The World Bank Sustainable Management of Mineral Resources (P096302) REPORT NO.: RES32525 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES APPROVED ON JUNE 9, 2009 TO UNITED REPUBLIC OF TANZANIA ENERGY AND EXTRACTIVES GLOBAL PRACTICE AFRICA REGION Regional Vice President: Hafez M. H. Ghanem Country Director: Bella Bird Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Christopher Gilbert Sheldon Task Team Leader: Mamadou Barry The World Bank Sustainable Management of Mineral Resources (P096302) ABBREVIATIONS AND ACRONYMS SMMRP Sustainable Management of Mineral Resources Project PDO Project Development Objective SDR Special Drawing Rights PPA Project Preparation Advance CFAST Catalyzing the Future Agri-food Systems of Tanzania Project The World Bank Sustainable Management of Mineral Resources (P096302) BASIC DATA Product Information Project ID Financing Instrument P096302 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 09-Jun-2009 31-Dec-2018 Organizations Borrower Responsible Agency Ministry of Energy and Minerals Tanzania Extractive Industries Transparency Initiave Project Development Objective (PDO) Original PDO To strengthen the Governments capacity to manage the mineral sector to improve the socioeconomic impacts of large and small-scale mining for Tanzania and Tanzanians and enhance private local and foreign investment. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56330 07-May-2015 03-Jun-2015 28-Aug-2015 31-Dec-2018 45.00 22.49 24.48 IDA-45840 09-Jun-2009 22-Jul-2009 22-Sep-2009 30-Jun-2015 49.13 50.17 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Sustainable Management of Mineral Resources (P096302) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Tanzania Sustainable Management of Mineral Resources Project (SMMRP, P096302), was initially approved by the Bank Board on June 9, 2009 in the amount of SDR 33.5 million (US $50 million equivalent). Based on satisfactory performance SMMRP and the positive trajectory of the sector more broadly, the World Bank Board approved an Additional Financing in the amount of SDR 32.7 million (US $45 million equivalent) on May 7, 2015. To-date, the project has disbursed 75% of the total credit amount, with a 100% disbursement of the original IDA and 48% disbursement from the additional financing after three years of implementation. A total of SDR 16.9 (US $23.5 million equivalent) remains undisbursed. The current closing date for the project is December 31, 2018. 2. During the first several years of implementation of the Additional Financing activities, progress toward meeting the Project Development Objectives (PDO) was rated satisfactorily. However, implementation progress stalled following changes to the legislative and policy direction of the sector introduced in 2017. The changes were to address benefit sharing, revenue, and transparency – but industry observers expressed concerns on the potential impacts on investment and growth, and the resulting uncertainty in the sector. Further, in 2016 the government decided that it no longer wanted to utilize project resources for a major project activity supporting matching grants to the industry – this also affected implementation. 3. As the project comes to a close, progress toward achieving the PDO and overall Implementation Progress have both fallen to moderately unsatisfactory ratings. These overall ratings are aligned with the performance rating given for each of the project components: A) Improving the Benefits of the Mineral Sector for Tanzania: Artisanal and Small-Scale Mining, Local Economic Development and Skills is rated as moderately unsatisfactory; Development; B) Strengthening Governance and Transparency in Mining is rated as unsatisfactory; C) Stimulating Mineral Sector Investment is rated as satisfactory; and D) Coordination and Project Management is rated as Unsatisfactory. 4. Despite the short-fall in project implementation resulting from the shift in policy at the central government level in the mining sector, there have been some promising achievements under the project. Moreover, progress toward achieving the development objective slightly improved as the Recipient rushed to implement activities which have been delayed for the past two years. These activities include: (i) significant progress in establishing the model mine in Rwamgasa; (ii) significant progress in the establishment of Demonstration Centers on gold and industrial minerals in four localities: Katente (Geita) and Itumbi (Chunya) for gold, Mkanyule (Kilwa) for salt, and Kona Z (Tanga) for limetsones; and (iii) rehabilitating zonal mining offices and transforming into the physical hosts of the centers of excellence in seven localities, namely Musoma, Songea, Mpanda, Chunya, Bariadi, Handeni and Bukoba. 5. There are some risks associated with closing. Not all of the centers of excellence, now under construction, will be completed by December 31, 2018. The Bank was clear during the last mission (March 2018) that the project could not be extended, so the client would need to ensure all new contracts could be completed before the closing and would be responsible to finance all activities past the closing date. The Recipient is working with its contractors to accelerate implementation of works. It is estimated that an addition US$6 million will be required to complete The World Bank Sustainable Management of Mineral Resources (P096302) remaining works. Beyond the reputational risks, the task team has not identified any other risks associated with the partial completion of these activities. 6. An estimated SDR 15,937,095.00 from the project will remain undisbursed at project close. B. Rationale for Restructuring: 7. The client has requested that the outstanding Project Preparation Advance (PPA) from the dropped Catalyzing the Future Agri-food Systems of Tanzania Project (CFAST, P161764) be refinanced through SMMRP. II. DESCRIPTION OF PROPOSED CHANGES A. Description of Proposed Changes 8. The proposed level-two restructuring includes the following:  The refinancing of the outstanding PPA for the CFAS Project (Q9080, P161764, in the amount of USD 1,740,404.00, under the SMMRP, per the Government’s request, for a dropped CFAST project. This will require the creation of a new disbursement category, which will be done by amendment. The corresponding amount has been made available by reallocating funds from Category 2: Goods, works and non-consulting services, Training and Operating costs under Part 1 of the Project, requiring notice to the borrower to include ‘refinancing the PPA for CFAST project’ as new disbursement category. This will require the creation of a new expenditure category 5 for PPA refinancing to be reallocated from part of the remaining balance.  Category 4 will be added to include the CFAS PPA refinancing with an aggregate balance of US1,740,404 is allocated for repayment of PPA No. Q9080. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ The World Bank Sustainable Management of Mineral Resources (P096302) DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) A. Improving the Benefits of A. Improving the Benefits of the the Mineral Sector for Mineral Sector for Tanzania: Tanzania: Artisanal and Small- Artisanal and Small-Scale Mining, 53.40 Revised 51.00 Scale Mining, Local Economic Local Economic Development Development and Skills and Skills Development Development The World Bank Sustainable Management of Mineral Resources (P096302) B. Strengthening Governance B. Strengthening Governance 14.60 No Change 13.33 and Transparency in Mining and Transparency in Mining C. Stimulating Mineral Sector C. Stimulating Mineral Sector 25.00 No Change 25.00 Investment Investment D. Project Coordination and D. Project Coordination and 6.90 No Change 5.81 Management Management Physical and price Physical and price contingencies 2.30 No Change 0.00 contingencies PPA Refinancing CFAST PPF refinancing 0.00 Revised 2.40 (P161764) TOTAL 102.20 97.54 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-56330-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GDS,WKS,NCS,CS,TRG OC A2,A4,A5,B 13,700,000.00 8,942,793.27 13,700,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GDS,WKS,NCS,CS,TRG,OC A1 16,500,000.00 0.00 14,759,596.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GRANTS part A3 2,500,000.00 0.00 2,500,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: UNALLOCATED 0.00 0.00 0.00 100 iLap Category Sequence No: 5 Current Expenditure Category: PPA Refinancing 0.00 0.00 1,740,404.00 100 The World Bank Sustainable Management of Mineral Resources (P096302) Total 32,700,000.00 8,942,793.27 32,700,000.00 .