Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 59466-SL

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)

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.

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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

AF Additional Financing

ASM Artisanal and Small Scale Mining

AWP Annual Work Plan

CPPR Country Performance Portfolio Review

DfID Department for International Development of UK Government

EIA/SIA Environmental Impact Assessment / Social Impact Assessment

EITAP Extractive Industries Technical Assistance Project

EITI Extractive Industries Transparency Initiative

FA Financing Agreement

FM Financial Management

GBP British Pound Sterling

GDP Gross Domestic Product

GoSL Government of Sierra Leone

IDA International Development Association

ISDS Integrated Safeguards Data Sheet

M&E Monitoring and Evaluation

MMR Ministry of Mineral Resources

MTAP Mining Technical Assistance Project

NMA National Minerals Agency

ORAF Operational Risk Assessment Framework

PDO Project Developmental Objective

POM Project Operations Manual

PRU Petroleum Resource Unit

PST Project Support Team

SDR Special Drawing Rights

SESA Strategic Environmental and Social Assessment

SLEPA Sierra Leone Environmental Protection Agency

SPU Strategy and Policy Unit under the President’s Office

TA Technical Assistance

UNDP United Nations Development Program

USAID United States Agency for International Development

WAMGP West Africa Mining Governance Project

WAMSSA West Africa Mineral Sector Strategic Assessment

Vice President: Obiageli Katryn Ezekwesili

Country Director: Ishac Diwan

Country Manager: Vijay Pillai

Sector Manager: Paulo de Sa

Task Team Leader: Ekaterina Mikhaylova

SIERRA LEONE

EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT

ADDITIONAL FINANCING

CONTENTS

Project Paper Data Sheet………………………………………………………… i

Project Paper

I. Introduction..................................................................................... 1

II. Background and Rationale for Additional Financing and

Restructuring of Original Project…………………........................ 2

III. Proposed Changes……………………………............................... 7

IV. Appraisal Summary……………………….................................... 11

Annexes

1. Revised Results Framework and Monitoring Indicators................ 14

2. Operational Risk Assessment Framework………………………. 19

3. Detailed Description of Modified and New Project Activities 22

1. Updated Project Description

2. Amendment to National Competitive Bidding Exceptions

3. Project Processing

4. Map……………………………………………………………... 27

REPUBLIC OF SIERRA LEONE

EXTRACTIVE INDUSTRIES TECHNICAL ASSISTANCE PROJECT

ADDITIONAL FINANCING DATA SHEET

Basic Information - Additional Financing (AF)

Country Director: Ishac Diwan

Sector Manager/Director: Paulo de Sa

Team Leader: Ekaterina Mikhaylova

Project ID: P124633

Expected Effectiveness Date: June 2011

Lending Instrument: Technical Assistance

Additional Financing Type: Scale up

activities and cost overrun

Sectors: Energy and Mining

Themes:

Environmental category: B-Partial

Assessment

Expected Closing Date: June 30, 2016

Joint IFC: No

Joint Level: No

Basic Information - Original Project

Project ID: P099357 Environmental category: B-Partial

Assessment

Project Name: Mining Technical

Assistance Project

Expected Closing Date: December 31,

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:

Cofinancing:

Borrower:

Total Bank Financing:

IBRD

IDA

New

Recommitted

7.4

3.4

-

4.0

-

4.0

4.0

-

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 15 16

Annual 1.0 1.0 1.0 0.8 0.2

Cumulative 1.0 2.0 3.0 3.8 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)

Natural Habitats (OP/BP 4.04)

Forests (OP/BP 4.36)

Pest Management (OP 4.09)

Physical Cultural Resources (OP/BP 4.11)

Indigenous Peoples (OP/BP 4.10)

Involuntary Resettlement (OP/BP 4.12)

Safety of Dams (OP/BP 4.37)

Projects on International Waters (OP/BP 7.50)

Projects in Disputed Areas (OP/BP 7.60)

[X]Yes [ ] No

[ ]Yes [X] No

[ ]Yes [X] No

[ ]Yes [X] No

[ ]Yes [X] No

[ ]Yes [X] No

[ ]Yes [X ] No

[ ]Yes [X] No

[ ]Yes [X] No

[ ]Yes [X] No

Does the project require any exceptions from Bank policies?

Have these been approved by Bank management?

[ ]Yes [X] No

[ ]Yes [ ] No

Conditions and Legal Covenants:

Financing Agreement

Reference

Description of

Condition/Covenant

Date Due

5.01 Effectiveness of Co-financing

Agreement

Upon Effectiveness

Schedule 2, Section IV,

B. 1 (a)

Disbursement Category 2

conditions: (i) the MMR adopts a

policy for the development of

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.

Disbursement Condition to be

complied with on an annual

basis

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 government’s 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 country’s 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 Kingdom’s Department for International Development (DfID) in the

1 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 GoSL’s ultimate

objective towards developing Sierra Leone’s 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 country’s 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

2 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, Anadarko’s 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 (NMA

5–

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 President’s 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 Officer’s 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, PRU’s 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 GoSL’s 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 DfID’s 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 government’s capacity to

manage and regulate the minerals sector; the PDO will be updated in line with the Additional

Financing to “build government’s 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 Bank’s 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 Bank-

financed 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 government’s 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 Leone’s 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 President’s Office to regulate the

oil and gas sector; and

Review and strengthen the monitoring functions of the Government’s 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 sub-

region 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.

7 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.

7

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

government’s 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

Original

Project

Additional

Financing

(IDA)

Total

Revised

Cost (IDA)

DfID Co-

Financing

Total

Project

Cost

Component A: Overarching Regulatory

Frameworks for Extractive Industries Sector

0.29

0.37

0.66

0.31

0.97

Component B: Institutional Strengthening

for Extractive Industries Sector

2.85

3.52

6.37

2.95

9.32

Component C. Project Management 0.26 0.11 0.37 0.09 0.46

PPF refinancing 0.40 - 0.40 - 0.40

Total Baseline Cost 3.80 4.00 7.80 3.35 11.15

Physical and Price contingencies 0.20 0.20 0.20

Total Project Cost 4.00 4.00 8.00 3.35 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

social regulations for large-scale and

mechanized small-scale mines;

preparation of a mining sector Code

of Practice; preparation of

underground mining regulations;

preparation of trading license

regulations

Covering cost overrun for the preparation of regulations under the

original component.

Completing mining implementing regulations of the Mines and

Minerals Act

Finalizing enabling legal acts, regulations and operating guidelines

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

(when it is formally established)

through capacity building and

provision of urgently required

equipment – field vehicles,

generators, and equipment for

geochemical surveying and mapping.

Provision of additional equipment and technical assistance to MMR

and, upon its establishment, NMA for departments responsible for

monitoring and inspection of mining operations and to geological

survey department (until the NMA is formally established, assistance

will be provided to respective department of the MMR that are

expected to transfer under the NMA).

Geochemical surveying of selected

areas (9 blocks).

Covering cost overrun of the Original Project and carrying out

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 Government’s Diamond Office, including training,

advisory services and capacity building

Mineral promotion through

development of materials and

participation in major global and

regional mining events

Setting up secure geodata management and information system

(linked with mining cadastre system) in MMR (to be transferred to

NMA upon its establishment), including development of web-based

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 Government’s 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.

Temporary salary support for up to

four new staff to be hired by MMR,

and upon its establishment, NMA

Extend financing of up to two additional MMR and, upon its

establishment, NMA staff required to make the new agency

operational

Support for a post-mining

rehabilitation program

NA

Strengthen the capacity of MMR to

manage donor-financed projects and

day-to-day administration.

Extend the support through an additional year of implementation to

ensure sustainability

Developing a monitoring and

evaluation system and benchmarking

progress through over the life of the

project

Continue evaluation of and reporting on the sector development

through the project implementation period

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 consultant’s 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

Categ Description

Additional

Financing

Amount

(in SDR)

Additional

Financing

Amount

(in US$)

DfID

Financing

Amount

(in GBP)

Eligible Financing

Percentage

1

Consultants' services, goods,

training, workshops and study

tours, and operating costs 2,530,000 3,900,000 2,039,616 54% IDA; 46% DfID

2 Salary support under Part B(ii) 70,000 100,000 57,000

Such percentage as shall be

specified in the Annual

Work Plan and Budget for

the respective fiscal year

TOTAL 2,600,000 4,000,000 2,096,616

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 Accountant’s 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 co-

financing 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 Leone’s 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 Comments/

Rationale for Change

PDO

Current (PAD) Proposed

To build capacity of the

Government to improve

management and regulation of

the mining sector

Revised: To build capacity

of the Government to

improve management and

regulation of the extractive

industries sector

PDO indicators

Current (PAD) Proposed change*

Mining licenses issued in

compliance with revised

regulations adopted by MMR

Continued

MMR (NMA when it becomes

operational) implements its human

resource policy and trains and

retains qualified staff

Continued

Geodata are easily available and

accessible through the web Continued

NA 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) Proposed change*

Regulations for environmental and

social management for mining,

underground mining and precious

minerals trading are developed and

adopted by the MMR

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

Revised to reflect

additional law and

regulations

MMR (NMA when it becomes

operational) monitor and report

annually on enforcement of

Continued

15

Revisions to the Results Framework Comments/

Rationale for Change

EIA/SIA regulations for industrial-

scale mining projects

MMR monitors and reports

annually on production and

revenue of the sector

Revised: GoSL monitors and

reports annually on

production and revenue of

mining and oil sector

Revised to reflect

additional financing

activities

NA New: Functions and

governance structure for the

Petroleum Resources Unit

(PRU) are formalized

through regulations

New indicator to reflect

additional activities

New equipment used for field

work Continued

Field inspections to monitor

compliance of mining operations Continued

Geochemical surveying and

mapping of selected areas

completed

Continued Target value increased to

reflect additional areas to

be surveyed under the AF

Based on geochemical surveys and

mapping of selected areas,

Government selects candidate

areas for sector promotion

Continued Target value increased to

reflect additional areas to

be surveyed under the AF

Government selects areas for

further actions to develop other

land use (outside the project)

Continued

Government participates in annual

events to present information to

potential investors

Continued Target value increased to

reflect additional financing

Geodata website is regularly

updated and accessible Dropped overlap with PDO level

indicators

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 C

ore

UOM

Baseline

Original

Project

Start

(2009)

Progress

To Date

(2011)

Cumulative Target Values

Frequen

cy

Data Source/

Methodology

Responsibility

for Data

Collection

Comments 2011 2012 2013 2014

1. Mining licenses issued in

compliance with revised

regulations adopted by Ministry

of Mineral Resources

% None

Consult

ant to

prepare

regul-s

selected

New

Regula-

tions

adopted

50% 100% Annual Progress

Reports MMR/NMA

Annual progress of

percentage of licenses

in compliance;

For regulations see

indicator 6 below

2. MMR (National Minerals

Agency when operational)

implements its human resource

policy, and trains and retains

qualified staff

Yes/No

NMA

Transfor

mation

plan

drafted

NMA

Act

under

preparat

ion

Yes Yes Yes Yes Annual Progress

Reports MMR/NMA

Target to engage at

least 6 new qualified

staff for NMA under

public servants

contracts

3. Geodata are accessible

through the web

Yes/No

Some

general

data

available

on MMR

web-site

Not yet

due No Yes Yes Yes Annual

Progress

Reports MMR/NMA

Geodata = existing

geological data (non-

confidential) available

at geological survey

and geochemical data

to be obtained by

EITAP

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

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

Intermediate Results Indicators

Co

re

UOM

Baseline

Original

Project

Start

(2009)

Progress

To Date

(2011)

Target Values Frequency

Data

Source/

Methodo-

logy

Responsi-

bility for

Data

Collection

Com-

ments

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

Yes/

No None/ basic

Work

commenced Partially yes Yes Yes Yes Annual

Progress

Reports MMR

6. MMR (NMA when it

becomes operational) monitor

and report annually on

enforcement of EIA/SIA

regulations for industrial-scale

mining projects

Yes/

No

Basic

requiremen

ts

Not yet due

No

(develop

framework)

No

(develop

first report)

Yes

Yes

Annual

Progress

Reports

MMR/

NMA

7. MMR monitors and reports

annually on production and

revenue of the mining; and PRU

reports on oil and gas sector

Yes/

No None

First EITI

report of

2010 was

not

compliant

Achieve

compliant

status

Set up

frameworks

for oil

sector

reporting

First report

on oil and

mining

sectors

published

Annual

report on

mining and

oil sector

revenues

Annual Progress

reports

MMR and

PRU

8. Functions and governance

structure for the Petroleum

Resources Unit are formalized

through regulations

Yes/

No NA

Law in

place;

regulations

under

preparation

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 0

equipment

procured Yes Yes Yes Yes Annual

Progress

Reports

MMR/

NMA

18

Intermediate Results and Indicators

Intermediate Results Indicators

Co

re

UOM

Baseline

Original

Project

Start

(2009)

Progress

To Date

(2011)

Target Values Frequency

Data

Source/

Methodo-

logy

Responsi-

bility for

Data

Collection

Com-

ments

2012 2013 2014 2015

10. Field inspections to monitor

compliance of mining operations

% and

num

Limited

ad hoc Not yet due Not yet due

25% of

industrial-

scale mines

50% of

industrial

scale mines

and ASM

100% Annual Progress

Reports MMR

11. Geochemical surveying and

mapping of selected areas

completed

Num 0 Consultant

engaged

Commence

surveying 9 areas

surveyed

Publication

of 9 sheets

of maps

Annual Progress

reports

MMR/N

MA

Kangari

Hills; Sula

Mountain Shist Belt,

Loko

Greenstone Belt.

12. Based on geochemical

surveys and mapping of selected

areas, Government selects

candidate areas for sector

promotion

Num 0

Consultants

selected,

survey

equipment

purchases

Select at

least 4

targets

for

promotion

Annual Progress

Reports

MMR/

NMA

13. Government selects areas for

further actions to develop other

land use (outside the project)

Num 0 Not yet due Concept

Prepared 1 area 2 areas 3 areas 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

Num None 0 3 event 4 events 4 events 4 events Annual Progress

Reports

MMR/

PRU

Annual

targets

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

Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks

M-I Consultations held during the preparation of the Original Project indicated that stakeholders strongly support sector reforms targeted to improve the government’s capacity for policy and strategy formulation, for monitoring compliance with contractual obligations and sector regulations, and promotion.

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.

Implementing Agency Risks

H 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

The project is design to strengthen institutional capacity and thus in itself represents mitigation mechanism going forward. EITAP is targeted to (i) improve Government’s capacity to manage the extractive industries sector; (ii) improve knowledge of the mineral endowment; (iii) assist with set up and making operational the NMA,

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.

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.

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.

Joint needs assessment during preparation with Government and donors indicated that project design was well accepted by the majority of stakeholders.

Social and Environmental

M-L 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.

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.

Program and Donor

L 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.

A Mining Working Group was established to meet once a month to share information about donor activities in the extractive sector

Delivery Quality

M-L 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.

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

M-I M-I

The package of reforms for the extractive industries sector has been well tested in many countries and is already under implementation in Sierra Leone. Government’s 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.

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.

3. 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.

Part B. 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 post-

mining 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.

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.

3. 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.

4. Strengthening the technical, institutional and management capacity of the PRU for managing and

analyzing geological and geophysical data.

5. Strengthening the capacity of the Government Gold and Diamond Office.

6. Developing and strengthening the monitoring, evaluation, and reporting systems for the

extractive industries sector.

Part C. Project Management

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

Association’s 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 Planned Actual

Concept Review December 15, 2010

Appraisal February 22, 2011

Negotiations March 16, 2011

Board Approval April 21, 2011

Planned date of Effectiveness June 2011

Planned date of Mid-term Review July 2013

Planned Closing Date June 30, 2016

Bank staff and consultants who worked on the project include:

Name Title, Unit

Ekaterina Mikhaylova Task Team Leader, Sr Mining Specialist, SEGOM

Mamadou Barry Sr Mining Specialist, SEGOM

David Santley Sr Petroleum Specialist, SEGOM

Sylvia Kalley EITI Consultant, SEGOM

Cecilia Tan Team Assistant, SEGOM

Tsri Appronti Procurement Specialist, AFTPC

Joyce Agunbiade Financial Management Specialist, AFTFM

Luis Schwarz Sr Finance Officer, CTRFC

Christine Makori Counsel, LEGAF

Peter Kristensen Sector Leader, AFTEN

Joseph Akpokodje Sr Environmental Specialist, AFTEN

Maria (Chona) Cruz Lead Social Development Specialist, AFTCS

Anders Jensen 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

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This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 20 40

0 20 40 50 Miles

60 Kilometers

IBRD 38372

FEBRUARY 2011

SIERRA LEONE

MINING TECHNICALASSISTANCE PROJECT

Additional Financing

SELECTED CITIES AND TOWNS

DISTRICT CAPITALS

NATIONAL CAPITAL

RIVERSMAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES

ALGERIALIBYA

NIGER

NIGERIA

CHAD

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AN

CAMEROON

GABONSÃO TOMÉ AND PRÍNCIPE

EQUATORIAL GUINEA

CONGO

DEM.REP. OFCONGO

CENTRAL AFRICANREPUBLIC

MALICAPE VERDE

THE GAMBIASENEGAL

GUINEA-BISSAU

LIBERIA

SIERRALEONE

GUINEA

CÔTED’IVOIRE GHANA

TOG

OBE

NIN

BURKINAFASO

MAURITANIA

FORMERSPANISH

SAHARA

A T L A N T I C O C E A N

SIERRALEONE

AT

LA

NT

I C

O C E A N