidding Procedures. The procedures to be followed for National Competitive Bidding shall be those set forth in The Public Procurement Act, 2004, of Sierra Leone (the Act). Details on the exceptions are provided in Annex 3. IV. Appraisal Summary Economic considerations 35. The additional financing is economically justifiable as it will improve chances of Sierra Leone for new sustainable extractive industries sector investments and increasing sector revenues through (i) improving efficiency and transparency of licensing, management, and monitoring of extractive industry operations; and (ii) scaled up targeted surveying and sector promotion. Based on the experience of similar projects in resource-rich countries (see for example project experience in Tanzania, Madagascar, Mozambique, Uganda, or Nigeria), reform measures proposed under EITAP are expected to yield highly positive economic results within a few years after the commencement of reforms (with full benefits to be reasonably expected 10+ years after the commencement of reforms). The revenues generated through extractive industries
9

The procurement under the original grant that commenced prior to the effectiveness of the additional financing grant, will be allowed to be completed in accordance with the original financing agreement provisions

12 exploration and exploitation projects can significantly change the economic structure of the country and bring in resources to meet various development and infrastructure spending requirements in the country. 36. The original financing estimated that, with appropriate reforms, subsequent mining sector investment could bring the value of exports to US$1.2 billion per year by 2020. Achieving this level of investment - in addition to exploration results and behavior of the commodity markets which cannot be controlled by this project will strongly depend on consistent application by the Government of updated sound legal and regulatory frameworks for extractive industries sector and ability of the Government to monitor sector performance and collect revenues due reforms that are targeted in the proposed scaled-up operation. Level of oil and gas sector investment and revenues will be hard to estimate in the next four to five years, but the importance of developing of the optimal sector regime and building capacity for its management and monitoring in advance of the investment and actual production is recognized globally and within the country as crucial. Risks 37. The risk profile for the new financing is very similar to the Original Project. The project has a risk rating of Medium-Impact (MI). Among the key risks of the project are implementation capacity risks, donor coordination risks, and reputational risks. The Operational Risk Assessment Framework (ORAF) is included in the Annex 2. Main mitigation measures include: (i) maintaining high level championship within the GoSL at all stages of the reform; (ii) maintaining strong focus on capacity building with the Government entities involved in sector management and oversight throughout the project implementation; (iii) undertaking regular consultations and information sharing on reforms financed by the project with stakeholders both within country and international CSOs; (iv) ensuring that project outputs, including new geodata, are used in public interests and is publicly available; and (v) maintaining strong link with EITI. Safeguards 38. By the way of background, a mining sector Strategic Environmental and Social Assessment (SESA)10 for Sierra Leone was prepared in 2007 and its core recommendations were incorporated into the original MTAP. In 2010, as part of preparation of the regional mining project (WAMGP see para 21 above), the Bank financed preparation of a West Africa Minerals Sector Strategic Assessment (WAMSSA)11. While most of the recommendations of WAMSSA target regional level reforms, the scaled-up EITAP will, inter alia, contribute to the goals of (i) strengthening environmental governance; and (ii) improving social accountability and mineral sector governance. 39. The project will maintain safeguards category B triggering OP/BP 4.01. The scaled-up project does not trigger any additional policies and remains a technical assistance project. The Integrated Safeguards Data Sheet (ISDS) for the additional financing has been updated and
10

Sierra Leone Mining Sector Reform: A Strategic Environmental and Social Assessment, World Bank, 2007.

11

West Africa Mineral Sector Strategic Assessment for the Development of the Mineral Sector in Mano River Union, the World Bank, March 31, 2010.

13 disclosed prior to appraisal to confirm the category, safeguards management approach, and to reflect additional activities as noted in the paragraph below. The Terms of Reference for preparation of environmental and social regulations for mining sector and related capacity building that were disclosed prior to the Original Project appraisal (October 2009) remain valid. 40. The additional financing will (i) scale-up capacity building activities to MMR, Ministry of Lands, Country Planning and Environment, Sierra Leone Environmental Protection Agency (SLEPA) and CSOs to monitor environmental and social compliance of the extractive industries operations (the sector specific regulations, as well as sector guidelines and code and practice for mining, are being prepared with the support of the Original Project); and (ii) initiate and support policy dialogue among the Government and stakeholders to foster the development of policy frameworks and strategies to support environmentally sustainable and socially equitable development of Sierra Leones oil and gas sector. Policy Exceptions 41. There are no exceptions to Bank policies proposed under this additional financing. The project implementation structure is fully in place and operational, all manuals are in compliance with the Bank requirements, the Project Operations Manual has been updated prior to negotiations, the 18 months procurement plan for the additional financing has been prepared and approved by the Bank prior to negotiations.

14 Annex 1: Results Framework and Monitoring Sierra Leone Extractive Industries Technical Assistance Project Revisions to the Results Framework PDO Current (PAD) To build capacity of the Government to improve management and regulation of the mining sector PDO indicators Current (PAD) Mining licenses issued in compliance with revised regulations adopted by MMR MMR (NMA when it becomes operational) implements its human resource policy and trains and retains qualified staff Geodata are easily available and accessible through the web NA Proposed change* Continued Proposed Revised: To build capacity of the Government to improve management and regulation of the extractive industries sector Comments/ Rationale for Change

Continued

Continued New: New petroleum exploration licenses issued in compliance with Petroleum Act and supporting regulations New indicator to reflect additional activities

Intermediate Results indicators Current (PAD) Regulations for environmental and social management for mining, underground mining and precious minerals trading are developed and adopted by the MMR

Proposed change* Revised: Regulations for environmental and social management for mining, underground mining, precious minerals trading, and enabling act and regulations for NMA are developed and adopted by the MMR Continued

Revised to reflect additional law and regulations

MMR (NMA when it becomes operational) monitor and report annually on enforcement of

15 Revisions to the Results Framework EIA/SIA regulations for industrialscale mining projects MMR monitors and reports annually on production and revenue of the sector NA Comments/ Rationale for Change

New equipment used for field work Field inspections to monitor compliance of mining operations Geochemical surveying and mapping of selected areas completed Based on geochemical surveys and mapping of selected areas, Government selects candidate areas for sector promotion Government selects areas for further actions to develop other land use (outside the project) Government participates in annual events to present information to potential investors Geodata website is regularly updated and accessible

Revised: GoSL monitors and reports annually on production and revenue of mining and oil sector New: Functions and governance structure for the Petroleum Resources Unit (PRU) are formalized through regulations Continued Continued Continued

Revised to reflect additional financing activities New indicator to reflect additional activities

Continued

Target value increased to reflect additional areas to be surveyed under the AF Target value increased to reflect additional areas to be surveyed under the AF

Continued

Continued

Target value increased to reflect additional financing overlap with PDO level indicators

Dropped

16 REVISED PROJECT RESULTS FRAMEWORK12 Project Development Objective (PDO): To build capacity of the Government to improve management and regulation of the extractive industries sector
PDO Level Results Indicators UOM Baseline Original Project Start (2009) Progress To Date (2011) Cumulative Target Values

2011

2012

2013

2014

Frequen cy

Data Source/ Methodology

Responsibility for Data Collection

Core

Comments

1. Mining licenses issued in compliance with revised regulations adopted by Ministry of Mineral Resources 2. MMR (National Minerals Agency when operational) implements its human resource policy, and trains and retains qualified staff

None

Yes/No

NMA Transfor mation plan drafted Some general data available on MMR web-site

Consult ant to prepare regul-s selected NMA Act under preparat ion

New Regulations adopted

50%

100%

Annual

Progress Reports

MMR/NMA

Yes

Yes

Yes

Yes

Annual

Progress Reports

MMR/NMA

3. Geodata are accessible through the web

Yes/No

Not yet due

No

Yes

Yes

Yes

Annual

Progress Reports

MMR/NMA

4. New petroleum exploration licenses issued in compliance with Petroleum Law and supporting regulations

Yes/No

NA

No

No

Yes

Yes

Yes

Annual

Progress Reports

PRU

Annual progress of percentage of licenses in compliance; For regulations see indicator 6 below Target to engage at least 6 new qualified staff for NMA under public servants contracts Geodata = existing geological data (nonconfidential) available at geological survey and geochemical data to be obtained by EITAP Law will be largely prepared under a Norad project; EITAP will finance in part regulations, software and application and capacity building to implement the regulations

12

Because the main beneficiaries of this project are institutions, the project does not report on the otherwise mandatory core indicator Direct project beneficiaries (number), of which female (%).

17

Intermediate Results and Indicators

Baseline Original Project Start (2009) Data Source/ Methodology Responsibility for Data Collection Comments

Intermediate Results Indicators Core

UOM

Progress To Date (2011)

Target Values

Frequency

2012

2013

2014

2015

Intermediate Result 1: Increased compliance of mining and petroleum operations with regulations 5. Regulations for environmental and social management for mining, underground mining, precious minerals trading, and enabling act and regulations for NMA are adopted by the MMR 6. MMR (NMA when it becomes operational) monitor and report annually on enforcement of EIA/SIA regulations for industrial-scale mining projects 7. MMR monitors and reports annually on production and revenue of the mining; and PRU reports on oil and gas sector 8. Functions and governance structure for the Petroleum Resources Unit are formalized through regulations

Yes/ No

None/ basic

Work commenced

Partially yes

Yes

Yes

Yes

Annual

Progress Reports

MMR

Yes/ No

Basic requiremen ts

Not yet due

No (develop framework)

No (develop first report) Set up frameworks for oil sector reporting

Yes

Yes

Annual

Progress Reports

MMR/ NMA

Yes/ No

None

Yes/ No

NA

First EITI report of 2010 was not compliant Law in place; regulations under preparation

Achieve compliant status

First report on oil and mining sectors published

Annual report on mining and oil sector revenues

Annual

Progress reports

MMR and PRU

Yes

Yes

Yes

Yes

Annual

Progress Reports

PRU

Intermediate Result 2: Regional and central departments of MMR (NMA when it becomes operational) efficiently perform field work 9. New equipment used for field work
Yes/ No

equipment procured

Yes

Yes

Yes

Yes

Annual

Progress Reports

MMR/ NMA

18

Intermediate Results and Indicators

Baseline Original Project Start (2009) Data Source/ Methodology Responsibility for Data Collection Comments

Intermediate Results Indicators Core

UOM

Progress To Date (2011)

Target Values

Frequency

2012

2013

2014
50% of industrial scale mines and ASM Publication of 9 sheets of maps

2015

10. Field inspections to monitor compliance of mining operations

% and num

Limited ad hoc

Not yet due

Not yet due

25% of industrialscale mines

100%

Annual

Progress Reports

MMR
Kangari Hills; Sula Mountain Shist Belt, Loko Greenstone Belt.

11. Geochemical surveying and mapping of selected areas completed 12. Based on geochemical surveys and mapping of selected areas, Government selects candidate areas for sector promotion 13. Government selects areas for further actions to develop other land use (outside the project)

Num

Consultant engaged Consultants selected, survey equipment purchases Not yet due

Commence surveying

9 areas surveyed

Annual

Progress reports

MMR/N MA

Num

Select at least 4 targets for promotion Concept Prepared 1 area 2 areas 3 areas

Annual

Progress Reports

MMR/ NMA

Num

Annual

Progress Reports

MMR

Annual targets

Intermediate Result 3: Targeted promotion of mineral and petroleum resources 14. Government presents SL mining and petroleum sectors to potential investors at regional and global events Progress Reports MMR/ PRU Annual targets

Num

None

3 event

4 events

4 events

4 events

Annual

19

ANNEX 2 OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)

EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT
Project Development Objective(s) Description: The Project Development Objective is to build capacity of the Government to improve management and regulation of the extractive industries sector Key Results Indicators: 1. Mining licenses issued in compliance with revised regulations adopted by MMR 2. MMR/NMA implements its human resource policy, and trains and retains qualified staff 3. Geodata are easily available and accessible through the web 3. New petroleum exploration licenses issued in compliance with Petroleum Act and supporting regulations

Risk Category Project Stakeholder Risks

Risk Rating M-I

Risk Description Consultations held during the preparation of the Original Project indicated that stakeholders strongly support sector reforms targeted to improve the governments capacity for policy and strategy formulation, for monitoring compliance with contractual obligations and sector regulations, and promotion. Sierra Leone has a modern policy, legal and regulatory framework in place for mining sector; for petroleum sector the policy is place and the law and regulations are under development. The institutional framework is currently being reformed, but there is a severe shortage of specialist staff and technicians, adequate

Proposed Mitigation Measures The project will continue to hold broad consultations with stakeholders and civil society and regular updates during implementation to ensure coordination of efforts and better exploitation of synergies to maximize the project impact. The project is design to strengthen institutional capacity and thus in itself represents mitigation mechanism going forward. EITAP is targeted to (i) improve Governments capacity to manage the extractive industries sector; (ii) improve knowledge of the mineral endowment; (iii) assist with set up and making operational the NMA,

Implementing Agency Risks

20
equipment, and information resources. The Government recognizes the crucial need for institutional capacity building and is directing its efforts to restructuring the MMR to better serve the sector management and regulation needs. On petroleum side, the government is targeting capacity building support for the Petroleum Resource Unit to enable it to manage licensing and sector monitoring. MMR will continue to manage the project and carry out procurement and financial management and disbursements functions - for both mining sector and petroleum sector parts of the project. It has built some experience during the preparation and implementation of the Original Project, but the Project Support Team at MMR does not yet have the full capacity to implement projects independently (currently supported by a team of consultants), but is making progress on building the required expertise. The Ministry has extended consultants contract for six months to ensure a proper transition to fully autonomous PST. Project Risks Design L The design of this project has been tested in other countries. The Original Project has commenced the implementation and has been progressing smoothly. The project is rated environmental category B for monitoring purposes; OP 4.01 is triggered. The risks are indirect and largely reputational. The project will provide associated capacity building. No works or investments will be supported under the project. including builds its capacity to monitor mining operations and ensure compliance with contractual covenants and sector regulations; and (iv) build capacity of the PRU to manage the new petroleum sector.

The project will continue to include substantial strengthening of staff and institution-wide procurement, financial management, and project management capabilities. MMR will also implement staff secondment program and request exception to mandatory rotation of senior staff to ensure stability and continuity within the PST.

Social and Environmental

M-L

Joint needs assessment during preparation with Government and donors indicated that project design was well accepted by the majority of stakeholders. The initial project is already assisting the government to build adequate environmental and social regulations for the mining sector. The legal covenants of the project commits Government to using good practices for env/ social management of mining operations. The project will support training and capacity building to the CSOs on understanding the

21
implementation and monitoring of the environmental and social regulations for extractives. This is supporting demand side governance so CSOs can hold companies and government more accountable. A Mining Working Group was established to meet once a month to share information about donor activities in the extractive sector

Program and Donor

DFID is a co-financier under this project and has been actively involved in project design. The government has developed in 2009 a comprehensive development needs matrix for mining sector which takes into account support from various donors. Lack of experience with donor-funded projects and low in-house capacity for contract management and M&E at MMR could affect the quality of delivery. There have been two leadership changes in as many years. The resulting high level of turnover of critical staff could increase the quality of delivery.

Delivery Quality

M-L

Sustainability assessments will be conducted periodically as part of project M&E, leading to design modifications if needed. The likely benefits of a better managed sector (in terms of sector revenues and mining induced broad-based growth) will provide an incentive to sustain the reforms.

Overall Risk Rating at Preparation

Overall Risk Rating During Implementation

Comments The package of reforms for the extractive industries sector has been well tested in many countries and is already under implementation in Sierra Leone. Governments commitment to sustainable sector development is high and government and donor coordination has been also a success. Key risks evolve from the institutional capacity of the government entities to implement the reform and consistently apply good practices in the future.

M-I

M-I

22

ANNEX 3
Sierra Leone Extractive Industries Technical Assistance Project 1. Updated Project Description
The scaled-up Project consists of the following parts (additional activities are italicized, updates of Original Project are underlined). Part A: Overarching Regulatory Framework for Extractive Industries Sector

1. Provision of capacity building support to the Government to improve the regulation of the mining sector through the preparation of, and the carrying out of related consultations on, new or revised mining regulatory instruments including inter alia: (i) legislation, regulations and model terms of reference for the preparation, disclosure, consultation and enforcement of environmental and social impact assessments, resettlement action plans, environmental and social management plans and mine closure plans for large-scale and mechanized small-scale mines, as well as mechanisms and procedures for community information dissemination, consultation, dispute resolution and benefit-sharing including improved linkages between large-scale mining and broader economic planning; (ii) a mining sector code of practice; (iii) underground mining regulations; (iv) mineral trading licenses regulations; and (v) the Mines and Minerals Act and supporting regulations. 2. Improve the regulatory framework governing the extractive industries sector, through support for the preparation, and carrying out, of related consultations on new or revised draft regulatory and other instruments, in view of: (i) developing a regulatory and administrative framework for the NMA; and (ii) reviewing and updating the Petroleum Act and preparing supporting petroleum and gas regulations. Establishing and managing policy level dialogue to support formulation of a strategy for future regulatory requirements and arrangements for environmental and social management of the oil and gas sector. Institutional Strengthening Strengthening oversight and governance of the extractive industries sector, in particular: 1. Provision of capacity building support to the Government to improve the management of the mining sector through: (i) support to the MMR to carry out its functions and operations including, inter alia, collection and management of geological and geochemical data for selected sites, carrying out targeted geochemical surveying, mineral resource assessment, and mapping of selected sites; (ii) carrying out investment promotion activities including setting up and operating a secure geodata management and information system and developing promotion materials; (iii) carrying out mine inspections and regulatory enforcement; (iv) provision of transitional salary support for selected civil servants in the MMR, for the carrying out of geological, data management, monitoring, evaluation, and environmental functions; (v) development of a postmining rehabilitation program for selected sites; (vi) support to MMR to manage donor-financed projects including the building of skills for procurement, financial management and project management and monitoring; and (vii) support to MMR to develop a monitoring and evaluation system and benchmark progress towards the achievement of key governance-related indicators for the mining sector.

3.

Part B.

23
2. Strengthening the technical and institutional capacities of MMR, Petroleum Resources Unit (PRU), the Ministry of Environment, Sierra Leone Environmental Protection Agency, and civil society organizations for implementing environmental and social regulations for the extractive industries sector including monitoring, evaluation, reporting and carrying out consultations. Strengthening the technical, institutional, and management capacity of MMR, the Strategy and Policy Unit, and the Negotiations Committee, for carrying out extractive industries contracts negotiations, including financial and economic modeling, review of technical and feasibility reports, updating model agreements for specific commodities, and developing negotiations strategies. Strengthening the technical, institutional and management capacity of the PRU for managing and analyzing geological and geophysical data. Strengthening the capacity of the Government Gold and Diamond Office. Developing and strengthening the monitoring, evaluation, and reporting systems for the extractive industries sector. Project Management

3.

4. 5. 6.

Part C.

Provision of technical and financial support to the MMR for the management, procurement, financial management, monitoring, evaluation and audit of the Project.

24 2. Amended Exceptions to National Competitive Bidding Procedures

The procedures to be followed for National Competitive Bidding shall be those set forth in The Public Procurement Act, 2004, of Sierra Leone (the Act), subject to the following provisions: (a) Procuring entities shall use appropriate standard bidding documents acceptable to the Association; (b) The eligibility of bidders shall be as defined under Section I of the Guidelines Procurement under IBRD Loans and IDA Credits (the Procurement Guidelines); accordingly, no bidder or potential bidder shall be declared ineligible for contracts financed by the Association for reasons other than those provided in Section I of the Procurement Guidelines; (c) No restrictions in respect of eligibility to participate in bidding for contracts shall be placed on the basis of nationality of the bidder and/or the origin of goods other than those imposed by primary boycotts; (d) Foreign bidders shall be allowed to participate in National Competitive Bidding procedures; (e) No domestic preference shall be given for domestic bidders and/or for domestically manufactured goods; (f) Bidding shall not be restricted to pre-registered firms, and foreign bidders shall not be required to be registered with local authorities as a prerequisite for submitting bids; (g) Foreign firms shall not be required to associate with a local partner in order to bid as a joint venture, and joint venture or consortium partners shall be jointly and severally liable for their obligations; (h) Government-owned enterprises shall be eligible to participate in bidding only if they can establish that they are legally and financially autonomous, operate under commercial law and are not dependent agencies of the Recipient. Such enterprises shall be subject to the same bid and performance security requirements as other bidders; (i) Subject to these provisions, procurement shall be carried out in accordance with the Open Competitive Bidding procedures set forth in the Act; (j) Bidders shall be given at least thirty (30) days from the date of the invitation to bid or the date of availability of bidding documents, whichever is later, to prepare and submit bids; (k) Bids shall be submitted in a single envelope;

25 (l) An extension of bid validity, if justified by exceptional circumstances, may be requested in writing from all bidders before the expiration date and for a minimum period required to complete the evaluation or award a contract, but not to exceed thirty (30) days. No further extensions shall be requested without the prior concurrence of the Association; (m) All bids (or the sole bid if only one bid is received) shall not be rejected, the procurement process shall not be cancelled, and new bids shall not be solicited without the Associations prior concurrence; (n) Qualification criteria shall be applied on a pass or fail basis; (o) Bidders shall be given at least twenty-eight (28) days from the receipt of notification of award to submit performance securities; (p) Each bidding document and contract financed out of the proceeds of the Financing shall include provisions on matters pertaining to fraud and corruption as defined in paragraph 1.16(a) of the Procurement Guidelines. The Association will sanction a firm or an individual, at any time, in accordance with prevailing Association sanctions procedures, including by publicly declaring such firm or individual ineligible, either indefinitely or for a stated period of time: (i) to be awarded an Association-financed contract; and (ii) to be a nominated sub-contractor, consultant, manufacturer or supplier, or service provider of an otherwise eligible firm being awarded an Association-financed contract; (q) In accordance with paragraph 1.16(e) of the Procurement Guidelines, each bidding document and contract financed out of the proceeds of the Financing shall provide that: (i) the bidders, suppliers, contractors and subcontractors shall permit the Association, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Association; and (ii) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.16(a)(v) of the Procurement Guidelines; and (r) The Association may recognize, if requested by the Borrower, exclusion from participation as a result of debarment under the national system, provided that the debarment is for offenses involving fraud, corruption or similar misconduct, and further provided that the Association confirms that the particular debarment procedure afforded due process and the debarment decision is final.

26 3. Project Preparation Project Schedule Milestone Concept Review Appraisal Negotiations Board Approval Planned date of Effectiveness Planned date of Mid-term Review Planned Closing Date Planned Actual December 15, 2010 February 22, 2011 March 16, 2011

April 21, 2011 June 2011 July 2013 June 30, 2016

Bank staff and consultants who worked on the project include: Name Ekaterina Mikhaylova Mamadou Barry David Santley Sylvia Kalley Cecilia Tan Tsri Appronti Joyce Agunbiade Luis Schwarz Christine Makori Peter Kristensen Joseph Akpokodje Maria (Chona) Cruz Anders Jensen Title, Unit Task Team Leader, Sr Mining Specialist, SEGOM Sr Mining Specialist, SEGOM Sr Petroleum Specialist, SEGOM EITI Consultant, SEGOM Team Assistant, SEGOM Procurement Specialist, AFTPC Financial Management Specialist, AFTFM Sr Finance Officer, CTRFC Counsel, LEGAF Sector Leader, AFTEN Sr Environmental Specialist, AFTEN Lead Social Development Specialist, AFTCS Monitoring and Evaluation Specialist, AFTDE

Key institutions responsible for preparation of the project: Ministry of Mineral Resources, Ministry of Finance and Economic Development, Petroleum Resource Unit, Strategy and Policy Unit

IBRD 38372
FORMER SPANISH SAHARA

ALGERIA

LIBYA

MAURITANIA CAPE VERDE SENEGAL THE GAMBIA GUINEA-BISSAU GUINEA

SIERRA LEONE

SELECTED CITIES AND TOWNS

MALI DISTRICT CAPITALS NIGER SUDAN CHAD

MINING TECHNICAL ASSISTANCE PROJECT

Additional Financing
MAIN ROADS RAILROADS DISTRICT BOUNDARIES INTERNATIONAL BOUNDARIES
To Our-Kaba

SIERRA LEONE

NATIONAL CAPITAL
TOGO BENIN

RIVERS
CTE DIVOIRE

BURKINA FASO

ATLANTIC OCEAN

NIGERIA CENTRAL AFRICAN REPUBLIC DEM. REP. OF CONGO

LIBERIA

GHANA

CAMEROON EQUATORIAL GUINEA SO TOM AND PRNCIPE

GABON

CONGO

SIERRA LEONE

12W 10N
To Kindia

11W
To Faranah

10N 0 20 40 60 Kilometers

Falaba Yana

go Mon

G re at S car cies

13W

Kamakwie

ar

ar

t a M

s.
Kabala
Bendugu

20

40

50 Miles

KOINADUGU
Se

To Forecariah

Fadugu Madina Junction

li

Bagbe
Bintimani (1948 m)

Kamaron

Litt le S car cies

KAMBIA
Kambia
9N Mange

ts.

BOMBALI
Pendembu Batkanu Bumbuna
Pamp ana

GUINEA

Alikalia

Lo

Kurubonla

9N Kayima

Gbinti

Makeni

Binkolo

Port Loko
Lungi

FREETOWN WESTERN AREA F.R.

Banana Islands

Pepel

Masiaka Songo Waterloo Rotifunk

T O N K O L I L I Masingbi
Yonibana Yele Mongeri

Sefadu

Go

NjaiamaSewafe Gandorhun

ri H ills

PORT LOKO

Lunsar
l oke

Magburaka
Matotoka

Tefeya Yengema

KONO

Koindu

oa
Buedu

Kailahun
Panguma

To Kolahun

Moyamba
Mano

Dambara

KAILAHUN
Pendembu Daru 8N

Yawri Bay
Shenge

YA M O YA M B A
Sembehun

BO
Bo
wa Se
Blama Kribundu

KENEMA
Lago

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LI B E R I A

Sherbro
Turtle Islands

Mo a

Lake Mape 12W Sulima

Fairo

7N 13W

AT
LA

Sherbro Island

Momaligi

Bonthe

Matru

Sumbuya Potoru

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B O N TKH E
ittam

LIBER I A
Zimmi o an
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.

N
T
I
O
CE AN

PUJEHUN
Lake Mabesi

Pujehun

To Monrovia

11W FEBRUARY 2011