Document of The World Bank Report No: ICR00002788 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-38100, IDA-38101, IDA-3810A and IDA-49330) ON A CREDIT IN THE AMOUNT OF SDR21.1 MILLION (US$32.15 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF MAURITANIA FOR A SECOND MINING SECTOR CAPACITY BUILDING PROJECT June 13, 2014 Sustainable Energy, Oil, Gas, and Mining Unit Sustainable Development Network AFCF1 Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective May 15, 2014) Currency Unit = Mauritania Ouguiya (MRO) MRO 1.00 = US$ 0.0034 US$ 1.00 = MRO 298 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS Bpd Barrels per day CAS Country Assistance Strategy CNITIE Comité National de l’Initiative pour la Transparence dans les Industries Extractives CNRE Centre National des Ressources en Eau CPPR Country Portfolio Performance Review DMG Direction des Mines et de la Géologie EI Extractive Industries EITI Extractive Industries Transparency Initiative GIRM Government of the Islamic Republic of Mauritania GIZ Gesellschaft fur Internationale Zusammenarbeit ICR Implementation Completion Report IDA International Development Association IDB Islamic Development Bank LED Local Economic Development IMF International Monetary Fund M&E Monitoring and evaluation MMI Ministère des Mines et de l’Industrie MPEM Ministère du Pétrole, de l’Energie et des Mines NORAD Norwegian Agency for development Cooperation PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective PRECASP Projet de Renforcement des Capacités du Secteur Public PRISM Projet de Renforcement Institutionnel du Secteur Minier PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper PSC Production Sharing Contract QAG Quality Assurance Group QALP Quality Assessment of Lending Program SAE Service des Affaires Environnementales SESA Strategic Environmental and Social Assessment SIGE Système d’Information Géologique et Environnemental SIGM Système d’Information Géologique et Minier ii SMH Société Mauritanienne des Hydrocarbures SNIM Société Nationale industrielle et Minière SPEG Société de Production de l’Electricité à partir de Gaz UPM Unité de Promotion du Secteur Minier Vice President: Makhtar Diop Country Director: Vera Songwe Sector Manager: Christopher Sheldon Project Team Leader: Morten Larsen ICR Team Leader: Morten Larsen ICR Primary Author: Yves Duvivier iii MAURITANIA Second Mining Sector Capacity Building Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph   1. Project Context, Development Objectives and Design ........................................................................14  1.1 Context at Appraisal ...........................................................................................................................14  1.2 Original Project Development Objectives (PDO) and Key Indicators ..............................................16  1.3 Revised PDO and Key Indicators, and reasons/justification .............................................................17  1.4 Main Beneficiaries .............................................................................................................................18  1.5 Original Components .........................................................................................................................18  1.6 Revised Components .........................................................................................................................19  1.7 Other significant changes ...................................................................................................................20  2. Key Factors Affecting Implementation and Outcomes ........................................................................21  2.1 Project Preparation, Design and Quality at Entry ..............................................................................21  2.2 Implementation ..................................................................................................................................23  2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization ...................................23  2.4 Safeguard and Fiduciary Compliance ................................................................................................24  2.5 Post-completion operation .................................................................................................................25  3. Assessment of Outcomes .....................................................................................................................25  3.1 Relevance of Objectives, Design and Implementation ......................................................................25  3.2 Achievement of Project Development Objectives .............................................................................26  3.3 Efficiency ...........................................................................................................................................30  iv 3.4 Justification of Overall Outcome .......................................................................................................31  3.5 Overarching Themes, Other Outcomes and Impacts .........................................................................32  3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ..................................33  4. Assessment of Risk to Development Outcome ....................................................................................33  5. Assessment of Bank and Borrower Performance.................................................................................34  5.1 Bank Performance ..............................................................................................................................34  5.2 Borrower Performance .......................................................................................................................35  6. Lessons Learned...................................................................................................................................36  7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ......................................37 Annex 1. Project Costs and Financing ....................................................................................................38  Annex 2. Outputs by component .............................................................................................................40  Annex 3. Economic and Financial Analysis ............................................................................................56  Annex 4: Bank Lending and Implementation Support/ Supervision Processes ......................................63  Annex 5. Beneficiary survey results ........................................................................................................65  Annex 6. Stakeholder workshop report and results .................................................................................66  Annex 7. Summary of Borrower’s ICR ...................................................................................................67  Annex 8. Comments of co-financiers and other partners/ stakeholders ..................................................72  Annex 9. List of supporting documents ...................................................................................................73  Map ..........................................................................................................................................................75  v A. Basic Information SECOND MINING Country: Mauritania Project Name: SECTOR CAPACITY BUILDING PROJECT IDA-38100,IDA- Project ID: P078383 L/C/TF Number(s): 38101,IDA-3810A,IDA- 49330 ICR Date: 06/08/2014 ICR Type: Core ICR ISLAMIC REPUBLIC OF Lending Instrument: TAL Borrower: MAURITANIA Original Total XDR 13.10M Disbursed Amount: XDR 20.34M Commitment: Revised Amount: XDR 20.34M Environmental Category: B Implementing Agencies: UCPM - Unite de Coordination du Projet Minier Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/12/2002 Effectiveness: 10/17/2003 10/17/2003 Appraisal: 04/29/2003 Restructuring(s): Approval: 07/08/2003 Mid-term Review: 06/30/2008 06/30/2008 Closing: 03/15/2009 11/15/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Highly Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: vi C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project at No Quality at Entry (QEA): None any time (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 20 20 Other Mining and Extractive Industries 70 70 Sub-national government administration 10 10 Theme Code (as % of total Bank financing) Environmental policies and institutions 29 29 Other environment and natural resources management 14 14 Other public sector governance 29 29 Participation and civic engagement 14 14 Water resource management 14 14 E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Callisto E. Madavo Country Director: Vera Songwe A. David Craig Sector Manager: Christopher Gilbert Sheldon Peter A. van der Veen Project Team Leader: Morten Larsen Paulo De Sa ICR Team Leader: Morten Larsen ICR Primary Author: Yves A. Duvivier F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective is to strengthen the Government's capacity to regulate mining activities in its territory and thereby facilitate private investment in the mining sector, through: (i) fostering local economic de- vii velopment in mining areas, (ii) improving gathering and access to geological information, and (iii) strengthening the Government's institutional and technical capacity to manage mineral resources. Revised Project Development Objectives (as approved by original approving authority) The objective of the project is to strengthen the Recipient's capacity to manage national mineral sector activities in an environmentally, socially and economically sustainable manner. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Target Values documents) Years Indicator 1 : Direct project beneficiaries At least 100 mining- Value Training: 750 related personnel in Training: 850 quantitative or 0 Micro-projects: social development Micro-projects: 2,152 Qualitative) 1,100 issues Date achieved 12/31/2003 03/15/2009 11/30/2011 11/15/2013 Comments (incl. % Achieved and exceeded (micro-projects included in 2011) achievement) Indicator 2 : Direct female beneficiaries Not gender- Value Training: 30% disaggregated in Training: 40% quantitative or 0 Micro-projects: original project Micro-projects: 75% Qualitative) 70% design Date achieved 12/31/2003 12/31/2003 11/30/2011 11/15/2013 Comments Achieved and exceeded (incl. % (Revised in 2011) achievement) Indicator 3 : Hydrocarbons Law and regulation have been revised in line with international practice Value Law and regulations Law and regulations quantitative or Old law in place No change approved following approved Qualitative) international practice Date achieved 12/31/2006 03/15/2009 10/01/2011 12/31/2011 Comments (incl. % Achieved achievement) Increase in household income in areas where local economic development activities are Indicator 4 : implemented 20% increase in Value Average HH Average HH income: Average HH income: 45,745 average HH income. quantitative or income: MRO MRO 126,800 Mauritanian Ouguyas (MRO) Value: 45,745*120% Qualitative) 119,000 (current) (current) = MRO 54,900 Date achieved 04/01/2004 03/15/2009 11/30/2011 11/15/2013 Comments Achieved and exceeded (Based on 3 HH surveys: 2004, 2011 and 2013) (incl. % (Revised - updated in 2011) achievement) Indicator 5 : Percent of operators annually reporting to central compliance database on performance viii standards (Environment, social, operational, fiscal) 1% (the three largest Value Not included in operators) quantitative or 1 operator reporting (SNIM) original project 60% 98% of production Qualitative) design value Date achieved 12/31/2003 03/15/2009 11/30/2011 11/15/2013 Comments Partially achieved. Reporting system installed and operational, but only three largerst (incl. % operators are reporting. The 3 companies represent 98% of production value achievement) (Revised 2011) Indicator 6 : Time required to process a mining title by the Mining Cadastre Value quantitative or 21 30 days No change 21 days Qualitative) Date achieved 12/31/2003 03/15/2009 11/30/2011 11/15/2013 Comments (incl. % Achieved and exceeded achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Target Values documents) Years Indicator 1 : Petroleum cadastre established and fully functional 18 months after effectiveness of the AF Value No petroleum cadastre in Petroleum cadastre in Petroleum cadastre in (quantitative place place place and operational or Qualitative) Date achieved 12/31/2006 06/30/2008 12/20/2011 Comments (incl. % Achieved achievement) Sector Databank and Information Systems for petroleum have been established within 30 Indicator 2 : months of effectiveness of AF Value Petroleum databank Petroleum databank No petroleum databank and (quantitative and information and information information system in place or Qualitative) system established system in operation Date achieved 12/31/2006 03/15/2009 10/01/2013 Comments (incl. % Achieved achievement) Environmental regulations for petroleum sector management have been prepared with Indicator 3 : participation of sector stakeholders and are effective Environmental Value No environmental regulation Environmental petroleum regulation (quantitative specific to the petroleum petroleum regulation approved and or Qualitative) sector approved and effective effective Date achieved 12/31/2006 03/15/2009 01/11/2013 Comments Achieved (incl. % ix achievement) Strategic Environmental and Social Assessment for petroleum to be completed within 12 Indicator 4 : months of effectiveness of AF Strategic Strategic Value Environmental and Environmental and (quantitative No SESA drafted Social Assessment Social Assessment or Qualitative) completed completed Date achieved 12/31/2006 12/31/2007 07/31/2011 Comments (incl. % Achieved achievement) Environmental Unit at the Ministry in charge of petroleum to be created 9 months after Indicator 5 : effectiveness Environmental Unit Environmetal Unit in Value No unit is solely dedicated to in place in the place in the Ministry (quantitative environment ministry in charge of of Petroleum, Energy or Qualitative) petroleum and Mines Date achieved 12/31/2006 09/30/2007 06/10/2013 Comments (incl. % Achieved achievement) Production Sharing Contract model to be applied to new petroleum permits has been revised Indicator 6 : and modernized Value Out-dated Production Sharing Modernized PSC in Modernized PSC has (quantitative Contract in place place been adopted or Qualitative) Date achieved 12/31/2006 03/15/2009 07/01/2010 Comments (incl. % Achieved achievement) Railway and harbor facilities in NW Mauritania available to regional economic operators by Indicator 7 : mid-term review Railway and harbor Value Railway and harbor Railway and harbor facilities facilities open to (quantitative facilities open to other only available to SNIM other economic or Qualitative) economic operators operators Date achieved 12/31/2003 12/01/2007 03/01/2011 Comments (incl. % Achieved achievement) Decision by private companies to proceed with the development of two new mines before Indicator 8 : project closure Value Two mine sites at exploration Two additional mines Two additional mines (quantitative stage operational in operation or Qualitative) Date achieved 12/31/2003 03/15/2009 01/01/2007 Comments (incl. % Achieved (three other mines had gone into operation but closed again) achievement) Indicator 9 : Mining Sector Monitoring System reports regularly on: (i) Increase in average annual x exploration investment in the mining sector, (ii) Increase in average annual mineral exports 10% annual increase starting (i) US$ 104 million - Value from: (i) US$ 13.5 million 10% annual increase 25.5% p.a. (quantitative (i) US$ 33.5 (ii) US$ 176 million for both indicators (ii) US$ 1.760 - 8% or Qualitative) million p.a. (ii) US$ 1,400 million Date achieved 12/31/2003 03/15/2009 11/30/2011 12/31/2012 Comments Achieved (incl. % (Revised - updated in 2011) achievement) Indicator 10 : Communes/villages participating in micro project program and/or local investment plans Value Not included in 27 (quantitative 8 original project 15 (Revised 2011) or Qualitative) design Date achieved 11/30/2011 12/31/2004 11/15/2013 11/15/2013 Comments (incl. % Achieved and exceeded achievement) Indicator 11 : Micro projects completed under the small grants program Value 206 micro-projects 75 micro- (quantitative 0 35 micro-projects (Revised - updated projects or Qualitative) 2011) Date achieved 12/31/2003 03/15/2009 11/15/2013 11/15/2013 Comments (incl. % Achieved and exceeded achievement) Indicator 12 : M&E Database established for tracking of socio-economic indicators in mining areas M&E Database Value Two socio-economic surveys Not included in M&E Database populated with 3 (quantitative conducted separately in 2004 original project operational surveys and or Qualitative) and 2011 design operational Date achieved 11/30/2011 12/31/2003 11/15/2013 11/15/2013 Comments Achieved and exceeded (incl. % (Revised 2011) achievement) Indicator 13 : Publication of geo-data and hydrological data Access to geo-data and Value Knowledge about Public access to hydrological data at (quantitative Not available availability of water geo-data and the ministry or Qualitative) in target mining areas hydrological data (Revised 2011) Date achieved 12/31/2003 03/15/2009 11/15/2013 11/15/2013 Comments (incl. % Partially achieved (no online data access) achievement) Indicator 14 : Regulatory framework established for autonomy of School of Mines Value Not included in Regulatory Regulatory framework (quantitative Not available original project framework drafted and approved or Qualitative) design drafted and xi approved Date achieved 11/30/2011 12/31/2003 11/15/2013 07/31/2012 Comments Achieved (incl. % (Revised 2011) achievement) Indicator 15 : Student survey satisfaction rating at the School of Mines Value Not included in 75% positive 80% positive response (quantitative Not available original project response rating rating or Qualitative) design Date achieved 11/30/2011 12/31/2003 11/15/2013 11/15/2013 Comments Achieved and exceeded (incl. % (Revised 2011) achievement) Indicator 16 : Number of lecturers at the School of Mines to have completed training Value Not included in 7 lecturers and two 10 lecturers to be (quantitative 0 original project personnel staff have trained or Qualitative) design completed training Date achieved 11/30/2011 12/31/2003 11/15/2013 11/15/2013 Comments Substantially achieved. (incl. % Only 7 out of planned 10 lecturers have been recruited achievement) (Revised 2011) Indicator 17 : School of Mines curriculum development Full curriculum Full curriculum for 5 Value Not included in for 5 years years academic (quantitative Not available original project academic program has been or Qualitative) design program to be completed completed Date achieved 11/30/2011 12/31/2003 11/15/2013 11/15/2013 Comments Achieved (incl. % (Revised 2011) achievement) G. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 04/05/2004 Satisfactory Satisfactory 0.50 2 09/02/2004 Satisfactory Satisfactory 0.99 3 05/04/2005 Satisfactory Satisfactory 2.14 4 11/30/2005 Satisfactory Satisfactory 4.34 5 12/18/2005 Satisfactory Satisfactory 4.34 6 11/20/2006 Satisfactory Satisfactory 7.29 7 07/31/2007 Satisfactory Satisfactory 9.96 8 01/12/2008 Satisfactory Satisfactory 11.70 9 12/12/2008 Satisfactory Moderately Satisfactory 14.87 10 05/29/2009 Moderately Satisfactory Moderately Satisfactory 14.87 11 11/29/2009 Moderately Satisfactory Moderately Satisfactory 16.68 12 03/11/2010 Moderately Satisfactory Moderately Satisfactory 17.17 xii 13 12/22/2010 Satisfactory Moderately Satisfactory 18.23 14 09/26/2011 Satisfactory Satisfactory 19.69 15 06/03/2012 Satisfactory Moderately Satisfactory 22.87 16 01/27/2013 Satisfactory Satisfactory 23.83 17 10/19/2013 Satisfactory Satisfactory 28.13 H. Restructuring (if any) Not Applicable I. Disbursement Profile xiii 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Mauritania has since its independence in 1960 been highly dependent on revenues from its natural wealth of iron ore and fisheries. Traditionally, they have accounted for the bulk of national exports. For this reason the two Mining Sector Capacity Building Projects (“Projet de Renforcement Institutionnel du Secteur Minier”, or PRISM), have been considered important building blocks in Mauritania's national development strategy. The state-owned Société Nationale industrielle et Minière (SNIM) commenced iron ore mining in the early 1960’s and has remained a central source of government-funding since its creation. Paradoxically despite important ore reserves and massive donor financing for its investments, SNIM's annual production of 10-12 million tons remained stagnant between the mid 1970’s to early 2000’s. At the time of preparation of the second PRISM, in the beginning of the 2000’s, SNIM enjoyed a virtual monopoly in the mining sector, Government institutions in the sector were weak and few foreign investors, let alone domestic companies were present in the mineral sector1. The country's overall business environment, coupled with limited knowledge about the country’s mineral reserves outside SNIM's concession areas, was not appealing to private mining investors. The absence of a modern institutional framework for the mineral sector exacerbated the situation. The fact that the Fraser Institute Global Mining Survey did not include Mauritania in its survey (despite being the continent’s second-largest producer of iron ore) is symptomatic for Mauritania’s perceived isolation at the turn of the twentieth century. 2. The first PRISM project was approved in 1999, and the second in 2003. The preparation of the two operations took place during a time when nationwide reforms gained traction. In the late 1990’s Mauritania, then one of the poorest African countries was one of the first to prepare a full Poverty Reduction Strategy (PRS). Mauritania had also taken steps towards better governance with the adoption of the "General Framework for the National Program of Good Governance" in 1991; governance strengthening and capacity building was one of the four strategic focus areas of Mauritania's first Poverty Reduction Strategy Paper (PRSP) presented to the IMF and World Bank Board in 20012. The 2nd CAS (24122-MAU) for 2001-2005 maintained a continuity of government’s strategic priorities since the early 1990’s. The objectives and approaches selected under both PRISM projects were aligned with the thrust of the first PRSP and the CAS. 3. Private sector-led growth was one of the underpinnings of the national development strategy, which underscored the government’s eagerness to attract (foreign) private investors to the economy and particularly the mining industry in order to exploit the country’s resource potential. An institutional audit conducted under the “Private Sector Development and Capacity Building Project” (1995) recommended an ambitious mining sector reform program to improve sector competitiveness and to enable public sector mining institutions to efficiently regulate the sector and attract and manage foreign investments. 1 Interest from international mining companies began to emerge in the early 2000’s, but all of this centered around exploration with no actual production coming on stream until late 2006. 2 The other strategic focus areas were: (ii) accelerating private sector-led growth, (iii) growth anchored in the economic environment of the poor and (iv) developing human resources and ensuring universal access to basic infrastructure and services. 14 In 1999 the Government of the Islamic Republic of Mauritania Box 1.Timeline of main events (GIRM) issued its Mining Policy Declaration which, in addition to private sector promotion, emphasized: (i) rationalization of the role 1991 General Framework for of the State by reducing its involvement in mining exploration and Good Governance exploitation; (ii) sustainability of the agencies involved in monitoring and regulating mining activities; and (iii) environmental 1997 1st Mauritania CAS management. In response to the GIRM's request to advance those policies (and in line with the PRSP and CAS objectives) the Bank 1999 PRISM-1 effectiveness prepared the first Mining Sector Capacity Building Project, PRISM (P057875) which was approved in 1999 with a US$15 million 2001 1st Mauritania PRSP equivalent credit (IDA-32060). 2nd Mauritania CAS 4. The first PRISM project was successful in its objectives to 2003 PRISM-2 effectiveness strengthen GIRM's capacity to act as an investment promoter and regulator of the mining sector and to significantly increase the 2005 Mauritania becomes EITI geological and hydrological knowledge of the country (Table 1 in Candidate Country Annex 2 presents the achievements of PRISM-1 compared to PRISM-2). Its outcome was rated Satisfactory and its institutional Coup toppling Ould Taya development impact Substantial (ICR 32599 June 2005). Given the magnitude of the challenges, PRISM-1 was designed to support the 2006 1st Additional Financing of first phase of a long-term institutional and capacity building PRISM-2 program. Under PRISM-1 geological knowledge was greatly Chinguitti oil field starts enhanced through the establishment of various specialized services. production However, the legal and institutional structures developed required further support in terms of developing skills and experience among Akjoujt Copper and gold government staff as well as procedures and rules for long-term mine starts production sustainability of these agencies. PRISM-2 was designed to deepen core regulatory and institutional reforms. But at the same time, 2008 Tasiast Gold Mine starts PRISM-2 aimed broaden its impact by piloting local economic production development activities in support of three of the second CAS goals: (i) institutional development and governance; (ii) accelerating Coup, followed by WB private sector-led growth: and (iii) and fostering infrastructure and moratorium of operations access to services. At the time of project design, such activities had 2009 Mauritania issues first never been tried in IDA-funded TA projects in the extractive EITI report industries.3 Resumption of WB 5. PRISM-2 was approved on July 8, 2003 with a US$18 million operations equivalent credit, shortly before the PRISM-1 was completed. By then, Mauritania was entering into a new phase of the development 2011 2nd Additional Financing of its mineral resources as: (i) international mining companies had of PRISM-2 started extensive exploration encouraged by the overall reforms undertaken by the GIRM and by the first significant institutional 2012 Mauritania becomes EITI improvements realized under PRISM-1; (ii) following promising compliant country off-shore oil exploration campaigns by international companies, a reputable oil company launched major investments in oil production, raising strong expectations that 3 Community-oriented programs pre-empted the recommendations of the Extractive Industries Review in terms of assuring that communities impacted by EI gain direct benefits from the operations. 15 offshore production would commence on a significant scale by 2005-2006. Given this new development PRISM-2 was originally designed with a comprehensive capacity building component for the hydrocarbons sector in order to support transparency and governance of the projected petroleum resources. However before project appraisal was completed the national authorities declined the Bank’s involvement in this sector. Given the limited IDA funds available for Mauritania at that time and the large financing needs to pursue the reform and institutional strengthening agenda in the hard mineral sector alone, it was agreed to launch the PRISM-2 without the hydrocarbon component. The ambition was that the hydrocarbon component could be introduced later if the appetite for transparency and capacity building reemerged in the hydrocarbon sector. 6. In August 2005, a bloodless military coup ended the 21-year presidency of President Ould Taya. A transition government quickly returned to democracy and elections were held in late 2006 – early 2007. The new government was committed to a development agenda focusing on economic governance. GIRM took a number of key steps that broke with earlier practices and re-launched a constructive dialogue with the development partners. A new Poverty Reduction and Growth Facility (PRGF) was approved with the International Monetary Fund (IMF), and in December 2006 Mauritania was granted debt relief under the Multilateral Debt Relief Initiative. Mauritania’s population and partners had high hopes for the beginning of a new era, coinciding also with the commencement of off-shore oil production. The PRSP-2 was thus prepared in a highly optimistic environment and provided the basis for the third CAS (2008-2011). In addition, the Bank responded to a government request to scale up its support in the mineral resources sector and boost its assistance by: (i) granting on July 6, 2006 a US$5 million equivalent additional financing to PRISM-2 to re-integrate the hydrocarbon component (IDA- 38100); and (ii) helping GIRM set up the pillars for a more transparent revenue collection in the extractive industries (including oil) through the Extractive Industries Transparency Initiative (EITI). A National Committee for EITI (CNITIE) was established in January 2006 (as one of the first countries to do so), and Mauritania received a US$240,000 grant from the Multi-donor trust fund (MDTF) for EITI 2006-2008 activities. Finally, a second additional financing of US$7.1 million to PRISM-2 was granted on May 19, 2011. Various observers, inside and outside the Bank4, ascribe Mauritania’s relative stability and enhanced governance since 2009 to the reforms and success of the extractive industries which set a benchmark for other sectors of the economy, e.g. the recent push to push for inclusion of the fisheries sector under the EITI framework. 1.2 Original Project Development Objectives (PDO) and Key Indicators 7. The Project's development objective5 as stated in the Development Credit Agreement was to “strengthen the Borrower’s capacity to regulate mining activities in its territory and thereby facilitate private investment in the mining sector, through: (a) fostering local economic development in mining areas, (b) improving gathering and access to geological information, and (c) strengthening the Borrower’s institutional and technical capacity to manage mineral resources” 8. The initial set of indicators included: 4 “He [President Aziz] can also argue that political stability thanks largely to military strength, the financial fruits of a renewed hunt for oil and minerals, along with some efforts at reform and liberalization, has delivered a turn-around in the country’s economic fortunes…”, Financial Times, April10, 2014 5 This wording from the Development Credit Agreement differs from the PAD which defined the following objectives: (i) Build up and consolidate the Government's long term institutional and technical capacity to manage the country' s mineral resources, including social and environmental management; (ii) Promote private investments in the minerals sector; and (iii) Improve mining sector contribution to national and regional socio-economic development 16 - Mining related personnel of Ministry of Mines and Industry (MMI) and mining institutions, and representatives of local government and NGOs of mining areas trained (numbers); - average time to grant a mining title maintained below 30 days; - increase of sector (a) investments and (b) exports; - railway and harbor facilities in NW Mauritania made available to other mining operators than SNIM - extent of diversification of economic activities in mining areas as measured by number of sub-projects implemented under the small grants program; and increase in household income in those areas. 1.3 Revised PDO and Key Indicators, and reasons/justification First Additional financing (2006) 9. The first additional financing was provided in 2006 to build the capacity of the institutions in the oil sector in line with the support provided for the hard minerals. This addition was aligned with the original development objective of capacity building for mineral resources without requiring any changes, but the following key indicators were added: - Revised hydrocarbons law and regulations plus modernized model Production Sharing Contract (PSC) which is to be applied to new petroleum permits; - Training of staff of petroleum ministry; - Creation of an Environmental Unit within the ministry; - Completion of Strategic Environmental and Social Assessment (SESA), and preparation and effectiveness of environmental regulations for petroleum sector management; - Operationalization of Petroleum Cadastre and Sector Data Bank/Information Systems ; - Completion of key sector strategic studies. QALP Review (2008) 10. A QALP (Quality Assessment of Lending Program) assessment of November 2008, by QAG rated the quality of implementation satisfactory, quality of supervision moderately satisfactory, likelihood of achieving DOs as moderately unlikely and quality of design moderately satisfactory (originally QAG rated it moderately unsatisfactory). The last two ratings related basically to the new hydrocarbons component, the addition of which QAG qualified as unwarranted considering the major setback with Chinguitti oil production at that time. The project and country teams disagreed strongly with QAG, pointing out that the assessment was carried out shortly after the start of the period of deep political turmoil. QAG's assessment of the hydrocarbon sector potential has indeed proved to be unfounded given the rebound in oil exploration (eight wells to be drilled in 2013-14) and discoveries of natural gas with the potential to supply not only domestic demands but also export to neighboring Senegal and Mali. Still, QAG's unsatisfactory rating of candor and realism of the ISRs6 at that time, was taken into account. The results framework and tracking of indicators were strengthened and subsequent ISRs improved. Second Additional financing (2011) 11. A second additional financing was approved on May 19, 2011 to support the scaling up of successful activities undertaken so far and finance a new activity: School of Mines and Vocational Training. The PDO was rephrased to better reflect the achievements to which the technical assistance 6 QAG criticized a “perhaps forced choice of inappropriate mining indicators and artificially low target levels” and commented that before adding a petroleum component the team should have recommended a rigorous technical evaluation of oil production prospects. 17 activities could reasonably be attributed. The revised PDO was to “strengthen the Recipient’s capacity to manage national mineral sector activities in an environmentally, socially and economically sustainable manner.” The key indicators were updated and revised to reflect the more ambitious project scope. A set of new intermediate results indicators was added with respect to the new Mining School and Vocational Training component. The revised PDO was approved by the Board as part of the Additional Financing package. 1.4 Main Beneficiaries 12. The initial 2003 PRISM-2 Project Appraisal Document (PAD) listed as target populations and sectors: (i) local communities in mining districts, in particular along the Zouerate-Nouadhibou corridor; (ii) private foreign and national mining investors/operators; (iii) national and regional sector authorities; (iv) water management authorities; and (v) land use management authorities. The two additional financing activities expanded the categories of the beneficiaries to up- and mid-stream petroleum agencies including (vi) the departments in charge of the petroleum sector, (ix) the national oil company Société Mauritanienne des Hydrocarbures (SMH), and the special purpose vehicle for the Banda gas-to-power project (Société de Production de l’Electricité à partir de Gaz, SPEG). The second additional financing activity also benefited (x) the School of Mines as well as (xi) the national EITI committee and its stakeholders. The additional financing also expanded the number of the beneficiaries through the scaling up effect and the extension to populations in areas impacted by new mining and oil activities. 1.5 Original Components 13. Component 1 - Local economic development (LED) in the mining areas, supporting the empowerment of local communities and municipalities for the development of alternative economic activities and increased efficiency in the delivery of social services. The inclusion of LED was highly innovative at the time of preparation and responded to the strong pressure on the global extractive industries to assure that local communities enjoyed direct benefits from the operations7. Such activities have later been widely adopted by subsequent Bank projects and within the industry at large. Project activities included: (i) facilitation of alternative economic activities to diversify the local economic base; (ii) provision of small grants for small businesses and entrepreneurs; (iii) capacity building of local authorities for the delivery of social services and regional development; and (iv) hydrogeological studies and works to improve the availability of water in the regions. 14. Component 2 - Geo-information and development. This component provided the geo-scientific information necessary to enhance economic development. It supported a variety of sectors, including water resources and environmental management, and helped promotion of investments in the mining sector. This component continued the work started under PRISM-1 by upgrading existing information and increasing its availability. It included: (i) airborne geophysical surveys over selected areas with mineral potential; (ii) geological mapping; (iii) metallogenic studies of selected ore districts and/or minerals based on outputs from PRISM-1; (iv) updating of the country's hydro- geological map in collaboration with the National Center for Water Resources (CNRE); and (v) supervision assistance of complex technical activities in particular geophysics. The Islamic Development Bank (IDB) which had already co-financed PRISM-1, provided US$ 3.6 million in parallel financing for additional airborne surveys under this component. 7 Extractive Industries Review, 2003 18 15. Component 3 - Capacity building of public mining institutions. Mining sector management capacity was to be strengthened by establishing a Mining Sector Promotion Unit (UPM) and by reinforcing the Mining Cadastre Office and the sector monitoring and control capacity of the Directorate for Mining and Geology (DMG) both created under PRISM-1. It would thus consolidate the sustainability of public mining institutions established under PRISM 1. Inter-institutional relationships were to be strengthened, especially between the Ministry of Rural Development and Environment and the DMG's environmental unit - Service des Affaires Evironnementales (SAE). A comprehensive training program was included to build capacity of the employees involved in sector activities directly (or indirectly such as local authority representatives). 16. Component 4 - Project management. It built upon the existing PRISM-1 Project Coordination Unit (PCU). A regional project coordination unit was established in Zouerate to coordinate local economic development activities in the North. This satellite office was moved to Akjoujt with the second additional financing in 2011. 1.6 Revised Components 17. The 2006 additional financing operation eventually introduced the one component already proposed in 20038 to cover hydrocarbon sector management issues with five subcomponents: (i) Improving the legal, regulatory and contractual framework through model Production Sharing Contracts (PSCs), revised Hydrocarbons Law plus a coherent package of secondary legislation and regulations. (ii) Capacity building in the Ministry of Petroleum and Societe Mauritanienne des Hydrocarbures (SMH) and institutional audit of that Ministry to streamline organization and sector roles. (iii) Strengthening of environmental management through preparation of a Strategic Environmental and Social Assessment (SESA), preparation of environmental regulations and training of the core team responsible for environmental approval and monitoring of oil projects. (iv) Data management/petroleum cadaster: creation of a data bank and related information system, including the cadastre system for oil/gas concession blocks. (v) Strategic assessments: preparation of strategic assessments for utilization of natural gas, promotion strategy of exploration in relinquished acreage. 18. Under the second additional financing operation, one new component - Support to the School of Mines and Vocational Training – was added to the existing five. In addition, all of the four original mining components were expanded in order to (i) cover populations in areas which had seen a recent influx of mine investments, (ii) further analyze existing geo-scientific data, and (iii) deepen capacity building, with special focus on inspection capacities of Direction de Police des Mines. The second additional financing also supported the national EITI Committee, which has established itself as an important platform for dialogue among stakeholders from (i) government, (ii) civil society, and (iii) operators. The new component of support to the School of Mines and vocational training was to support the public-private partnership of government and mine operators which aimed at nurturing this new sub-sector of the national education system. This was done through a dedicated academic and technical school to accommodate the growing demands from the mining industry for a specialized and skilled workforce. 8 Detailed in the September 2002 project identification document 19 Box 2. School of Mines The Mauritania School of Mines was created in 2011 as a partnership between government, a group of mining operators (SNIM, Kinross and First Quantum) and development partners, including the World Bank. The school is a response to the need to qualify human resources in a sector that is going through rapid transformation in Mauritania. The school signed a convention with the Polytechnic School of Montreal, Canada, as strategic pedagogic partner and other conventions of partnership with academic and scientific institutions in Nouakchott, Rabat, Ouagadougou, Niamey, Istanbul and Alger. The school is located temporarily in Nouakchott, while waiting for the construction of its campus in Akjoujt, a mining city 255 km north of Nouakchott. The construction work is expected to start in July 2014 for the school to be ready for entrance in 2016. The school started with a group of 25 students selected among the best secondary graduates in scientific areas and had a total enrollment of 75 students at project closure in November 2013. It will offer programmes for mechanical engineers and geologigists (bac +5) as well as technicians (bac+3). The first students will graduate in 2016. The PRISM-2 supported the school by financing the purchase of pedagogical equipment (language lab, library), training of faculty staff and management, legal administrative support as well as facilitation of regional collaboration. 19. The project design changes were prepared in response to the evolution of the sector and the evolving demands of the sector stakeholders. Implementation arrangements were maintained based on the same PCU which performed well all along (as it already did under PRISM-1). The mid-term review (reported as of May 2006 in the files) was in essence the preparation of the first additional financing, but embedded in the 2006 Board Project paper. 1.7 Other significant changes Development of the oil sector 20. In 2006, oil production – entirely for export - effectively started at the Chinguetti off-shore field, but actual output rapidly declined from its projected 75,000 barrels/day (bpd). Hampered by technical difficulties due to a more unfavorable geology than expected, production decreased to 18,000 bpd in 2007. It finally stabilized at 7,500 bpd, under a new operator (Petronas). The Chinguetti setback resulted, inter alia, from unrealistic pressure from the government as well as from some decision- makers in the operating consortium to start cashing in from oil production as soon as possible and get a quick return on investments. Not enough consideration was given to potential technical setbacks and a slower production development strategy allowing for example a more sustainable exploitation of combined oil and gas production. In effect, it reflected the lack of institutional capacity in the hydrocarbon sector.9 This underscores the relevance of the hydrocarbon component which was introduced belatedly. 21. Although some oil exploration continues off-shore as well as onshore, gas exploration has proved more successful. The Banda gas field was declared commercially viable in 2013 while comprehensive drilling campaigns continue for other deposits. The strong relations with MPEM allowed the Bank to gain a central role in the development of the Banda gas-to-power project. Consequently, parts of the projected oil support activities were redirected to support of the gas development (notably social and environmental impact assessment of the Banda development, master planning for handling and storage). A separate package of Bank support (through investment and risk guarantees) was approved on May 29, 2014, to support financing of the proposed 180 MW (and later 350 MW) gas-to-power 9 The Bank team had proposed in 2003 an emergency TA to effectively provide immediate advice to the government and thereby also respond to recommendations from other decision makers of operating consortium, concerned by the lack of experience on the government side 20 plant which will supply Mauritania and its neighbors Senegal and Mali. The proposed plant will also supply the mining companies in the North, which are among the key sponsors (see Annex 3). Institutional upheavals 22. The political climate has posed challenges throughout project implementation. First, successive changes of the ministry responsible for hydrocarbons and the ministry of mines (first split in 2005, re- merged in 2007, then split again in 2008 and re-merged in 2010 with energy also) complicated implementation. Moreover, the military coup of 200810 caused the country to plunge into a period of political instability. As a result, the international community put most of its activities in Mauritania on hold until the return to democratic rule. In accordance with OP/BP 7.30 (Dealing with de facto government), the Bank suspended its disbursements and missions; contacts with authorities were put on hold and non-essential staff of the Bank country office went on administrative leave. Following new elections in 2009, the Bank re-engaged with resumption of on-going activities in September 2009. The period of political instability caused a delay in project execution of approximately 20 months. The closing date of the original credit was extended to December 31, 2011. The 2nd additional financing (approved in July 2011) allowed for a two year implementation period with closing date on November 15, 2013. The same closing date was granted for the 1st additional financing whereas for the first credit the closing date remained December 31, 2011. The political and institutional instability between 2004 and 2012 is reflected in the CPIA ratings in which Mauritania has remained stagnant at 3.2 in the overall rating and with relatively weak performance in areas of transparency/ accountability (constant of 2.5), public administration (constant 3.0) and public sector mgmt. & institutions (2.9 to 3.1). Likewise, Mauritania is 173th (out of 189) in the 2014 Doing Business survey. Against this background, PRISM-2 implementation has been remarkably successful. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 23. As a direct follow-up operation to PRISM-1, PRISM-2 benefited substantially from the lessons learned under the first operation. PRISM-2 was prepared in a timely manner to allow a seamless transition between the two projects. Implementation was designed to rely on the successfully tested PCU of PRISM-1, which was staffed by a combination of former ministry staff and external consultants. The design and scope expanded on the various components of the first project (see table 1 Annex 2) and also took into account recommendations collected under the 2003 Extractive Industry Review, most prominently the local economic development support. This approach emulated the Extractive Industries Value Chain which aims to address all stages of mineral development from mineral discovery to distribution of benefits as illustrated in the box below. The EI Value Chain emphasizes five distinct features in the natural resource management process. A resource-dependent country has to move through each of these. They cover: the organizational matters that are a prerequisite for commencing activities, particularly the establishment of a legal and contractual framework; regulation and monitoring of operations; the collection of taxes and royalties; revenue management and distribution and sustainable development policies and issues, as illustrated in the five chevrons below. The first four may be understood sequentially but the fifth chevron attempts to capture a number of related considerations that influence (more or less) all of the activities in the extractive industries. The components included under PRISM-2 cover all of the links except the fourth 10 The project experienced also an earlier coup in 2005 21 link concerning “Revenue allocation”, which has been addressed through the Public Sector Capacity Building Project (P082888 – “PRECASP”). Box 3. Extractive Industries Value Chain New components 24. A new component - local economic development - was added (compared to PRISM-1) with multiple dimensions supporting small-scale business development, community investments as well as local development planning. The project and its design fitted well within the Bank's Mauritania project portfolio with direct linkages to other flagship project, e.g. Community-Based Rural Development, Public Sector Capacity Building and Education Sector Support Projects. 25. The need for a hydrocarbon sector component was clearly identified by 2002-2003, but as mentioned above the authorities then in power eventually did not want to include this critical component at appraisal. It was however reintroduced as an additional financing in 2006 under very different political circumstances. The political commitment to transparency and institutional strengthening in the hydrocarbon sector has been substantial in Mauritania since the approval of the first Additional Finance. Indeed the government that came to power then, and the later one in 2009, were clearly committed to transparency and institutional strengthening in the oil sector. 26. Paradoxically the (re)introduction of this hydrocarbon component was the main reason of the relatively negative score for quality of design of QAG's 2008 QALP. The upswing in the hydrocarbon sub-sector after 2009 illustrated that, on the contrary, reinforcing institutional capacity in this part of the extractive industries sector was paramount and long overdue. Institutional strengthening in the hydrocarbon like in the hard mineral sector has proven to be key in the sustained effort to improve governance in Mauritania11. 27. Risks at entry were generally identified and correctly rated and mitigation measures (including on the fiduciary front) were broadly adequate. The risks associated with political instability (not mentioned in the first PAD but listed in the documents for the first additional financing) were underestimated – a broader issue that affected all Bank operations in Mauritania, reflecting an over- optimistic mood among donors after the 2006 democratic elections. Political events primarily resulted in delaying implementation but did neither derail nor stop much the institutional development. 11 Revenue collection has shown formidable growth recently with tax collection rising from 12% to 19% between 2009 and 2012, while revenue from extractive industries has increased fourfold over the same period. 22 2.2 Implementation 28. Two important events were: (i) the two additional financing operations through which new key components were added on the basis of expressed client demand following a proactive and flexible approach; and (ii) the 2008-2009 period of political instability when the Bank suspended its disbursements and missions. Despite the political turmoil and uncertainty, the PCU managed nonetheless to retain its staff and pursue “survival” activities. The PCU diligently and efficiently used the counterpart funds that remained available. There was however an interruption in the policy dialogue. Payments to suppliers/ consultants were on hold, and a number of complaints were filed by those who did not receive payment for completed work during the suspension. The project team however reengaged diligently once the suspension was lifted. Resumptions of payments resolved most problems, except evidently for the significant delays in implementation and some resulting cost escalation. A technical audit of the whole operation was also carried out as part of the re-engagement. 29. The first Additional Financing was beset by slow disbursement at the beginning. At several times, a high staff turn-over in the ministry and agencies hampered effective capacity building and retention of skills. Inter-ministerial coordination was also not always up to expectations. Sustained PCU and supervision efforts ensured that activities regained traction while a reorientation of some activities (towards the storage and transport segment) met actual country demands. The second Additional Financing achieved its end targets despite a compressed timetable of just 24 months of implementation. 30. The project was never rated as a problem project or potential problem project, even during the 2008-09 suspension. The only flag raised then pertained to the country risk. The re-engagement of this project was one of (if not) the most successful and efficient of the Mauritanian project portfolio. The DO ratings from supervision were most of time S, dropping only briefly to MS during 2009-2010. Likewise, IP ratings were mostly S, dropping only to MS during 2009-2010 and briefly in 2012. Under a comprehensive project scorecard system used up to 2009 for the Mauritania portfolio, the project was consistently rated among the two best Bank projects out of a portfolio of more than 10 operations (achieving for example a score of 4.7 over 5 for the 2008 CPPR). The Bank’s engagement through similar sectoral support operations has been limited to a Business Environment Enhancement Project (P102031) and an Agricultural Policy Lending (P088828), both of which rated Moderately Satisfactory in ICRs. Disbursement rates were satisfactory. The first credit (IDA 38100) was 98.5% disbursed. The final disbursements for the first additional financing (IDA 38101) reached 95.7% while the second additional financing (IDA 4933) achieved 91.1% disbursement. The combined disbursement rate stands at 96.4% 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 31. The indicators selected in 2003 regarding training and mining title registration, as well for the small grant program reflected adequately the immediate progress. Mining investors' decisions to invest before project end (new mines to be opened) did also indicate progress towards PDO and reflected actual strengthening of institutional capacity and procedures in place. But cumulative investments in the sector and particularly increase in annual exports by project end were less appropriate indicators because of time lag aspect and the high exposure to factors beyond control of the project. Cumulative investments may reflect, to a certain extent, the effect of project outcomes on international investors' decisions, but those decisions are also influenced by other factors (political environment, international market developments, capital funding available and other investments alternatives). Likewise the indicator - increase of mineral exports – is usually partly flawed by fluctuating commodity prices. In 23 the specific Mauritanian case the various production increments (in gold and copper) which actually occurred – albeit later than initially expected - can still be attributed in part to PRISM-2. A variety of global mining investment surveys have unanimously identified the three most important pull factors for mining investment: (i) good mineral prospectivity, (ii) clear and secure licensing framework, and (iii) clear legal framework. Indeed, PRISM-2 has supported Mauritania strengthen all of the three areas. The appropriateness/target levels of the mining investment production indicator were questioned in the QALP assessment. This assessment also pointed at the mix of outcomes and output in the results framework. 32. An institutional sustainability index mentioned in the 2003 PAD was not clearly defined and eventually not applied. The indicators for the oil component added in 2006 were essentially straightforward, reflecting well the TA nature of the operation. Several of these indicators go to the core mandate of the energy authorities (i.e. management of geo-science data, establishment of environmental management functions, drafting of legal texts, etc.). The set of indicators was adjusted in 2011 as a part of the second Additional Financing. Final target numbers were increased, some reshuffling between PDO and Intermediate indicators, and new M&E database for tracking socio- economic developments in mining, and new intermediate indicators added for the new School of Mines component. These changes responded to the QALP comments concerning artificially low end targets for some indicators. Data collection has been generally effective and broadly adequate. A number of straightforward indicators were used to report insufficient progress during implementation in the ISRs and particularly in aide-memoires, and to make recommendations. 2.4 Safeguard and Fiduciary Compliance 33. Bank standards were observed with respect to safeguard and fiduciary issues in the operation. A key component of the project included training and institutional strengthening of staff from MPEM in the area of environmental and social management and enforcement the Ministry of oil and mines. The creation of Police de Mines and an Environmental Unit for hydrocarbon sector oversight testify the stronger institutional capacity. Project activities with identified safeguard risks (i.e. micro-projects and School of Mines) complied with framework procedures which were designed during project preparation. The School of Mines is implementing a mitigation and management plan for impacts caused by construction work. All micro-projects were screened against a rapid assessment framework. On the other hand, the ambitions of cross-ministerial collaborations were only occurring on ad hoc basis. The PCU was particularly diligent with respect to compliance with fiduciary aspects and safeguards requirements, such as stakeholder engagement 34. Identification and evaluation of micro-project proposals followed elaborate procedures which included multiple consultations and a scoring framework which promoted projects with community- wide impacts as well as female participation. The PCU launched consultations to assess the degree of achievement of target objectives of the project. Surveys were conducted in 2004, 2011 and 2013 to collect household and community-level information in areas impacted by extractive operations. Moreover, as part of the EITI, consultations have been held in most of the 17 provinces. The topics have included EITI implementation, environmental protection, natural resource governance, promotion of local sub-contractors and job creation, the fight against corruption and PRISM-2 outputs and studies. 24 2.5 Post-completion operation 35. PRISM-2 has arguably expanded and solidified the management capacities of relevant authorities in the sense that with the PRISM-2 Mauritania has been successful in (i) expanding its geological and hydrological knowledge base and (ii) diversifying the industry structure by attracting reputable global operators to complement SNIM’s operations (see 3.2 and Annex 3). Accordingly, there is strong reason to expect that Mauritania’s extractive industries will witness a further growth in scope and scale over the coming five to ten years. Nonetheless, with respect to the wider challenge of sustainable natural resource management, achievements must be consolidated through consistent inter-agency collaboration and the development of linkages with other sectors (e.g. energy, infrastructure, local private sector) of the economy. In particular, a clearer government policy and strategy is needed in order to maximize revenues from the EI, as well as a further capacity building in the area of fiscal management of the mine operations as well as oil and gas exploitation. A better design of tax instruments and incentives is required together with capacity strengthening in tax calculation and collection, including tax audit exercises and financial modeling. An analysis and subsequent capacity building would focus on (i) bench-marking of Mauritania compared to other mining countries, (ii) the effectiveness of the current fiscal terms, and (iii) administration of tax and revenue collection. There is also a need for further strengthening of monitoring and regulatory capacity within the Ministry of Petroleum, Energy and Mines (MPEM). Further hydro-geological research is needed as limited availability of water resources is a factor which at the same time slows down exploration and investment in new mining operations and hampers the economic development of the country at large and the well-being of the population. A follow-up operation is proposed for FY 2015 under a new multi-sector capacity building project, benefiting a number of ministries and agencies including the Ministry of Finance and MPEM that would inter alia address EI revenue collection and management at the central level. Also the annual revenue reporting promoted by the EITI will continue under the auspices of the national EITI committee.12 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Ratings: Substantial 346 Relevance of objectives. As the extractive industries (EI) have been the center of Mauritania's economy (GDP contribution, exports, tax revenues, technological advancement) since independence and will remain so for decades to come, the strategic relevance of the project objectives remains as substantial now as at the time of appraisal. The importance of the EI has been reflected in the country's PRSPs and the successive CAS which highlighted the country’s objective of achieving economic and social development thanks to increased private sector development and natural resources exploitation. The project has precisely addressed these objectives by (1) improving the institutional environment to attract private sector investments to exploitation of natural resources; and (2) supporting the integration of new investments into the social and economic development of the impacted regions and the economy at large. Given the embryonic institutional set-up in Mauritania's extractive industries in the early 2000s and the limited presence of private investors, the PDOs of improving institutional and technical capacity, and promoting private sector investment, were clearly relevant, appropriate and timely. 12 Mauritania did go through a 6-months period of suspension in first half of 2013 due to delayed reporting. However, the reporting compliance was restored in June 2013, and Mauritania is current EITI Compliant 25 37. Relevance of design. The project design was thoroughly prepared, on the basis the successful design of PRISM-1 plus lessons learned from similar TA operations in a dozen other mining countries worldwide and Bank studies/ reviews.13 The project was innovative as it was used as a strategic opportunity to engage the mining industry in supporting local development planning, strengthening capacity of local authorities for improved service delivery in mining areas, and providing small grants for promoting enterprises and alternate employment opportunities for the locals to reduce dependency on mining. Both additional financing operations were designed with due consideration to the complete value chain of the extractive industries (see Box 3 above). The broad mix of field surveys, analytical studies, legal and regulatory drafting, and technical support to the various agencies was adequate for the broad institutional strengthening objectives. Likewise for the local economic development component, a balanced mix was chosen between a small grant program and actions for the strengthening of the local authorities. On the hydrogeological side, the comprehensive approach followed to improve the knowledge of available water resources in the mining regions, was a first of its kind in Mauritania; this included a new effort to consolidate for the first time the data and overall works of the CNRE and DGM, which belong to a separate ministry. 38. Relevance of implementation. Implementation support by the Bank was fully responsive to changing needs and country circumstances. The important hydrocarbon component was swiftly reintroduced as soon as the post 2005 government demonstrated its commitment to transparency and institutional building in the sector. The new activity added with the second Additional Financing - support to the establishment of a School of Mines - was also in response to very strong government and private sector demand and co-financing. The partial reorientation at the end of the project of the hydrocarbon component to support also the mid-stream segments of the hydrocarbon sector was a result of express client demand, but within the remit of MPEM and the project objective. Whenever the opportunity arose, the Bank assisted Mauritania access EITI, IDF, EI-TAF and bilateral (NORAD and IDB) funds in order to consistently leverage additional advice and financial support for reform in the EI. 3.2 Achievement of Project Development Objectives Rating: Satisfactory 39. The PDO was formally revised as part of the second Additional Financing in 2011 in order to better reflect the achievements to which the technical assistance activities could reasonably be attributed. As a consequence, the explicit reference to local economic development was removed in recognition of the various external factors which could impact local economic development. The following table provides a split evaluation of the PDO achievement. Subsequent paragraphs provide justifications for the rating. 13 Including the Bank's 2004 management response to the Extractive Industries Review. 26 Box 4 Split evaluation of achievement of PDO Original PDO: “The objective is to strengthen the Government's capacity to regulate mining activities in its territory and thereby facilitate private investment in the mining sector, through: (i) fostering local economic development in mining areas, (ii) improving gathering and access to geological information, and (iii) strengthening the Government's institutional and technical capacity to manage mineral resources”. Revised PDO: “The objective of the project is to strengthen the Recipient's capacity to manage national mineral sector activities in an environmentally, socially and economically sustainable manner” At the time of approval of the revised PDO in 2011, disbursement stood at US$19,064,000, or 61%, of the total end-of-project disbursement of US$31,082,000. The following table provides a split evaluation of the respective PDO achievements weighted against the actual disbursement. The original PDO contains three sub-components: (i) local economic development, (ii) geological data management, and (iii) institutional strengthening. The achievement of the LED and geo-data management sub-components is considered to be “Satisfactory”. Institutional strengthening is considered to be “Highly Satisfactory”. The combined evaluation of the achievement of the original PDO is thus “Satisfactory”. Achievement of the revised PDO is also considered “Highly Satisfactory” since all three dimensions of sector management (environmental, social and economic) are considered “Highly Satisfactory”. Against original Against revised Overall Comments PDO PDO Rating Satisfactory Highly satisfac- Original PDO is tory evaluated against end of project achievement Rating value 5 6 Weight (% of 61% 39% 100% disbursement before/after re- vision) Weighted value 3.0 2.4 5.4 Final rating Satisfactory 40. Mining sector development. PRISM-2 contributed in a major way to developing institutional capacity and improving governance in the mining sector, making the industry attractive to private operators, including world players (as expressed in both the original PDO as well as the revised version of 2011). The expanded geological knowledge base (Indicator 13) has played an important role in reassuring investors of the mineral and hydrological resources in the country. Sale of cartographic and geological data (financed by PRISM-1 and 2) increased seven-fold between 2004 and 2010, and mine permit approval processes have remained efficient and in line with international benchmarks (PDO 27 Indicator 6: average response time of 21 days). The flow of investments in exploration (Indicator 9) has increased nine-fold between 2004 and 2012 from US$ 13.5 million to US$ 104 million, thus outperforming global averages (see chart below). Increase in production and exports of minerals over the last 10 years has been significant (from US$ 175 million in 2003 to US$ 1,761 million in 2012) (see detailed analysis in Annex 3). The PRISM-2 support to the drafting of the Mining Law of 2008 added reassurance to investors as it was hailed as one of the best examples in West Africa at the time.14 Box 5. Chart of mining expenditure 25000 120 100 20000 US$ mill "Mauritania" US$ mill "Global" 80 15000 60 Global 10000 Mauritania 40 5000 20 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Source: Ministry of Petroleum, Energy and Mines) 41. These achievements are significantly better compared to the subdued investment climate and business environment in Mauritania in general (CPIA ratings for business regulation and trade have both declined since 2004 and Mauritania is 173th on the Doing Business ranking). FDI flows to Mauritania since 2004 have been characterized by three spikes, all of which directly related to investments in the Chinguitti oil field (2004-06), Akjoujt and Tasiast copper and gold mines (2005-08), and SNIM modernization and expansion 2011-13). Total investments of the mentioned projects are in the order of US$ 2,000 million while total FDI amount to US$ 3,760 million. Hence, subtracting the FDI to extractive industries, the average annual FDI stands at around US$ 200 million. The importance of EI investments compared to overall FDI is illustrated in the following chart. 15 14 Investor enterventions at Mauritanides Mining Forum, November 9-11, 2010 15 The timing of EI investment is inferred from standard construction schedules since detailed disbursement schedules of the investments have not been available 28 Box 6. Chart of foreign direct investment inflow and EI investments  $1,400  $1,200  $1,000  $800 US$ mill. FDI  $600 EI invest  $400  $200  $‐ 2004 2005 2006 2007 2008 2009 2010 2011 2012  $(200) (Source: World Development Indicators and company info) 42. The most important industry development is the diversification of operators and commodities which has seen SNIM’s virtual monopoly of 2004 being transformed to a diversified industry of 2013 also including copper and gold production as well as phosphate exploration (Indicator 8). SNIM’s monopoly of the critical railway line has been dismantled which is paving the way for other international miners (Glencore-Xstrata and MMG) to advance their development plans, which are so far confirmed in an amount US$ 900 million, leading to 50% increase in national output but likely to expand even further within 12 to 24 months.16 This diversification can be directly attributed to GIRM’s (and MPEM’s) enhanced planning and regulatory capacities (Indicator 7). 43. At the same time, oversight and enforcement of operators’ performance was enhanced – as demonstrated in the reliability of the mining cadaster (PDO Indicator 6) at a time when demands for mining concessions increased rapidly and the gradual evolution of the “Police des Mines”. A direct project achievement is the computerized management system (Indicator 9) which has been installed for tracking of exploration and mine titles as well as for environmental monitoring. In summary, PRISM-2 substantially contributed to institutional strengthening along three axis: improved geological knowledge, enhanced legal certainty, and greater regulatory efficiency (as reflected in the PDO indicators 5 and 6 and outcome indicators 7, 8, 9, and 13). 44. Hydrocarbon sector development. The pace of exploration in hydrocarbons has surged17 after the positive results of the Banda field (to which PRISM-2 provided critically needed support). These developments are evidently not the result of PRISM-2 only but also of other factors (such as high regional demand for energy and general investor appetite world-wide). It is however clear that better governance, a modern regulatory and investment framework (PDO Indicator 3), well-functioning government institutions, availability of updated geo-science data (Indicator 1), - all of which supported 16 “Sphere to build US$900 million iron-ore mine in Mauritania”, Mining Weekly, April 24, 2014 17 four wells were drilled in 2013 and an additional four wells projected before mid-2014, the highest level ever in Mauritania 29 by the project - have spurred investors' interests. It is also noteworthy that the disappointing (and ill- advised) outcome of the Chinguitti oil field unfolded in the absence of Bank support (i.e. prior to 2006), whilst the comprehensive and promising Banda gas field development is realized with substantial Bank support. The revisions of the regulatory framework for oil and gas operations (financed by the PRISM-2) are important cornerstones of this development. Moreover, there are high expectations that the new database management systems for concession management and geo-science data collection in the hydrocarbon sector will help optimize the national potential in planning and contract negotiations, (These achievements respond to PDO indicator 3 and outcome indicators 1 - 6) 45. Socio-economic development. The project, in combination with the EITI, has helped stakeholders gain a better understanding of hard mineral and oil sector operations and flow of revenues management. Civil society gained from improved transparency of EI development with increased access to information and dialogue with other stakeholders.18 The small grants program for income generating activities was ground-breaking and performed well with more than 2,100 direct beneficiaries across 27 communes (PDO Indicators 1 and 2 plus Indicators 10 and 11) and as demonstrated by the improved local development outcomes in areas adjacent to mine operations19. Studies funded by the project allowed local communities to identify locations for drinking water. Access to drinking water was made possible in the town of Choum (population: around 5,000) with three water gathering points built with project funds. The creation of the School of Mines is a significant contribution to increased “Mauritanian capacity and participation” in an industry which has often been criticized for its enclave nature. Graduates20 from the school are also expected to be the next generation of regulators and decision-makers assuring the long-term sustainability of the institutional strengthening. (These achievements respond to PDO indicator 1, 2 and 4, as well as outcome indicators 10, 11, 12 and 14 - 17) 46. Overall, Mauritania has substantially advanced all parts of the EI value chain, from award of licenses over tracking of performance and revenue collection to the final objective of sustainable social and economic development deriving from the EI. The project was also highly regarded by the donor community in the efforts to build governmental capacity and ability to manage the EI in a transparent manner. PRISM-2 shows a very strong delivery record with respect to project indicators and general human development indicators (as reflected in Annex 3). It is important to mention that these achievements were realized in the northern part of the country which is traditionally the most vulnerable to food insecurity and low HDI (see CPS FY ’14-’17). Targets of all six PDO indicators were essentially achieved or exceeded21. Out of the additional 17 intermediate indicators, 15 were achieved or exceeded22. Indicators for the economic diversification component exceeded significantly revised targets (120% to 275%). 3.3 Efficiency Rating: Satisfactory 18 Five regional workshops, newspaper coverage and a 10-minutes documentary in 2013, alone. 19 As reflected in the three socio-economic surveys which report indicators which are significantly better than the national average. 20 20-25 academic graduates per year from 2016 plus a number of technical diploma graduates. 21 The central mining compliance data base became operational before closure, with however 3 of the producing operators out of 10 reporting , versus target of 60%; however those 3, the largest, represent however the bulk of Mauritania's actual mining production. (97%) The other are small (quarries) or barely at the point of starting extraction. 22 The number of professors of the mining school trained is 7 instead of the target of 10, as only 7 were hired. Geo-science data is puiblicly available at the ministry whereas on-line access has not yet happened. 30 47. As it is essentially a capacity building project, PRISM 2 does not lend itself well to a traditional economic or other quantitative investment analysis. However, numerous economic indicators illustrate the benefits to Mauritania of the rapidly expanding mineral sector (detailed in Table 1 of Annex 3). In parallel with the large increase of total mineral sales (from a low of US$175 million in 2003 to a peak of US$ 1,761 million in 2012, see Annex 3) royalties/taxes paid to GIRM increased from approximately US$9 million in 2005 to more than US$370 million in 2011. Table of fiscal receipts Year Mining Hydrocarbons Total fiscal US$23 US$ mill. receipts mill. US$ mill. 2005 8.73 0.46 9.19 2006 69.63 197,38 276.01 2007 88.28 91,78 180.06 2008 142.54 88,87 231.41 2009 130.28 62,18 192.46 2010 129.25 62,18 191.43 2011 304.52 68,43 372.95 (Source: Mauritania EITI) 48. Direct efficiency gains within the mining sector administration are illustrated by the permit fees paid by mining companies. Since 2007 the annual revenue from fees has multiplied by about ten from US$ 500,000 to US$5 million in 2010 and peaked at US$ 7.4 million in 2011 (see Annex 3). Sale of cartographic and geo-scientific data also rose from US$ 16,000 to more than US$ 100,000 per year which testifies that geological data and interpretations financed by the project are indeed sought after by investors. Another project outcome worth quantifying is that of the small grant subcomponent. With a budget of about US$1.4 million the project helped create or supported the development of 206 income generating activities involving 2,152 beneficiaries; their aggregate annual revenues (based on a sample of 52 micro-projects one year after the end disbursement) was estimated at US$ 2.4 million. Considering the many project achievements and outcomes in light of the total credits amount of some US$ 30 million, the use of funds can be considered efficient, even if the total duration of the project was longer (almost two years delay caused by the political disruptions) and some increase of operational expenditure (resulting from the delays) over the original estimates. 3.4 Justification of Overall Outcome Rating: Satisfactory 49. Based on the relevance of the objectives and design, the Satisfactory implementation and efficiency, and particularly the Highly Satisfactory outcome assessment, it is proposed to rate the Overall Outcome Satisfactory. One should reiterate that Bank support to Mauritania's EI has been and remains highly relevant in light of rapidly expanding mining operations as well as advanced negotiations on gas exploitation for power generation. Expanding on the achievements of PRISM-1, PRISM-2 has been instrumental in bolstering Mauritania's successful promotion of its EI through improved knowledge of the national geology and mineral potential as well as modern systems for investment management. The effects are felt by the population in terms of surging government revenue, benefits to directly affected communities and improved job opportunities in the sector and 23 US dollar revenues figures are converted using historical exchange rate for the year the revenues were reported 31 associated industries. These conclusions were also highlighted in the 2008-2011 CAS Completion Report. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 50. Poverty and social development. The positive impact of the small grant program is mentioned above and detailed in Annex 3. The percentage of women as direct beneficiaries of the micro-projects exceeded end of project targets (75% compared to 70% target). The community development program has also contributed to the preparation of a comprehensive community development model for areas affected by current and future mine operations (encompassing not only community grants but also wider infrastructure and social service delivery initiatives). Water supply, community centers and productive activities have benefited from improvements, and a positive ripple effect was observed on the level of economic activity. A comprehensive household study was carried out in the mining and nearby areas with surveys in 2004, 2011 and 2013. In particular in the areas of the Nouadhibou- Zouérate corridor between 2004 and 2011, 16 out of the 20 surveyed social and economic indicators (access to services, schooling, employment, income), showed major progress with increases ranging from 11% to 120% (see Annex 3). Of particular significance in these areas: (i) the average monthly revenue per working person more than doubled from MRO 42,600 in 2004 to MRO 98,950 (about four times the national official minimum wage) in 2013; (iii) the average revenue per household increased by 177% from MRO45,700 in 2004 to MRO126,800 in 2013. This trend is slightly higher than national average for the period, but it should be noted that the impact areas are located in the northern regions which have seen far lower social and economic growth trends than the national average (CPS 2014-17). Thus, the impacts are significantly higher than comparable surrounding areas. 51. Gender considerations. The Mauritanian context offers a challenging environment for promotion of gender equality given a relatively low participation in the job market and the public debate by Mauritanian women. For this reason, a focused effort was made in promoting women’s participation in the micro-project component (with extra weight given to female project proponents in the selection criteria). It is noteworthy that the ambitious target of 70% direct micro-projects beneficiaries was exceeded (actual rate: 75%). Training in micro-project management achieved a commendable 40% female participation rate. On the other hand, training at MPEM and other public agencies suffered from the low ratio of female staff resulting in a reportedly low participation rate, although this was not tracked systematically. The School of Mines has a gender policy which means that about 30% of students are women. This rate has been possible since, inter alia, separate living facilities for women are provided by the school. (b) Institutional Change/Strengthening 52. As detailed above, significant progress was achieved with the PRISM-2 in establishing and strengthening the different EI agencies and the MPEM. Pioneering work was also done with the introduction of transparent measures in managing the petroleum sector, such as the set-up of the oil fund (in collaboration with the IMF), publication of petroleum contracts on-line, implementation of EITI. A number of positive indicators allow for optimism with regard to sustainability: (i) observed resilience of agencies despite the repeated political turmoil in 2005 and 2008-09, (ii) rapidly increasing income streams from service fees directly to MPEM because of the surge in investor activity, and (iii) introduction of dedicated contributions to “Training Funds” in oil-gas contracts and model mining agreements. The current institutional chart is reproduced in Annex 2. 32 (c) Other Unintended Outcomes and Impacts (positive or negative) 53. The two PRISM projects have created the “enabling environment” in the extractive industries in terms of geological knowledge, legal certainty and regulatory efficiency. This environment has promoted (i) external (private) investment and (ii) transparency and better governance in the extractive industries. This has contributed to Mauritania's economic development and relative political stability (since 2009) despite political division and military pressure. Interestingly, the positive correlation between natural resource dependence and enhanced governance indicators, i.e. “inverse Resource Curse” has also been documented at a global scale since 2000 in McMahon and Moreira (2014) which show that economies with high dependence of mineral or hydrocarbon resource have outperformed other economies in the areas of regulation, rule of law and corruption since 2000. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 54. A number of stakeholder consultations were conducted as part of the EITI implementation. The minutes of these consultations are recorded at www.cnitie.mr and demonstrate a solid appreciation of the socio-economic effects deriving from the extractive industries. The PRISM projects have clearly gained a very high recognition, although a general sentiment has been that the extractive operations remain isolated from the broader economic and social spheres in Mauritania. 4. Assessment of Risk to Development Outcome Rating: Moderate 55. Except for the addition of the oil sector, the risk to development outcome for PRISM-2 is hardly different from that of PRISM-124 outcomes which have proved sustainable even after the 2005 coup and the 2008-2009 political turmoil. Arguably, the ministerial structure has become more stable in light of the current track record of four years of continuous operation in which petroleum and mining are housed under the same ministry. It is also noteworthy that funding mechanisms have been put in place by which 0.1% operators’ revenue is allocated to training and skills up-grading of ministry staff. PRISM-2 has faced the traditional dilemma of TA support to government agencies since staff can be tempted to accept (better-paid) positions in the private sector. In order to counter this trend, PRISM 2 has supported (i) long-term organizational planning and (ii) the School of Mines, both of which are expected to nurture development of new talent. 56. The risk with respect to the continuing existence and efficiency of the various EI institutions/agencies created/supported under PRISM can be considered small. The institutions (the two Cadastres, SIGE, SIGM, and Mining Police) are now fully operational in an autonomous and transparent manner, with some producing their own cash flow.25 One risk factor concerns the viability of some IT systems which were implemented during the final year of project execution (mineral fiscal modeling and the monitoring system of operators’ performance. The legal and regulatory framework reforms implemented under the project were adopted with full backing of the Government. The geological data products created by the project are available to the international investor community (although not yet on-line) and present up-to-date knowledge of Mauritania’s mining resource potential. 57. With the project's support and EITI activities in Mauritania, the civil society has been strongly engaged in the EI with respect to ensuring transparency in revenue management. Under the auspices of the national EITI committee, a platform for consultation between civil society, government and the 24 Its ICR rated its sustainability likely. 25 The revenues generated by the mining cadastre have steadily raised from US$ 0.3 million in 2000 to US$ 34to 7 million by 2010-2013. 33 private sector has been established. This platform has created a common understanding of the actual fiscal contribution by the EI. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 58. As a result of the intensive sector dialogue with government during the implementation of PRISM- 1 and lessons derived from the first project, the Bank prepared a comprehensive institutional development and capacity building program for the EI that is at the very center of Mauritania's economy. Experience was also drawn from similar projects in Africa and Latin America, particularly in the areas of cadaster management and geo-science data management. From PRISM-1 to 2, the project activities have gradually evolved from institutional capacity building and investment promotion to a stronger emphasis on managing the impacts and benefits of extractive industries and responding to community needs. The project was broadened and deepened with the two additional financing operations, with the first one expanding in a timely manner its scope to the oil sector and the second one embracing the establishment of the School of Mines. Dialogue concerning the petroleum sector and project studies was instrumental in the development of the Banda gas-to-power project which is expected to mark a new level of collaboration between Mauritania and Senegal as well as public- private partnership. PRISM-2, in each of its three steps, has been fully consistent with the national PRSPs and the Bank CAS/CPS. The reintroduction of the oil component was carried out in a timely manner in 2006, reflecting a high staff proactivity and client responsiveness by the Bank. In sum, the resurgence of the oil and gas exploration justifies that “Quality at Entry” is elevated to Satisfactory rating as compared to the “Moderately Satisfactory” rating given at the QALP review. The weaknesses in original results indicators, as identified by QALP, remain counterweights in the assessment. b) Quality of Supervision Rating: Satisfactory 59. Supervision missions were conducted on a regular basis, staffed with a generally good mix of sector specialists. Continuity of staff on the Bank team was high and much appreciated by the Mauritanian counterparts. The Bank team pursued the close working relationship attained in PRISM-1 with its Mauritanian counterparts who remained actively engaged in project implementation. The supervision team, with steady assistance of the country office and close involvement of the country managers, were also constantly engaged in sector dialogue with GIRM and provided substantial assistance in the government interaction with other donors (such as the IDB, NORAD, GIZ) and the private investors. A high degree of cooperation was achieved with other Bank projects in Mauritania, Community-based Rural Development and Public Sector Capacity Building Projects in particular. 60. Bank’s implementation assistance was highly responsive to the country's evolving needs. This is illustrated not only by the two additional financing operations and the reintroduction of the hydrocarbon component, but also by: (i) the speed and effectiveness of re-engagement of the Bank in the EI sector after the 2008-2009 suspension of disbursement and missions: (ii) the synergies achieved with the EITI programs; and (iii) intense policy dialogue in order to safeguard the important institutional gains previously achieved, at every change of government and particularly the successive 34 episodes of institutional reorganization when the ministries responsible for mines and for oil were split or re-merged. 61. Weak points in supervision mentioned in the 2008 QALP report included lack of energetic follow- up of social and regional economic impacts, weak follow-up of training initiatives despite the important role of training in institutional development; and the temporary disuse of the ISR as a vehicle for candidly and comprehensively recording issues for management attention and action, and for recording significant developments. For some period of time (2006-2009) extensive and detailed comments and recommendations contained in the aide-memoires following the supervision mission were indeed not fully reflected in the ISRs. Following the discussions of this QALP report, the ISRs improved in candor and transparency and were quite comprehensive until project closing. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 62. Overall, Bank performance is rated Satisfactory. The design stage took a balanced and realistic approach to the social, gender and environmental dimensions, while the technical design was appropriate and pragmatic – as proven by the continued relevance of PRISM-2. Supervision inputs and policy dialogue were considered to be adequate. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 63. Borrower ownership and commitment has been high. The successive Ministries of Mines and Industry/Oil/Energy were generally committed partners in the identification of strategic reform objectives as well as in the implementation of reform and institutional capacity building. While the pre-2005 government was not favorable to Bank engagement in the hydrocarbon sector, the successive governments after 2005 all gave priority to governance issues. As a result of the two periods of political turmoil, changes in ministers and sector agencies were frequent – a factor that made the dialogue costly in time and resources. But overall, the ministries' and the agencies’ commitment to sector reform remained firm and they performed well to assist in implementation of the PRISM-2. The monitoring and reporting activities were carried out regularly under the control of the PCU which fully served its purpose. Counterpart financing was timely and satisfactory. The delays in project implementation were caused by repeated periods of political disruption, which were beyond the control of implementing agencies. There were no significant problems in procurement, disbursements or financial management. (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory 64. The PCU was exemplary in its implementation of the project, including in financial management and audit, disbursement and procurement functions. Its excellent management allowed the project to achieve its objectives, and to use cost savings to attain additional outcomes. It followed procurement and financial management procedures in line with the World Bank guidelines. The PCU maintained a positive and pro-active relationship with implementing agencies and the Bank team throughout the 35 project implementation. It was able to carry out the planned activities26 in a timely manner. It had a consistent and reliable leadership and the quality and stability of its key staff (most were active since the beginning of PRISM-1 until the end of PRISM-2) were major factors of success. The project was consistently rated first or second in Bank portfolio reviews and was highlighted as one of the successful intervention in the CAS FY 08-12 Completion Report. These ratings are testaments to the PCU’s strong performance. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 65. Throughout the implementation process27 the authorities were committed to all the project objectives, were actively engaged in policy dialogue and acted diligently towards implementing the project in close partnership with the Bank. 6. Lessons Learned 66. The majority of lessons learned from PRISM- 1 still apply to PRISM-2 (not laid out in detail here28), but an additional set of lessons from PRISM-2 should be highlighted: First, development impact through sector reforms with solid institutional strengthening is achieved with a sustained engagement - not through a “one-shot” 4-5 year project, but over 10 to 15 years. Particularly in Mauritania where there is a pervasive problem of weak capacity (especially in government and state agencies) and frequent government changes, the problem of absorption capacity can be mitigated through the Bank’s long-term involvement with a program of reforms and sustained capacity building efforts with realistic objectives in a timeframe that is progressive and also realistic. The commitment of the borrower and its agencies (and the sustainability of the outcomes) is significantly reinforced when they know that the Bank will remain a long term partner in the sector. The persistent support also allows an opportunistic approach which can ultimately bring about changes in sensitive matters when the time is ripe. The inclusion of the oil component with the first additional financing and the buy-in of post-2005 governments into EITI are strong illustrations of policy dialogue which has required time before coming to fruition. 67. Second, leverage for change is not directly linked to the volume of financing brought by the donors. Through its sustained efforts in policy dialogue and capacity building, with less than US$ 45 million over 15 years, the Bank has contributed to major institutional and structural changes in Mauritanian EI which could not have been achieved through an engagement via to the single state-owned entity, SNIM. 29 Over the past 25 years, billions of funds have sustained SNIM’s operations (and current expansion) without contributing to sector reform. 68. Third, Promotion of local economic development was innovative at the time of project design. Such activities have later been widely adopted by subsequent Bank projects and within the industry at large. It is clear that EI sector TA’s are not the best vehicle to promote innovative community-driven development practices. On the other hand, numerous TA projects over the past decade have piloted and 26 Several strategic studies for the oil & gas as envisaged in 2006 were not carried under the PRISM and were replaced by more urgent studies and other activities pertaining to the downstream segments of the oil and gas sector. 27 The oil sector issues being a different sort of problem during the first 3 years when there was not yet an hydrocarbon component 28 Lessons listed in the PRISM-1 ICR: Government commitment; inter-ministerial/inter-project cooperation; project implementation arrangements under an independent PCU, rather than through the sector ministry; substantial resources for local/international training of the Client; stringent contract management and supervision arrangements. See PRISM-1 ICR. 29 Frequent criticism from Mauritanian civil society holds that the mining sector under SNIM absorbed a too large chunk of donors’ financing, at the expense of other sectors, like rural and urban development. 36 facilitated methodologies for community development and investment among oil, gas and mining companies. With established and well-documented procedures for consultation, decision-making and accountability, such initiatives have gained much more legitimacy at local and national level.30 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 69. All the Mauritanian counterparts consulted have been satisfied with the World Bank team and the project, which they consider to have achieved all its objectives. The Bank team not only maintained a high quality supervision of the project but continuously provided high quality advice to the authorities on EI issues. The quality of this advice and dialogue would be missed if the Bank were not present any more in the EI in the future through a follow-up operation (b) Cofinanciers 70. It has not been possible to obtain inputs from the Islamic Development Bank since staff involved in the project support is no longer available. (c) Other partners and stakeholders 71. The Islamic Development Bank participated in the original PRISM-2 through a parallel financing of US$ 3.6 million. Additionally GIZ is actively involved in transparency and management of natural resources including mining and fisheries sectors. The Bank and GIZ have collaborated to advance the implementation of the Extractive Industries Transparency Initiative (EITI) since 2011. 72. Donors and commercial entities have a long tradition of financing SNIM’s investment plans. In December 2009, the French Development Aid Agency (Agence Francaise pour le Developpement), the African Development Bank and European Development Bank, together with other European private banks invested around US$ 1.1 billion in SNIM's modernization and expansion project. The program includes: the development of Guelbs II (new mine), constructions of a new mining port in Nouadhibou, modernization of the railroad from Nouadhibou to Zouerate, and a professional training center. 30 “Sharing Mining Benefits in Developing Countries”, Wall, Elizabeth and R Relon, 2011 37 Annex 1. Project Costs and Financing (a) Projected Costs and Actual Expenditures Components Projected Projected Actual Costs Actual Cost Costs in US$ Costs as in MRO in US$ million Million million 1. Local Development 8.35 23.00% 2,000 6.84 2. Geo-information & 11.35 31.30% 2,776 9.5 Development31 3. Capacity building of mining 5.57 15.30% 1,632 5.78 institutions 4. Support to Petroleum Sector 5 13.80% 1,484 5.08 5. School of Mines 1.05 2.90% 206 0.7 6 Project Coordination & 4.45 12.30% 2,029 6.75 Management 7. Unallocated 0.53 1.50% 0 0 TOTAL 36.3 100.00% 10,126 34.65 The comparison between the Projected and Actual expenditure per component is partly distorted by the fact that the PCU recorded training costs and particularly costs of long-term local consultants under “Project Coordination & Management” expenditures (as an illustration the actual expenditure of the project management category is in the order of US$ 2.5 million, the remainder of the US$ 6.95 million is consultant expenditure). Moreover, the cost of project coordination exceeded original projections because of the prolonged implementation period. Several contracts on geo-information were executed at an actual cost below original forecast. Likewise, the School of Mines expenses were less than expected because private sector contributions replaced parts of the planned vocational training. 31 Includes expected work under parallel financing of IDB which was projected originally at US$5 million but subsequently reduced to US$3.6 million. The JICA parallel financing operation is not included – not being accounted for by the project 38 (b) Actual Funding by Financing Sources Source of Funding Amount in US$ million IDA credits & Grants 29.6 Islamic Development Bank 3.6 GIRM counterpart funds 1.4 TOTAL 34.6 39 Annex 2. Outputs by component Additionality of PRISM-2 over PRISM-1: Comparison of objective and achievements between PRISM-1 and PRISM-2 In order to correctly quantify and assess the value added of PRISM-2, it is relevant to establish the achievements upon completion of PRISM-1 which, in turn, defines the baseline of PRISM-2. The two projects were closely interconnected as PRISM-2 built on PRISM-1 by expanding and deepening the achievements of the first project. PRISM-1 was designed as the first phase of a comprehensive and long-term program to build the institutional and regulatory framework necessary for the sustainable development of the extractive industries in Mauritania. In an abbreviated form, sustainable development of extractive industries can be condensed to five steps: 1. Understanding of the geology and indication of mineral prospectivity; 2. Attraction of investment to develop and exploit the mineral resources; 3. Assurance of inspection, enforcement and management capacities of extractive operations; 4. Effective and balanced revenue collection by authorities; 5. Equitable redistribution of revenue and benefits. Table 1 below illustrates how PRISM-1 achieved important outcomes relating to the first three steps, inter alia, by developing knowledge of the country's mineral resources, ensuring open access to this knowledge to potential investors and development of sector governance capacities. In other words, PRISM-1 established the foundation for mineral development. As shown in the second column of Table 1, PRISM-2 was successful, first of all, in greatly expanding the outcomes of each of the three steps, i.e. multiplication of maps and geological interpretations, expansion active exploration and mining licenses, and sophistication of oversight and enforcement agencies. Moreover, PRISM-2 achieved substantially higher revenue collection as well as broad-based benefit-sharing through local economic development and enhancement of the education sector. In summary, PRISM-1 provided the important foundation for developing the extractive industries in a sustainable manner as defined in steps 1-3 above. In comparison, PRISM-2 assisted government in capitalizing on the geological knowledge and investor interest by multiplying revenue collection as well as redistributing the benefits, that is steps 4 and 5. At the same time, the three basic cornerstones of good sector governance were further enhanced. Additionally, PRISM-2 entered a new industry segment by supporting the hydrocarbon development whilst PRISM-1 was limited to the hard minerals. PRISM-2 supported an overhaul of the Petroleum Law, including revisions to the standard Production Sharing Agreement. Regulatory capacities of the hydrocarbon agencies were expanded through reforms of the institutional structures, including establishment of a sector-specific environmental unit as well as a revamped license registry and database of geological and pre-development information. The School of Mines represents the final additionality of PRISM-2. The project contributed to the private-public partnership which also included government and a number of public and private mine operators. PRISM-2 ensured that the legal framework and ownership structures of the school were defined. Moreover, academic and administrative staff skills were supported and essential teaching material, including library and media facilities were developed. 40 The table below lists first the main achievements of PRISM-1. These achievements are then compared to PRISM-2 achievement. The supplemental activities supported under PRISM-2 are listed in the following rows. Table 1 - Comparative table of components and achievements PRISM 1 PRISM 2 1.Capacity building of sector ministry 3. Capacity development of public mining (total expenses: US$ 3.15 million institutions (total expenses: US$5.57million)  Creation of semi-autonomous Mining • Further expansion of Mining Cadastre Unit Cadastre Unit (appr. 400 active licenses by June 2013)  Increase and diversification of mining sector • Increase in fiscal revenue from mining investors (appr. 200 active license holders by (US$22 million in 2004 to US$280 million end of 2004) in 2011)  Increase in fiscal revenue from mining (from US$15 million to US$22 million in 2004) 2. Upgrade of geological infrastructure 2. Geo-information and development (US$9.8 (US$14.62 million) million)  Creation of a geological and mining • Production of 75 map sheets information system • Production of 53 interpretations and  Production of 16 maps substance analyses 3. Environmental management (US$1.02 3. Capacity development of public mining million) institutions – Sub-component 3.3 Environmental management of the mining sector • Establish baseline environmental and social • Creation of Mines Inspection Division (also assessments known as “Police des Mines”) • Creation of computerized Mining Sector Monitoring System Not part of the design 1. Local economic development in mining areas (total expenses: US$ 6.8 million) • Completion of 206 small grants activities • Development of manual and training program for community development funds Not part of the design 5. Petroleum sector support (US$5.08 million • Revision of standard Production-Sharing Contract • Creation of petroleum cadaster and database • Creation of Environmental Unit for the petroleum sector • Revision of the regulatory framework for transport and storage of petroleum products Not part of the design 6. School of Mines (US$0.7 million) • Creation of School of Mines • Development of 5-years curriculum for mine engineering and geology 4. Project implementation 4. Project implementation 41 Review of PRISM-2 outputs The specific outputs of PRISM 2 are detailed below, by component and subcomponent. Indicators are listed with reference to activities and outputs to which they are directly attributed. It also shows the funding as originally allocated per component and subcomponent (italics) and the total actual expenses per component (bold). 1. Local Economic Development in Mining Areas US$ 6.84 million Indicators Target Actual value at completion PDO indicator 1: Direct project beneficiaries Training: 550 micro- Training: 620 micro- grant administrators grant administrators Micro-project Micro-project recipients: 1,100 recipients: 2,152 PDO indicator 2: Direct female beneficiaries Training: 30% Training: 40% Micro-project Micro-project recipients: 70% recipients: 75% PDO indicator 4: Increase in HH income project MRO 119,000 MRO 126,000 areas Intermediate indicator 7: Railway and harbor Railway and harbor Railway and harbor facilities in NW Mauritania available to regional facilities open to other facilities open to other economic operators by mid-term review economic operators economic and mine operators Intermediate indicator 10: Communes/villages 15 27 participating in micro project program and/or local investment plans Intermediate indicator 11: Micro projects 75 project 206 projects completed under the small grants program Activities under this component were aiming to (i) diversify the local economic base by seeking alternative economic activities, (ii) fund a small grants program to provide necessary funds to small businesses and entrepreneurs seeking to increase or diversify their productive capabilities; (iii) strengthen the capacity of local authorities for the delivery of social services; (iv) develop hydrogeological studies to improve the availability of water in the region; and (v) strengthen the regional development management capacities, especially in the environmental and social areas. 42 1.1 Development and diversification of local economic activities (a) Local business development This program identified in a participatory way new local economic activities and initiatives in mining areas. Assessments were conducted within a regional development framework, through workshops, studies and surveys. Participatory diagnostics were the key element in establishing the necessary partnerships among local communities, local authorities and mining societies in order to establish the projected demand for public infrastructure, service delivery, and alternative economic activities in light of development potential and priorities. This analysis provided orientation and information to existing and potential artisans and small entrepreneurs. Originally concentrated in the Zouerate area the participatory diagnostic process was extended to other areas with mining activities. (b) Feasibility studies of social infrastructure, service delivery and alternative economic activities This subcomponent assessed the feasibility of the alternative economic activities identified under the participatory process. A consulting company carried out: (i) a study to identify possible promising agricultural activities in the region; (ii) feasibility studies (technical, social and economic) of 11 projects selected among the identified activities; and (iii) detailed definition (with cost estimates) of 5 pilot projects, to be submitted for financing to the government, donors and mining companies. (c) Small grants program to support diversification of local economic development and technical assistance This program provided the necessary funds to artisans and small entrepreneurs to diversify and or increase their productive capabilities through improved level of expertise, increased capacity, purchase of new equipment, training and new business development. The program applied to already-established as well as new small businesses, NGOs, and community organizations. Two parallel tracks were targeted: (i) exploiting the potential for supplying and servicing the mine sites so as to increase local and national content in mine operations, (ii) offering higher quality and more diversified goods and services to the local consumers in sectors not related to mining in order to reduce the community dependence from mineral operations. Concessional cost-sharing percentages were applied to target vulnerable groups including women and the elderly. The program was first established in zones of influence of mining activities the North, principally along the Zouerate-Nouadhibou corridor. It was extended to other mining areas, covering in total four provinces. Training modules were offered to local entrepreneurs in topics such as business planning, financial management and technical skills. In total 206 micro-projects were financed, using a total amount MRO 393 million (US$1.355 million32) or US$ 6,580 per project. Total number of people employed in the projects is estimated at 2,152 of which 741 in new jobs financed by the grants. 618 persons were trained. (d) Micro project administration Administrative modalities and implementation procedures (including selection criteria, standard financing agreement and simplified procurement procedures) were developed and refined as lessons were learnt from the initial batch of micro-projects and lessons from the Bank-financed Community- Based Rural Development Project. The procedures were widely disseminated so as to provide lessons for other potential other sources of funds, including private mine operators who had expressed interest. Information was gathered and monitoring was done through stakeholders’ surveys, workshops. Information campaigns preceded all entries into new towns and regions in order to assist in 32 With an average rate of exchange rate of MRO290/US$ (MRO280/US$ for Cr. 38100 and ROM302/US$ for Cr.4933. 43 management of community expectations and to keep the various parties (populations, local and national authorities, companies, government and donors) informed. An impact study was carried out on a sample of 52 micro-projects on year after the end of the first round of projects implemented along the Nouadhibou-Zouerate corridor. {e) Development of local enterprises After an inventory of the goods, works, and services local enterprises are providing to the mining companies, a consultant developed a plan for upgrading the capacity of the enterprises to supply better the mining sector. A pre-feasibility study was also prepared for a proposed Business Development Center. 1.2 Improved service delivery in the Zouerate-Nouadhibou corridor This subcomponent provided technical assistance to streamline and improve the provision of services to local communities located along the Zouerate-Nouadhibou corridor – identifying alternatives of a sustainable system for the delivery of services, including private sector sub-contractors. Impact areas included zones which were previously serviced by SNIM as well as zones without pre-existing services (water and electricity). This subcomponent included: (i) the construction of a water distribution33 network for Choum, a community which so far could not take advantage an existing fresh water well; (ii) a study on the use of renewable energy (solar, wind) for the power supply of seven communities along the Nouadhibou-Zouerate line, leading to the preparation of seven basic proposals and technical specifications for different supply mixes, ready for funding by donors or mining companies; and (iii) a detailed study, following a Poverty and Social Impact Analysis (PSIA) approach of alternative schemes for the management of power and water delivery to all the communities along the railway line currently dependent on SNIM. 1.3 Hydro-geological studies This subcomponent financed hydrogeological work in the Zouerate - Choum segment of the railway corridor area with the objective to locate new water reservoirs, through an inventory of existing information, satellite imagery and aerial photo data interpretation as well as detailed geological and geophysical and exploration surveys on the ground. International consultants carried out first a hydrogeological study identifying 11 locations for drilling and promising areas for further exploration for water. In the course of the study the existing databases of CNRE and SNIM were integrated with data of the ministry of mines collected through various instruments, together with mathematical models of aquifers. Then a foreign company drilled 11 reconnaissance wells under a US$2,4 million program including deep wells. Two wells produced substantial water flow. The data was used in the preparation of the feasibility study of the iron ore project El Aouj that the mining conglomerate Xstrata is planning to develop in partnership with SNIM. 1.4 Strengthening of development management capacity This subcomponent aimed at providing: (i) support to municipalities for the set-up of community development plans through participatory consultation, technical assistance and training; (ii) reinforcement of the regional capacity to manage social and environmental impacts of mining 33 Choum was supplied until then with low quality water brought in on SNIM's trains. 44 development, including SNIM's social and environmental management capacities and (iii) assistance to strategic long-term economic development planning of the area. An integrated regional development strategy was developed for the Inchiri province where two large- scale mine operations Tasiast (gold) and MCM Akjoujt (gold and copper) mines are located. A regional public expenditure plan (PEP) 2020 was prepared, which should meet local demands resulting from an inflow of investments and migrants34. The PEP lays out an investment program of MRO 41,600 million (US$ 139 million) for absorbing the expected inflow of people, based on a comprehensive assessment of investment needs for infrastructure and social services. The expansion of mine operations will also require substantial investments in infrastructure (road, water and possibly railway and port facilities). The PEP was articulated along the 5 pillars of the national PRSP. The PEP merges the public investment needs with the mine operators’ investment plans so as to open up infrastructure investments for combined usage and assess sustainability issues (financing maintenance costs of the public goods and services as well as needs for local capacity building in order to manage and sustain the investments). The Inchiri PEP will also serve as a model to be replicated in other parts of the country. A study by an international consultant defined the needs of the municipalities in the Zouerate- Nouadhibou corridor and of SNIM for acquiring the capacity to manage environmental and social impact of mining development. Training and TA was then provided to staff of the municipalities and SNIM. For SNIM, it centered on the creation of an environmental management system for its Guelbs mining site. Direct material support was provided to the municipalities in the Zouerate-Nouadhibou corridor: construction or rehabilitation of 5 municipalities (some of which did not have permanent building before) and procurement of computers and furniture for the offices of 6 municipalities. 1.5 Supervision of local economic development The M&E subcomponent supported government and local authorities in defining an appropriate M&E system to capture impacts of mine investments through regular reporting. The activities monitored affected communities and the local economy. A number of field missions were carried out to follow the various local development activities. Three household surveys (2004, 2011, 2013) examined the evolution of 20 indicators of the populations in the mining areas. Their results are detailed in Annex 3. 2. Geo-information and development US$ 9.5 million Indicators Target Actual value at completion Intermediate indicator 13 Publication of geo-data Public access to data Access to data at the and hydrological data Ministry 34 The town of Akjoujt is estimated to have grown from some 15,000 to 50,000 inhabitants between 2005 and 2010. A second wave of migrant workers, dependents and other business people is expected to arrive with the expansion of the Tasiast mine and potential developments of other promissing mine sites in the province. 45 Data collection with a wide range of geo-physical and geological surveys as well as geo-chemical analysis had been conducted under PRISM-1 and through prior and parallel financing. Additional data collection was undertaken under this component of PRISM-2. While sector agencies had done substantial interpretation and developed a comprehensive knowledge base, more data analysis and integration of data, was carried out with further refinements in software and modeling techniques under PRISM-2. In addition PRISM-2 supported dissemination of the outputs. 2.1 Airborne geophysical surveys Figure 1- Airborne surveys PRISM-1 and 2 PRISM-1 (with a contribution of IDB) had financed some airborne geophysics (a cost- and time- efficient tool for providing information on surface and sub-surface rocks characteristics and geology) over an area of 226,000 km². PRISM 2 with the IDA Credit as well as with new IDB parallel funding has covered another 480,000 km² with airborne surveys totaling 680,000 line km over three selected areas complementing the works carried out under PRISM-1 (see Fig. 1). As a result, more than 70% of the national territory has been covered. At the end of the project, 75 map sheets at an 1/200,000 scale had been completed. 46 2.2 Geological surveys (a) Support to SIGE and SIGM Geological mapping carried out under PRISM-135 (with a synthesis covering the whole country at a 1:500,000 scale and 32 map sheets surveyed at a 1/200,000 scale) already confirmed and identified parts of the country's mineral potential. The raw data produced contributed to attract the attention of private mining investors and the interest of other sectors. PRISM-2 extended the coverage to areas not yet covered under the first survey. International consultants (BRGM, BGS) produced an additional 21 geological maps at the 1:200,000 scale (ca. 185,000 km²) over selected areas of the country. In addition, the project financed capacity building for the DMG's two units charged with database management and analysis of geological and environmental information (Service de la Géologie and Service de l’Environnement Minier). A comprehensive system update was done of the two dedicated information systems, Système informatique de gestion environnemental (SIGE) and Système informatique de gestion minière (SIGM). Capacity building included technical assistance to assess system functionality, on-the-job training and software plus purchase of critical hardware. (b) Publication and dissemination of geological survey Technical assistance was provided to support the MPEM in further publication of key aspects (characterization of high potential mineral groups, hydrological survey data, etc.) to communicate the full range of available date to the wider investment community and local businesses. 2.2.1 Hydro-geological mapping and water database of Mauritania The project supported the development of a national computerized water wells data base and information system, in close cooperation between the ministry in charge of mines and the National Water Resources Center (CNRE), based on CNRE’s own data and on that generated under PRISM-1 and PRIDSM-2. A hydrogeological map at the scale of 1:500,000 was completed. The project financed international and national consultants - to develop the information system, disseminate the information and produce the map – as well as hardware and software, equipment, and training. 2.2.2 Synthesis of geological data and mineral resources information This sub-component provided assistance to further process geo-data generated under PRISM-1 and PRISM-2 and prepare maps, documents and materials aiming at promoting the mining sector as well as spreading the use of the information to other sectors and users. The knowledge base36 comprising various dimensions of information, including geo-physical, geological and geo-chemical parameters was integrated, by the USGS consultants. Products include various maps of Mauritania at the 1/ 1,000,000 scale as well as regional mineral resources assessments, ore deposits modeling and exploration of methodology guidelines, thematic studies on geo-environment. Parallel financing was provided by JICA (Japanese International Cooperation Agency) to train OMRG (Mauritanian Geological Research Office) in ore deposits modeling and mineral resources assessment documents production, to be promoted by the Mining Promotion Unit. 35 Before the PRISM 1, Mauritania had only one map of 1968 at 1/1000,000 covering the whole country. 36 However political reluctance has obstructed on-line access to the geo-data base; data access is possible on walk-in basis in the ministry. 47 2.2.3 Supervision of the geological infrastructure component Given the highly technical nature of the airborne geophysical surveys and cartography, an engineering supervision was needed to ensure smooth progress of the activities and quality of output. The supervising team of consultants advised the PCU in evaluating bidding documents, overseeing works progress, assisting in the coordination of training programs and disseminating products and information generated by the project. 3. Capacity building of Public Mining Institutions US$5.58 million Indicators Target Actual value at completion PDO indicator 5: Central database for compliance Established and 60% of Established and 3 on performance standards operators reporting larges operators (98% of production) reporting PDO indicator 6: Time required to process mining 30 days 21 days title at the Cadastre Intermediate indicator 8: Decision by private Two additional mines Two additional mines companies to proceed with the development of operational operational two new mines before project closure Intermediate indicator 9: Mining Sector 10% annual increase for (i) 25.5% Monitoring System reports on regularly: (i) both (ii) 2004-11: 29% Increase in average annual exploration investment (iii)2011-13: 8% in the mining sector, (ii) Increase in average annual mineral exports Intermediate indicator 12: M&E data base for Operational Operational & socio- economic indicators in mining populated with 3 surveys 3.1 Mining Sector Promotion Unit This sub-component supported the establishment of a Mining Sector Promotion Unit (UPM) by funding the procurement of goods, including hardware, software and office equipment, the contracting international as well as national consultants to set up the unit, preparation of studies and materials, and support in carrying out promotion activities. The UPM was later integrated into the ‘Direction du Cadastre et de la Géologie’. The project financed the annual participation of Mauritania at the international high level mining forums INDABA (South Africa) and PDAC (Canada), part of the organization of the mining and petroleum forum “MAURITANIDES” in 2010 and 2012, where hundreds of participants got acquainted with Mauritania's mining and hydrocarbon potential, and its legal and regulatory framework. More than 3000 investors, suppliers, operators or stakeholders participated in the 2012 forum, almost twice as many as the 2010 conference forum. This event showed the level of investor and business interest in the Mauritanian mining sector. A consultant designed: (i) a mining promotion strategy to enhance the awareness of the geological potential and the depth of geo-data already available in Mauritania, targeting local businesses as well as international investors; (ii) a guide for investors and (iii) a website for the dissemination of data. A road-show and series of workshops was designed for a local audience (small mining enterprises and 48 geological consulting companies). Consultancy services provided a comparative review of the existing mining legislation and rules, together with a comparison of tax regimes in a sample of mining countries. Finally various texts were drafted to update the mining law and ancillary decrees. 3.2 Mining cadastre unit follow-up Created under PRISM-1, the Mining Cadastre Unit had become a successful and exemplary operation ensuring secure, prompt and transparent issuance and follow-up of mining titles for exploration and production. PRISM-2 financed the modernization of its software system up-grading of equipment, plus additional training of its staff. 3.3 Environmental management of the mining sector PRISM-2 expanded the capacity building activities initiated under PRISM-1. First, logistical support was provided to the new Police des Mines (financing and technical support of a number of field missions; supply of equipment and furniture). Second, international experts directed teams of government staff in detailed environmental and social audits of the three main mining companies currently operating; this work assessed to what extent the companies were complying with environmental and social regulations and whether or not agreed performance obligations and management plans were properly implemented. Third, follow-up activities related to the environmental audits of the three largest operators above were also included under sub-component 3.4 below. 3.4 Institutional strengthening of the Directorate for Mining and Geology During the ten years of project implementation, the institutional set-up of the ministry went through various revisions in order to respond to sector needs and policy changes and priorities of the Mauritanian government. The final administrative which prevailed at the completion of PRISM-2 is illustrated below. 49 Organization chart of Ministry of Petroleum, Energy and Mines 50 Two information systems established during the PRISM-1, Système Informatique de la Gestion Environnementale – SIGE - and Système Informatique Géologique et Minière – SIGM, received continued support throughout PRISM-2. A broad range of support included further training of personnel and procurement of software. Moreover, the systems were updated and redesigned in order to facilitate data transfer and communication with associated agencies, i.e. the separate water resource and geological survey agencies (CNRE, OMRG). A dedicated IT system was developed to facilitate monitoring of license holders’ activities throughout the lifetime of a mineral license from the award of license at the Mining Cadastre through exploitation to eventual mine closure. The system allows DMG and the Police des Mines37 to properly monitor exploration and production activities of the mining operators. In this way, the separate capacity building activities which had been targeted the Mining Cadastre and the Environmental Monitoring Unit were integrated into a joint supervision and enforcement mechanism. A consultant carried out a needs assessment of the tax administration insofar as it related to the mining operations. Tax audit manuals were prepared based on international accounting standards and ad hoc training for the personnel of the tax administration was rolled out. The consultant also accompanied the fiscal audit of the two private mining operations, Tasiast and MCM. Throughout PRISM-2 strengthening of the regulatory framework of mining operations (US$150,000) continued. Various issues had not been addressed when the Mining Law was revised during the 2008 times of political turmoil. Technical assistance prepared revisions to the law as well as specific regulations inter alia: (i) occupational health and safety regulations for mining; (ii) divisions of authority between provincial and central authorities and across sector agencies, such as the division of responsibility between MEPM and the Ministry of Environment; (iii) division of benefits with the local authorities; and (iv) detailed regulations on mines inspection. 3.5 Training programs Training programs to underpin the institutional capacity building were centered around three pillars: (i) Technical training programs (in-country and at regional or overseas training centers) were targeted staff at the public agencies; (ii) On-the-job training was provided as part of the TA activities, inter alia, mine site inspection, IT system development and financial analysis; (iii) Public awareness programs and consultations benefited a broader set of stakeholders and the national population at large. Support to regional dissemination campaigns of the Extractive Industries Transparency (EITI) entered under this component. 37 Its task is the overall coordination of inspecting mine operators but its resources and knowledge are sourced from other departments and ministries, including the Ministry of Environment, tax authorities and others. 51 4. Support to the Petroleum Sector US$5.08 million Indicators Target Actual value at completion PDO indicator 3: Hydrocarbons Law and Law &Regulations Law & Regulations Related Regulations in line with international Revised Revised practice Intermediate indicator 1: Petroleum cadastre Established Established 12/2011 and operational Intermediate indicator 2::Petroleum sector Established Established 10/2013 databank and information system and operational Intermediate indicator 3:Enviromental Prepared and effective Prepared and effective Regulations petroleum sector 01/2013 Intermediate indicator 4: Strategic Completed Completed 7/2011 Environmental & Social Assessment Intermediate indicator 5: Environmental Unit for In place In place 6/2013 petroleum sector Intermediate indicator 6: Production Sharing PSC modernized PSC modernized and Contract (PSC) Model applied 7/2010 A substantial support to the hydrocarbon development and management was included through the first additional financing. The sub-components were substantively designed at the time of the original credit in 2003 but due to domestic politics and priorities, the activities were put on hold until a new administration came to power in 2005. The timing of the additional financing, i.e. coinciding with first production from the Chinguitti oil field, was somewhat coincidental since the scope of activities had no direct relation to Chinguitti operation. Rather, the activities were oriented towards general sector governance and data management. During implementation the use of the funds of the first additional IDA credit for the financing of this component has partially changed compared to the 2006 fund allocation per subcomponent, since in several instances alternative financing had become available while on the other hand other needs appeared in the hydrocarbon sector for which no other financing was available. This was particularly the case with the partial reallocation of the funds, initially all concentrated on the upstream part of the hydrocarbon sector to its downstream part. 4.1 Improving the legal, regulatory and contractual framework The old legal and fiscal regime applicable for the oil sector (1988) and PSC model (1994) needed updates and the secondary regulations (covering technical, economic and environmental aspects) were incomplete. An international consultant carried out a comparative assessment of the competitiveness of the existing legal and contractual framework vis-a-vis state of the art sector legislation, and PSCs. This was followed by a comprehensive revision of the Petroleum Law including the decrees on petroleum concession titles and the petroleum cadastre. A Production Sharing Contract was also drafted. This PSC is the standard being used for current license rounds. 52 4.2 Capacity building Main beneficiaries of the capacity building were personnel of the Direction Générale des Hydrocarbures (DGH), including upstream exploration and production agencies as well as mid-stream energy storage and transport agencies. Moreover, Société Mauritanienne des Hydrocarbures (SMH) also benefited from the support. Institutional assessments and organizational training plans underpinned the training activities which were provided to personnel. These activities were complemented by an IDF grant which facilitated preparation and implementation of an action plan for the capacity building in hydrocarbon sector agencies. Training in financial modelling and analysis of oil and gas operations was also offered to ministry counterparts of the Ministry of Finance. National technical experts provided continuous advice in areas including legal, contractual and financial matters as well as data management support. An important activity concerned negotiations advice and training related to the negotiations of the Banda Gas Field. 4.3 Environmental management of the petroleum sector Advisory services were provided to the drafting of environmental and social obligations as part of the standard investment agreement. Moreover, the project supported the establishment of environmental (including social) unit of the DGH. An important activity which was originally planned under this sub- component was the Sector Environmental and Social Assessment (SESA). This activity was eventually financed by a NORAD (Norwegian) grant but under the purview of the UPCM. This instrument was key in assessing the existing environmental and social status of the hydrocarbon sector. The output of the study was a report with strategic recommendations and directives, and a second report providing the basic data. Thanks to cost savings, it was possible to finance the definitive social and environmental assessment of the proposed Banda Gas-to-Power project. This assessment is central to the realization of the landmark Banda Gas Project, which is expected to unlock the national gas potential. 4.4 Data management/petroleum cadastre The project financed the development and implementation of the petroleum cadastre. A high level international consultant was hired to: (i) develop and help establish a modern cadastre with its computerized system allowing to record and monitor the oil concessions with their contracted areas; (ii) support in the start-up this new entity. The consultant also assisted in ensuring the performance of various IT systems in the ministry (mining and oil cadastres, SIGM, SIGE, Intranet and Website). The credit financed the purchase of the necessary equipment. The project financed also the design and installation of a large database to receive and store the numerous technical, economic, environmental, financial data submitted (mostly in digital form) by the oil operators during their survey, exploration and production activities. The project funded the development by a specialized consultant and the installation of the whole system with hardware and software. The whole system includes a Geographic Information System (GIS), a website, a main data base system in the MPEM and archives. 4.5 Sector strategic assessments Advisory services together with limited hardware and software supported: (i) strategy for promotion of exploration; (ii) economic modeling for the upstream part; and (iii) economic modeling for the gas value stream. Additional activities supported storage and transportation of petroleum products. These 53 included: (i) a review and updating of legal and regulatory framework of the subsector; (ii) advisory services for the development of a new Public Private Partnership (PPP) to manage the refined products storage installation previously run by an SOE; (iii) development of norms, security and certification standards for liquid and gas petroleum products (storage and distribution); (iv) Master plan by 2020 for the transport of refined petroleum products including butane gas. 5. School of Mines and Vocational Training support US$ 700,000 Indicators Target Actual value at completion Intermediate indicator 14: regulatory framework Prepared & Approved Prepared & Approved for autonomous School of Mines Intermediate indicator 15: Student survey 75% positive rating 80% positive rating satisfaction rating in School of Mines Intermediate indicator 16::Number of lecturers 10 lecturers trained All 7 lecturers hired and trained 2 personnel staff trained Intermediate indicator 17: School of Mines Developed Full 5 year curriculum Curriculum developed developed The School of Mines (SOM) is established by the government in close partnership with the three main private and public mining companies as well as the World Bank. The bulk38 of the capital costs is financed under corporate sponsorships, while operational expenditures are projected to be covered from a sales tax on mineral sales. Resources from the Bank cover fiduciary aspects, quality assurance of study program, training of trainers and supplementary course programs. 5.1 Coordination and advisory services for oversight of School of Mines development The project financed: (i) a coordinator of the engineering and construction monitoring to Akjoujt, legal counsel for the preparation of regulations of the School and other legal and administrative framework; (ii) the Environmental and Social Impact Study for the campus. 5.2 Curriculum development and research/professional outreach programs The project financed: (i) an institutional and pedagogic audit; (ii) courses given by foreign professors; purchase of software, hardware, and teaching materials (including language teaching); and (iii) a survey of student satisfaction (merged with (i)) 5.3 Training of trainers Professors and administrative staff benefitted from managerial, technical and teaching training in at a variety of partner institutions in the region as well as in France and Canada. The beneficiaries included the seven professors recruited so far. 38 The full cost including the new campus in Akjout with equipement and 4 years of operation is estimated at US$24 million 54 5.4 Peer reviewing of School of Mines This activity was merged with the institutional and pedagogic audit under sub- component 5.2 above. 5.5 Coordination of vocational training programs. This activity was not carried out under the IDA financing since programs were developed and funded by private operators which envisage transferring the programs to the School of Mines at a later stage. 55 Annex 3. Economic and Financial Analysis PRISM-2 is essentially a capacity building project and for this reason it does not lend itself well to a standard economic analysis. No separate revenue streams are generated as a result of the project. However there are a number of parameters available that allow quantitative evaluation of specific project components and their outcomes. These are: • Direct outcome of the small grants program • Wider social and economic impacts on population in mining regions • Increase of exports revenues from the mining • Tax income derived from the mining sector • Service fees for the mining cadastre and from the sale of geological maps Outcome of the small grants program. This program supported 206 micro-projects in four provinces for a total amount MRO 393 million (US$1.355 million 39) or US$6,580 per project. The total number of people employed in the projects is estimated at 2,152 of which 741 in new jobs derived from the grants. In addition to the financial support, basic business training and project management was provided to the beneficiaries. A total of 618 persons were trained. The percentage of women was 75% in terms of direct beneficiaries and 40% in terms of persons trained. The micro-projects covered a range of activities, including vegetable growing, sheep/goats breeding cooperatives, carpet weaving, tanneries, simple jewelry making and other crafts, trade and tourism. The bulk of the projects were in the two provinces (Tiris-Zemmour and Inchiri) where the three large mining companies are operating. An impact study was carried out on a sample of 52 projects in 2010, one year after the funds had been disbursed. The total annual turnover of these micro-businesses amounted to MRO168 million (US$558,000) and the total incremental turnover that could be attributed to the project financing itself was MRO87 million (US$288,000). The average incremental annual sale per project amounts to US$5,547 – which compares quite favorably to the average funding of US$6,580 provided per project by the program. When the figures of the sample are extrapolated to the whole population of 206 projects, the total annual turnover of the 206 projects would amount to MRO668 million (US$2.2 million) and the total incremental turnover at MRO345 million (US$1.14 million) per year. Impact of the Expanding Mine Sector and the Project on the Population. Reviews of the local economic development activities and three household surveys (2004, 2011 and 2013) were carried out in the Tiris-Zemmour, and Inchiri provinces, around the Zouerate mines and Zouerate-Nouadhibou corridor, Akjoujt and Tasiast mines. The number of municipalities surveyed was gradually increased with the 2011 survey and lastly the 2013 survey (when the Atar – regional capital of the Adrar region province was included). The full data series 2004 to 2014 does not exist for all municipalities and a full comparative assessment of the changes is not possible for the whole period for all regions. Still a positive evolution is clear for the Zouerate, Zouerate-Nouadhibou corridor and Inchiri towns. The data from the 2004 and 2011 surveys for 20 social indicators in eight towns/municipalities of the corridor show a good progress for 16 of those indicators40. Selected 39 With an average rate of exchange rate of M2RO90/US$ (MRO280/US$ for Cr. 38100 and MRO302/US$ for Cr.4933. 40 The lack of progress for four others (School enrolment, number of pupils per class, solid housing, connection to water network) and a stagnation or relative decline between 2011 and 2013 for others reflects in fact the arrival of migrants, including in new, peripheral areas of Zouerate, without public services 56 indicators are shown below – with significant improvements shown in bold and some declines shown in italics. Paradoxically, for some indicators there was a substantial improvement from 2004 to 2011 (reflecting the positive impact of mining developments) followed by a stagnation or decline to 2013, as a result of a important arrival of migrants in those “booming” areas. The data for Atar, a regional capital not located close to mines and thus only indirectly impacted by the mining boom 2013, allows better appreciation of the influence of mining activities. The strongest impact can be seen in Zouerate (mostly because of SNIM) but after that along the Zouerate-Nouadhibou corridor, impacted by the PRISM-2 itself and the Tasiast mine. Table of social and economic indicators in project areas Zouerate Nouadhibou- Zouerate Inchiri Total Atar Total Corridor w/o with Atar Atar 2004 2011 2013 2004 2011 2013 2011 2013 2011 2013 2013 Unemployment 25 21 20.5 26 16 24 14 33.5 16 33.3 27.9 rate % Household water 48 30 38 45 44 43 65 53 48 39 43 access % Avg Monthly 43,800 81,800 107,500 42,600 73,800 98,950 101,290 93,440 79,570 54,630 88,500 revenue/working person Avg Revenue/ 48,000 92,800 134,240 45,745 82,675 126,799 114,440 72,100 88,960 74,290 89,450 household UM Revenue earning 986 1,012 611 1,278 1,286 833 44 202 1,330 365 1,188 entities Avg permanent 1.5 1.9 3.3 1.5 1.7 2.8 1.5 5.7 1.6 6 4.8 jobs/entity Health facilities 18 16 13 27 28 24 6 17 36 21 63 Qualified Health 16 44 71 22 57 88 27 33 85 75 Staff Net school 88 82 94 87 78 86 72 70 76 79 80 Enrollment % Primary schools 3 14 13 10 23 23 9 10 34 15 50 Pupils per class 45 56 33 38 44 30 32 24 41 41 33 Three indicators are particularly significant: (i) the unemployment rate has significantly dropped in the Northern corridor from 26% in 2003 to 16% in 2011; (ii) the average monthly revenue per working person more than doubled from UM42,600 in 2004 to UM98,950 (about four times the national official minimum wage) in 2013; (iii) the average revenue per household increased by 177% from UM45,700 to UM126,800 in 2013 in current prices. In constant prices, the annual increase in household income between 2004 and 2013 mirrors the average national GDP growth rate, but it is significantly higher other areas outside the capital Nouakchott. The numbers of permanent jobs per entity/small businesses surveyed increased significantly in about all areas surveyed. Evidently the significant improvement of 57 most indicators cannot be attributed solely to the project itself (except for the small businesses developed with the small grant program). It results from a combination of the fast development of the mining industry, of the project itself and the impact of some other local development programs by the government and some donors. Development and Exports of the Mining Industry The recent impressive development of the mining sector is illustrated by a number of striking indicators. The first indicator is the steadily growing number of active mining titles in the mining cadastre (below). Records of active mining licenses Type of license 31/12/2009 31/12/2010 31/12/2011 31/12/2012 24/10/2013 Exploration 117 141 234 269 254 Production 7 7 10 12 10 Small mines 6 4 2 2 2 Quarries 27 37 84 90 81 TOTAL 157 189 330 373 347 (Source: Ministry of Petroleum, Energy and Mines) The total number of active titles increased by 121% from 2009 to 2013. The number of exploration titles increased by 117%, while the number of production titles for large mines went from 7 to 10. These increases are translated in spending amounts. The total annual amount of investment in exploration (i.e. excluding physical and movable assets) increased from US$13.5 million in 2003 to US$33.5 million in 2010 and US$104 million in 2012. This translates to an annual average increase of 27% since 2003 – significantly above the 10% growth set as target for the PRISM-2 intermediate outcome indicator. This trend outperforms global average growth of 20% p.a. as well as African exploration expenses which saw an annual increase of 22.5% during the period 2004 to 201241. 41 Source: Metals Economics Group 58 Chart of mining expenditure 25000 120 100 20000 US$ mill "Mauritania" US$ mill "Global" 80 15000 60 Global 10000 Mauritania 40 5000 20 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Likewise, the increase in total mineral production (all exports) is considerable. Even when discounting the substantial increase in world market prices for iron ore, Mauritania’s growth is remarkable with diversification into other commodities, including gold, copper, phosphates and quartz (although the latter two have ceased operation after a few years of operation). Mauritanian mining exports increased from a low of US$175 million in 2003 to a peak of US$ 2,115 million in 2011, the exports of the two new private mines, MCM and Tasiast alone, grew from 0 in 2005 to US$664 million in 2011 and US$624 million in 2012. The exports in volume and value are detailed below. Chart of annual sales in US$ million 2500 2000 1500 SNIM US$ mill MCM Gold/Copper 1000 Tasiast Gold Total 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 59 Table of detailed production figures Year SNIM MCM Akjoujt Tasisast Total Iron ore $million Copper Gold Kg $million Gold Kg $million $million tons tons 2000 11050 198 198 2001 10093 189 189 2002 10460 185 185 2003 9627 175 175 2004 11004 237 237 2005 10639 389 389 2006 10655 490 1300 100 7 497 2007 11815 520 30673 1706 228 695 17 764 2008 10968 832 31914 1926 191 4356 119 1142 2009 10523 523 36610 2904 197 3688 110 830 2010 11534 1089 33554 2296 267 5809 229 1585 2011 11176 1451 39079 2067 355 6124 309 2115 2012 11496 1130 37688 2067 334 6324 297 1761 (Source: Ministry of Petroleum, Energy and Mines) With the spectacular increase in sales revenue, the extractive industries industry has consolidated its dominance of Mauritanian foreign exchange earnings from 20 to 40% of total exports in the early 2000s to more than 60% after 2010. While the PRISM-2 had no influence on the increase of SNIM's sales and production, the geological data acquisition and interpretation as well as the enhanced regulatory framework under PRISM-2 were important contributors to investors' decision to engage in the development of the Tasiast gold mine and the gradual expansion of the MCM Akjoujt gold/copper mine. The perspectives of further mining developments in the near future are favorable. The Kinross group (fourth largest gold producer in the world) is envisaging a US$1.5 billion investment over three years to expand production of the Tasiast mine by 2016. Tasiast gold mine is also one of the sponsors and will be a main beneficiary of the SPEG gas-to-power project that the Bank has been actively promoting including with TA from PRISM 2. The Glencore Xstrata group (the world fourth largest mining group by revenue) has been actively preparing investments in three large-scale iron ore deposits in northern Mauritania, Guelb El Aouj, Lebtheinia and the Askaf joint venture with SNIM. The combined production volume of these developments would exceed 20 million tonnes per year. One key bottleneck was removed in late 2013 with a framework agreement in place for access to existing railway facilities, which are owned and operated by SNIM. This would allow Glencore Xstrata to complete definitive Feasibility Studies and joint venture plans with SNIM plus stand-alone investments with a commencement of production around 2018. SNIM is also advancing on modernization and expansion plans which saw total 60 production in 2013 reach a new record of 13 million tonnes with planned increases to 18 million tonnes by 2018. Revenues for the Mauritanian Government and fees collected by the Cadastre Total fiscal receipts accruing to government from the extractive industries have seen an exponential growth but also a relative stability in later years, although the trend has been a gradual increase in revenue from the mining sector while the hydrocarbons have generally trended downwards since the initial one-year surge in 2006 when oil exploitation commenced. It is impossible to extrapolate any future trends from the existing numbers since a variety of factors will influence future revenue collection: (i) a decline in the world market price for iron would directly influence the profitability of SNIM, which remains the single-most important revenue source; (ii) expiration of initial tax holidays is expected to see a gradual increase in payments from other mine operators, (iii) gradual depletion will strain output from the Chinguitti oil field, (iv) signature bonuses for oil/gas exploration licenses will generate one-off windfalls, and (v) commencement of the Banda gas operation will provide a new long- term revenue stream. Despite these factors of volatility, it is valid to point out that PRISM-2 has contributed to a diversification of the extractive operations. This diversification is likely to continue to provide a stabilizing effect to the volatile nature of extractive industry profitability. Table of fiscal receipts Year Mining Hydrocarbons Total fiscal US$42 US$ mill. receipts mill. US$ mill. 2005 8.73 0.46 9.19 2006 69.63 197,38 276.01 2007 88.28 91,78 180.06 2008 142.54 88,87 231.41 2009 130.28 62,18 192.46 2010 129.25 62,18 191.43 2011 304.52 68,43 372.95 (Source: Mauritania EITI) Direct gains for the mining sector administration are the permit fees paid by mining companies. Since 2007 the annual revenue from fees multiplied 15-fold from US$500,000 to US$7.4 million in 2011 before stabilizing around US$4.4 million in 2012/13. The total fees collected recently by the cadastre were as follows (in UM). 42 US dollar revenues figures are converted using historical exchange rate for the year the revenues were reported 61 Table of fees collected in relation to mineral licenses (UM ‘000) Entry Annual Bidding Total in Total in US Year Permit fee fee acreage fee Fees UM $Million 2009 8,750 156,000 840,539 1,005,289 3.3 2010 18,200 330,500 1,231,334 60,780 1,640,814 5.4 2011 20,450 372,000 903,476 948,570 2,244,496 7.4 2012 13,300 216,000 1,133,236 1,362,536 4.5 forecast 2013 14,938 172,702 1,124,480 1,312,120 4.3 Regarding the SIGM, its purpose is promotional rather than commercial. Thus the revenues from the sale of its products are small but have been on the rise: from about US$ 16,000 in 2004 to a peak of US$ 105,000 in 2010 and the US$23,000 in 2012. 62 Annex 4: Bank Lending and Implementation Support/ Supervision Processes (a) Task team member Name Job Title Unit Role Alexandra Pugachevsky Senior Country Officer MNCA4 FORMER TASK TEAM LEADER Gotthard Walser Consultant FORMER TASK TEAM LEADER Morten Larsen Mining Spec. SEGM2 TASK TEAM LEADER Salamata Bal Senior Social Development AFTCS Specialist Silvana Tordo Lead Energy Economist SEGM1 Paulo De Sa Sector Manager SEGOM FORMER TASK TEAM LEADER Moustapha Ould El Senior Procurement Specialist AFTPW Bechir Peter A. van der Veen Consultant Brahim Abdelwedoud Senior Urban Development MNSSU Specialist Christopher Gilbert Shel- Sector Manager SEGOM don Ahmedou Hamed Consultant Nina Inamahoro Operations Analyst SEGOM Maimouna Mbow Fam Sr Financial Management Spe- AFTMW cialist Siaka Bakayoko Lead Financial Management AFTMW Specialist Maman-Sani Issa Senior Environmental Special- AFTN2 ist Tjaarda P. Storm Van Consultant Leeuwen Adriana Maria Eftimie Operations Officer CSBO3 Sileye Demba Ba Driver AFMMR Peter John Coombes Sr Mining Spec. Souleymane Traore Driver AFMMR Charles E. Di Leva Chief Counsel LEGEN Amadou Tidiane Toure Consultant Helen Ba Thanh Nguyen Team Assistant SEGOM Viktoria Tsoy Team Assistant (STT) SEGOM Mainouna Touré Team Assistant AFMMR Augustine Wright Team Assistant SEGOM Yahya Ould Aly Jean Program Assistant AFMMR 63 (b) Staff cost Year Source of WPA Plan Labor Travel Other Total Funding 2003 BB/BB – Bank 0.00 Budget 2004 BB/BB – Bank 50,000.00 61,632.51 17,215.38 195.85 79,043.74 Budget 2005 BB/Bank Admin 55,000.00 46,688.87 23,381.03 395.42 70,465.32 fund 2006 BB/Bank Admin 90,000.00 22,394.74 10,913.05 3,075.66 36,383.45 fund 2007 BB/Bank Admin 90,000.00 22,394.74 10,913.05 3,075.66 36,383.45 fund 2008 BB/Bank Admin 83,300.00 40,396.36 27,103.18 39,930.90 107,430.44 fund 2009 BB/Bank Admin 107,000.00 40,990.33 6,213.62 984.08 48,188.03 fund 2010 BB/Bank Admin 95,396.00 61,266.12 31,539.77 25,687.99 118,493.88 fund 2011 BB/Bank Admin 85,000.00 48,574.86 32,540.42 10,717.04 91,832.32 fund 2012 BB/Bank Admin 100,000.00 66,205.33 41,180.72 18,396.26 125,782.31 fund 2013 BB/Bank Admin 120,000.00 44,342.03 50,652.04 5,003.15 99,997.22 fund 2014 BB/Bank Admin 90,000.00 22,394.74 10,913.05 3,075.66 36,383.45 fund Grand 850,383.61 Total 64 Annex 5. Beneficiary survey results See Annex 3 for analysis of socio-economic surveys 65 Annex 6. Stakeholder workshop report and results See EITI consultations at www.cnitie.mr 66 Annex 7. Summary of Borrower’s ICR In recent years, the mining sector in Mauritania experienced a boom. Mining exports increased by more than 10 times between 2001 and 2011, from $ 188.6 million to 2,115 million. Also, royalties and various fees charged by the state experienced a similar growth. Over the coming years, it is expected that the sector will maintain its expansion. Several large mining projects are under preparation or implementation. These are:  The merger acquisition of Kinross and Red Back Mining that will create the world's 4th largest gold producer and generate financial resources for the mine expansion Tasiast to be one of the largest in Africa with an investment of USD 1.5 billion over 3 years, an annual production of one million ounces and about 3,000 jobs are expected by 2015 ;  The acquisition of Sphere by Xstrata (4th global mining group and the largest producer of coal), to develop iron projects in Mauritania ( Askaf , El Aouj and Lebtheiniya) for an investment of 6 billion U.S. dollars;  SNIM has undertaken an ambitious program of modernization and development (PDM) that will enable among others to increase its production 4Mt/year from 2014 and see production reach 40mt by 2025 through partnerships including with Arcelor Mital , MinesMetal and SABIC . These perspectives are also enhanced by new factors conducive to investment in the mining sector such as:  The establishment of a stable and attractive legal and regulatory framework;  A more secure and less costly access to energy and thanks to the project for electricity produc- tion from gas;  The existence of a skilled labor force and thanks to the recent opening of the School of Mines. However the geological potential of Mauritania is still under-exploited and a number of accompanying measures should be taken to increase the attractiveness of the country to fully benefit from the activities in progress. These measures can be organized under the following themes: 1) Local Development: In order to maximize the impact of mining on local populations, some actions should be taken with regard to:  The creation of a coordinating unit for the development of mining areas: the unit, which must be linked to the Office of the Minister (MPEM), to coordinate social activities of mining com- panies. The unit would receive annual action plans of all mining companies to avoid duplication or excessive concentrations of operations in a few regions. It would also provide space for ex- change and cooperation between the various mining companies. The coordinating unit could al- so develop community projects in priority areas and propose co-financing of these projects to mining companies. Some PRISM II studies such as the feasibility study of renewable energy in the corridor or study on agricultural activities carriers can help identify community projects; 67  Support to domestic SMEs: mining companies in Mauritania are using service providers in many areas such as engineering, logistics, transportation, supplies but Mauritanian companies in these sectors are not much involved due to a lack of expertise in those sectors. To improve local content of services offered by mining companies, the Mauritanian firms should benefit from a program of strengthening their technical and managerial skills. A study conducted under PRISM II on the development strategy of local firms can be a starting point in the right direction. 2) Geo-information for development: prospects in this area can be grouped as:  Airborne Geophysics: Mauritania has covered a good part of its territory by airborne geophysi- cal (magnetic and radiometric) surveys but still much remains to be done in this area as the na- tional coverage is not complete. The uncovered areas can host significant unexplored mineral reserves. In addition, the coverage of these areas could help with the development of other sec- tors of the economy, such as the search for hydrocarbons and hydrogeology. The few methods that have been used so far are magnetometry and radiometry. It would be worthwhile to cover some areas previously selected by other methods such as airborne geophys- ical gravity and electromagnetic surveys. The density measurement under current coverage is regional with a flight line spacing of 700 meters. It is recommended to cover selected areas with a higher density measurement, that is to say, closer flight lines (200 m or less).  Geology: The realization of a geological map should not be the end of the geological studies of a country but rather the beginning of the process. Existing studies in the PRISM helped to en- hance the field and provided a basis for work of great value. In fact, the geological knowledge of Mauritania is still in its infancy. The work of major international geological offices such as BRGM, BGS and USGS helped raise a large number of technical issues that need to be ex- plored. Further research in at least two directions would provide more information: First, carry out more detailed mapping of selected areas for their geological, mining, hydrogeo- logical or other elements. Current maps are scaled at 1:1,000,000, 1: 500,000 and 1:200,000. It would be desirable to make more detailed maps with scales such as 1:50,000, for example. In fact, many issues were identified thanks to previous work. Those issues should be studied and analyzed. They included the need for additional absolute dating to remove many ambiguities recorded. In addition, petrographic, geochemical, sedimentological, stratigraphic are still need- ed. Higher resolution maps and specific studies will help to achieve not only a better understanding of the national subsoil but also contribute significantly to mineral exploration, hydrogeological research hydrocarbons and other sectors of the economy.  Hydrogeology: The availability of drinking and industrial water is an important factor for eco- nomic development in Mauritania. In the absence of surface water resources, it is imperative to turn to groundwater resources. The work of PRISM in this area was exploratory. The current 68 geological map is preliminary. It is necessary to perform a more detailed hydrogeological map- ping of the country (1:200,000) based on fieldwork. Furthermore, the detailed study of the region Choum - Zouerate was a pilot study that validated the use of a set of technical tools. This study should be replicated in other mining areas. It is also necessary to conduct additional drilling and more to make a regular update of the mathematical model produced.  Synthesis and interpretation of the acquired data: PRISM produced a considerable amount of geo-scientific data. The utilization of this data is underway by various mining companies active in the sector. However, these studies are limited to particular sectors and their results are not available to the public. It is therefore necessary to carry out thematic studies to maximize the value of the significant investment that has already been made. Moreover, there is a need to explore and see ways of disseminating the available scientific information to a larger audience. The new School of Mines could be a springboard for the development of a national scientific capacity in the field of geosciences. 3) Support and strengthen the capacity of the administration: in this area, priority areas to be strengthened include:  Promotion of the mining sector: In this area, the Government must act on the following three areas:  Organization and participation in mining forums: in this area, The MPEM can consolidate and build on the gains made in the organization of the ‘Mauritanides forum’ and further prepare the content of participation in international and regional mining forums;  Set up a special unit to support mining investors (exploration and exploitation). On this basis, this unit should play the following roles: (i) record the concerns of investors; (ii) study these concerns to suggest recommendations; (iii) decide how policy change, adopt according to the interests of the country; and (iv) implement the policy changes necessary. In the same context, the Government should encourage mining companies to establish an industry group (e.g. a Chamber of Mines) to facilitate consultation with these operators.  Engage in dialogue on improved legal and regulatory framework;  Support for supplies and equipment: In this context, the Government must continue to support the institutions responsible for the management of the mining sector (Department of Mines, Po- lice Directorate of Mines, Mining Cadastre, MMIS, etc.) supplies equipment and software, as these institutions are working in a highly sensitive area and the renewal and updating of soft- ware is of utmost importance;  Support in the field of training and modernization of tools: the Government must continue to develop annual training programs to the institutions in charge of the mining sector. It must also 69 modernize the working tools of these institutions. In particular, it is useful to develop a proce- dures manual for the Directorate of the Mines Police. Moreover it will also be necessary to strengthen the capacity of the MMIS through targeted recruitment. 4) School of Mines Mauritania: The number of current teachers at the temporary premises in Nouakchott and the scientific and educational equipment do not cover all the planned theoretical and practical teaching needs. Therefore, pending the installation at the Akjoujt campus, the school will have to rely on foreign experts and foreign institutions to provide some modules – and partner institutions to provide some practical teaching indispensable for the theoretical training. As the engineering students advance in their training that includes an integrated preparatory course of two years and a three years specialization course, the school will need new educational, scientific and technical equipment to provide teachers and students ever more efficient and specialized teaching tools. The school should continue to allow its officers, professionals and teachers ongoing training to enable them to keep up with global developments in their respective fields, so that the quality of management and that of the education is always the best possible. There will be a pressing need for funding to carry out curriculum development and also undertake studies on the educational curriculum for supervisors and quality control of the instructional level. Budget currently provided by SNIM is ear-marked daily management, Kinross and First Quantum support is oriented to campus constructions in Akjoujt. The School of Mines needs an important financial backing to carry out those activities, to complete the preparation of the Akjoujt site and to cover some immediate needs: - equipment - library and media center - laboratories and workrooms - Educational and Administrative offices - boarding and cafeteria - a sports center and a health center - production of conventional and renewable energy to provide the school with autonomy - recruitment of consultants and experts - audits and evaluation - acquisition of university textbooks - teaching and subscription to journals software - learning trips - managerial , technical , educational and academic training - transport of students (locally and abroad ) - acquisition of transportation and transport equipment for supplies to the Akjoujt campus (refrigerated trucks) and public transport students (study tour) and staff - ICT The Ministry of Petroleum, Energy and Mines (MPEM) considers the PRISM II as a great success. The Project contributed greatly to the exceptional development of the mining sector in Mauritania in recent years. 70 Virtually all indicators of project performance were achieved. All in all the PRISM II exceeded its targets by 33%. The contribution of the PRISM II to the development of the mining sector in Mauritania is convincing with impacts covering all segments of the mining sector. With regard to sector research, the PRISM II provided geology and airborne geophysics with the necessary geological data. This data are stored in the MMIS, which was established with the support PRISM. The cadastre unit was also set up with the support PRISM, to provide information on the availability of a particular area and the application for permits. PRISM II strengthened sector operations with enhanced capacities of the institutions responsible mining and the establishment of the appropriate legal and regulatory framework. The success of PRISM II was made possible through a combination of several factors such as: - The relevance of the development objectives of the project; - The commitment and continued support of the World Bank and in particular the project’s team; - Government’s support; - The cumulative experience of the team of the Project Coordination Unit. Even though the mining sector is booming and exports increased more than 10 times between 2001 and 2011 and the sector's prospects are reassuring, the challenges facing the sector are still significant. The Mauritanian subsoil is still unexplored, investments in the sector are not yet at the height of the geological potential of the country and local operators are not yet able to take full advantage of the current industry trends. The Government, in collaboration with its technical and financial partners must mobilize the necessary resources to meet the challenges. It is within this context that the support of the World Bank in Mauritania mining is essential for the consolidation and development of the sector. [The Borrower has reviewed the draft ICR without providing additional comments to what was capture in the Borrower’s own Completion Report] 71 Annex 8. Comments of co-financiers and other partners/ stakeholders N/A 72 Annex 9. List of supporting documents 1. Country Assistance Strategy for Mauritania 2002-2005. May6, 2002 2. Country Assistance Strategy for Mauritania. June 14, 2007. Report No. 39532-MR. 3. Country briefs for Spring and Annual Meetings 2002-2013 4. Country partnership strategy for Mauritania 2014-2016. Report 75030-MR. September 5, 2013 5. CPPR minutes - November 17, 2009 6. Extractive Industries Review – Striking a Better Balance (2003) 7. Financial Times, Special Report on Mauritania, April 10-12, 2014 8. IDF grant TF 92304 Minerals and Petroleum Institutional Capacity Building Project P110923 April 29,2008 9. Implementation Completion Report PRISM1. June 15, 2005, Report No: 32599 10. ISRs 1 to 17; Mission aide-memoires and transmittal letters 11. Joint staff advisory note on the 3rd PRSP: June 6,2011. Report 62413 12. Mauritania CEM -April 10 2010 – Report. 48566-MR 13. Minutes of the PCD Review Meeting PRISM 2. Memo October 25, 2002 14. Minutes or Summary of Decision Package Review Meeting for MAURITANIA: 2nd Mining Sector Cap Building First Supplemental Fiancing– P100078. Memo April 25, 2006 15. Minutes or Summary of Decision Package Review Meeting for MAURITANIA: 2nd Mining Sector Capacity Building Second Supplemental Financing– December 2, 2010 16. Miscellaneous memos on reengagement of Bank operations in Mauritania 2nd and 3rd quarter 2009 17. Poverty Reduction Strategy Paper -July 2013 - IMF Country Report No. 13/189 18. Project Appraisal Document PRISM 2, June11, 2003. Report 25961 19. Project Paper on the First Additional Credit, June 7, 2006. Report 36304-MR 20. Project Paper on the Second Additional Credit, April 25,2011. Report 60828-MR 73 21. Quality Assessment of Lending Portfolio (QALP-1) of PRISM2 by QAG-Draft November13,2008; COPCO Response Memo (P. De Sa's email of November 20, 2008); final QALP report January 5, 2009 22. Rapport de Clôture du Projet Prism-2- Evaluation du Project par l'Emprunteur Novembre 2012 23. SESA Mauritania Final Report - Integrated Environments Ltd & D’Appolonia S.p.A. May2011 24. Sharing Mining Benefits in Developing Countries, Wall, Elizabeth and R Relon, 2011 25. The Contribution of the Mining Sector to Socioeconomic and Human Development – McMahon, Gary and Susana Moreira, April 2014 74 IBRD 33445R M A U R I TA N I A SELECTED CITIES AND TOWNS MAIN ROADS REGION CAPITALS RAILROADS NATIONAL CAPITAL REGION BOUNDARIES RIVERS INTERNATIONAL BOUNDARIES 15W 10W This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 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