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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF SDR 20.9 MILLION (US$ 33 MILLION EQUIVALENT) TO BURKINA FASO FOR THE MINERAL DEVELOPMENT SUPPORT PROJECT Draft: 05/23/2011 Report No: BF This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2011) Currency Unit = CFAF US$ 1 = US$ = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AFD AfDB AFMBF AFTCS AFTEN AFTFM AFTPC ASCE ASM BUMIGEB BUNED CAS CIDA CDR CEDP CEM CFAF CIFE CPAR CQ CRAL CSO CSR CTRFC DA DGEQL DGMC DGTCP DRC EAP EI EITI ET EU ESW FBS FM GAC GDP GTZ Agence Française de Développement African Development Bank Burkina Faso Country Office Africa Region Post Conflict and Social Development Environment and Natural Resources Management Africa Region Financial Management Africa Region Procurement Autorité Supérieur de Contrôle d Etat Artisanal and Small Scale Mining Bureau des Mines et de la Géologie du Burkina Bureau des Evaluations Environnementales et des Déchets Country Assistance Strategy Canadian International Development Agency Commission de Règlement des Différents Capacity and Enterprise Development Project Country Economic Memorandum Common Currency West Africa Economic and Monetary Union Circuit Intégré des Financements Extérieurs Country Procurement Assessment Report Consultant Qualification Commission de Règlement des Litiges à l Amiable Civil Society Organization Corporate Social Responsibility Loan Fiduciary and Controls Group Designated Account Directorate General of Environment and Of Quality of Life Directorate General of Mining and Quarrying Direction Générale du Trésor et de la Comptabilité Publique Democratic Republic of Congo Energy Access Project Extractive Industries Extractive Industry Transparency Initiative Extended Term European Union Economic and Sector Work Fixed Budget Selection Financial Management Governance and Anti-Corruption Initiative Gross Domestic Product German Development Agency

3 HIPC IBRD IC IDA IFMIS IFR IGAME IGF IS ISR IT GAC GIS LCS LEGAF MDTF MEU MESD MMQE MoFE NCB NGO OECD OHADA OP/BP ORAF PDO PEFA PIM PIU PMT PRECAGEM PREM PRGED PRM PROMIN PRSP PSDP QBS QCBS SC SCADD SEGOM SESA SME SOE SRFP SSS SYSCOHADA TOR TTL UER UN UNICEF VAT WAEMU Highly Indebted Poor Countries International Bank of Reconstruction and Development Individual Consultant International Development Association Integrated Financial Management Information Systems Interim Financial Report Inspection Générale des Mines et de l Energie Inspection Générale des Finances Implementation Support Implementation Status and Results Report Information Technology Governance and Anti Corruption Geographical Information System Least Cost Selection Africa Region Legal Practice Group Multi-donor Trust Fund Mining Environmental Unit Ministry of Environment and Sustainable Development Ministry of Mines, Quarrying, and Energy Ministry of Finance and Economy National Competitive Bidding Non Governmental Organisation Organization for Economic Co-operation and Development Organisation pour l Harmonisation en Afrique du Droit des Affaires Operational Policy Operational Risk Assessment Framework Project Development Objective Public Expenditure and Financial Accountability Project Implementation Manual Project Implementation Unit Project Management Team Mining Sector National Capacity Building and Environmental Management Project Poverty Reduction and Economic Management Programme de Renforcement de la Gestion de l Economie et des Finances Personne Responsable des Marchés Journées de Promotion Minière Poverty Reduction Support Project Power Sector Development Project Quality Based Selection Quality and Cost Based Selection Steering Committee Stratégie de la Croissance Accélérée et du Développement Durable World Bank Sustainable Energy Department, Gas, Oil, and Mining Sectoral Environmental and Social Assessment Small to Medium Size Enterprises Statement of Expenditures Stratégie de Renforcement des Finances Publiques Single Source Selection Système Comptable OHADA Terms of Reference Task Team Leader Unité d Exécution de la Réforme du Secteur de l Energie United Nations United Nations Children s Fund Value Added Tax West Africa Monetary and Economic Union

4 Regional Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader: Obiageli Katryn Ezekwesili Madani M. Tall Jose Luis Irigoyen Paulo de Sa Boubacar Bocoum

5 Table of Contents I. Strategic Context... 1 A. Country Context... 1 B. Sectoral and Institutional Context... 1 C. Higher level objectives to which the project contributes... 7 II. Project Development Objectives... 7 A. PDO Project Beneficiaries PDO Level Results Indicators... 7 III. Project Description... 8 A. Project Components... 8 B. Project Financing C. Lessons Learned and Reflected in the Project Design IV. Implementation A. Institutional and Implementation Arrangements B. Results Monitoring and Evaluation C. Sustainability V. Key Risks VI. Appraisal Summary A. Economic and Financial Analysis B. Technical C. Financial Management D. Procurement E. Social (including safeguards) F. Environnent (including safeguards) Annex 1 Results Framework and Monitoring Annex 2 - Detailed Project Description Component A: Fostering Beneficial Mineral Resource Development A.1 Policy, legal, and regulatory framework A.2 Geo-data infrastructure A.3 Office of the Mineral Cadastre and Geology Component B: Strengthening Institutional Sector Management, Coordination, and Accountability B.1 Institutional Strengthening and Coordination... 25

6 B.2 Tertiary Education in Mineral Resource Management B.3 Transparency and Accountability B4. Economic Integration Analysis, Facilitation, and Knowledge-Sharing Component C: Project Coordination and Management Annex 3: Implementation Arrangements A. Project institutional and implementation arrangements a. Project administration mechanisms B. Financial Management and Disbursements a. Country Issues b. Risk Assessment and Mitigation C. Procurement D. Environmental and Social (including safeguards) Annex 4 - Operational Risk Assessment Framework (ORAF) Annex 5: Implementation Support Plan Tables Table 2: Results Framework and Monitoring Table 4: Financial management: Risk assessment and mitigation Table 3: FM Weaknesses and how to address Table 4: Disbursement Table Table 5: Thresholds for Procurement Methods and Prior Review Table 6: Goods and non-consulting services Table 7: Consulting services Table 8: Operational Risk Assessment Framework (ORAF) Table 9: Main focus in terms of World Bank support to implementation Table 10: World Bank Support Team Skills Mix Required Table 11: World Bank Team Composition Table of Figures Figure 1: Extractive Industry/EITI++ Value-Chain... 2 Figure 2: Extractive Industry Value-Chain Detailed Figure 3: Fund flow and disbursement arrangements... 37

7 Date: May 23, 2011 Country Director: Madani M. Tall Sector Manager: Paulo de Sa Project ID: P Lending Instrument: Technical Assistance Grant - TA Team Leader(s): Boubacar Bocoum Does this project include any CDD component? [ ] Loan [ ] Credit [ x ] Grant [ ] Guarantee For Loans/Credits/Others: Total Project Cost (US$M): 33.0 Cofinancing: 0 Total Bank Financing (US$M): 33.0 Burkina Faso Mineral Development Support Project PROJECT APPRAISAL DOCUMENT AFRICA SEGOM Risk Rating: Medium-I (High Impact/Low Likelihood). Sectors: Mining and Other Extractives EA Category: B Themes: Project Financing Data: [ ] Other, explain: Yes X No Borrower IDA New Recommitted Source Total Amount (US$M) Borrower: Burkina Faso Responsible Agency: Ministry of Mines, Quarrying, and Energy Contact Person: Mabourlaye Nombre Telephone No.: Fax No.: mabourl@yahoo.fr Project Implementation Period: 5 years Expected effectiveness date: 21 September, 2011 Expected closing date: 30 September 2016 Does the project depart from the CAS in content or other significant respects? Yes X No

8 Does the project require any exceptions from Bank policies? Have these been approved/endorsed (as appropriate by Bank management? Is approval for any policy exception sought from the Board? Does the project meet the Regional criteria for readiness for implementation? Yes X No Yes No Yes X No X Yes No No policy exceptions are requested. Project development objective: To strengthen the capacity of key institutions of Burkina Faso to manage the industrial mineral sector. Project Description Component A: Fostering Beneficial Mineral Resources Development. The objectives of this component are to secure increased private sector investment in mining, and increase value derived by government from these investments through: (i) updating of the national mining policy, legal and regulatory frameworks, (ii) improvement in the availability of geo-scientific information and in sector promotion, and (iii) improved efficiencies and transparency of the Cadastre and Geology Office. Component B: Strengthening Institutional Sector Management, Coordination, and Accountability. The objective of this component is to strengthen the institutional capacity of the government and other stakeholders for efficient and transparent mineral sector management through: (i) improved sector management capacities at the ministries in charge of Mines, Finance and Environment; (ii) increased availability of tertiary education to address the public and private mining sector needs, (iii) fostering transparency and accountability, and (iv) the provision of the analytic underpinnings and assistance to the government in developing a strategy to enable improved social and economic benefits from mining. Component C: Project Management. This component will support project implementation and management by a Project Management Team (PMT) located in the Department of Mines under the Ministry of Mines, Energy and Quarrying (MMQE). Activities to be carried out under this component include monitoring and evaluation of project implementation, project reporting, and audits. The PMT will be composed of externally hired project coordinator, financial management, procurement, accountant, mineral, and M&E experts.

9 Safeguard policies triggered? Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waters (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) X Yes No Yes X No Yes X No Yes X No Yes X No Yes X No Yes X No Yes X No Yes X No Yes X No Conditions and Legal Covenants: Financing Agreement Reference Schedule 2, Section I.A Description of Condition/Covenant Steering Committee established Hiring of a Project Coordinator, a Financial Management Specialist, an Accountant; a Procurement Specialist; and a Mineral Expert for the PMT; Date Due Effectiveness Effectiveness Project Manual adopted; Effectiveness Subsidiary Agreement between the Recipient and BUMIGEB to be concluded. Effectiveness Recruitment of an external audit firm. not later than three months after effectiveness Hiring of M&E expert for the PMT Dec 31, 2012 Schedule 2, Section I.D Schedule 2, Section I.C SESA carried out and recommendations, together with action plan based on the recommendations furnished to IDA for review (thereafter, action plan agreed with IDA to be carried out). Mar 31, 2013 Institutional plan for sustainability

10 developed and furnished to IDA for comment (and thereafter to be implemented taking into account IDA s comments). Mar 31, 2014 Schedule 2, Section I.A Community development guidelines developed and furnished to IDA for review. Mar 31, 2014

11 I. Strategic Context A. Country Context 1. Burkina Faso is a land-locked, predominantly rural West African country. The rapidly expanding population of over 14 million inhabitants relies upon a very narrow natural resource base, with cotton and gold as the major existing export commodities. Highly variable rainfall, poor soils, lack of adequate communications and other infrastructure, and a low literacy rate are longstanding problems facing this landlocked country. External factors, such as international prices of cotton, fluctuating fuel and food prices also impact the country. As a landlocked country, bordered by six neighbors, Burkina Faso is highly dependent on good relations with and the stability of its neighbors for transit, trade with external markets and political stability. 2. Since the early 1990s, the country has benefited from relative political stability, democratic rule and a progressive platform of economic reforms. Starting from the early 1990s consecutive presidential and legislative elections held in 1991, 1998, 2007, and 2010 resulted in stability at the Presidency. Over the last two decades, the Government of Burkina Faso has embarked on a dramatic economic and political reform agenda, involving reforms in trade, currency and price liberalization, as well as tentative moves towards decentralized governance. Between 1998 and 2006 Burkina Faso enjoyed high economic (GDP) growth rates of about 6 percent per annum. Burkina Faso became one of the first countries to be eligible for the Heavily-Indebted Poor Countries Initiative (HIPC). Nevertheless, the country is one of the poorest in Sub-Saharan Africa, and remains largely dependent on foreign aid, which represents 10 percent of the gross domestic product and accounts for 80 percent of public investments. Average income per capita remains at US$300 and Burkina Faso rates number 161 out of 168 on the UN Human Development Index (2010). B. Sectoral and Institutional Context 3. Mining is a key driver of diversification and growth. Mineral resources have become the main export commodities in Burkina Faso since Government reforms in the mining sector, including a modern mining code in 2003, have already attracted important foreign direct investments, notably in gold mining and exploration. According to the National Mining and Quarrying Direction 5.5 tons of gold were produced in 2008, 12 tons in 2009, 22.5 tons in 2010, and 26 tons are projected annually starting from Export earnings from gold mining rose from 2 billion CFAF in 2007 to 332 billion CFAF (or about US$ 660 million) in The mining sector generated 3,350 direct jobs in 2008 and represented 2.8% of GDP in The contribution of the sector to GDP has significantly improved with the opening of the Essakane the largest gold mine thus far - in October Further developments are expected on gold, manganese and zinc (which will be a first in West Africa). The mineral deposits are well spread across the country, and could play an important role in developing rural economies.. 4. The Government is developing new policies and strategies to continue attracting investment, while also ensuring that the impact of these investments on the overall economy and on poverty alleviation is optimized. These reforms include the preparation of a new mineral policy declaration and a new mining code which promotes a better integration of mining 1

12 on the national economy and local community living conditions, and to further address environmental issues, mine closure, etc. This new Mining Code is currently in draft format and is undergoing consultations. The Government still needs to develop a longer term vision of its mineral sector, and to put in place the framework and capacities needed to enable improved benefits from the sector including revenues, economic linkages, and induced economic development opportunities. The macroeconomic implications of the rapid growth in tax and foreign exchange revenues generated by the mining sector and its spinoffs may require new policy and institutional initiatives by the Government. 5. The World Bank and resource rich countries are increasingly using the extractive industry (EI) value-chain approach (described in detail in Annex 2) to identify the key challenges related to the mining sector along the links of the value chain and to initiate coherent strategic programs to address them. Burkina Faso has embarked on the extractive industry transparency initiative (EITI), and is currently a candidate country. Each link in the EITI++ value-chain and how it broadly relates to Burkina Faso is described below. These are used as a framework to identify and prioritize gaps and actions. Figure 1: Extractive Industry/EITI++ Value-Chain Link 1 Access to Resources 6. Improving information about mineral resources: In spite of the development of six gold mines over the past four years, the largely unknown geological potential of Burkina Faso remains a major obstacle for attracting investors, and for the diversification of mined commodities. Relatively limited geological, geophysical and geochemical mappings and works have been carried out thus far (13 out of 26 geological sheets) using modern techniques, and the operating mines are a result of focused exploration by private companies of known mineral occurrences. There is still substantial unexplored gold potential with additional potential bauxite, copper, manganese, zinc, and nickel prospects in the country. 7. Improving the sector s legal and regulatory environment: Government reforms in the mining sector, including the 2003 mining code, have attracted important foreign direct investments, notably in gold mining and exploration. However the legislation lacks many provisions on environmental, economic and social inclusion, and the Government finds itself challenged to manage private sector led industrial mining. The ongoing work on the updating of the mining policy, and legislation supported by the World Bank financed Competitiveness and Enterprise Development Project (CEDP) will be useful, however more will need to be done in 2

13 terms of regulations, and economic, environmental and social implementation guides. The UNDP has initiated discussions with Burkina Faso to build the capacities of the key institutions involved in the sector in mining contract negotiations. This program will also benefit from the existence of a sound legal and regulatory framework. Link 2 Monitoring of Operations 8. Strengthening government supervisory institutions. Government oversight capabilities are critical in ensuring economic, social, financial and environmental compliance of the mining sector. In particular, the Stratégie de la Croissance Accélérée et du Développement Durable (SCADD the Accelerated Growth and Sustainable Development Strategy) mentions the importance of strengthening environmental oversight of the mining sector. The CEDP initiated some capacity building; however the sector needs are well above the resources available within that project. The lack of operational equipment, tools, and budget; and the aging and retiring experienced staff negatively affect Burkina Faso s institutional performance in the sector. For example, to date very few inspections have been undertaken on the operating mines with respect to their environmental or socio-economic impacts. Furthermore, the current institutional structures managing the sector still largely reflect the pre-industrial mining mandates and orientation. Insufficient coordination and cooperation between various ministries, the lack of a higher level shared vision, and at times overlapping roles and responsibilities further hamper oversight. Link 3 Collection of Taxes and Royalties 9. Increasing fiscal receipts and improving the allocation of revenues: Burkina Faso has been able to put in place a competitive fiscal framework. It has, however, significant challenges in managing expectations and in building consensus between the ministries in charge of Mines and Finance on the level of mineral sector revenues to be collected at this stage. One such challenge, involves living up to the incentives provided to firms to enable the development of industrial mines. Others include complexities with mineral accounting and addressing the sophisticated schemes that private companies put in place to minimize tax payment, and the asymmetries in skills between the administration and the private companies. While the Ministry of Finance has setup an internal coordination framework on mining revenues collection and some collaboration has been initiated with the Ministry of Mines, significant improvements are needed on the processes and skills sets. The EU and the French cooperation both have programs either under way or expected to start within months to support tax administration issues in Burkina Faso. These programs could potentially be supported further to address the specifics of mineral tax collection compliance. 10. Revenue transparency and accountability: The Government has initiated some steps toward transparency in the mining sector management including through its participation in the EITI (which benefited from the EITI MDTF), and the establishment of an anti-fraud commission to track gold mined at an artisanal level. The French cooperation is also supporting the EITI process, and this provides for the pooling of resources/support to further transparency and EITI related activities. However, as has been shown in neighboring mining countries, mining revenue flows are likely to present governance challenges unless they are accompanied by a strengthening of transparency and accountability in public financial management. Internal and 3

14 external oversight bodies appear unfamiliar with the mining sector. Effective checks and balances are needed to provide for a sound accountability framework for the management of extractive industry resources. Access to relevant information is a prerequisite for effective monitoring. Parliament, media, and civil society organizations have roles to play for improved accountability. The management of the sector will benefit from adequate capacities for each of the stakeholders to carry out their functions. Link 4 Revenue Management and Allocation 11. Ensuring sustainable allocation of revenues at the central and decentralized levels. While fiscal receipts might progressively increase as a result of streamlining and improving the performance of collecting agencies, there is need for improving mechanisms, allocation criteria and management capacity for the use of such revenues to benefit (a) the central government, (b) the provinces and local communities particularly when considering the present process of decentralization, and (c) the financial sustainability of the entities in charge of monitoring and regulating the sector. The current legislation is silent on revenue allocation to community development around mining sites. The issue of enhanced transparency and capacity in managing the fiscal decentralization process is also signaled in the SCADD as critical to growth. The current situation is primarily one in which the mining companies have responded to an assortment of uncoordinated pressures and provide various concrete benefits to the local communities, mostly schools and health care facilities. 12. Macro-economic implications: Similarly, the macroeconomic implications of the rapid growth in tax and foreign exchange revenues generated by the mining sector and its spinoffs may require new policy and institutional initiatives by the Government of Burkina Faso. It will soon be important for the Government to formulate a plan as to how it will use the increased fiscal revenues to further the development of the country and avoid the natural resource curse common to several mineral dependent countries as well as how it will manage the likely fluctuations in such revenues generated by the mining sector depending on the commodity cycle. In particular, while as part of the West African Economic and Monetary Union (WAEMU) common currency zone, fluctuations in foreign exchange revenues will not directly impact upon Burkina Faso s foreign exchange rate, they will have internal inflationary impacts that could affect the competitiveness of other industries (Dutch Disease) as well as the prices of consumer goods. Link 5 Use of Revenues for Sustainable Development Purposes 13. Insufficient long-term strategic plan to promote technology transfer and skillsdevelopment. Plans to increase the participation of Burkinabe in the mining industry, either directly or through sub-contracting are at their early stage and insufficient. While the mining code encourages a steady increase in the number of Burkinabe workers in the sector, and efforts by public and private sector are underway to fulfill this goal including the creation of the National College for Engineering in Fada, the country has a long way to go to train its citizens in higher skilled jobs. The industrial mining sector is highly mechanized; however, it can be a good catalyst for employment generation if the population can leverage the utilities of the mines, the increased purchasing power of the employees of the mines, and the demand of the operations. More importantly, there is currently no systematic plan in place for identifying the types of 4

15 goods and services and associated training that Burkinabe entrepreneurs could reasonably be expected to supply in the short to medium terms. Using the presence of the mining companies to catalyze SME growth is also aligned with the private sector priorities identified in the SCADD. 14. Potential growth poles. The spread of mines and advanced projects across the country could play an important role in developing rural economies. Three clusters of mines and advanced projects, creating opportunities for economies of scale, have the potential to become growth poles. Identifying non-mining comparative advantages, reducing factor costs, enhancing the investment climate and engaging SME's linked to the mining sector will likely attract further direct investments. The government has developed the SCADD , which aims to increase and sustain an economic growth with positive impacts on the revenues and living standards of the population in a context of sustainable management of natural resources. Mining has been identified as a strong priority sector for the realization of the SCADD, and this could provide for the framework for driving mining induced economic development and employment generation. The French Development Agency (AFD) is investigating the possibility of facilitating the extension of financial services to SMEs working in mining, and this could potentially help in addressing one the key ingredients for the inclusion of the sector in the national economy. 15. Insufficient infrastructure planning: The lack of adequate transport infrastructure is preventing the development of zinc and manganese mines. The current rail transporting goods to the port in Abidjan is reported to be insufficient, and its managing company to have initiated discussions with Areva for the transport of their uranium mines products from Niger to the port after their trucking to Bobo Dioulasso. Energy infrastructure is also an issue, and companies either generate their own electricity or import it from neighboring countries (Youga) at high cost (including transaction cost with the national electricity company reported to have the monopoly on power distribution in Burkina Faso). Some mining companies are investigating the potential of developing solar energy supply for their mines, and have initiated discussions with some donors (including the EU and the AfDB), but this is still to be integrated and formulated in cooperation with the National Energy Company. Overall there is little evidence of the existence of a framework for facilitating the development of infrastructure in a coordinated way and in a way that may be useful to other sectors of the economy or to the local population. 16. The following cross-cutting issue also needs attention: Artisanal and Small-scale Mining (ASM): There is a need to improve conditions for artisanal and small-scale miners. ASM is an important aspect of the mining sector in Burkina Faso. It is estimated that there are over 200,000 artisanal miners actively supporting their households in Burkina Faso. The artisanal sector presents challenges for the Government, distinct from those of the industrial mines. ASM is a low investment/low productivity activity, has significant adverse environmental impacts, but still represents a very significant income alternative, and under the right circumstance, opportunities for poverty alleviation. Competition for the exploitation of mineral resources is emerging between artisanal miners and large-scale/industrial companies, and needs to be managed. UNICEF is supporting the sensitization around some 80 artisanal mines sites on child labor, maternal health and gender issues. An estimated five thousand children are being helped, and these activities need to be extended to the over 600 identified ASM sites in Burkina Faso. 5

16 17. Alignment with CAS and SCADD: The GoBF is committed to making mining an important development instrument. The proposed project is aligned with the Country Assistance Strategy (CAS) the primary objective of which is to help Burkina Faso make progress on promoting economic transformation and activating new drivers of growth that can be sustained over time. Relevant points of reference between the CAS and the proposed project include: (i) accelerate private sector-led diversification, increase exports; and (ii) governance and capacity-building. The proposed project is also aligned with the four pillars of the SCADD, including the: (a) promotion of growth poles and reduction of economic vulnerabilities, (b) development of economic infrastructure, (c) investment in human capital, and (d) improvement of the sustainable development framework. The proposed project represents an implementation of the SCADD in the mining sector. 18. The proposed project will build on IDA s active mining sector dialogue since the early nineties. The World Bank financed the Mining Sector Capacity Building and Environmental Management Project (PRECAGEN), the mining component under the Competitiveness and Enterprise Development Project (CEDP), and is managing the EITI MDTF grant to Burkina Faso. The PRECAGEM has been instrumental in supporting Burkina Faso s efforts to attract sound mineral sector development, the CEDP has targeted some capacity and policy issues, while the EITI MDTF is supporting EITI implementation. Mining policy advice has also been provided by the World Bank through the recently completed Country Economic Memorandum and an ESW on local procurement in mining. Two studies are underway and will provide insights in the management and reform needs in the mining sector, including: The Political Economy Analysis of the Mining Sector" and The Engagement of Civil Society and the Local Government in the Mining Sector in Burkina Faso. 19. Rationale for IDA involvement: The Bank has extensive conceptual and technical experience in the sector and can draw on lessons learned through the implementation of similar operations globally and in the region, such as in Ghana, Liberia, Madagascar, Mauritania, Mozambique, Nigeria, Tanzania, Uganda, and Zambia. The Bank is also uniquely positioned to offer assistance covering the full spectrum of the extractive industries value chain (EITI++ approach) through the proposed project and in coordination with other World Bank and donor supported activities. 20. Partnerships: The Project will provide the Government of Burkina Faso with an opportunity to initiate further mining sector induced growth policies in future Bank operations, including through a series of four development policy operations, two of which will be focused on growth. In addition, the Government will continue to work closely with on-going development partners financed mining initiatives related to governance and decentralization including GAC. There is also a good fit with, and opportunities to leverage, IFC s investments, which include two green-field gold exploration companies. Interest from other donors, including CIDA, UNICEF, the French cooperation, AFD, GTZ in supporting the mining sector beyond already existing supports to EITI will also be further explored during implementation. 6

17 C. Higher level objectives to which the project contributes 21. The overarching goal of Bank support in the mining sector is to improve governance and create enabling conditions to increase its contribution to growth and sustainable development at the national and local levels. The proposed project represents an implementation of the SCADD, which notes the mining sector s significant potential to contribute to economic growth, and to kick-start private sector-led growth, by attracting private capital. The role of government would be to provide an environment conducive to private investment, as well as macroeconomic and political stability, and improved governance for the sector to deliver in its developmental potential. II. Project Development Objectives A. PDO 22. The Project Development Objective (PDO) is to strengthen the capacity of key institutions of Burkina Faso to manage its industrial mineral sector. 1. Project Beneficiaries 23. The beneficiaries will be (i) Burkina Faso at large through the contribution of increased mining sector activities to sustainable economic and social development, (ii) the private sector through the improvements in the investment climate, the provision of improved geological information and a more efficient cadastre system for acquiring and maintaining mineral rights, (iii) mining-affected communities who will benefit from a framework to provide improved socioeconomic opportunities and a regulatory framework to reduce, mitigate and compensate for mining related risks, (iv) government institutions and their staff involved in managing the mineral sector who will benefit from capacity building, and (v) civil society and institutions such as parliament who will benefit from capacity building and from improved information on the mining sector. 2. PDO Level Results Indicators Indicator One - Number of days to process a mineral license. Indicator Two - Percentage of industrial mines covered by annual tax controls. Indicator Three - Percentage of large-scale mining operations covered by annual technical inspections. Indicator Four - National guidelines on mining community development developed in a participatory manner, and implemented in at least one mine. Indicator Five - Percentage of large-scale mining operations covered by annual environmental inspections. 7

18 III. Project Description A. Project Components 24. The Project will enable the Government of Burkina Faso to address gaps and challenges along links 1, 2, 3 and 5 of the EI value-chain (see Annex 2). The project has three components: Component A (Link 1): Fostering Beneficial Mineral Resources Development (US$15.0 million); Component B (Link 2 and 3): Strengthening Institutional Sector Management Capacity and Accountability (US$15.7 million); Component C: Project Coordination and Management (US$2.3 million). Component A: Fostering Beneficial Mineral Resources Development (US$15.0 million): 25. This component will assist the Government of Burkina Faso in addressing challenges related to Link 1 of the EI value-chain including the need to update policies and regulations, to address the insufficiency of geological information, the outdated geo-data infrastructure, and the weak and insufficiently transparent mineral titling and licensing system. It will provide technical assistance in terms of legal expertise, geo-scientific mapping, systems and information technologies development, and training to government agencies while also enhancing public participation and access to information in the following three sub-components: A.1 Policy, legal, and regulatory framework (US$ 2.0 million). This sub-component will provide technical assistance to the Ministry of Mines, Quarrying, and Energy (MMQE), the Ministry of Finance and Economy (MoFE), and the Ministry of Environment and Sustainable Development (MESD) to: (i) complete the on-going work on updating the national mining policy and the mining code, including ensuring extensive consultations with public, private, and civil society stakeholders; (ii) carry out the sectoral environmental and social assessment; (iii) develop mining regulations, guidelines, and manuals designed to provide for the application of sound fiscal, accounting, health and safety standards, artisanal and small-scale mining standards; environmental and social standards including those related to mine closure or resettlement; and mining community development guidelines, all with due consideration of decentralization, and gender; (iv) develop a communication and public consultation strategy; and (v) provide goods and training required for the above. A.2 Geo-data infrastructure (US$10.0 million). The objective of this sub-component is to increase private sector investment in mining and increase value derived by government from these investments through: (i) geological, geophysical and geochemical surveying and mapping of thirteen geological sheets out of the total of 26 sheets for the whole country; (ii) updating the geological mapping standards, (iii) upgrading of the existing GIS systems to ensure adequate storage, management and assessment of the geological information, and (iv) training, tools and equipment. A.3 Office of the Mineral Cadastre and Geology (US$ 3.0 million): The objective of this sub-component is to facilitate and enhance transparency in the mineral titling process and information. This sub-component will support the: (i) updating of procedures related to the processing of applications for mineral rights to reflect the updated mining code and regulations; (ii) provision of relevant hardware and software to support a modern mineral cadastre; (iii) training of the cadastre personnel; (iv) training and equipment of staff to 8

19 control and monitor exploration sites; (v) compilation and storing of exploration information; (vi) ranking of relevant prospective sites under public domain so that the government may capitalize on the known value of its deposits; and (vii) development of a public information center for mining stakeholders. Component B: Strengthening Institutional Sector Management, Coordination, and Accountability (US$15.7 million) 26. This component will help address challenges related to Links 2, 3, and 5 of EI valuechain, with a focus on strengthening capacities of government and other stakeholders including central government institutions, sub-national governments, decentralized authorities, artisanal and small-scale miners, civil society and community members to efficiently, transparently and more equitably manage the mining sector. This component will help set the stage and create the framework for ensuring that Burkina Faso drives the development of its mineral sector to enhance equity and socio-economic benefits. The sub-components are as follows: B.1 Institutional Strengthening and Coordination: (US$9.2 million). The objective of this subcomponent is to strengthen the institutional capacity of the government for efficient and transparent mineral sector management. Activities to be undertaken will include the following: Institutional strengthening at the MMQE for the enhanced implementation of the mineral law, regulations, standards and systems to ensure compliance of operations with established norms through the: (i) development of mining technical control and monitoring procedures, manuals and processes; (ii) training and equipment of staff in mineral related data collection and processing, physical control and monitoring of mining operations; (iii) strengthening of collaboration and coordination with the MoEF; (iv) support to and sensitization of artisanal and small scale miners to HIV AIDS, health and safety, environmental and social matters in close cooperation with the MESD; and (v) conduct of a study to identify, evaluate and recommend measures designed to ensure the sustainability of its institutional capacity to manage and oversee the mineral sector in Burkina Faso; and to implement its selected recommendations. Institutional strengthening at the Ministry of Environment and Sustainable Development (MESD) for the enhanced implementation of the environmental law, regulations, standards and systems pertaining to the mining sector to ensure compliance of operations with established norms through the: (i) development of environmental control and monitoring procedures, manuals and processes; (ii) training and equipment of staff in the Environment Division of the MESD; (iii) equipment support to the environmental laboratory in Ouagadougou and its annexes in Bobo-Dioulasso; (iv) control and monitoring of environmental management plans, programs and site rehabilitation works; and (v) implementation of selected recommendations identified in the SESA. Institutional strengthening at the MoFE on mineral tax and revenue collection: This sub-component will support a series of activities that will help develop the overall mineral tax collection framework for the mineral sector such as: (i) development of an information system designed to facilitate coordination and collaboration between the ministries of finance and Mines; (ii) mapping of physical and financial control points to 9

20 indentify and address risks of tax avoidance by mineral extraction firms; (iii) training on revenue information collection and processing; (iv) development of management reporting systems and database on revenues; and (v) procurement of goods, publications and carrying out consultations, all as needed for assessing the compliance of revenues collection. B.2 Tertiary Education in Mineral Resource Management (US$2.0 million). The objective of this sub-component is to increase the availability of training capacity and sustainability of capacity building efforts for the public and private mining needs in Burkina Faso. In this context, this sub-component will help: (i) a tertiary education institution in Burkina Faso to structure selected training programs in demand both by the public and private sector in Burkina Faso in the form of training modules for continued education, and (ii) support training programs, the training of trainers, and the equipment of the National College for Engineering in Fada. B.3 Transparency and Accountability (US$2.3 million): This sub-component aims at improving transparency and accountability in the management of extractive industries in Burkina Faso. The activities to be supported under this sub-component will include: (i) EITI post-validation requirements in reporting, capacity building and sensitisation; (ii) a system of mining information collection, management and diffusion; (iii) providing training to mining stakeholders in sound mining principles, including those relating to public revenue generation and collection, social and environmental considerations in communities affected by or dependent on mining. This component would leverage ongoing initiatives to strengthen civil society capacity around the demands for good governance. B.4 Economic Integration Analysis, Facilitation, and Knowledge-Sharing (US$2.2 million): The objective of this sub-component is to provide the analytic underpinnings, and assist the government in developing strategies to enhance social and economic benefits from mining and to avoid the growth of an enclave mining economy. The activities under this sub-component will include assessments and have strong participation, with private sector, civil society and mining community members, such as: (a) national spatial analysis and development of road-map for mining growth pole, (b) assessment of conditions for improved local content of mining operations, and development of an action plan for the development of a supplier development program; and (c) Knowledge-Sharing/Information Platform to support and leverage private sector economic inclusion and community development activities, by facilitating access to information on (i) international best practices in community development, local procurement, public-private partnerships, and (ii) other mining related issues, and recommendations to address such issues. Component C: Project Coordination and Management (US$2.3 million) 27. This component includes project coordination and management of fiduciary aspects. It will also include monitoring and evaluation of project implementation, project reporting, and audits. The project will be managed by a Project Management Team in the Department of Mines and composed of externally hired project coordinator, financial management, procurement, accountant, mineral, and M&E experts. 10

21 B. Project Financing 28. The Project will be a Technical Assistance Grant of US$33.0 million focusing on capacity building, and on enabling the economic inclusion of the sector. The project is expected to last five years, and to close on Sept 30, Table Project Financing Table Project Components A. Fostering Beneficial Mineral Resources Development. Project cost 15.0 IDA Financing 15.0 % Financing 100% B. Strengthening Institutional Sector Management, coordination and Accountability % C. Project Coordination and Management % Total Baseline Costs % Total Financing Required % C. Lessons Learned and Reflected in the Project Design 29. The Project builds on experience gained from similar mining sector technical assistance operations in many countries, especially in Africa. This includes countries with long traditions of industrial mining like Ghana, DRC, Zambia and Mauritania, and countries where mining has only recently emerged like Mali, Madagascar, Mozambique and Tanzania. Lessons learned are regularly captured in SEGOM analytical work and publications. Recent examples include technical papers on mining cadastres and guidelines for community development agreements in mining areas (see In addition the preparation of the Project will be informed by an on-going GAC financed Political Economy Study of the Mining Sector in Burkina Faso, and a study on CSO capacity in Burkina Faso. 30. The EITI++ approach used in the Bank s current programs on extractive industries (see Box in Annex 2) has been instrumental in highlighting the critical need to integrate interventions aimed at improving mining sector performance with those related to the management of resource rents generated by the sector. This approach is strongly reflected in the project design. The main lessons learned from mining sector operations in various regions include the need for: (a) a sector-specific focus, while integrating to the extent possible cross-sectoral issues arising from the EITI++ value chain; (b) clear delineation of authority and responsibility across the various sector ministries and agencies; (c) beneficiary participation in project preparation, organization, implementation, and coordination at the field level; (d) institutional champions to ensure the sustainability of different project components; and (e) strong ownership and political commitment to project objectives. 11

22 IV. Implementation A. Institutional and Implementation Arrangements 31. During project preparation, the financial management and procurement responsibilities has been managed by an existing PIU, the Unité d Exécution de la Réforme du Secteur de l Energie (UER). Reflecting the central role the Department of Mines plays in the development and implementation of all components of the Project, at effectiveness, the project management will transfer to a Project Management Team (PMT) in the Department of Mines of the MMQE. The PMT will be responsible for all financial management and procurement matters under the Project, including project reporting and monitoring, and evaluation of performance against the Results Framework. Project management will be conducted in accordance with a Project Implementation Manual (PIM) to be developed before effectiveness. 32. The PMT will be headed by a Project Coordinator to be hired. This Project Coordinator will be responsible for coordination and supervision of project implementation, and reporting to the Project Steering Committee. To strengthen the capacity of the Department of Mines in project management, fiduciary, procurement, and monitoring and evaluation matters, the PMT will also consist of consultants previously familiar with World Bank procedures including a mineral expert, a financial management expert, a procurement expert, an accountant, and a monitoring and evaluation expert. 33. The PMT will manage an IDA Designated Account and financial transactions and procurements for the other institutions which are also beneficiaries of the Project, including the MESD, and the MoEF. This relieves the burden on the beneficiary institutions and ensures fiduciary transactions are consolidated in one agency with World Bank sponsored project management capabilities. 34. The Steering Committee (SC) including high-level representatives of the relevant ministries, which will be established prior to effectiveness, will be responsible for reviewing and approving the PIM, providing overall strategic guidance for the Project as well as coordination between project activities, initiatives and reforms. It would include the Deputy Minister of MMQE (Chair), the Deputy Minister of the MoEF, the Deputy Minister of the MESD, (who will both be Vice Chairs) and other relevant members as needed, and according to Burkina Faso legislation. Because the Bureau of Mines and Geology (BUMIGEB) is a public enterprise, the proceeds of the Financing allocated to the Bureau of Mines and Geology will be on granted to the Bureau, under a subsidiary agreement to be concluded between the Government and the BUMIGEB as a condition of effectiveness. However because of the lack of familiarity of BUMIGEB staff with World Bank procedures, the fiduciary management responsibilities will be assumed by the PMT. B. Results Monitoring and Evaluation 35. The PMT will have the overall responsibility for monitoring and evaluation in accordance with the indicators and milestones included in the results framework (Annex 1). Given the scope of the project, it will be important to measure progress and impact at different institutional levels, 12

23 involving stakeholders in government, civil society, and perhaps the private sector. This will require a sufficiently robust system for monitoring and evaluation. Therefore the Project will secure the services of an M&E specialist by December 31, 2012 to establish system requirements, develop adequate and reliable monitoring and evaluation tools, which would provide systematic data and reporting of sector performance beyond the scope of the project. The various ministries involved will be trained to collect and assess the performance indicators, including on gender. C. Sustainability 36. The Government commitment to implement the proposed activities is very important for the sustainability of their outcome and for the reform agenda in the sector in general. Repeated requests from authorities in Burkina Faso including from the Prime Minister, the Minister of Economy and Finance, and the Minister of Mining, Quarrying and Energy, combined with the identification of mining as a key driving sector for the SCADD attests to the importance given to the sector for the improvement of socio-economic conditions in Burkina Faso. The project itself constitutes an implementation of the SCADD measures in the mining sector. 37. The activities provided for under the project will improve the mineral sector management including at the local level, while also consolidating and improving Burkina Faso s image and attractiveness to investors. At the national level, the project will help improve the Government s capacity to: (a) manage the sector properly; (b) enable the flow of the revenues due to Burkina Faso flow to the Treasury; and (c) improve conditions for better value addition, and integration of the mining sector. The project is also expected to strengthen Burkina Faso s policy/regulatory framework, and enhance its institutional and human resource capacity to address the environmental and social impacts of mining. Capacity building of civil society and systematized accessibility of information are also expected to contribute to sustainability through stronger demand for good governance. 38. At the community level, sustainability will be supported through enhanced approaches to community development including participatory processes, and alignment of CSR activities with longer term local economic development plans. V. Key Risks 39. The overall risk rating during implementation is considered to be Medium-I with a low likelihood of risks (but high impact if they were to be realized). The implementing agency risk is considered Low at preparation, since the Project is using an existing well-performing PIU in the same ministry. As mentioned above, the UER has experienced and trained staff, established management, procurement, and financial management systems. See more details on risks and mitigation measures in Annex 4 ORAF. 13

24 VI. Appraisal Summary A. Economic and Financial Analysis 40. The potential scale of the sector was estimated in the Country Economic Memorandum (2009). Gold production is anticipated to reach 26 tons in 2011 and the mining sector is already the leading source of export revenues with an estimated bn CFA (about US$660 million) in The taxes and fees paid in 2009 are estimated at 9.5 bn CFA. 41. The Project intends to enhance the Government s ability to manage the country s mineral resources so that the mining sector contributes to sustainable development. By supporting the development of efficient, transparent and sustainable management of the sector, Burkina Faso can be expected to both expand mineral investment flows and optimize their contribution to sustainable development, including improving revenue collection. The project will help Burkina Faso in improving the ratio of taxes collected to the total revenue from the sale of mining commodities in the country. This should strengthen fiscal sustainability of the Project. B. Technical 42. The project design is based on analysis provided by the Country Economic Memorandum (2009), the Political Economy Study of the Mining Sector in Burkina Faso (2011), Mining and Business Enterprise Development in Burkina Faso (2010), and the long standing understanding that Bank staffs have gained over the past decade of support to the mining sector of the country. The Government has been benefiting from a PPF to assist it in preparing the project, and the continuous dialogue and joint preparation of activities has been designed to help to find the right balance between government capacity, sector maturity, the local context and international best practises in designing project activities. C. Financial Management 43. In accordance with the new Financial Management Manual issued in March, 2010 and AFTFM ORAF guideline, the Financial Management arrangements of the Project have been reviewed to determine whether they are acceptable to the Bank. The conclusion of the Financial Management Assessment is that, upon implementation of the mitigations measures proposed below, the overall project arrangements will satisfy the Bank s requirements under OP/BP10.02 to provide, with reasonable assurance, accurate and timely information on the status of the execution of the project. 44. The overall FM risk is considered Medium Impact. The Project will be implemented by a Project Management Team (PMT) in the Department of Mines of the MMQE. A FM specialist and an accountant will be recruited under the PPF before project effectiveness to handle the project transactions during implementation under the leadership of the Project Coordinator. They will develop a manual of procedures which will include key controls on accounts reconciliations, segregation of duties, control over fixed assets, and delegation of authorities. Prior review of project transactions will be performed by the financial controller located at the Directorate of 1 Source: EIU Country Report, February 1,

25 Finance of the MMQE. The existing accounting software with multi projects option at the Bank financed projects in the MMQE will be installed at the PMT to increase efficiency and reliability of the financial information. The financial management arrangements will be complemented by annual external audit arrangements under the leadership of the Court of Accounts which might outsource the tasks to private audit firms. The Designated Account to be opened at the Central Bank and the Transactions Account at the Public Treasury will be managed by the PMT. Authorization for disbursements will require signatories from the FM specialist and the Coordinator. Details of the financial management arrangements are described in the FM section of Annex Conditionality and FM covenants: Recruitment of a FM specialist and an accountant, both with qualifications and experience and terms and conditions of employment satisfactory to the Association, and adoption of a Project Manual approved by the Association are conditions of effectiveness. The Recipient is required to recruit the external auditing firm not later than three months after effectiveness. D. Procurement 46. Procurement for the proposed Project would be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated January 2011, and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated January 2011, and the provisions stipulated in the Financing Agreement. For each contract to be financed by the Grant, the Procurement Plan has defined the appropriate procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, the prior review requirements, and the time frame. The Procurement Plan will be updated at least annually, or as required, to reflect the actual project implementation needs and improvements in institutional capacity. 47. The procurement procedures, thresholds and other detailed procurement information are found in Annex 3. Major issues concerning procurement activities for project implementation have been identified and include: (i) the absence of capacities in the Division of Mines to prepare TORs and other technical documents; (ii) the limited number of staff in the Financial Departments of the three ministries involved with the project and in BUMIGEB; and their procurement units; (iii) the lack of training and experience in World Bank procurement rules of the fiduciary staff in the three ministries and in BUMIGEB; and (iv) the weakness of the filing system. The following corrective measures were agreed with all stakeholders: (i) the recruitment of a mineral expert; (ii) the recruitment of an experienced procurement specialist with strong knowledge of the Bank procedures who will prepare procurement documents and notices for the Personne Responsable des Marchés (PRM) review; and (iii) the training of the four procurement units staff in the MMQE, MoEF, MESD and BUMIGEB. 48. Conditionalities: Recruitment of a procurement specialist and a mineral expert with qualifications, experience and terms and conditions of employment satisfactory to the Association are conditions of effectiveness. 15

26 E. Social (including safeguards) 49. The Sectoral Environmental and Social Assessment (SESA) (see TORs in Annex 7) to be undertaken not later than Dec 31, 2012 will provide a diagnosis of the environmental and social issues associated with mining sector development. The SESA will include a time-bound action plan to address key issues identified related to mining and environmental management. The SESA will also assess the adequacy of the existing environmental and resettlement policies. The project will finance the SESA. 50. Under the Project the Recipient will not later than Mar 31, 2014 develop a framework for mining community development and support activities aiming at capacity building of communities within the context of decentralization. The community development framework will amongst other things provide for the enhancement of participation and leadership from community including gender, and the alignment of investment with decentralization and local economic development plans. F. Environnent (including safeguards) 51. The Project is expected to have significant positive environmental impacts through the improvement of the environmental management of the mining sector, the sensitization programs, and the enhancement of the environmental management capacity in MESD. As a technical assistance operation, activities will not have significant physical impact on the environment. The project will only provide support for the establishment and improvement of general sector management systems, and will not engage in zoning, planning or preparatory activities for specific investments linked to identifiable impacts. 52. Although the proposed Project is limited to the provision of technical assistance and is not expected to result in direct environmental or social impacts, the support to sector development may lead in the long run to further investment in the sector, hence the benefits of a Sectoral Environmental and Social Assessment to address potential future safeguards concerns, and the classification of the project as a Category B, triggering OP/BP 4.01 (Environmental Assessment). The Government has prepared and published the TORs for the SESA in country and at InfoShop. Based on the study, the Recipient will develop recommendations to address the issues identified, and will prepare a time bound action plan based on the recommendations; selected actions under the action plan within the timeframe of the project, and agreed with IDA, will be carried out under the Project. 53. While the Bank will not, under this TA operation, require the adoption of the recommendations coming out of the studies undertaken under the Project (except as noted in the preceding paragraph), the Recipient will be required to ensure that all ToRs for such studies are consistent with and pay due attention to the Bank s environmental and social safeguards policies as well as the country s own environmental and social laws, and that all regulations prepared under the Project pay due attention to these policies and laws. In addition, IDA would have a suspension remedy should it determine that: (i) prior to the disbursement deadline, the Recipient had failed to apply sound environmental or social standards or practices in its management or carrying out of activities in its industrial mining sector and (ii) as a result of such failure, a situation had arisen making it improbable that the objectives of the Project would be achieved. 16

27 Core Table 1: Results Framework and Monitoring Annex 1 Results Framework and Monitoring BURKINA FASO: Mineral Development Support Project Project Development Objective (PDO): To strengthen the capacity of Key institutions of Burkina Faso to manage the industrial mineral sector. PDO Level Results Indicators* Indicator One: Average number of days to process a mineral license application: Unit of Measure Number Baseline Cumulative Target Values** YR 1 YR 2 YR 3 YR 4 YR 5 Frequency Data Source/ Methodology Title request logs, Decrees, and Orders. Responsibility for Data Collection DGMGC 2 Description (indicator definition etc.) Average time to process requests after all documents are submitted. Exploration Bi-annual Exploitation Indicator Two: Percentage of industrial mines covered by annual tax controls. Indicator Three: Percentage of industrial mining operations covered by annual technical inspection. Indicator Four: National guidelines on mining community development developed Bi-annual % Bi-annual Annual Report from the General Office of Taxation in MoFE. % Annual Records at Inspectorate Division and IGAME. Yes/no No No Yes Yes Yes Yes End of Project Guidelines on mining community development adopted by the MMQE. General Office of Taxation/MoEF MMQE DGMGC/ DGTCP Control of mining payments compliance with the contractual obligations. Number of mines subjected to annual technical inspections. Guidelines defined and adopted. 2 National Directorate for Mining, Geology and Quarries 17

28 Indicator Five: Percentage of industrial mining operations covered by environmental inspection. INTERMEDIATE RESULTS % Bi-annual Inspection reports and activity reports. Intermediate Result: Component A Fostering Beneficial Mineral Resource Development BUNED/MESD Inspections will assess compliance with environmental laws and regulations. Regulatory Framework updated Mining regulations adopted. Manual for mining inspections drafted. Manual for environmental inspections drafted. Number of geological sheets covered by geo data acquisition. Number Annually Regulations DGMCC/IGAME /DAJC/BUNED Yes/No No No Yes Yes Yes Yes Annually Manual DGMCC/IGAME /DAJC/BUNED Yes/No No No Yes Yes Yes Yes Annually Manual DGMCC/IGAME /DAJC/BUNED Number Annual BUMIGEB BUMIGEB/MM QE Development of regulations and operational manuals for the implementation of the new Mining Code. Area covered by geoscientific mapping. Geo-data database (GIS) integrating geological, geophysical and geo-chemical information accessible in the public domain. Updated and modernized mineral cadastre with accessible Yes/No no no no yes yes Yes Bi-annual BUMIGEB geo data accessible online. Yes/No no No No Yes Yes Yes Bi-annual Cadastre accessible on-line. MMQE/BUMIG EB MMQE/Cadastre Geodata accessible on line. Updated Cadastre data available on line. 18

29 information on line. Number of exploration sites inspections commissioned by the Geology Office. Number of sites in the public domain assessed and valued. Number Bi-Annual Field reports of the Office of Geology. number Annual Valuation reports of the Office of Geology. Intermediate Result: Component B Strengthening Institutional Sector Management, Coordination and Accountability Office of Geology/MMQE Office of Geology/MMQE Cumulative number of field visits to inspect the conduct, and compliance of exploration activities. Valuation of prospective sites returned to the public. Direct Project Beneficiaries (number) of which female (%) Number of people trained in the implementation of environmental legislation regarding mining operations. Number of advanced stage exploration companies subjected to tax and cost controls. Number % 0 4, ,990 9,835 10,575 11,315 Annually Activity reports, training records. PMT/MMQE Aggregate number of beneficiaries from all training related indicators, sensitization campaign, and students (see indicators below) number Bi-annual Activity reports MESD/MMQE Cumulative number of people identified in the regions and trained on the implementation of the environmental legislation. Number Annual Annual Report from the Direction General of Taxes/ Geology Unit. Direction General of Taxes in MoFE, and Geology Unit in MMQE Control of costs, and exonerated goods and services beneficiaries. 3 65% male and 35 % female 19

30 Number of persons trained under the project (by gender): Civil servants Number Public oversight institutions ASM and mining communities sensitization and training on mining environmental matters. Number of students graduating annually from a master degree in mining engineering at Fada. MMQE Communication strategy developed and implemented National Framework for local content developed. Community members trained and consulted in the development of the Mining Community Development framework. 4 60% men, 40% female Number Number 0 3,850 7,700 8,200 8,700 9,200 Number annual Engineering graduation dissertations approved by the Fada School of Engineering enrollment register Yes/No No No Yes Yes Yes Yes Bi-annually MMQE records on consultations Yes/no no No Yes Yes Yes Yes Bi-annually MMQE/Chamber of Mines/Commerce 20 Bi-annually Training records MMQE Cumulative number of people trained. This will be verified through logs kept to record attendance, by gender. MMQE PMT/MMQE PMT/MMQE Cumulative number of students trained on mining engineering at Fada. Mining Sector Communication Framework to include supplier development plan, procurement forum for mines, and adequate policies. Number Bi-annually Records at MMQE MMQE PMT Communities representatives consulted and trained on mining community development.

31 Annex 2 - Detailed Project Description 1. The MDSP is supporting the Government of Burkina Faso in addressing gaps and challenges along selected links of the EITI++ value-chain (see below). The project has three components: Component A (Link 1): Fostering Beneficial Mineral Resource Development (US$ 15.0 million); Component B (Link 2 and 3): Strengthening Institutional Sector Management Capacity and Accountability (US$15.7 million); Component C: Project Coordination and Management (US$2.3 million). Figure 2: Extractive Industry Value-Chain Detailed Box 1. The Extractive Industries Value Chain Approach (EITI++): In many resource-rich countries, the Extractive Industries Transparency Initiative (EITI) is an important entry point to the sound management of the oil, gas, and mining sector. Effective management of oil, gas, and mining resources however requires attention along the entire chain from granting access to those resources, to monitoring operations, to collecting taxes, to improving economic management decisions, to spending resources effectively for sustainable growth and poverty reduction. An EITI++ framework approach encourages countries to take a strategic and comprehensive view of how to translate wealth from the extractive industries into growth and development. Implementing the EITI++ approach means that a government has (or is interested in developing) a vision for the good governance and sound management of its extractives sector and a (rolling) program of policy actions, institutional capacity-strengthening, and investments consistent with its vision. The program, framed against the value chain needs to be prioritized, sequenced and tailored to country circumstances. This methodology has already been used to analyze the extractive sectors of several countries globally. Component A: Fostering Beneficial Mineral Resource Development(US$15.0 million) 2. This component will assist the Government of Burkina Faso in addressing challenges related to Link 1 of the EI value-chain, including the need to update policies and regulations, the lack of geological information, the outdated geo-data infrastructure, and the weak and insufficiently transparent mineral titling and licensing system. It will provide technical assistance in terms of legal expertise, geo-scientific mapping, systems and information technology development, and training to government agencies while also enhancing public participation and access to information in the following three sub-components: A.1 Policy, legal, and regulatory framework (US$2.0 million). Government reforms in the mining sector have attracted important foreign direct investments, mainly in gold mining exploration. The legislation however lacks many provisions on social, environmental and economic aspects, and as a result the country finds itself challenged to manage private sector led industrial mining. The ongoing updating of the mining policy and legislation (currently in draft 21