79708 AFGHANISTAN RESOURCE CORRIDOR PRIVATE SECTOR DEVELOPMENT Detailed procurement plan for Aynak and Amu Darya PROGRESS REPORT #1 31st March, 2012 www.altaiconsulting.com Copyright 2012 EXECUTIVE SUMMARY • Aynak and Amu Darya represent an immediate opportunity for the Afghan economy to trigger private sector development • Development phase of both projects are opportunities for the Afghan construction and civil works sector • Regarding Aynak: – ~$500m could be injected into the Afghan economy during Aynak project development (20MT ROM scale), mainly driven by construction and civil work activities (equipment, labour, consumables) – An additional $400m could also be invested in the mid-term through local companies in key sectors needed during project development (steel structures, piping, etc.) – In the long-term, a large share of operational expenditures to manage the mine, process the ore, and operate the power plant could be sourced locally » Efforts to develop the foundry industries and technical explosives needs to be undertaken; it is realistic as some of these industries have been developed in similar environments (Mauritania, Algeria, etc.) » Fuel supply and management also represents a large share of activity Once operating, Aynak mostly represents opportunities for Afghan companies able to supply consumables related to mining operations and life-support • Regarding Amu Darya – ~$150m could be injected in the short-term, also driven by construction and civil work activities – An additional ~$130m could be triggered locally if pumping equipment and drilling operations are developed in the mid-term – In the long-term, a large part of operations could also be supplied locally, as already achieved in similar environments (Chad, Angola, Gabon, Algeria) Once operating, Amu Darya represents minor opportunities for Private Sector Development in Afghanistan 2 SUMMARY - AYNAK CAPEX & OPEX PER CATEGORY Once operating, Aynak mostly represents opportunities for Afghan companies able to supply consumables related to mining operations and life-support Millions USD Cat.1 Cat.2 Cat.3 450- CAPEX 700 400-700 1100-1600 OPEX 100-150 100-150 150-250 Consumable Construction Material Maintenance Equipment Services/Labor Bubble size is proportional to expenditures 3 SUMMARY - AMU DARYA CAPEX & OPEX PER CATEGORY Once operating, Amu Darya has marginal category II opportunities, thus representing minor opportunities for Private Sector Development in Afghanistan Millions USD Cat.1 Cat.2 Cat.3 CAPEX 150-300 200-400 100-200 10-20 20-30 OPEX 50-100 Consumable Construction Material Maintenance Equipment Bubble size is proportional to Services/Labor expenditures 4 AGENDA 1. Procurement plan approach 2. Aynak and Amu Darya projects key figures 3. List of prioritized categories 4. Zoom on technical categories to support suppliers discussion 5. Annexes • Benchmarks • Procurement plan models 5 1. GENERAL APPROACH Aynak and Amu Darya procurements plans have been developed based on available information. Gaps have been covered through international benchmarks and interviews Benchmarks of local content and induced Definition of Aynak and Amu Darya projects’ development triggered by mining and oil & potential procurement plan gas projects in similar industrial contexts • Definition of the projected industrial set-up • Benchmarking industrial development for Aynak and Amu Darya generated in contexts similar to Afghanistan, in terms of industrial capability • Breakdown of projects’ set-up by main activities / competencies (Capex / Opex) • First insights on goods and services easily outsourced by mining and oil & gas • Sizing of the individual competencies companies in similar industrial contexts required Categorisation of the individual competencies into the 3 categories defined in the TOR 6 1.APPROACH - PROCUREMENT PLAN DESIGN The design of both procurement plans aims to develop homogeneous categories in terms of local content approach Procurement plan breakdown structure Services / Labor Development Equipment Construction Material Services / Labor X Asset 1 Asset 2 Asset … Operations Consumables Maintenance Level of detail for the procurement plan • Based on benchmarks, mining operations (excluding smelting / refining activities) can generate between 50,000 to 100,000 procurement events • Oil&Gas upstream operations can encompass between 10,000 to 20,000 procurement events ⇒ The detailed procurement plan will try to capture key subcategories (that could themselves encompass different procurement events) 7 1.APPROACH - PROCUREMENT PLAN SIZING During the project lifecycle, 3 milestone reviews are conducted by mining companies. CAPEX/OPEX can vary by up to 50% in the “scoping study� phase alone. Error tolerance Scoping Study Procurement plan -50% +50% sizing range 100% Pre-Feasibility Study -20% +20% 100% Feasibility Study -10% +10% 8 1. APPROACH – CLASSIFICATION OF PRIORITY CATEGORIES Local procurement definitions consist of a combination of factors to rate the value- added content captured from extractive investments • According to World Bank reports, the local procurement preference consists of varying combinations of the following three elements: – Participation of citizens in » Employment » Management » Ownership of mining supply activities. – Extent of value add taking place locally, along the continuum of raw materials sourcing, manufacturing or production, and sales, distribution and associated services: “local sourcing,� “local content.� – Distinction in terms of geography between the area immediately surrounding the mine— “local local� or “community content�—and at a subnational level—“regional content�, or more widely at a national level. • Qualification of suppliers will be a continuum based on different criteria, integrating local procurement definition as well as capability and competitiveness elements Source: World bank report “Increasing local procurement by the mining industry in West Africa� 9 1. APPROACH – INTERVIEWS CONDUCTED A selected number of experts have been interviewed in order to fully grasp the scale and scope of activities and estimate the size of the procurement plan • Thomas Loffet, Project Manager for Oil&Gas operations (active in Mozambique, Ghana) Bolloré SDV • R. Herrenschmidt, Former Head of BP refineries in France (Dunkerque, Lavéra), Independent Consultant • D. Di Pace, former head of BP Group for refining activities optimization, Independent Consultant • Christophe Du Rotois, Reservoir Engineer, Perenco • P.L. Migairou, Mining Engineer active in coal and copper, former Anglo-American • A. Dissaux, Hydrometallurgical manager, Process and Engineering – Eramet Group • J. J. Reverdy, Industrial Manager, Eramet Nickel Division 10 AGENDA 1. Procurement plan approach 2. Aynak and Amu Darya projects key figures 3. List of prioritized categories 4. Zoom on technical categories to support suppliers discussion 5. Annexes • Benchmarks • Procurement plan models 11 2.CAVEATS • In this report, figures used for the sizing of category items rely mainly on international benchmark and interviews • CVA has done its best to benchmark similar environments in order to capture the effects on Afghanistan – Mauritania – Indonesia – Etc. • An overall cross-check of main figures has been done with available information on Aynak and Amu Darya projects • Interviews have been conducted in order to ensure robustness of figures and selection of categories I and II • Modifications from the assumptions drawn from available information would impact the sizing of the different categories 12 2. 1. KEY FIGURES AYNAK - CAPEX Aynak project should quickly present opportunities for the Aynak area in terms of labour and materials. CAPEX breakdown per asset ($m) 1,350-1,850 300-550 300-550 69% 15% 15% 20-40 1% Mining & Refining Electric line Power Plant Water pipeline of copper CAPEX breakdown per expenditure type ($m) 1,000-1,500 650-950 50% 350-550 33% 17% Labour/Services Equipment Material 13 2. 1. KEY FIGURES AYNAK - OPEX Operations at mine and power plant should drive the opportunities for labour, services and consumables OPEX breakdown per asset ($m) 350-450 200-400 53% 45% 5-10 0-5 Copper Mining Electric line Power Plant Water pipeline and Refining (300km) (400MW) (20-30km) OPEX breakdown per expenditure type ($m) 400-600 68% 150-200 40-80 25% 7% Labour/Services Consumables Maintenance (excl. Labour) 14 2. 2. KEY FIGURES AMU DARYA - CAPEX Amu Darya CAPEX will be driven by the number of wells. Labour & materials will represent 2/3 of full CAPEX. CAPEX breakdown per asset ($m) 400-750 33% Refinery investment 66% (Turkmenistan) 150-200 5-10 Civil works 50-100 Oil Drilling & Production Transportation Refinery CAPEX breakdown per expenditure type ($m) 200-400 150-250 100-200 44% 33% 23% Labour/Services Equipment Material 15 2. 2. KEY FIGURES AMU DARYA - OPEX Operations at refinery could represent an interesting opportunity for Amu Darya Region OPEX breakdown per asset ($m) 90-180 80% 10-20 10-20 10% 10% Oil Drilling & Production Refinery Transportation OPEX breakdown per expenditure type ($m) 50-100 30-60 30-60 46% 27% 27% Labor / Services Consumables Maintenance (exc. Labor) 16 AGENDA 1. Procurement plan approach 2. Aynak and Amu Darya projects key figures 3. List of prioritized categories 4. Zoom on technical categories to support suppliers discussion 5. Annexes • Benchmarks • Procurement plan models 17 3.1. CLASSIFICATION OF AYNAK PROCUREMENT PLAN CATEGORIES Aynak will quickly represent an opportunity for local procurement during the investment phase; an important share of operating expenditures could be sourced locally in the medium term. Costs Non-RecurringNon (CAPEX) (m$) Recuring Costs (OPEX) (m$) RecurringRecuring 1,100-1,600 300-500 55% 150-250 500-700 400-700 100-150 55% 25% 20% 27% 18% Cat. I Cat. II Cat. III Cat. I Cat. II Cat. III # of sub-cat. # of sub-cat. (27) (14) (39) (15) (12) (16) (Approximation) (Approximation) 500-700 400-700 1,100-1,600 100-150 300-500 150-250 100% Services / Labor 100% 16% 9% 31% 27% Services / Labor 48% 14% Consumables 93% 83% 40% 71% 69% 67% Equipment Construction Maintenance Material 12% Consumables 8% 4% Cat. I Cat. II Cat. III Cat. I Cat. II Cat. III 18 3.1. PRIORITY CATEGORIES – AYNAK Focusing on 10 priority Category 1 items and 3 priority Category 2 items, we cover more than 50% of “actionable� Capex and 60% of “actionable� Opex Non-Recurring Subcategories (CAPEX) Recurring Subcategories (OPEX) $m; based on lower range estimates $m; based on lower range estimates 1. Construction equipment (all sites) ~$165m 2. Civil works & concrete labour (all sites) ~$95m 1. Fuel $50m 3. Transportation & hauling ~$50m 2. Spares for light vehicles $3m 4. Construction Labour – road & building ~$30m 3. Limestone $3m 5. Concrete ~$20m Cat.1 Cat.1 4. Medical products $2m 6. Painting ~$10m 5. Protection equipment $1m 7. Electric board ~$5m 6. Clothes, food and appliances $1m 8. Pumps for plants operation ~$5m 7. Supplies (valve, piping, etc.) $1m 9. Sand / stone ~$5m 10. Bitumen ~$5m ~$390m ~$60m 75% coverage 60% coverage 1. Metallic piping $70m 1. Coal $180m Cat.2 2. Steel structure $60m Cat.2 2. Ammonium nitrate/explosives $20m 3. Electric cable $50m 3. Wear parts (foundry) $15m ~$180m ~$215m 45% coverage 70% coverage 19 3.2. CLASSIFICATION OF AMU DARYA PROCUREMENT PLAN CATEGORIES Amu Darya also represents a short-term opportunity for local procurement; the refinery and well operations represent a long-term opportunity for the region Non-Recurring Costs (CAPEX) (m$) Recurring Costs (OPEX) (m$) 200-400 50-150 150-300 100-200 45% 60% 0-50 0-50 33% 22% 20% 20% Cat. I Cat. II Cat. III Cat. I Cat. II Cat. III # of sub-cat. # of sub-cat. (20) (24) (15) (20) (8) (5) (Approximation) (Approximation) 150-300 200-400 100-200 50-150 0-50 0-50 100% 100% 29% 46% Services / Labor 41% 38% Services / Labor 49% 50% 32% 14% Equipment 12% Consumables 41% 46% Construction 50% 48% 39% 39% Maintenance Material Consumables 18% 8% Cat. I Cat. II Cat. III Cat. I Cat. II Cat. III 20 3.2. PRIORITY CATEGORIES – AMU DARYA With 10 priority Category 1 and 3 priority Category 2, we cover a large share of Amu Darya “actionable� local procurement Non-Recurring Subcategories (CAPEX) Recurring Subcategories (OPEX) $m; based on lower range estimates $m; based on lower range estimates 1. Fuel, power & Water – Oil prod. 1. Cement/Concrete $50m & Refinery $30m 2. Transportation & Hauling $20m 1. Administration – Oil prod. $4m 3. Equipment for civil works – Refinery $15m 2. Operators – Oil production $3m 4. Labor for civil works – Refinery $15m 3. Work over rig services $3m 5. Testing and analysis – Oil production $10m Cat.1 Cat.1 4. Maintenance of tanker trucks $3m 6. Administration labor – Oil production $5m 5. Fasteners (nuts, bolts) $2m 7. Fuel & Power – Drilling $5m 6. Remedial services $2m 8. Housing and catering – Drilling $5m 7. Automotive services $2m 9. Environmental & Safety $5m 8. Labor – Refinery $2m 10. Water $3m 9. Drivers – Oil transportation $2m ~$130m ~$50m 80% coverage >90% coverage 1. Operator – Drilling $70m 1. Small spare parts – Oil production $5m Cat.2 2. Pumping equipment $40 Cat.2 2. Protection equipment $0.5m 3. Civil works material – Refinery $20m ~$130m ~$6m 65% coverage >90% coverage 21 AGENDA 1. Procurement plan approach 2. Aynak and Amu Darya projects key figures 3. List of prioritized categories 4. Focus on technical categories to support suppliers discussion 5. Annexes • Benchmarks • Procurement plan models 22 4. KEY CATEGORIES WITH DETAILED FOCUS Labour and raw material like concrete or metallic structures represent the largest subcategory of items that the local economy could supply. A detail on technical products is described in the following slides • Construction Equipment • Pumping Equipment • Engineering services • Explosives • Steel structures • Piping • Tanks • Foundry • Labor requirement 23 4.1. DETAILED PROCUREMENT PLAN ON CONSTRUCTION EQUIPMENT – (1/4) Construction equipment will be purchased or lease depending on the type of equipment and on MCC’s choice. Optimization of construction operations will impact the number of equipment used and the total cost. • Perimeter • Stakes – Mining & Processing plant – $100 to $200m of expenditures for – Transmission line plant leasing/purchasing of construction equipment, – Power plant utilization of machinery and transportation during the entire project. – Water treatment plant & pipeline – Potential leverage for other construction – Roads projects in Afghanistan Category articles - illustration of product typology • Earth moving equipment − Wheel loader, excavator… − Crawler dozer 10 − Grader − Dragline − Scrapper, etc. • Paving equipment & concrete wall equipment − Asphalt pavers − Concrete pavers − Curb & gutter pavers − Cold planers & milling machine 10 − Tandem vibratory rollers − Soil stabilizing equipment − Concrete pumps, etc.… Number of equipments used for each Aynak project piece (forecasted numbers based on assumptions and interviews. 24 They might differ from MCC choice) 4.1. DETAILED PROCUREMENT PLAN ON CONSTRUCTION EQUIPMENT – (2/4) The major part of construction equipment will be for framing, wall and foundation construction. • Perimeter – Mining & Processing plant – Transmission line plant – Power plant – Water treatment plant & pipeline – Roads Category articles - illustration of product typology • Frame construction equipment − Tower cranes − Rough terrain cranes / Heavy cranes − Scaffolding 27 − Aerial work plateform − Etc. • Trucking − Medium & heavy duty trucks − Trailers − Mixer trucks − Mining truck 34 − Telehandlers − Drills − Etc. Number of equipments used for each Aynak project piece (forecasted numbers based on assumptions and interviews. 25 They might differ from MCC choice) 4.1. DETAILED PROCUREMENT PLAN ON CONSTRUCTION EQUIPMENT – (3/4) Few equipment will be used for specific construction activities like transmission line of underground works. • Perimeter – Mining & Processing plant – Transmission line plant – Power plant – Water treatment plant & pipeline – Roads Category articles - illustration of product typology • Specific transmission line equipment − Puller tensioner 2 − Insulated bucket trucks − Etc. • Underground Work − Pipelayers 2 − Tunnel mining machines − Etc. • Other specific equipment − Heavy lift helicopter − Water truck − Explosive truck 15 − Fire truck, ambulance… − Etc. Number of equipments used for each Aynak project piece (forecasted numbers based on assumptions and interviews. 26 They might differ from MCC choice) 4.1. DETAILED PROCUREMENT PLAN ON CONSTRUCTION EQUIPMENT – (4/4) Many diverse light construction equipment will be used on every construction site. • Perimeter – Mining & Processing plant – Transmission line plant – Power plant – Water treatment plant & pipeline – Roads Category articles - illustration of product typology • Light equipment − Electric generator sets − Hydraulic power pack − Jackhammers − Portable light towers − Portable air compressors − Concrete saws − Hydraulic tools − Water pumps − Vibratory plate compactors − Formwork − Etc. 27 4.2. DETAILED PROCUREMENT PLAN ON PUMPING EQUIPMENT Pumping equipment are used for many applications in multiple industries. Capabilities developed for Aynak and Amu Darya could easily be re-used elsewhere. • Perimeter • Stakes – Lot of different pumps will be required during the – More than $55m of pumping equipment for development phase as well as the production phase Aynak and Amu Darya projects for Aynak and Amu Darya Project. Category articles - illustration of product typology • Few standard for pumping equipment in Oil industry − API Standard 610, 674, 675, 676, 68, 682… • Several types of pumps exist: − Horizontal pumps − Vertical pumps − In line pumps − Submersible pumps − Slurry pumps − Etc. • Pumps are used to create pressure or move: − Water − Air − Fluids − Oil − Cement − Etc. 28 4.3. DETAILED PROCUREMENT PLAN ON EPCM SERVICES EPCM services for big mining project are usually done by major specialized EPCM companies that integrate the activities of all contractors and subcontractors, being the single point of contact for the client. • Perimeter • Stakes Full project scope – 150 to 250 million dollars from preliminary study to – Engineering plant commissioning – Procurement – Indivisible package of services – Construction Management – Great expertise required Category services • Project management services • Operation & Technical services − Project Management − Mechanical & Electrical engineering − Contract Management − Civil/Structural engineering − Corporate Governance / Insurance − Process engineering − Project Audit / Review − Instrumentation engineering − Project Controls − Etc. − Etc. • Quality, Safety and Commissioning services • General construction services − QA/QC Management − Construction Management − Safety Management − Etc. − Commissioning Engineering − Etc. Several major EPCM companies for Mining / Oil industries • SNC Lavalin • Amec • Jacobs • Ausenco • Fluor • Etc. 29 4.4. DETAILED PROCUREMENT PLAN ON EXPLOSIVES – CONSUMABLES (1/2) Explosives are a key consumable for mining operations, encompasses 4 main technical products, specific labor for blasting operations could be developed • Perimeter • Stakes –Explosives encompasses all consumables – $20 to $25m per year of required for the blasting of rock used recurring business during mining operations – Potential leverage for many –Politically sensitive, some explosives are other sectors (civil works, currently available for aggregate other mines, roads) blasting using low-tech products Category articles • POROUS PRILL AMMONIUM NITRATE (ANPP) • Electronic detonator and associated softwares − Main category ~25mt per year − Eg.: Carrick® Statsafe® from AEL Cy. NH4 NO3 concentration >98.6% Total Nitrogen concentration >34.5% Insoluble in water <0.8% humidity H2O<0.2% PH A 20 D>C> (SOLUTION 10% 4.5A6 acidity HNO3 <0.01 Coating: MINERAL ANTIMOTTANT: Organic composes organic <0.09% Test D'abel @ 80 D.C.>1H Density Versement 0.67+-0.03 FIOUL retention capacity >11% • Emulsion: E.g. • Aluminium granules Energan product − Used as a fuel in blasting agents from AEL Cy. − E.g. US Granules corporation products 30 4.4. DETAILED PROCUREMENT PLAN ON EXPLOSIVES – LABOR (2/2) Operations for blasting could have a large part of local content Head of blasting operations HSE manager ANFO plant Blasting - Production manager Maintenance Finance - Production assistant - Production manager - 2 technicians - Accounting - Logistics - 2 drivers - 2 operators - Warehouse - 4 operators Logistics and purchasing Administration - Purchase manager - Administrative assistant 31 4.5. DETAILED PROCUREMENT PLAN ON STEEL STRUCTURES Steel distribution is core for Aynak investment, it can easily be leveraged for other sectors • Perimeter • Stakes – Mainly unalloyed carbon steel for plant structures – $60m investment (non- – Encompasses also some wielding consumables recurring) – Potential leverage for many other sectors Category articles - illustration of product typology • Flat profile steel – 50x10 – E24 NF A35-501 • Non alloyed carbon steel – diam. 160mm, grade A70, 6m long • Angle iron L 50x50x5 E24 NF A35-501 (>5000 MLN) • Angle iron L 60x60x6 E24 NF A35-501 (> 5000 MLN) • UPN 100x50x6, profile U E24 NF A35-501(>2000 MLN) • Heel anti-abrasive 40x40 Z120M12 (>2000 MLN) • Steel sheet 6x1000x2000, NF A35-501 (> 2000 MLN) • Tube 1’’ Tarif 10, TU E220A (>1000 MLN) • µTube ¾’’ Tarif 3, galvanized threaded (>3000 MLN) • Rod 37x68 – 500 HB (>200 PC) • H 200x200x15, HE24 (>200 MLN) • Cable DIA.2 MM NF35-551 (>2000kg) 32 4.6. DETAILED PROCUREMENT PLAN ON PIPING Piping is a large investment for Aynak • Perimeter • Stakes – Lot of different tubes with different diameters will be required for – $70m investment (non- sulfuric acid plant but also for all the processing plant recurring) – Potential leverage for many other sectors Category articles - illustration of product typology • Stainless steel, either 304L or 316L • Caan SS-304L X 33 4.7. DETAILED PROCUREMENT PLAN ON TANK CAPACITIES AND TANK INTERNAL LINING Tank construction and lining can easily be leveraged from Aynak development and re- used for other sectors • Perimeter • Stakes – Storage capacities will be required at Aynak for fuel, sulfuric acid, – $60 investment (non recurring) copper ore leaching, liquid effluent treatment, caustic soda, raw – Potential leverage for many water other sectors Category articles - illustration of product typology • Wielded Steel Tanks for Oil Storage • Tank lining − API Standard 650 − Lining done with phenolic coatings • Sulfuric acid tanks and lining • Water tanks − Mainly carbon steel: − Usually Bolted Steel Tanks − Industry standards: API, ASME, AWS, AWWA, NFPA, UBC and UL-142 www.sulphuric-acid.com 34 4.8. DETAILED PROCUREMENT PLAN ON FOUNDRY PARTS Foundry for mining equipment wear parts as well as rebar casting represent a good opportunity to be further sized during detailed procurement plan • Perimeter • Stakes – Replacement parts for mining equipment (shovels, scrapers, – $10 to $20m per year of bulldozers, crushers) are within the top 5 categories of mining recurring business consumables – Potential leverage for many – Various articles are required to serve the industry for replacement other sectors to develop parts (teeth, blades, grinding ring, etc.), and technology required foundry activity (construction, to produce these articles can vary from simple to complex cement plant wear parts) Category articles • Wear parts for shovels, draglines, and bulldozers Need of − Teeth / lips for buckets ~xkt per year − Blades / Crawler shoes • Wear parts for crushers: Need of − Grinding ring / liners ~ykt per year • Consumables for concentrator plant Need of − Grinding media ~ykt per year • Steel for construction phase Need of − Rebar casting ~ykt per year 35 4.9. MINING OPERATIONS – LABOR (1/4) Based on mining environments similar to Afghanistan, approximately 75% to 85% of the manpower could be sourced locally, representing 800 to 1,500 direct jobs and $15m to $37m/y Non-Mine Mine Processing $1-2m General $1-2m Management Management Management $0.5m $20m to $45m will be spent $2-5m Technical $1-2m Technical Administration services services yearly in direct $0.5-1m labour needs, corresponding to Human 1,000–1,800 $1-2m $2-4m Operations $3-8m Operations Resources direct jobs, of which a large part could be $2-4m HSE $1-3m Maintenance $2-5m Maintenance sourced locally Services (incl. $3-10m Utilities & Infrastructure Maintenance) 380-700 jobs 500-750 jobs 200 - 300 jobs Note: figures are based on international salaries for expatriates positions and on salaries of Mauritania-like countries for local positions 36 4.9. MINING OPERATIONS – LABOR (2/4) Around $5 to 9m per year should be spent in direct mine labour, corresponding to 500 to 750 jobs, a large part of which to be potentially sourced locally Mine positions # Mine positions # Mine positions # Management - TS employees Operations employees Maintenance employees Mine Manager 1 Superintendent 1–2 Maintenance Superintendent 1-2 Maintenance Manager 1 Foreman 4–6 Workshop Foreman 2-4 Technical Services Manager 1 Shift supervisors 10 - 20 Shift Supervisor 4-6 Chief Geologist 1 Shovel Operator 15 – 20 Fitter 20 – 30 Senior Mine Engineers 1–2 Truck Operator 100 – 150 Electrician 8 – 15 Chief Surveyor 1–2 Loader Operator 8 – 25 Welder 20 - 30 Surveyors 2–4 Dozer Operator 35 - 50 Serviceman 20 - 30 Mine Engineers 3–6 Grader Operator 10 - 20 Maintenance Planner 2-4 Geologist 3 -5 Drill Operator 25 – 35 Senior Mechanical Engineer 4-6 Surveyor Assistant 2 -5 Water Truck Operator 15 – 30 Helpers/Trainees 60 - 80 Field Assistant 4–8 Explo/RC Drill Operators 1–2 140-220 jobs Secretary 3–8 Powder Crew 10 – 15 $1-3m Opex / year Clerks 3–8 Sample collectors/Drill asst. 8 – 15 Systems Analyst 2–4 Helpers/Trainees 100 - 120 Assistants/Trainees 8 -15 350-500 jobs 40-60 jobs $2-4m Opex / year $1-2m Opex /year Note: benchmark performed on different iron ore – copper mine in the same range (ROM) than Aynak 37 4.9. MINING OPERATIONS – LABOR (3/4) $6m to $15m per year should be spent in direct processing labor, corresponding to 500 to 750 jobs, a large part of which to be potentially sourced locally Processing positions # Processing positions # Processing positions # Management - TS employees Operations employees Maintenance employees Processing Manager 2 Shift Supervisor 4–8 Maintenance Manager 2 Maintenance Manager 2-4 Control Room Operator 4-8 Maintenance Planner 2 Process/Metallurgical Reclaim & crusher operator 10-15 Planning Coordinator 2 2-4 Engineer Metallurgical Accountant 2-4 Concentration Cleaner 4-6 Welder 10 Tails disposal operator 15-20 Fitter 10 8-15 jobs $1-2m Opex /year Laboratory Manager (EXP) 2 Mobile crane driver 10 Laboratory Technician 10-15 Electrical & Instrument 10 Supervisor (EXP) Primary crusher operators 10 Electrician 20 Others operators 20 Other operators 10-20 80-100 jobs 80-100 jobs $3-8m Opex / year $2-5m Opex / year 38 4.9. MINING OPERATIONS – LABOR (4/4) $10m to $25m per year should be spent in direct non-mine and life-support labour, corresponding to 380 to 700 jobs, with a large part to be potentially sourced locally Non-mine positions # Non-mine positions # # GM and HR employees Administration employees Non-mine positions HSE employee General Manager 1 Administration Manager 1 s Government liaison 1 Commercial Manager 1 H, S & E Manager 2 Contract Manager 1–2 Logistics Manager 1 Security Manager 2 Shipping Coordinator 2–4 Puchasing Officer 1 Flight Coordinator 2-4 Security officers 20 Purchasing Clerks 4-6 Legal 2 Superintendent Health 2 Customs Clearance Officer 1 Drivers 4–6 Payroll Officer (EXP) 1 Nurse 4 Security 8 – 10 Payroll Officer 1 Ambulance Attendants 5-10 Clerical/Secretarial 3-5 Salaries and wages clerk 2 Safety Officer 5 – 10 Human Resources Manager 1 Financial Controller 1 Records Clerk 2 Training Manager 3 Chief Accountant 1 Environnemental Manager 2 Training Assistants 10 – 20 Accounts Clerk 6-8 Environmental Officer 5 Records Clerk 3 Systems Analyst 1-2 Clerical / Secretarial 10 Helpers / Training 5 IT Assistants 4-6 Recruitment Supervisor 2 Warehouse Manager 1 Clerical/Secretarial 5 - 10 Non-mine positions # Stores Supervisor 10-15 Stores Assistants 10-15 Support services for employee 25-35 jobs Clerical/Secretarial 20-30 camp s $2-4m Opex /year Power Station 30-50 60-100 jobs Water supply 50-80 $2-4m Opex / year Building Maintenance 25-50 Accomodation 100-200 Transport 50-80 Infrastructure 5-10 300-550 jobs $5-15m Opex / year 39 AGENDA 1. Procurement plan approach 2. Aynak and Amu Darya projects key figures 3. List of prioritized categories 4. Zoom on technical categories to support suppliers discussion 5. Annexes • Benchmarks • Procurement plan models 40 5.1 BENCHMARKS Benchmarks Mining and Oil&Gas 41 BENCHMARKING PANEL Initiatives for private sector development have been benchmarked in similar environments Mining projects Oil & Gas projects 4 1 Kazakhstan: Mauritania: - One of the largest petroleum - Iron ore mining activity developments in the world - Poor local industrial setup - A JV of 7 world class - Interesting initiatives around companies private sector development 5 Azerbaijan: - Offshore gas production 2 - Very important investments of Indonesia: BP in Azerbaijan (roughly - Performed in the poorest $31.6 B) province of Indonesia (North - Existing knowledge from USSR Moluku) period - Lack of industrial clusters - Local content initiatives 6 Chad: driven by government - Important political issues - Consortium of three 3 companies Mozambique: - Annual production comparable - Strong initiative around Mozal to Afghanistan potential project supported by World 7 Bank Nigeria: - Mozal was the anchor of - Shell is the oldest oil & gas Maputo Development corridor company in Nigeria - Both land and offshore activities - Important oil & gas industry 42 MAURITANIA BENCHMARK - SYNTHESIS (1/4) The context and outcomes of a large iron ore mining project in Mauritania were analysed. • Context: – Iron ore company operating in Mauritania critical to development – ~12MMT production of iron ore – Limited local capacity available • Outcomes on local procurement development that is considered as successful – Foundry activity for wear parts of mining equipment (shovels, excavators, bulldozers, crushers) – Mechanical engineering activity (bonding, machining, milling) – Automotive fleet (~500 vehicles) full management (maintenance) – Catering activity and camp/hotel management ~$50-100m – Sanitation/sewerage systems of the camp at stake for 10 MMT ore – Civil works activity extraction – Gypsum stack management – Air transportation – Insurances for employees • Ideas under feasibility study ~$10-20m at – Foundry for grinding media stake for – Foundry for rebars (for construction sector supply) 10 MMT ore – Recapping unit for conveyor belts extraction 43 MAURITANIA BENCHMARK - FOUNDRY (2/4) The Mauritania iron ore project had a successful foundry component, as detailed below: • Focus on foundry activity – ~120 employees for ~2,000-5,000 MT capacity; – Main activity is foundry for wear parts that require a relatively standard foundry technology: - Excavators/shovels/draglines (teeth and lips for buckets, crawler shoes); - Bulldozers (lips, blades, shoes), simple buckets; ~$7-15m - Crushers (grinding ring, liners). revenue – Studies were considered for the development, with future investments, of: potential for a 10 MMT - Rebar production; ore activity - Grinding media production. • Comment: – The development of foundry activity to serve the mining industry has been successful in many countries with low levels of industrialisation (Mauritania, South Africa, Mozambique, Morocco, Algeria). The development of the foundry for wear parts is triggered by mining activity, but afterwards can serve other sectors having wear parts (cement plant, civil works engines); – Most of these developments have been achieved through partnerships with international companies (Magotteaux, Scaw Metals); – Energy at economically viable prices + local scrap presence aid this development. 44 MAURITANIA BENCHMARK - AUTOMOTIVE FLEET (3/4) The Mauritania iron ore project had a successful fleet management component, detailed below: ~$2-5m • Zoom on automotive fleet management activity revenue – ~800 vehicles (light cars, 4x4s, buses); potential for a 800 – More than 150 people in charge of the fleet; vehicles – Main activity managed locally is: - Administrative management of the fleet (monitoring of cars, supervision of maintenance rounds, drivers, purchasing of new cars,…); - Maintenance of the cars (mechanical maintenance, electrical maintenance, standard maintenance) - Spare parts management: imports, warehousing and distribution to the different sites. • Comment: – Externalisation of fleet management has been also successfully achieved by some international mining companies in some remote countries: - BHP – Freeport at Antofagasta mine in Chile; - OCP in Morocco; - Oil & Gas companies in Alberta, Canada. 45 MAURITANIA BENCHMARK - MECHANICAL ENGINEERING (4/4) Mechanical engineering activities are an important component of a mining project. The regional context can be used, as in the Mauritanian project. Focus on mechanical engineering activity – Mining infrastructure development and early operations required mechanical engineering activities, specifically: - Steel construction; - Rollers maintenance / production for conveyor belts; - Machining of metal pieces used for vehicles, trucks, and fixed installation maintenance; ~$5-10m revenue - Bonding of metal infrastructures. potential • Comment: – Morocco has successfully developed a plant of roller fabrication for OCP conveyor belts (Maroc Rouleaux). – Roller fabrication was considered in Mauritania by the SNIM subsidiary COMECA but has yet to be achieved. – Bonding of metal pieces / infrastructures is an important competence that is often developed through the financing of training and technical schools. 46 AZERBAIJAN(BP) - SYNTHESIS The context and outcomes of a petroleum development in Azerbaijan were analysed. • Context: – Nearly $31.6 B investment on different projects in Azerbaijan – Off shore gas production • Outcomes of successful local procurement development – Waste Management – Electrical Equipment Installation – Telecom Equipment Installation and Maintenance – Construction – Logistics – Project Management and Design – Construction of Electric Line – Installation, Running, and Restoration of Fibre-optic and Copper Cables – Rental of Crawler Cranes and Provision of Personnel – Fabrication of Steelwork – Pipe and Ductware, Blasting, Painting and Welding Services 47 AZERBAIJAN(BP) - SYNTHESIS In the context of BP’s development in Azerbaijan, some successful examples of local development can be outlined: Examples of local procurement development – RT Services Ltd. (RTS) was established in 2002 to provide waste management (used brine treatment) Services. In 2009, the company won the contract with BP for the provision of integrated waste management. – TelcoPlus was established in 2005 to provide a wide range of technical services as well as technical consulting in the following areas: electrical equipment installation, telecom equipment installation and maintenance, construction, logistics, project management and design. The company won a contract with BP for the construction of electric lines along BTC to supply with electric energy for the valves and other electric devices. – Cable Services LLC was established in 2001 to provide cable installation, maintenance and field services. Cable Services LLC won a contract with BP for the provision of installation, running, and restoration of fibre optic and copper cables. – SOCAR Heavy Crane Alliance was established in 2009 as a JV with SOCAR and Heavy Crane (Dubai) to provide heavy lifting services. The company won a long-term contract with BP for the rental of crawler cranes and provision of personnel. – MQS, formerly Metal Qaynaq Sinaq (Metal Weld Testing), was set up in Azerbaijan in 1998. Its areas of expertise include fabrication of steelwork, pipe and duct ware, blasting, painting and welding services. 48 NIGERIA (SHELL) - SYNTHESIS The context and outcomes of a petroleum development in Nigeria were analysed. • Context: – Oldest Oil & Gas Company in Nigeria – Both Land and Offshore Activities • Outcomes on successful local procurement development: – Helicopters And Air Transport – Seismic Acquisition – Insurance Policy Contract – Brownfield Maintenance And Engineering Services – Integrated Pipeline Maintenance, Pigging And Corrosion Control • Examples of local procurement development: – Contracts to Nigerian-owned Caverton Helicopters ltd to provide helicopters and associated services. In total, this five-year contract is worth $694m. – A $26.7m contract to Sonar Limited for ocean bottom node seismic acquisition. – An operational insurance policy contract worth $7.6m was awarded to Sovereign Trust Insurance for the Bonga deep water production vessel. – Dorman Long Engineering, a Nigerian company, was awarded a contract worth $41m for brownfield maintenance of the Bonga and EA Fpsos. – A $59m contract was awarded for brownfield engineering services and integrated pipeline maintenance to another Nigerian company, Baywood Continental Limited. – A contract for $28m was awarded to B. G. Technical Limited for integrated pipeline pigging and corrosion control. 49 INDONESIA BENCHMARK - SYNTHESIS The context and outcomes of an nickel mining project in Indonesia were analysed. • Context: – ~65 thousand metric tons hydrometallurgical nickel project (6 MMT of extracted ore) – Investment of $6 B – First industrial project in the region / complete feedback on successful local procurement experiences has not yet been measured • Outcomes on local procurement initiatives – Exploration work (sampling, assaying, laboratory work) – Mine truck driving – Environmental management/preparations for rehabilitation phase (Tree nursery) – Logistics (warehousing of consumables, customs management) – Civil works (roads, buildings) – Site security – IT / Maintenance – Catering – Financial services (development of a local bank branch) 50 MOZAMBIQUE BENCHMARK - SYNTHESIS The context and outcomes of an aluminium project in Mozambique (Mozal) were analysed. • Context: – Mozal is an aluminum smelter that has been developed near Maputo, Mozambique, in a $2 B joint venture involving BHP Billiton, Mitsubishi, the government of Mozambique, and the Industrial Development Corporation of South Africa. – Mozal was the first major foreign investment in Mozambique, and was considered as the anchor of Maputo Development corridor. International companies and IFC pushed for the development of SMEs through Mozlink program, in order to: - Build stronger and more competitive Mozambican SMEs - Transfer knowledge and capacity from foreign countries to Mozambique - Increase spending with Mozambican Companies ~750 full-time – 19 companies were awarded at least one contract jobs and 2,500 indirect jobs ~$35-50m sourced • Outcomes of successful local procurement development to local SMEs yearly – Basic services (catering, cleaning, landscaping earthworks, manned security) – Engineering / manufacturing industry firms (pots, chimneys and pipes production and maintenance, repair of start-up equipment) – Construction firms (maintenance, water drains, removal of temporary buildings, electric installations and wiring, and repairs, electricity substation in the plant and acoustic barrier in the port of Matola, housing construction and maintenance of buildings ) – Industrial services (phone and phone data base network, suppliers and maintenance of hydraulic equipment, industrial waste removal, employee transport) 51 KAZAKHSTAN (NCOC: ENI, SHELL,TOTAL) - SYNTHESIS The context and outcomes of an petroleum development in Kazakhstan were analysed. • Context: – One of the largest petroleum developments in the world – A joint venture of 7 world class companies – Offshore project • Outcomes of successful local procurement development – Marine fleet operations – Fleet maintenance – Offshore services from construction to commissioning – Pipe racks fabrication – Barge assembly – Catering – Accommodations, services, medical services – Telecommunications • Examples of local procurement development – Caspian Offshore Construction, first private company with 100% Kazakh content providing marine fleet operations and maintenance. The forecast revenue for 2011 is $75m. COC has around 300 employees. – Ersai is a JV (50/50) between a Kazakh company and Saipem. It provides onshore and offshore services from construction to commissioning. In particular, Ersai fabricated pipe racks (18,000 MT/year) and also assembled barges. Ersai has more than 3,000 employees. – Sayan Firm, is a subsidiary of a Kazakh company. Its activity covers catering, accommodations, services, medical services, and telecommunications. Sayan has more than 500 employees. 52 CHAD (EXXON) - SYNTHESIS The context and outcomes of a petroleum development in Chad were analysed. • Context: – Construction was launched in October 2000, the consortium consisted of ExxonMobil (40%, project operator), Petronas (35%), and Chevron (25%). Oil production commenced in late 2003. • Outcomes of successful local procurement development: – Inspection for potential issues with the pipeline – Civil works (roads, trails, bridges) – Building (schools, factories, hospitals, airport) – Hydraulic urban & sanitation – Rental of vehicles, fleet management, heavy machinery and equipment and miscellaneous tools – Maintenance – Drilling ~$160m at – Pipe construction stake for – Security services and equipment ~90,000 bpd – Recruitment and training – Permitting • Examples of local procurement development: – ENCOBAT SA is a company specialised in building construction and civil works, founded in 1997. ESSO Group entrusted the company with work to develop its various sites including construction of oil rigs, drilling and maintenance. Encobat SA is now the 2nd subcontractor for Esso in Chad. – Copguard is a provider of security services and equipment. – Emploi & Services is the first recruitment and interim employment company in Cameroon and Chad. Emploi & Services is now operating in 7 West African countries. 53 5.2 AYNAK PROCUREMENT PLAN Aynak Procurement Plan 54 5.3 AMU DARYA PROCUREMENT PLAN Amu Darya Procurement plan 55