The World Bank Report No: ISR6451 Implementation Status & Results Papua New Guinea PG Second Mining Sector Inst Strengthening TA (P102396) Public Disclosure Copy Operation Name: PG Second Mining Sector Inst Strengthening TA (P102396) Project Stage: Implementation Seq.No: 6 Status: ARCHIVED Archive Date: 01-Mar-2012 Country: Papua New Guinea Approval FY: 2008 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Technical Assistance Loan Implementing Agency(ies): Mineral Resources Authority Key Dates Board Approval Date 26-Jun-2008 Original Closing Date 31-Dec-2013 Planned Mid Term Review Date 19-Mar-2012 Last Archived ISR Date 01-Mar-2012 Effectiveness Date 03-Aug-2009 Revised Closing Date 31-Dec-2013 Actual Mid Term Review Date 19-Mar-2012 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective is to improve the benefits from Extractive Industries (EI) to the national budget and to mining affected communities and to mitigate mining's health and safety risks for ASM miners. This will be achieved through improving effectiveness of key EI sector institutions, supporting EI communities to be better able to monitor the delivery of community programs and services, empowering disadvantaged groups including women and youth in extractive industries affected areas, and improving accountability of the sector and for management and use of mining-related revenues. The primary target groups are the institutions involved in the mining sector, the communities in the vicinity of both large-scale and artisanal/small scale mining operations and the recipients and managers of mining benefits streams. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Strengthening Policy and Regulatory frameworks 1.90 Strngthening Mining Sector Governance 8.19 Improving Revenue Collection 4.20 Public Disclosure Copy Strengthening Minng Sector Management in Bougainville 2.00 Project Management 0.67 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Page 1 of 7 The World Bank Report No: ISR6451 Implementation Status Overview This ISR reports on the findings of a World Bank supervision/Mid-term Review (MTR) mission to PNG from March 19-27, 2012. The project has been under implementation since August 2009, after delays in counterpart signature and effectiveness. Progress towards achievement of the Project Development Objective by the project closing date of December 2013 is only moderately satisfactory. Overall implementation progress remains moderately satisfactory, though in certain respects signs of improvement are already showing, with key Public Disclosure Copy actions identified by the last supervision mission on track. The Annual Report up to the end of December 2011 was received and is considered adequate. Monitoring and evaluation indicators were updated and confirmed during MTR. Disbursement has started to pick up, with about 20% of the proceeds being disbursed so far and another 15% committed. Following a discussion with the Mineral Resources Authority (MRA) project manager and procurement specialist, the task team agreed on strategies for more effectively managing the sequencing of procurement activities to accelerate disbursement rates going forward. Mid Term Review. The MTR finds that the MSISTAP, after a period of slow progress and delays, is making satisfactory progress towards the achievement of the PDO, as follows: • The first mining tax audit (finalized 2008) has resulted in an additional tax assessment of about K70 million (approx. US$35 million). However, while the audit-related sums are important, they have been dwarfed by the increase in total tax receipts from the EI sector from K768 million in 2009 to K2.1 billion (estimate) in 2011 reflecting a strong performance by the IRC to collect taxes during the 2009 – 2011 minerals boom . • MRA has supported preparation of six Mining Community Development Plans, in an inclusive manner, ensuring women’s participation, which is a strong output (but not an outcome) from the project. • The MSISTAP has supported a pilot artisanal and small scale (ASM) pilot project in Western Province which has resulted in an increased number (approx. 2000) ASM miners adopting mercury-free ASM production and 1,600 ASM miners using retorts to capture and recycle mercury instead of releasing it into the environment. The original targets were 120 and 80 respectively, indicating a very substantial accomplishment so far by the project. Based on these findings, the MTR finds that the PDO is still relevant and can achieved in the remaining time to project closure and recommends that the PDO remain unchanged. Locations Country First Administrative Division Location Planned Actual Pap. New Guinea Not Entered Independent State of Papua New Guinea Pap. New Guinea Bougainville Bougainville Results Project Development Objective Indicators Public Disclosure Copy Page 2 of 7 The World Bank Report No: ISR6451 Indicator Name Core Unit of Measure Baseline Current End Target Increased Tax Assessments from IRC audits Text Value 0 US35 million dollars US24 million dollars (estimate) Public Disclosure Copy Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments First mining audit resulted in an additional tax assessment of K70 million. However, while audit related sums are important, they have been dwarfed by the increase in total tax receipts form EI sectors from K768 million in 2009 to K2.1 billion in 2011 Mining community representatives participate Text Value 0 6 6 in preparation of Local Level Mining Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Community Development Plans Comments MRA indicated (and coordinators' reports confirmed) that so far six local level development plans have been prepared with the participation of mining communities representatives. Target is achieved Number of community groups participating in Text Value 0 3 at each mine site 3 at each mine site community planning Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments MRA indicated (and coordinators' reports confirmed) that communities groups are participating in community planning. Target achieved Public Disclosure Copy Number of ASM miners using mercury Text Value 0 1800 (average) 180 management or zero mercury technologies Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments MRA indicated that about 2000 miners are using zero mercury technologies and about 1600 mercury management. This is supported by the ASM training center established in Page 3 of 7 The World Bank Report No: ISR6451 Wau and the ASM pilot project in Ok Tedi. Target achieved Public Disclosure Copy Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Exploration and Mining license processing time Text Value 300 days 240 days (average) 120 days is reduced Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments The exploration license processing time is reduced to 180 days, while for mining licenses continue to be around 300 days. The new tenement management system will help to reduce the processing time towards the target Number of IRC tax audits conducted Text Value 2 2 6 Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments Due to the organizational changes of IRC (introduction of computerized self- assessment system) and delays in getting the mining andoil and gas auditors on board, no other audits have been initiated so far. IRC is willing to initiate other 2 audits once the miningand oil and gas auditors will be in place. New mining sector policies developed, Text Value 0 2 3 including mine closure, offshore mining and Public Disclosure Copy Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 mining safety Comments Offshore mining and mining safety policies have been developed with government funds. Consultant for Mine Closure Policy is being selected. New mining legislation developed and adopted Text Value 0 1 3 Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Page 4 of 7 The World Bank Report No: ISR6451 Comments 1 new piece of legislation was developed using other sources of funding - mine waste policy (funded by Public Disclosure Copy European Union) New mining M&E framework developed and Text Value Developed 0 Adopted by Developed 0 Adopted by Developed 1 Adopted by adopted mines 0 mines 0 mines 6 Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments M&E framework for measuring social outcomes under preparation Number of community plans reflecting priotities Text Value 0 6 6 opf women and youth Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 Comments MRA confirmed that there are 6 community plans that reflects the priorities of women and youth, namely: Simberi – 1 SEDP - the LOA’s SMAA’s SEDP - Hidden Valley – Family Development Plan of the LLG in the MOA - Ok Tedi – 9 CMCA Women & Children Development Plans. Source of funding to implement the Plans comes from the 10% each of the State, PNGSDPL & OTML. - Tolukuma – Current Public Disclosure Copy MOA outlines 10% funding of the Government’s Infrastructure Development Grant for women & children at Mine Closure -Ramu – Draft MOA currently in review outlines 1% Royalty funding of the KBK LOA for their women & children Page 5 of 7 The World Bank Report No: ISR6451 - Lihir – Lihir Sustainable Development Plan (LSDP) outlines community programs Public Disclosure Copy for women & youth . Target achieved Number of communities where MRA provides Text Value 0 0 6 reports on benefits streams and discusses Date 26-Jun-2009 27-Mar-2012 31-Dec-2013 these with communities Comments MRA and DMPGM are working together in this area. DMPGM is currently carrying on a study to review mining benefits streams and oncethe study will be completed, consultation on the results of the study would be carried out. MRA consultants are in the process to be deployed - too early to identify results Data on Financial Performance (as of 26-Jan-2012) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P102396 IDA-44910 Effective 26-Jun-2008 19-Feb-2009 03-Aug-2009 31-Dec-2013 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P102396 IDA-44910 Effective XDR 10.40 10.40 0.00 1.97 8.43 19.00 Public Disclosure Copy Disbursement Graph Page 6 of 7 The World Bank Report No: ISR6451 Public Disclosure Copy Key Decisions Regarding Implementation The Implementation and procurement plan for 2012, approved in January 2012, focuses on priorities identified by previous supervision mission (December 2011) and confirmed by the MTR, including preparation of a number of sector policies, development of the mineral tenement management system, undertaking a Strategic Environmental and Social Assessment of the mining sector and strengthening the capacities of the relevant authorities for fiscal and operational compliance monitoring and enforcement. Restructuring History There has been no restructuring to date. Related Projects P131462-PNG Social and Economic Empowerment for Women in Mining and Petroleum Areas Public Disclosure Copy Page 7 of 7