public disclosure authorized report no. 482-tun appraisal...

Report No. 482-TUN TOE RETURCED ro 6EPORTp yDSK FILE COPrAppraisal of RIE O EotSDS

Gafsa Phosphate Project RETURN T

Tunisia REPORTS DESK(In Two Volumes) INVolume II: Annexes WITHJuly 12,1974 ONE WEEKIndustrial Projects DepartmentNot for Public Use

U

Document of International Bank for Reconstruction and DevelopmentInternational Development Association

This teport was prepared for official use only by the 8ank Group. it may not be publishd.quoted or cited without Bank Group authOrization. The Bank Group dors not accept re5pon-sibi)tsy kcr the accuracy or complereness of the report.

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TUNISIA

APPRAISAL OF

GAFSA PHOSPIATE PROJECT

VOLUME TT

CURRCY EQUIVAlENTS WEIGHTS AND MEASURES

Except where otherwise indicated, Al units are metricall figures are quoted in U.S.Dollars (US$) and for Runisian 1 Metric Ton = 1,000 Kilograms (kg)Dinars (DT) 1 Metric Ton = 2,205 Pounds

1 Kilometer (km) = 0. 62 If lesSeptember 1973 - February 19714 1 Meter = 39.3 Inches1 Dinar = 2.27 US Dollars1 US Dollar = 0.44 Dinar

ABBREVIAIIONS AND ACRONYMS

BPL Bone phosphate of lime. It is the equivalent of TricalciumPhosphate content in rock phosphate or o.46 units of P2 05.

BTS Tonnes Brutes Tri6es Seches - gross sorted dry tonsCERPHOS Centre d'Etudes et de Recherches des Phosphates Mineraux - Paris.CIPHOS Compagnie Nouvelle des Phosphates du Djebel N'DiUaGAFSA Compagnie des Phosphates et du Cheuin de Fer de GafsaICM Industries Chiiiques MahgrebinesNPK NPK Tunisian Fertilizer CompanySIAFE Soci6tg Industrielle d'Acide Phosphorique et d'EngraisSNCFT Sooi6t6 Nationale des Chemins de Fer TunisiensSOFREMINES So¢i6t6 Francaise d'Etudes Minieres - ParisSOGREAH Soci6t6 Grenobloise d'Etudes HydrauliquesSTEC Socidtg Tunisienne d'Engrais ChimiquesSTEG Socidt6 Tunisienne del Electricit6 et du GazSTEPHOS Soci6t6 Tunisienne d'Exploitation PhosphatiareSTIPCE Soci6t6 Tunisienne Indcstrielle de Produits Chiniques et

d'Engrais

FISCAL !EAR OF GAFSA COMPANY

January 1 - December 31

Industrial Projects DepartmentJuly 12, 1974

TUNISIA

APPRAISAL OF THE GAFSA PHOSPRAIE PROJECT

Table of Contents

Volume II

ANNEXES

1. Glossary of Technical Terms

2-1 The GAFSA Company - History2-2 - Organization and Management2-3 - Geology and Ore Reserves2-4 - Mines2-5 - Plants2-6 - Infrastructure2-7 - Manpower2-8 - Historical Income Statements2-9 - Historical Balance Sheets

3-1 The Market3-2 The Tunisian Fhosphate Industry

4-1 Sehib Project - Technical Description4-2 - Organization and Management4-3 - Implementation Schedule

5-1 Sehib Project - Capital Cost Estimates5_2 - Working Capital Requirement5-3 - Equipment and Services to be Financed by the Bank5_4 - Disbursement Schedule

6-1 Sehib Project - Assumptions for Financial Projections6-2 - Operating Cost Projections6-3 - Projected Income Statements6-4 - Projected Source and Application of Funds6_5 - Financial Rate of Return and Sensitivity Tests6-6 - Break-even Point Analysis

7-1 ModernizationProgram - Technical Description

7-2 - Management and Implementation7-3 - Capital Cost Estimates7-4 - Production and Operating Cost Projections

8-1 The GAFSACompany - Projected Income Statements

8-2 - Projected Source and Application of Funds8-3 - Projected Balance Sheets

9-1 Economic Rate of Return Calculations and Sensitivity Tests9-2 Foreign Exchange Effects

ANNEX 1

TUNISIA- GAPSA PIIOSPHIATE PROJECT

GLOSSARY OF TECHNICAL TERMS TSED IN THE TEXT

Apatite - The major nlhosDhorus minerals of most phosphaterock including Tunisian rock are in the aoatitegroup and can be represented by the formulaCa5 (P0 4 ) 3 (F Cl OH). The (F Cl OH) radical mav beall fluorine. chlorine, or hvdroxyl ion or anycombination thereof. The (P04) radical can bepartlv replaced by small quantities of V04, AsO4,Sif4 and C03. Also small ouantities of calciumcan be replaced bv many elements, such as magnesium,manganese., strontium, lead, sodium, uranium, cerium,and vttrium.

Air Classification - Classification is the process of separating particlesof various sizes,densities and shanes. This can bedone by screening or by gravity methods. Gravitymethods use the concept of different settling ratesof particles of different size, shape and densityin a fluid media (water, air or slurry) to segregatethem. With the air classification of phosphate rockthe particles gravitate against a rising current ofair, the flow rate of which is so adjusted that thedesired heavv or coarse particles fall to a bottondischarge, while the lighter ones are upswept at ahigher speed than is compensated by their fallingrate and overflow.

Beneficiating - The dressing or processing of ores for the Purposeof (1) regulating the size of the desired product:(2) removing unwanted constituents: and (3) impro-ving the quality, puritv of assav grade of thedesired product. The seDaration and accumulationof economic minerals from waste material. Benefi-ciation of phosphate rock can be done by washing,air classificationr, calcination, flotation, orelectrostatic separation.

BPL - Bone nhosphate of lime. Th{s is the enuivalent ofthe tri calcium DhosDhate content (Ca3(PO4)2) inthe rock nhosphate. One BPL unit is equivalent to0.458 units of phosphorus pentoxide (P20 ), and oneP905 unit is ecuivalent to 0.436 units of phosphorus(P). Alternatively 1 unit of P is equivalent to2.2912 units of P205 and 5.007 13PL units. BPL isthe terminology most used when referring to thequalitv of rock phosphate- but P105 is most oftenreferred to when discussing the phosphate contentof fertilizers and acid.

ANNEX 1Page 2

BTS - Bruttes Triees Seches - gross sorted drv tons.This is the unit used to refer to run of mine oreafter sorting out waste by coarse screening and/orhand sorting. It is a calculated figure based uponthe weight of the wet run of mine ore adjusted foran assumed moisture content of 12%.

Calcination - Heating ores, concentrates, precipitates, or residuesto decompose carbonates, hydrates, or other compounds.When carbonates are heated sufficiently they decom-pose, evolving C02 and leave behind the correspondingoxides. The temperature of dissociation depends uponthe carbonate. Calcining of nhosphate rock resultsin dissociation of the mineral aDatite, with theCO2 being dissociated from the carbonate which iscombined to the calcium. In addition, the organicmaterial contained in the Dhosphate rock is burnedoff.

Epure - This is ground nhosphate rock ungraded bv the addi-tion of phosphoric acid. GAFSA produced a 71-72BPI, Epure bv adding phosphoric acid to their lowgrade 60-65% BPL rock.

Filterabilitv - In the context used in the report, this refers tothe ease and speed with which the phosphate rockcan after digestion with acid be filtered in aPhosphoric acid plant. Because of the high organiccontent the GAFSA rock has a slow filtration ratewhich restricts acid nroduction or requires that alarger filter area be installed.

Flocculation - The gathering of suspended particles into aggrega-tions. The addition of a flocculant greatlyimproves that rate of filtration (i.e., filterability)of the GAFSA phosphate.

Gypsum - A natural hydrated calcium sulDhate CaSO42H20. Thisis produced from the anatite mineral contained inthe phosphate rock during the digestion phase ofphosohoric acid production, and seDarated from thesolution during filtration.

ANNEX 1Page 3

Hyperphosphate - Phosnhate rock ground to less than 150 micron andsold for direct application as a fertilizer.

MAP - Monoammonium phosphate - a nitrogen phosphatefertilizer made from ammonia and pure phosphoric acidwith a formula of NH4H2PO4, and an analysis of 12% N,61% P. DAP or Diammonium phosphate has an analysisof 21% N, 53% P.

Oolite - A sDherical to ellipsodial body, 0.25 to 2 milli-meters in diameter. In the Tunisian phosphate rockthis is made up of apatite with a small amount ofincluded organic material.

Superphosphate - Anv of various commercial phosphate fertilizersobtained as white to gray granules or powders byacidulating grotnd insoluable phosphate rock; as

(SSP) (1) Simple sunerphosphate - a product made byacidulating with sulfuric acid, consisting essen-tially of soluable primary calcium phosphate, calciumsulphate, and small quantities of secondary calciumphosphate and containing usually about 20% of avail-

(TSP) able phosphoric acid, (2) Triple supernhosphate -a product made bv the addition of phosphoric acid,to phosphate rock, consisting essentially of primarycalcium Phosphate and containing usually 40 to 50%of available nhosnhoric acid.

Tailing - The part of any ore separated by processing andtreated as inferior in quality or value; the ganque,sand, ,ravel, slimes, and other refuse materialresulting from the w7ashing, beneficiation or treat-ment of ground ore. Those portions of treated oreregarded too noor to he treated further.

R3ashing - In phosDhate technology this means removing slimesfrom the relativelv coarse ore by washing, tumbling,scrubbing. Prior to washing in a nhosphate washingplant, the very coarse ore is separated bv screening,hence, the final Droduct after washing is the middling.

Industrial Projects DepartmentApril 1974

ANNEX 2-1

TUNISIA: GAFSA PHOSPHATE PROJECT

HISTORY OF THE CAPSA COMPANY

1. Phosphate reserves were discovered in 1886 near Metlaoui by thegeologist Philippe Thomas. In 1896, the authorities granted a concessionfor 60 years (a) to exploit the phosphate reserves in the south of Tunisialocated between the oasis of Gafsa and the border of Algeria, and (b) tobuild a railway between the mines and Sfax. The mining concessions heve beenrenewed for 99 years whereas the right to operate the railway was not renewed.The GAFSA Company "Compagnie des Phosphates et du Chemin de Fer" was establishedin 1887 as "societe anonyme" with headquarters in Paris. M. de Robert, one ofthe co-founders, received 50% of the share capital for bringing in the concessionand a 30,000 hectare olive estate (Domaine de Chaal).

2. In 1896, exploitation began in the Metlaoui mine, and Metlaouihas remained since then GAFSA's center of mining operations. The railwayMetlaoui-Sfax has operated since 1899 and was later extended to Moulares andRedeyef. GAFSA's output increased rapidly through opening of new deposits,i.e., Redeyef (1906/12) and Moulares (1919/23). The phosphate rock was dried,handsorted and marketed. The beneficiation plants are later additions; air-classification units in Redeyef (1950) and Moulares (1928), and 3 washingplants in Metlaoui dating from 1952, 1954 and 1966/69.

3. Beneficiation of the Tunisian phosphate rock (58-65% BPL, run ofmine ore) became essential when the Moroccan mines started exploitation in1929 producing high grade ore (70-75% BPL). Until then, Tunisia had domi-nated the world phosphate market and the GAFSA Company exported 2 milliontons of rock in 1926. The Company joined the marketing organization CPAN(Comptoir Phosphatier d'Afrique du Nord) in 1930 which remained in effectuntil 1960; this cartell restricted the Company's exports to 1.5 milliontons/year and regulated prices and sales conditions.

4. In 1938, the Company bought back and anulled the share capital ofM. de Robert. Subsequently, the ownership of the Company was dispersed amongsmall private shareholders excepting a 6-7% participation of the Banque deParis et des Pays-Bas. In 1960 after Independence, the private shareholdersvoted unanimously to offer the Tunisian Government a 50% equity participation.The Government accepted and paid in 2.5 million DT between 1961-64. Afterseveral equity capital adjustments, the Tunisian Government now holds 83% ofthe share capital.

5. In 1964 the olive estate Domaine de Chaal was nationalized; addi-tionally, the Government did not renew the railway concession in 1966, butmerged the GAFSA-SFAX line with the state-owned railway company SNCFT. Thecompensation question between the Government and the Company has finallybeen settled: the phosphate mining company CIPHOS (Compagnie Nouvelle desPhosphates du Djebel M'Dilla) was given to the GAFSA Company as part of the

ANNEX 2-1Page 2

settlement. CIPHOS had been managed by GAFSA since 1961. It owned oneoperating mine, M'Dilla, located about 20 km south of Gafsa, which had beenexploited since 1924, one calcination unit (1928), a washing plant (1952),and loading facilities in Sfax. In addition, CIPHOS had concessions for newlydiscovered reserves in Sehib, Kef ed Dour and Sra. El Quartane.

6. In 1962, the Company headquarters were transferred from Paris toTunis and again to Gafsa in 1968. However, the Company moved back to Tunisafter one year due to the difficulties encountered. To increase the produc-tion, the Company has been developing new mines (M'Rata and Sehib) and sub-contracted the exploitation of some outcrops near Kef Es Schfair.

Industrial Projects DepartmentJuly 1974

ANNEX 2-2Page 1


THE GAFSA COMPANY - ORGANIZATION AND MANAGEMENT

A. LEGAL POSITION

B. ORGANIZATIONAL STRUCTURE

1. Recent Development2. Financial Control3. Production (DEM)4. Planning, Programming and Budgeting

C. MANAGEMENT

Chart 1: The GAFSA Company - Organization Chart

ANNEX 2-2Page 2

A. LEGAL POSITION

1. The GAFSA Company has been established as "societe anonyme" withheadquarters in Tunis - 83% of its-share capital (8.85 million dinars) ispresently owned by the Tunisian Government. The general assembly of share-holders, each of them representing 20 shares or more, elect a Conseild'Administration (Board of Directors) consisting of at least 3 and at most12 members. The representatives are elected for 6 years and can be re-elected; they choose annually among themselves the President of the Company.At present, the Conseil d'Aministration is conmosed of 6 Tunisian Governmentappo'ntees (T. Amira, President and General Manager, H. Achave, A. Abassi,A. Slama, S. Mbaika, A. Boukhris) and two French representatives of privateshareholders, J. Peccio-Galetto and H. Basset.

2. The general assembly of shareholders nominates every 3 years anoutside accountant as "commissaire aux comptes" who investigates annuallythe financial statements according to the requirements of Article 83 of theTunisian Code of Commerce.

3. The Company statute regulates the distribution of profits asfollows: (i) 5% of profits have to be allocated to "legal reserves" as longas those reserves are less than 10% of equity capital; (ii) the generalassembly can, upon suggestion by the Conseil d'Administration, allocate anypart of the profit as retained earnings or special reserves. 7% of theremaining amount is distributed to the members of the Conseil d'Administrationbetere lividends are paid.

B. ORGANIZATIONAL STRUCTURE

1. Recent Development

4. The organizational structure of the GAFSA Company has changedsuccessively since 1966 because of the transition of managerial staff anda shiort-lived transfer of the Company's headquarters to Gafsa in 1968.4r. Jaussaud left GAFSA as General Manager in 1966 and he was succeeded byk!essrs. Abassi, Bahri and Boukhris and, at the same time, five technical-iainars followed: Messrs. Pescio, Boukhris, El Bongi, Bele Aid and Akrout.

The present organization is shown in Chart 1. GAFSA also managesSTEPVIOS (Societe Tunisienne d'Exploitations Phosphatiers) which operatesmines and beneficiation plants at Kalaa Djerda and loading facilities at1,.3 Goulette. Mr. Tahar Amira, a graduate of the Paris mining school, has1:--en President and General Manager since 1969. He is assisted by fouritirectors: Mr. Chebbi, head of the commercial department; Mr. Naccache, in

ehar-, of Administration and Finance; Mr. Ben Debba, in charge of the Develop-me~nt Department; and Mr. Nabbi, head of the Production Department in Metlaoui.Geographically and administratively, the GAFSA Company consists of twod±stl>nct un_ts:

ANNEX 2-2Page 3

(i) The Production Department comprising all miningbeneficiation and support facilities in the Gafsaregion and Kalaa Djerda; and

(ii) The Direction Generale which includes the officesin Tunis and Paris as well as loading facilitiesat Sfax and La Goulette.

6. During the past two years, there have been no major functionalchanges in the Company's organizational structure. Recently, however, andas elaborated below, the production, development and financial controlfunctions have been strengthened and an attempt has been made to improveshort- and medium-term coordination and planning within the Company. Inmid-1973, GAFSA commissioned SOTUETEC, a Tunisian management consultingfirm to undertake an organizational study. The First Phase, which reviewsthe corporate organization structure, has been completed; SOTUETEC iscurrently formulating an internal management reporting and planning systemwhich is scheduled to be implemented during a Third Phase at the end of 1974.

2. Financial Control

7. GAFSA's financial accounting had seriously been neglected duringand after the move of headquarters to GAFSA (1968). In 1971, the Companyinitiated a determined effort to improve the situation by (i) introducingthe standard accounting classification, (ii) starting the internal revisionof all accounts for the 1966-70 period, and (iii) in 1972, contracting theassistance of a local accounting firm. To date, about 95% of the accountshave been cleared and the remaining inconsistences are expected to bereconciled by end 1974. The greater emphasis on financial control is high-lighted by the recent appointment of a deputy director in charge of accounting.

8. A new cost accounting system has been set up under the directionof an experienced accountant and has operated since January 1973. Initialproblems and adjustments in connection with the inventory control systemwhich was designed and implemented by SOTUETEC, a Ttnisian consulting firm,have been overcome. As a next step to improving cost control, GAFSA iscomputerizing its accounting system. Since operating costs are collected andevaluated in Metlaoui, it is expected that the computer system will narrowthe existing conmunication gap between Tunis and Metlaoui. In addition, theconcept of separate cost centers operating under budgetary restrictions isbeing developed for the operating and service units of the Production Depart-ment. After cost accounting and budgetary standards have been established,it is however, essential that cost control is actually implemented. Thepresent high level of phosphate prices should not distract from the fact thatGAFSA is one of the highest cost producers of phosphate rock. Increasing costconsciousness of staff and foremen, is, therefore mandatory.

TNMEX 2-2Page 4

3. Production (DEM)

9. With the appointment of Mr. Nabbi as Director, the ProductionDepartment underwent a substantial personnel and organizational revivement.Chart 1 illustrates the new functional set-up. The reorganization hascentralized greatly the various geographically dispersed activities of theProduction Department by:

a) aDpointing one Deputy Director for Exploitation, wlho isin charge of and coordinates production, planning, train-ing and safety activities for all mine centers;

b) concentrating the several consulting contracts withSOFREMINES, the French consulting firm, and forming oneteam which assists in the implementation of the Company'straining and mechanization plans;

c) establishing a planning division as well as a training andsafety division under the Deputy Director for Exploitation;

d) strengthening the role of the head of the mine center bymaking him responsible for mining as well as treatment andauxilliary services.

10. The mission has the impression that the major objectives of thereorganization, i.e., better coordination among the production units andincreased productivity consciousness of all operating units, is beingachieved. The moral among the staff appears to be excellent. The presenteffort should be encouraged and continued.

4. Planning, Programming and Budgeting

11. One of the major shortcomings of the GAFSA Company has been erraticplanning which was partly due to (i) the non-existent medium and long-termplanning on the production unit level and (iii) frequent staff changes.

12. Over the past 3 years Mr. Ben Debba has built up and continuesto strengthen the Development Department. He is in charge of the develop-ment of new mines such as M'Rata, Sehib and Kef Eschfair, geological surveys,computer activities and general studies connected with the Company's equip-ment, construction, infrastructure and services needs. The Department islocated in Tunis. This geographical separation from the mines and otherproduction facilities has the advantages of facilitating (i) long-rangeplanning by being separated from the day-to-day problems of exploitation,(ii) improving the contact with potential suppliers and consultants and(iii) facilitating the recruiting of qualified staff who would be unwillingto live in the south. On the other hand, the separation of the DevelopmentDepartment in Tunis from the Production Department in Metlaoui has definiteshortcomings; (i) to familiarize themselves with the short and medium terminvestment needs of the mining centers, to elaborate studies and to implement

ANNEX 2-2Page 5

solutions staff from Tunis has to visit the mines for frequent and extendedperiods; (ii) in regard to new mine development the assistance and closecooperation with experienced production engineers--in contrast to planningoriented engineers--becomes crucial during pilot production. An early inte-gration of new mines in the organizational structure of the ProductionDepartment is, therefore, important.

13. The newly established Planning and Study Division at the Directiond'Exploitation Minieres in Metlaoui fulfills an important function by coordi-nating, and analyzing the short and medium term investment requirements.This division is not to substitute the initiative and planning responsibilityof the mine manager, but to supplement their work by (i) studying alternativesfor given investments, (ii) advising and elaborating on solutions and assistin investment implementation. At present, the division is understaffed. Itis recommended to strengthen the effectiveness of the Planning and Study unitin Metlaoui by:

a) assuring sufficient staff and supplies; andb) formalizing the coordination with the Development

Department in Tunis

On this basis, the division could function as study, implementationand coordination unit for the modernization program which urgently needsfollow-up actions.

14. At the request of the Bank, the Company has formulated a moderniza-tion program (Annexes 7-1, 7-4). Although the modernization program presentsadequately the investment needs of the production centers, it does not takeinto account the financial implications of such a program for the Company asa whole. Clearly, the Company is making a determined effort to initiate someplanning, but GAFSA is still far from attempting an integrated or even acoordinated planning approach. This shortcoming is partly due to inadequatecommunication between the technical and financial departments as well as thelack of financial analysis capabilities within the Company. Certainly, untilvery recently GAFSA's financial department was preoccupied with (i) theregularization of its accounts, (ii) the introduction of a cost accountingsystem and (iii) with cash management during continuing losses. However,after the basic system of financial control has been established, the Companyshould give a higher priority to the analysis of the financial repercussionsof its programs. This becomes particularlv relevant now, since GAFSA canexpect to realize profits. The considerable projected annual cash surplus(Annex 8-1) multiplies GAFSA's investment opportunities within and outside theCompany. It is, therefore, essential for the future that financial data areprepared which analyze and facilitate investment and corporate strategydecisions.

ANNEX 2-2Page 6

15. The Bank fully supports the Company's effort to improve its plan-ning function. To strengthen and expand planning programming and budgeting,GAFSA agreed to present to the Bank for its review:

a) annually updated 5-year investment programs; and

b) no later than July 1, 1975 a plan of action toimprove project and corporate financing analysismethods and thereafter implement such plan of action.

C. MANAGEMENT

16. The managerial and supervisory staff of the Company totalled 660or 6.2% of personnel including 17 expatriates. The staff and employeeswere divided as follows among the centers (1973):

Employees /1 Professional Total

Headquarters Tunis 165 34 199Sfax Loading 56 1 57TUNIFOS 8 2 10Mining Operations 1,336 73 1,409

1,465 110 1,575

Of which SupervisoryPersonnel 548 110 658

/1 Employees are all monthly paid personnel other thanprofessionals. However, they do not necessarily holdsupervisory positions.

17. The Company has had continuing difficulties to recruit qualifiedstaff for its Productions Department in the Gafsa area. To attract managerialstaff to the south, GAFSA revised recently its salary scales and now offersabout 30% higher salaries and fringe benefits than comparable employers inTunis. Nevertheless, the majority of Tunisian engineers at Metlaoui expectto stay for not more than 2-3 years. At present, only 24 of 55 Tunisian4taff members of the Production Department have been witIr the Company formore than 3 years. Such fluctuation disrupts the continuity of working rela-tions and impedes planning and project implementation.

18. The Company is aware of the lack of experienced staff in the south,in particular the lack of mining engineers. It, therefore, continues to hireexperienced and qualified expatriates on 3-year contracts and employs consult-ing firms for specialized tasks (SOFRFI'fNES, SOCREAH). Clearly, the personnel

ANNEX 2-2Page 7

problem is unlikely to be solved with the increased availability of qualifiedTunisian staff. The location of the mining activities will continue to be adefinite. disadvantage. The Company has to make a perennial effort to main-tain the quality of its staff in the south.



GAFSA COMPANY - ORGANIZATION CHART

|GENERAL MANAG;ER

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T I'VIi &PMEN' P R SDUCTIyN r | CAos A P COMMERCIALOEPARtTMENT DEP"tTMENT I DdNISTM.TltQN DEPART.fNT

_ A BEN DEB9A A NABBI N ACAH A, CHEBBI

{X 1~~~~~~~~~Pann & Swr Persnne

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DEPUTY DIR ECTOR DEPUTY DIRECTOR iEPUTY DIRECTOREXPLOITATION FINANCE ACCOUNTING

_ MORDOS KARRAY _ REGUIG

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Industri.l _`P6ro-eols Wedr-er World SBank |3IM.,c t974

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ANNEX 2-3Page 1

mTNISIA: GAFSA PHOSPHATE PROJECT

TRE GAFSA COMPANY: GEOLOGY AND ORE RESERVES

A. Geology

1. The phosphate beds worked by GAFSA outcrop from a synclinal basinwhich covers an area some 80 km long from east to west by 35 km wide fromNorth to South; extending into Algeria (Map IBRD: 10273). It is dividedinto two main synclinal folds; the Northern fold which carries the Moulares,M'Rata Redeyef and Kef Eschfair deposits, with a potential area of some300 km , and the Southern fold which carries the Metlaoui, M'Dilla, Sehib-Djellabia deposits with a potential area of some 600 km2. The old estab-lished mines are situated on secondary folds where the dip is minimal,around 100. The phosphate beds continue to a depth of 900 m in the middleof the syncline, and are overlain by a series of moicene sands, marls andlimestones which drilling has shown to be water-logged some 100-300 m belowthe surface.

2. The phosphate formation is from 15 m to 25 m thic1, with an averageof 20 m. It contains nine beds, interlain with marls and limestones. Fourof these are consistently too narrow for mining. The phosphate rock consistsof oolites of tricalcic phosphate of lime (BPL), calcite and quartz from 50to 800 microns in size, embedded in a clay matrix. The grade of the beds vary,either because the BPL content of the oolites changes or because the dilutionof the oolites in the matrix changes. The maximum content of the Tunisianoolites in 68% BPL, lower than in Morocco, Florida or the Pacific. This isthe reason why Tunisian phosphate cannot be concentrated above 68% BPL byclassical washing methods. The run of mine ore averages 58-60% BPL in thepresent mines. Uysually the grade decreases with depth.

B. Ore Reserves

3. The Gafsa phosphate field extends over 900 km2 of surface area,and is estimated to contain some 11,000 million tons of phosphate rock.Ilowever, the greater part of the formation is several hundred meters fromthe surface below a permanent water table and thus is of no economic valuefor the time being. Most mineable reserves occur along some 50 km of out-crop length. At 100 - 150 m below the surface, the formation enters awaterlogged area which is presently taken as the limit of the economicreserve tonnage.

4. Exploration in the area is incomplete and the figures for reservesas presented below have been established on a conservative basis and areclearly a minimum. The figures are based on dry sorted ore (BTS). Thedifference between ore "in situ" and "recoverable" is due to ore left inpillars. Depending on the mining method, the recovery varies from 60%

ANNEX 2-3Page 2

in conventional hand mining to over 80% with certain longwall techniques. Thecut-off grade for ore reserves is 57-58% BPL, and the deposits have beenlimited in depth by the water level, established or inferred. The reservetonnages below were calculated in December 1972; the "marketable" value isbased on a conservatively estimated 70% benefication recovery.

ANNEX 2-3Page 3

ORE RESERVES(million tons)

In Situ Recoverable Marketable

METLAOUI (Seams I and II b)

Proven 4.5 2.9 2.3Probable 0.9 0.6 0.4Possible 1.8 1.2 0.8

Total 7.2 4.7 3.5

MOULARES (Seams I and II a)


Total 2.9 1.9 1.9

M'DILLA (Seams V and VII)


Total 72.2 47.0 33.0

REDEYEF (Seams II a and II b)-/

Proven 7.7 5.0 4.6Probable 5.4 3.5 2.7Possible 13.8 8.6 o.6

Total 26.9 17.1 7.9

M'RATA (Seam I)


Total 31.8 25.5 17.9

SEHIB-DJELLABIA (Seams I and II)

Proven and Probable 41.8 37.6 32.0

KEF FBCHFAIR (Seams I to VIII),v/-Includes bmall burface DeFD=otsProven and Probable 46.6 42.0 n.a.

TOTAL RESERVES

Proven and Probable 146.8 120.3Possible 82.6 55.5 n.a.

Total 229.4 175.8

1/ Includes east extension to Chovabine deposit.2/ Includes small surface deposits.

N.A. - Not Available

ANNEX 2-3Page 4

5. These reserve figures give mine life as follows:

Deposits Production Rate Mine Life

Planned1973 Planned Capacity 1973 output Capacity

(000 tons BTS) (Years)

Metlaoui 510 510 9 9Redeyef 1,270 1,500 14 11/1Moulares 890 - 2-3 -M'Rata 320 1,200 80 20/2M'Dilla 1,025 1,500 45 31Sehib-Djellabia 400 2,000 100 19

Kef Eschfair 960 2,000 - 21

/1 Includes a very conservative estimate of the Chouabine reserves./2 Includes only Seam I. If seams II and III are included, the reserves

increase twofold to 48 million tons BTS recoverable (i.e., 40 yearslife).

Total Mine Life a) 5.5 million BTS/yr (4 million saleable product)-32 yearsb) 7 million BTS/yr (5 million saleable product)-25 yearsc) 9 million BTS/yr (6.2 million saleable product)-20 years

6. As indicated above the total reserves presently delineated aresufficient for about 20 years even vith major production increases, however,continued full production can only be achieved if several new mines replace thedepleted deposits. Moulares with a life of 2-3 years is being replaced by M'Rata.M'Dilla and Sehib have sufficient reserves to support production for more than20 years. However, the above would indicate that Metlaoui and Redeyof have alife of around 10 years which could be interpreted to mean that if GAFSA is tomaintain output it must open up a new project such as Kef-esh Schfair before 1983.Further exploration can realistically be expected to extend the Rbdeyef reservesdown dip and to the East in the Chouabine deposit; a 15 year life can realis-tically be expected but this will require substantial investment for developingthe Chouabine deposit. It is very possible that the life of the Metlaouimine could be extended up to 20 years by exploitation of seams V and VI under-lying the worked out seams I and II. These seams are the same as those to beworked in Sehib, and could increase reserves by 8 million tons. Little ex-ploration work has been done to delineate these reserves or to ascertain theeconomics of working them.

7. In addition, it can be reasonably safely assumed that more than250 million tons BTS recoverable phosphate deposits are available for futureexploitation. These include:

ANNEX 2-3Page 5

(a) M'Zinda - To the west of the Djellabia reserves. This depositwith possible reserves of 50 million tons in the form of afaulted dome structure. Exploration is underway with pittingand exploratory inclines;

(b) Sehib Sud - A steeply dipping deposit to the south of Sehib.Only outcrop mapping has been conducted;

(c) Kef e Dour - This deposit, west of Redeyef, has been exten-sively drilled by a team of experts from Bulgaria. A favorablecentral zone contains 10 million tons' BTS recoverable; the lessfavorable structures contain close to 30 million tons;

(d) Secteur 100 - This deposit has been explored by drilling,trenching, pitting, and inclines, in 1967 with Polish assistance;

(e) Oum el Krecheb - Adjacent to Secteur 100, this has only beenextrapolated from the knowledge of the latter (Heurtey conducteda prefeasibility study);

(f) Alima Sud - Drilled by Bulgarians; shown to be a steeply dipplingdeposit.

Industrial Projects DepartmentMarch, 1974

ANNEX 2-4Page 1


MINES: DESCRIPTION AND PERFORMANCE

1. There are four old established mines: Metlaoui, Moulares,Redeyeff and M'Dilla. Four other properties are in various stages ofdevelopment; M'Rata, Sehib, the open-pit operation and Kef esh Schfair.The major performance characteristics of these mines are presented below:

Performance Data -/

Productivity ofMine Production underground Seam being Exploited

Mine Personnel 1973 Mine Employees No. Width dip Grade(million tons BTS) (BTS/manshift) (meter)(% BPL

of BTS)Old Mines

Metlaoui 1,140 0.46 2.2 1&11 2.8,1.7 15-41% 60Moulares 2,260 0.97 2.2 11A&B 2.7-3.5 hor. to 61-64

vert.Redeyeff 1,680 1.40 3.7 11A 2.2-3.2 10-25% 59M'Dilla 2,030 0.90 2.5 1&11 3.5 8-30% 60-62

In Development

M'Rata 580 0.28 - 1 3-4 vert. 60-65Sehib 164 0.22 -- 1&11A 2-3 10% 60-62Open-pit Contract 0.58 ) 1 to 10% 55

) 8Kef esh Schfair - - - ) VIII 55

4.81

2. Metlaoui is the oldest mine of Gafsa and has been in operation for86 years. It also serves as the administrative and operational center forthe Gafsa field. It employs the traditional room and pillar extraction meth-ods; with mining done by hand, using hand auger or electric drills, blasting,picks and hand loading with shovels. The method is slow, inefficient (as in-dicated by above table) and dangerous, providing for an overall extractionrate of only 60% of the deposit. The present work sites are near the watertable level where the phosphate rock's humidity increases and its grade dimi-nishes. Metlaoui has a low overall productivity and the least valuable ore.

1/ See Table 1 for historical production.

ANNEX 2-4Page 2

3. At Moulares, the depletion of ore reserves is acute, and the minesremaining life span is 2 - 3 years. Recently, maintenance work has been cutdown to a minimum (the M'Rata mine, 10 km away, is being prepared as areplacement). It employs both the traditional roan and pdllar methods as usedat Metlaoui but also a sublevel method in the steeper parts of the seam.

4. Redeyeff is the company's main producing unit and has the highestoutput and efficiency even though employing the traditional room and pillarextraction method. The present production rate will deplete the proven re-serves within 9 years, however, adequate additional reserves not yet provenare available down dip, and to the West in the Chouabine deposit. The Rede-yeff ore is particularly soluble and has a well established market for directapplication.

5. The M'Dilla mine using the traditional room and pillar methodsdisplays a comparatively poor performance due to a chronic lack of productivelabor and water supply problems. Remedies for these problems are being sought.

6. The new M'Rata mine began operations in 1973 employing sublevelstoping for extracting the ore. The mine equipped by Romanian credits, isexpected to reach a production rate of 1 million tons per year in 1974from the near vertical seam (as opposed to the gently dipping seams in mostof the other mines), and is expected to attain a productivity of 6 tons BTSmanshift for the entire underground personnel. (Double that achieved in theother mines.) In addition the method should be much safer.

7. A small deposit near Kef-Esh-Schfair is being mined under contractby open-pit methods, to supply the Metlaoui washing plants some 9 km distant.All nine seams are being mined and the marl or clay interlayers are cleanlystripped and dumped nearby. Several other small surface deposits have beenstudied and will be extracted following depletion of the first deposit.Sufficient reserves exist in these deposits for 3-4 years operations at thepresent rate of 1 million-tons BTS/year. The operation has clearly indicatedthat all the phosphate seams can be extracted cleanly and selectively by sim-ple open-pit stripping methods.

8. The underground development of the Sehib mine has been partiallycompleted and a trial longwall face has been operating - though intermittently -for almost two years. Full scale developmnent is the subject of this loan. TheKef Eschfair deposit has been the subject of several prefeasibility studies. Theorebody is low grade when the extraction of all nine seams by open pit methodsis considered. This, nevertheless, would appear to be an attractive propositionand uill most likely be the next development after Sehib.

Operating Cost

9. Table 2 presents the mining costs per mine, indicating an averageunit cost varying between DT 1.4/ton for M'Rata and DT 2.1/ton for Metlaoui.The unit cost for Sehib is not representative since (i) the trial longwall

ANNEX 2-4Page 3

was operating less than 50% of the time, (ii) no treatment facilities areavailable at the site, so that the ore has to be shipped to M'Dilla forbeneficiation, and (iii) auxiliary services have to be provided by othermining centers, thus inflating the overhead cost. The cost structure ofthe old established mines (see table below) clearly shows that face extraction(drilling, blasting, supporting, loading and underground tramming) form themajor portion of the mining cost. It is these activities to which the majorattention is being directed in the modernization program.

Division of Mining Costs by Activity (%)

Activity/Mine Redeyeff Montares Metlaoui M'Dilla

Drilling 5.0 7.4 4.2 2.1Blasting 9.3 6.3 9.7 11.4Loading 49.6 58.4 44.3 48.5Tramming 29.4 21.2 33.8 25.4Timbering 5.0 4.6 6.5 11.0Other 1.7 1.6 1.5 1.6

Total 100.0 100.0 100.0 100.0

Industrial Projects DepartmentMarch 1974

ANNEX 2-4?age

TUNISi31A: GAFSA PHOSPHATE PROJECT

Table 1

MINE PRODUCTION(000 BTS)

1966 1967 1968 1969 1970 1971 1972 1973

Metlaoui 621 585 501 465 471 440 463 576Redeyef 1,403 1,231 1,431 1,289 1,378 1,435 1,397 J,253Moulares 1,14o 1,143 1,176 1,119 1,199 951 966 862M'Dilla 927 909 1,114 883 871 879 901 800M'Rata - - - - - 1& 4 282 300Kef Es Schfair-/ - - - - - 585 930Sehib2/ - - - - - 1/ 219 144

Total 4,091 3,868 42222 3,756 3,839 3,889 42813 4,865

l/ Sehib production included in M'Dilla in 19712/ Small surface deposits near Kef es Schfair5,/ Experimental long wall panel

PRODUJCTIVITY(BTS/man shift)

Sept.1966 1967 1968 19u9 1970 1971 1972 1973

M'Dilla 2.06 2.35 2.71 2.47 2.21 2.26 2.48 2.47Redeyef 3.88 3.97 3.94 3.85 3.81 3 96 3 85 3.81Moulares 2.60 2.67 2.61 2.75 2.72 3.43i/ 3.57W/ 1.88Metlaoui 3.05 2.88 2.72 2.50 2.01 2.00 2.15 2.71

Average--Old Mines 3.01 2.96 3.47 2.71 2.67 2.76 2.88 2.64

Sehib - - - - - - 6.37M'Rata - - - _ _ - -

Average Productivity 3.01 2.96 3.48 2.72 2.68 2.77 3.06

1/ M'Rata included in Moulares


TUNISIA - GAFSA PHOSPHATE PROJECT

Table 2

UNIT MINING COST - 1973-'

TOTAL 3/DT/ton 6 MSTLAOUI REDyYEF MOULARES N IDILIA SEHfIlB MRATA KEF ESCHFAIR

PROllJCTION (000 BTS) 4,143 515 1,133 740 727 136 277 o

Mine Developnernt 0.087 L.8 0.048 0.170 0.088 0.075 - 0.133Exploitation 1.249 69.5 1.395 1.043 0.967 1.339 1.190 0.953Handling (undergrournd) 0.026 14-5 0.004 0.017 - 0.125 0.011 -

Stock (mine) o.o84 4.7 0.205 0.057 0.118 0.126 0.007 0.026

Sub -tot al 1.466 81.5 1.652 1.289 1.173 1.665 1.208 1.116 1.507

Transport to Plant4/ 0.119 6.7 0.110 0.076 o.o66 o.o86 0.661 0.2717 0.110Overhead (mire) 0.232 12.8 0.379 0.206 0.477 0.324 0-559 0.291

MINING COST -- 1.797 100.0 2.141 1.571 1.716 1.751 2.430 1.392 1.617

1/ January - November 19732/ closed dcwn during 1973J/ sub-contractedI;/ includes transport of BTS to ths beneficiation plant at the mine only

Note: Comparative earlier figures are not available, since a cost accounting systemwas only established in January 1973.

Indlustrial Projects DepartmentMarch 1973

ANNEX 2-5Page 1

TWNISIA: GAFSA PHOSPHIATE PROJECT

PLANT: DESCRIPTION AND PERFORMANCE

1. GAFSA phosphate is low grade compared with other major producingcenters. It also has the highest CaO/P205 ratio in the world market whichcatuses hiigher consumption of sulphuric acid in fertilizer manufacture. Onthe other hand, the Tunisian ore is among the most reactive phosphates on themarket: it is highly soluble,and the rock finely ground, can be used fordirect application as a fertilizer without further treatment. As a result,Tunisian phosphate was largely sold without beneficiation until 20 years ago,when increasing competition from other producers and the decrease in BPLgrade made it necessary to install treatment plants.

2. Hand sorting, washing and air classification (locally called ventila-tion) constitute the 3 simple enrichment techniques presently in use. Thefirst is done near the mine after which the ore is transported to washingplants at Metlaoui and M'Dilla or to ventilation plants at Moulares, Redeycfand also M'Dilla. Physical beneficiation is closely tied to the granulometryof the phosphate rock. In the Cafsa ore the phosphate grains or "oolites'are found in the range 70 microns and 2-6 mm, depending upon the deposit.In washing the oolites are separated from the marls and clays by agitated washing,and then isolated by sizing with screens and cyclones. The same principle follow-ed in air classification. The ore is crushed and screened to eliminate oversizeand then dropped through an updraft of air from which the oolites are recoveredas an underflow and the fine waste is carried away. The capacities and 1972performance records of these plants is shown below.

Capacity and Performance (1972) of Treatment Plants

Rated Capacity Tnput Outnut Recovea(Output) BTS % BPI, tons dry % BPL I% ieight

--------------------------(000 tons)-------------------------

Wash in

Metlaoui I 250 314 60.0 205 64.7 65.2Metlaoui II 550-600 754 57.9 560 63.1 75.4Metlaoui III 500-600 536 53.1 412 63.2 76.8M'Dilla 300 374 60.2 294 65.3 78.7

Air-Classification

tbulares 600 708 60.5 485 61.6 68.5Redeyef 850-900 1,269 61.2 785 63.5 61.9M'Dilla 450-500 748 60.4 456 62.5 60.9

ANNEX 2-5Page 2

3. The present lack of controls made it difficult to evaluate theef£iciency of the various treatment plants and methods. The plant inputcannot be neasured for lacl of weighing machines and is '"guestimated' onthe hasis of mine cars, not always full, an assumed moisture content ande7oibht reduction by hand sorting. As long as the input is uncertain, allsubsequent determinations are of doubtful value, excepting treatment costswren related to output. Recovery (by weight) figures vary considerably fromone 1lant to another; from 65% to 79% for the various washing units, andfrorm 61% to 68% for the ventilation plants. These figures should be treatedvxith caution. The ore enrichment values are quantitative measurements andcan tlius be accepted: they indicate a 5% improvement in the BPL contentrvith !ashed ore and around 2,. for ventilated material. A time study coveringall of 1972 indicates that the plants operated an average of 75%. of the timeavailable. rhis compares with a widely accepted norm of 852 for plants ofthis type. M'uch of the down-time, however, about 2,000 hours per plant, wasOdue to lnalc of feed.

17. The present GAFSA beneficiation methods are basically simple,cheap and reasonably effective. Tmprovements in the washing plants wouldnrobably lead to a better recovery rather than to a higher phosphate content.The air-classification plants might lend themselves to more spectacularim'provenents both in recovery and in upgrading.

iS. Operating Costs: These make up only 18% of the total production costs,;.'ith mining costs making up 69% and overheads 13%. The operating costs of thel -ash4ng plants are 2 to 2-1/2 times those of the air-classification plants (seetollowing Table 1), but as seen from the earlier table the results are much in-ferior. The scope for reducing these costs is minor compared with scope for animprovement in operating results of the mines.

[ndustrial Projects DepartmentMar , 1974

UNIS IA - GAFSA PHOSPHATE PROJECT

Table 1

UNIT OPERiTIl; COST - 19731/

(DT/ton Saleable Producrt)

NETLAOUI RErEYEF MOULARES M'DILLATOTAL Wasfiing Washing Washing Air Air Washing Washing M'RATA Washing Air

jf/ton % Plant I Plant II Plant III Classification Classification Plant I Plant II Drkig Plant Classification

Recovery 70.38% - 78.38% 77.17% 73.12% 65.52% 64.46% 74.45% 49.67% 77.57% 67.41% 68.07%

Saleable Product (000 ton) 3,104 - 107 479 433 755 284 102 306 308 209 428

I. Mining CostL/ 2.524 69.0 2.477 2.338 2.574 2.404 2.757 2.306 3.566 2.205 2.931 2.968

II. Benefication Cost

Plant Operation 0.614 16.8 0.907 0.815 0.876 0.477 0.355 0.90L 1.039 0.276 0.7Y2 0.549

Plant Adninistration 0.007 3.2 0.021 0.019 0.01 - - 0.016 0.013 - - -

Handlirg 0.047 1.3 o.080 0.088 0.060 0.041 0.025 0.083 0.12L 0.026 0.008 0.009

Sub-total I. TT- 1.008 0.921 79 ¶0.974 0._3_ T 3 1.176 0.302 O.o ___0_

Overhead - rains center 0.160 5.5 0.156 0.143 0.156 0.183 0.168 o.1544 0.199 0.150 0.147 0.157Cverhead - DEM/ 0.294 8.3 0.294 0.293 0.287 0.298 0.309 0.271 0.421 0.288 0.296 0.295

III. Operatirg Cost 3.656 100.0 3.801 3.695 3.891 3.403 3.614 45050 5.362 2.944 5.194 3.978

1/ January - Novemiber 19732/ including transport to plants from outside rines . >

3/ Direction d'E8cploitations Minieres - lMetlaoui

Industrial Pro jects DepartmentMarch 1974

ANNEX 2-6


THE GAFSA COMPANY: INFRASTRUCTURE

A. Water Supply

B. Power Supply

C. Transportation

1. Internal Transport2. SNCFT Transport3. Problems and Constraints of the Metlaoui-Sfax Transport4. Stockpiling Facilities

D. Port Facilities

F. WIorkshops

ANNEX 2-6Page 2


THE GAFSA COMPANY: INFRASTRUCTURE

A. WTater Supply

1. The phosphate mines need water for two purposes: first, for thelocal population at Metlaoui, M'Dilla, Redeyef and Moulares; secondly, forthe washing plants located at Melaoui and M'Dilla.

2. At the present time Metlaoui washing plants use around 400 m3/hand the MWDilla (without recycling) 180 m3/h. The township of Metlaoui uses192 m3/h and M'Dilla 75 m3/h (l m'/h = a.2 & l/s).

3. The water is currently supplied:

(a) for Moulares-Redeyef by various wells along Tabeditt oued andGaraetsed Douza wiLh a total supply of 33 l/s and bv one well atTarfaia supplying 20 l/s. The water contains 3.2 g/l of solidmatter;

(b) for Metlaoui from 4 wells located at Ras el Aioun, northwest ofMtetlaoui. Since the beginning of the century the outflow has beenconstant. The solid matter content varies from one well toanother from 1 to 7 g/l. Current supply is around 200 l/s;

(c) for IM'Dilla from a shaft located at the southeast of Cafsa,near the Chott el Guettar, produces 70-90 l/s. However, thereliability of this supply is uncertain, and the water tablehas dropped significantly over the past 3 years. Furtherdrilling is being conducted to replace this source.

4. GAFSA is responsible for locating and exploiting its won watersupplies but must receive approval from the Ministry of Agriculture. Todate, the companv has experienced no difficulties with water supply with theexception of that for M'Dilla, but has now reached a position where severalof the wells need replacing (the life of a well is 7-10 years).

B. Power Supply

5. STEG (Societe Tunisienne d'Electricite et du Gaz) supplies theelectric power to the Cafsa company through the Metlaoui main transformerwith 150,000 volts. There are two main power lines supplying the Metlaouisubstation; one through Sfax and the other through Tadjerouine in the westernpart of the countrv. Power is produced in thermal plants located at LaGoulette and Gabes. In addition, there is a connection with a 90,000 voltline coming from Algeria at Tadjerouine.

ANNEX 2-6Page 3

6. STEG does not expect any power shortage in the future and is devel-oping an adequate program of production to support the demand. All the smallpower vlants of GAFSA are no longer operating and are considered as scrap.

7. The GAPSA Company currently consumes about 7,200 KVA (maximum)under a 10-vear contract with STEG which was renewed in 1972. An estimatedbreak6own of the consumption is presented in the following table.

Monthly Power Consumption (1972)

tMetlaoui Redeyef Moulares M'Dilla Sehib Total… ----- (000 kwh consumed per month)------------

line 202 280 399 199 194 1,266Wnashing Plant 939 - - 163 - 1,102Ventilation Plant - 385 196 248 - 829

Townshio 194 100 55 35 - 384rumpingf - 176 126 106 - 408Sundries at Surface 68 6 51 814 10 206

Total 1,403 947 827 814 204 4,195

3. Average consumption per marketable ton was, therefore, 1.33 kwhfor 3.15 million tons with an average price of DT 9.86 mill based upontariffs of UT 5 mill/kwh during the night, UT 10 mill/kwh during the dayind PT 15 mill/kwh for the peak demand periods.

9. At the substation in Metlaoui the voltage is stepped down from150,000 to 30,000 volts and distributed via 30 kv lines to 5 transformerstations located at Metlaoui, Moulares, Redeyef, M'Dilla, M'Dilla II (Sehib).At these transformers, the voltage is stepped down to 5,500 volts.

10. eith the implementation of the rehabilitation program and mechani-zation nf the mines, the power consumption is expected to increase markedlyas indicated in the following table.

Transformer Capacity

Increased Total FuturePresently Capacity CapacityInstalled Required (1976)

…(000 KVA)-------------------

Metlaoui 5.0 - 5.0Redeyef 2.5 2.5 5.0Mioulares 2.5 - 2.5Mf'R.ata - 2.5 2.51'Dilla I 2.5 2.5 5.0

' Dilla II(Sehib) 2.5 _ 2.5

15.0 7.5 22.5

ANNEX 2-6Page 4

C. Transportation

11. There are two kinds of transportation to consider:

(a) Internal transportation of ore from mines to plants; and

(b) transportation of saleable products from the plants toSfax and Cabes.

12. In the first case the company is responsible. In the second caseqNCFT (Societe Nationale des Chemins de Per Tunisiens), the national railway,is in charge of the transport.

1. Internal Transport

13. For internal transport the conpany uses:

(a) 42 ore cars, 142 PY 24-ton cars and 100 PX 28-ton cars withcapacities for phosphate rock of 18 tons and 24 tons,respectively, plus 52 PH 12-ton and 20 Bottom Dump 17-toncars. The company also has tank cars and passenger cars.The PY cars are in a good state at repair but the remainderare more than 50 years old and tend to be in a poor stateof repair.

(b) 14 Whitcomb Diesel 40-ton locomotives (24 years old); three32 ton diesel electric locomotives (2 years old); one 25-tondiesel electric locomotives, 18 vears old, and 6 electrictrolleys. All are in a poor state of repair due to age andlack of spares.

Both cars and locomotives are the property of the company. Report-edlv, the company has ordered 7n new PX 28-ton cars. The rails which havean average a-e of more than 50 years are in poor repair despite frequentm'aintenance

1L. >t'rmal maintenance is performed at lTftlaoui and general revisionr-o:-l -ilou1d 1e dore at Sfax in the SNCFT lorkshops. Overhauling at Sfax

ot'r 10Co7otives is currently not performed satisfactorily because SNCFT; isiZFicient personnel and narts. Seven locomotives should be overhauled

every vear, however, only 5 were overhauled in 1968, 6 in 1969, 3 in 1971.nc 7 in 1972. To help alleviate the situation which has become critical,the .ompanv has ordered a sufficient quantity of narts but SNCFT still hasprohleris implementing the correct maintenance, mainly because the workshopis not adequate, too small, dirty, etc. The railwav track itself ismaAntained by the company for the part located between mines and plants.

ANNEX 2-6Page 5

15. The internal transport does at present create a bottleneck inCAFSA's operation, most importantly due to lack of locomotives rather thanshortage of cars. Most of plant downtime is due to lack of transport ratherthan lack of mine production. The loading and unloading facilities areinefficient and create delays.

16. The internal transportation between Moulares and Metlaoui is carriedout by SNCFT at a charge of DT 0.3-0.4 per ton of ore.

2. SNCFT Transport

17. The SNCFT transportation starts from the plants, at Redeyef,Metaloui, Moulares and M'Dilla with a dispatching to Sfax at the Metlaouistation. At M'Dilla the trains go directly to Sfax after being dispatchedbv the Gafsa station.

1X. Equipment available for the transportation between Sfax and Gafsaconsists of:

Ore Cars Nos.

3-axle, 18-ton cars 1,3442-axle, 18-ton cars /1 492-axle, 24-ton cars 350

Total 1,743

/1 They will be transformed into 24-ton ore cars.

However, only 1,300 of these wagons are in good working conditions, theremaining 443 are in the workshops under repair.

There is nresently some difficulty in fully utilizing the new heavylocomotives since they must stop at Metloui main station and other lighterlocomotives used to haul the trains to the mines and plants. However, thissituation will be improved when the present program being conducted by SNCFTfor upgrading the track and marshalling yards at Redeyef and Moulares iscompleted.

3. Problems and Constraints of the Metlaoui-Sfax Transport

19. There is presently no problem with transporting the phosphate rockfrom the GAFSA plants to the port facilities and the fertilizer plants atSfax and to the ICM plant at Gabes. 1/ However, if production increases abovethe present level of 3.2-3.4 million tons, additional ore cars will have to

1/ 1,300 cars available for 350 days/year, with average turn-around time of2-1/2 days, carrving on average 18 tons per trip = 1,300 x 3 to 5/2.5 x 183-4 million tons/year.

ANNEX 2-6Page 6

be made available. To cope with the planned production for 1975 of 3.6 to3.7 million tons of phosphate rock, an additional 50-100 ore cars xill berequired, in addition to renewing up to 100 of the existing ore cars eachyear. Furthermore, for the system to be able to handle the planned 1975/76production of 4.2 million tons per year, a total 200 additional new cars 1/will be required (i.e., a total of 1,500 cars). Reportedlv, the track,loading and unloading facilities are adequate to handle this extra tonnage,and sufficient locomotives are available. The two crucial factors are theavailability of sufficient ore cars and the turn-around time.

2`n. The 200 ore cars would cost in the order of TJSS2.4 million and require1S-24 montlhs delivery time. Pence, it is very important that the arrangementsfor financing and ordering these cars be made innediately. The alternativeof fabricating the cars in the SNCFT workshops was suggested and has apparentlybeen done in the past. This should be reviewed further.

21. A turn-around time of 2-1/2 days was considered by the Bank RailwaySupervision Mission 2/ to be required. Hlowever, to maintain or improve thefigure, it w,ill be necessary that GAFSA, SNCFT and the fertilizer companiesfully cooperate and do not needlessly hold cars at the loading and unloadingfacilities. Undue delay is evident both at the mine where cars wait anaverage of 14 hours between arrival empty and dispatch to Sfax full, andat the fertilizer plants, where cars are often used as storage facilities,and after unloading kept at the plant for loading fertilizer for deliveryto the port. It is conceivable that the turn-around time and, hence, thecapacity of the railway could be improved by 10 to 15,%' (i.e., 3.8-3.9 milliontons) by improved control.

22. Apart from ore cars, it was reported that insufficient flat carsand tank cars are available for transporting supplies to the mines. Materials(oil, wood, etc.) are being held up at the port of Sfax for extended periods,and the companv has had to use truck transportation to solve the difficulty..These nroblems are being given due attention.

4. Stockpiling Facilities

23. The level of stockpiles at the various supply and distributionpoints are specified in relation to the transportation capacities. Theseinclude both internal and external storage facilities.

24. Internal: There are no stockpiles apart from loading bins oflimited canacity at the Redeyef, Moulares and Metlaoui mines since internaltransport facilities are readily available. For M'Rata, Kef Eschfair,

1/ 200 new cars available 350 days with turn-around of 2-1/2 days carryingan average of 24 tons = 100 x 365/2.5 x 24 - 700,000 tons/year.

2/ See "Tunisia, First Railway Loan" Supervision Report, May 1973, Messrs.MacDonald and Alston.

ANNEX 2-6Page 7

M'Dilla and Sehib mines which are located at around 7 km from the plants,there are 20-30,000 tons stockpile for each mine. At the entry of everybeneficiation plant, excepting the future plant of Sehib, the old dryingsite, dating fron the time when the run of mine was only hand sorted anddried, is used as stockpile. These storage capacities are large, oftenexceeding 500,noo tons. Since this is mostly uncovered storage, thesecapacities can obviously be significantly enlarged; the major restrictionbeing the loading capacity. At the exit of the plants, the saleable productis stockpiled in bins (30-80,000 tons) and, if necessary, can also be stock-piled as a sprayed material on a site near the plants.

25. The following table summarizes the storage capacities:

Stockpiles('000 tons)

TransportFacilities

Locations Mine Plant Entry Plant Exit Mine-Plant

ved.eyef 0 500 60 conveyor and rail'oulares 0 500 60 rail!' Rata 20 (to Moulares) conveyorMetlaoui 0 700 80 railKef Eschfair 30 (to Metlaoui) (to Metlaoui) trucksI'Dilla and Sehib /1 25 500 30 trucks at Sehib

Rail at M'Dilla

/1 Experimental Panel.

26. External: The storage capacitv at the port (discussed below) andthe fertilizer and acid plants also importantly affect the efficiency of thetransport network. Generally, these storage capacities are small but adequatenroviding from 7 to 10 days operation (i.e., ICM has 10,000 tons or 7 days,SIAPE has 13,000 tons or 10 days, NPK has 6,000 tons or 8 days). Thile thesesmall storage capacities can cause some delays in unloading, the major causeof delav is the unloading equipment. For instance, NPK has an unloading rateof 150 tons/hour or 8-10 hours per train; but has no plans to increase thiswith the planned increase in plant capacitv. SIAPE facilities can unload atthe rate of 100 tons/hour or 12 hours per train. The situation here isaggravated by the track layout and small shunting locomotives which requirethat each train be divided in 2 parts for unloading. The possibility ofimproving this situation is being reviewed.

D. Port Facilities

27. The production from GAPSA Company is shipped from Sfax. There arethree loading points at Sfax in the port area owned by the company. The first

ANNEX 2-6Page 8

is used by SIAPE, the second used formerly only by CIPHOS (before 1960), andthe third used traditionally by the company. The loading capacity at Gafsaand Ciphos piers are respectively 1,400 and 1,200 ton/hr.

28. The total covered storage capacity of the company is 250,000 tonsor a little less than one month of production at the current rate of output.At present the phosphate rock is stored according to the mine of origin andthe processing (i.e., 7 groups). In the future this will be changed tostorino only three qualities, a ventilated phosphate, a washed low gradenhosphate (60-62%) and a middle grade phosphate (65-68%). This will increasethe stockpiling capacity and is expected to be sufficient for the increasedproduction from the rehabilitation and the Sehib project. Part of the areaowned by the companv is used by the Port Authority. SIAPE rents 2n,nO tonsof the company's storage capacity.

29. Port facilities can receive 25,000 ton ships (the pier has a draftof 33 ft), which is sufficient for the clients of GAFSA. Many ships trans-porting phosphate are much smaller than this--the size of the ship beingdictated more by the depth of the receiving ports and the storage capacityof the client.

F. Vorkshons

30. Under the present operational technology most of the equipment islocated at the plants, consisting of electrical motors, cyclones, screens,thickeners, lo. washers, ovens. In the mines, there is presently very littleequipment: electrical drilling machines, diesel and electric locomotives, fewconvevors and small ore cars (600 liters). However, in the new Sehib mine,more sophisticated equipment is encountered like shearing machine, hydraulicsupports, continuous miners and with implementation of the rehabilitationprogran, equipment will become an important factor in the mines. Other majorequipment items are the diesel loconotives and ore cars used for surfacetransport, plus haulage trucks, loaders and surface conveyors.

31. NIaintenance for underground equipment is performed underground byspecial crews, but for major overhauls the equipment is brought to the surface.There is a workshop at each mine; the one located at Metlaoui is considered acentral workshop. In each workshop there are four sections (iron, wood,electrical, garage), two diesel sections for the surface locomotives are1-cateO in the 1"Pilla and zfetlaoui workshops. Htowever, most importantmaintenance work on the locomotives is done at the SNIOFT workshop in Sfax.CAPSA has no foundry or casting facilities, but has adequate facilities forsheet metal. working, fabricating underground mine cars. Electric motors arerepaired in Sfax. The shops are very old and not well equipped for the newmechanizedI mining methods.

ANNEX 2-6Page 9

32. rTimployment in these shops is as follows:

Employment Employmentin IJorkshop in Warehouse

Tetlaoui 286 50Youlares 96 26M 'Dilla 153 26Redeyef 175 14

Total 720 116

In addition, crews for maintenance of housing, plants and officestotal 1q7 persons (Mfetlaoui 10; Redeyef 20n Moulares 41; WT?illa 27).

33. Less than 25T of these workers are skilled and turn out qualitywork. lhence, an important program for training this group is underway.Poor maintenance has in the past led to significant loss of production.Ilence, improvement is very necessary. A recent revision of the warehousingoperation has had readily apparent effects, However, there still remainr'ross inefficiencies in the maintenance functions, and attention should begiven to the possibility of centralizing repair facilities, probably in*letlaoui; leavinc only sufficient facilities at the mines and plants forsmall emerqencv repairs. This should allow better utilization of existingrepair shop equipment, and skilled labor force, which will become much moreimportant as the mines are increasingly mechanized.

Tndustrial Projects Department.larch, 1974

ANNEX 2-7


MANPOWER

A. INTRODUCTION

B. LABOR SITJATION

1. Recent Development2. Labor Policy and ad hoc Measures3. Future Manpower Requirements

C. SAFETY PROGRAM

D. TRAINING

ANNEX 2-7Page 2


MANPOWER

A. INTRODUCTION

1. Over more than one decade the Company's manpower policy was charac-terized by maintaining or increasing the labor force in order to createemployment opportunities in the south, (ii) a neglect of training for all jobcategories, (iii) a neglect of preventive safety regulations and work condi-tions and (iv) a lack of labor-saving or productivity-increasing productiontechniques. The tiresome and dangerous work of face workers, which in thepast was not coupled with sufficient pecuniary incentives, lead to high turn-over, absenteeism and finally a lack of face miners. For the surface andother underground workers, however, the above policy resulted in an over-supplv of unproductive workers.

B. LABOR SITUATION

Recent Development

2. The GAFSA Company employs about 10,200 people of which 95% or 9,738work at the production facilities in the south. Table 1 of this Annex givesa detailed labor breakdown by operational unit for the 1969-73 period. Al-thiough production has been fluctuating around 4 million BTS/year, the numberof people employed by the mining centers has risen substantially in 1968/69when the labor force increased by 10% reaching 10,015 in 1969. Subsequently,the number of people employed at the production facilities declined again to9,738 in 1973. However, increases in wages and fringe benefits have beenrelatively high, so that labor costs account now for about 40% of thecompany's operating costs as compared to 36% in 1968.

3. The development of personnel in the mines during the 1963-1972oeriod is characterized as follows:

a) Metlaoui: The number of underground workers increased by 57%, i.e.,fro- 513 to 963 men, whereas the workers at the mine surface facilities nearlycnubled. At the same time, about 27% more workers were employed at the plantsand central services, whereas the number of "employees" 1/ increased four times.Overall, the labor force at Metaloui increased by 68% compared to a 0.5%increase of BTS output during the 1968-73 period.

b) Redeyef : The labor force increased by 28% compared to a 43%lncrease of mine extraction. New personnel were primarily added to the under-ground work force and the employees at the mine.

1/ Monthly paid personnel not including staff.

ANNEX 2-7Page 3

c) Moulares: Production and labor force have developed parallel toeach other and have a 20% and 19% increase respectively. The personnel at themine has been decreased from 2,253 in 1970 to 1,741 in October 1973, sincethe production will be phased out by 1976/77.

d) M'Dilla: The number of underground workers increased from 1,253 in1963 to 2,137 in 1966 and subsequently declined again to 1,601 in 1972. How-ever, the number of "employees" more than doubled in 1968 and has remainedsince then at about 250 men. Nevertheless, overall M'Dilla's 1972 outputlies 78% above 1963 extraction, whereas the manpower increased by 26% only.

4. High absenteeism, i.e., unexcused non-appearance at work has tradi-tionally been a problem at the GAFSA Company. This phenomenon contributes torelatively low productivity and additional cost burdens. On the averageabout 18-20% of underground workers do not appear at work compared to 3% ofthe workers holding surface jobs. Such periods of absence can be considerable;e.g., in 1972, 49% of absent mine workers stayed away for 4 days or more permonth. The major reasons for this work pattern and the particularly high ratesat Metaloui and M'Dilla (see Table 2) are (i) the hard and tiresome work at theface, (ii) dangerous work conditions underground, (iii) insufficient motivationand pecuniary incentives for face workers and (iv) supplementary employment inagriculture, if weather permits. In M'Dilla about 30% of the work force comesfrom Gafsa and El Guettar by company trucks and workers tend to stay home onMondays, Saturdays or rainy days. In Metaloui about 20% of the mine workershave been recruited from the north and return to their families for extendedvisits during the agricultural season and weekends.

5. Although manpower problems vary among the different mine centersaccording to the particular working conditions, accident record and compensa-tion of the labor force, Gafsa's manpower situation is characterized by (a)a lack of permanent face workers and (b) a large number of unproductiveworkers and employees. This situation which developed progressively over thepast two decades has stabilized since 1970 as the result of the Company'sad hoc measures against further labor force increases.

2. Labor Policy and ad hoc Measures

6. The Company is well aware of the existing labor problem and hasinitiated a number of steps which are designed to increase productivity,improve work conditions and normalize its labor cost structure.

7. In particular, to attract face workers, the company introduced:

a) an incentive-based salary system which gives 35% highersalaries to face workers than other workers.

b) an assiduity premium for face workers who are absentfor less than 3 days per month.

ANNEX 2-7Page 4

c) special productivity premiums and production campaigns.

d) on-the-job training and opportunity to participate in theGafsa center training program.

e) a better safety and accident prevention system which shoulddecrease the Company's high accident record.

However, the long term labor policy of the Cafsa Company is to mechanize theexisting mines, thereby, decreasing the demand for face workers, increasingtotal production and decreasing labor as well as total operating costs. Asoutlined in the modernization program (Annex 7-1. 7-4) Gafsa plans to intro-duce the scraper method in its existing mine. This technique is a steptowards mechanization from the present "room and pillar" method however, itis relatively labor intensive compared to other forms of mechnization(continuous miners, longwall, etc.) and does not require a highly skilledlabor force.

3. Training

8. In 1971, GAFSA initiated a training program to upgrade the skill-level of its workers and facilitate the mechanization of its mine operation.The program included:

(a) upgrading of underground supervisory personnel (about 320people) in three 5-week courses;

(b) training of scraper teams under the supervision of SOFREMINES;

(c) formulation of a 4-year training program by SOFREMINES;

(d) establishing of safety instructions on the job and in theGafsa Training Center;

(e) expansion of the Gafsa Training Center.

9. The new emphasis on training and safety measures has been illustratedby the creation of a training and safety division. At present, GAFSA relies on4 training teams: (i) a team of 13 instructors for the Gafsa Training Center;(ii) 3 training advisors from SOFREMINES who assist in the preparation of train-ing programs and supervise directly the training of new scraper teams; (iii)2 underground foremen in each mine center who are in charge of on-the-jobtraining; and (iv) 8 general training officers who select and prepare workersfor specialized training at the Cafsa Training Center. The Gafsa TrainingCenter, which is funded by GAFSA, provides three 18-month courses and follow-uptraining for foremen, technicians such as mechanics, electricians, diesel mecha-nics and electro-mechanics as well as safety instructions. The center is expectedto train about 120 men per year, of whom 62 would be foremen and 58 technicians.Besides the instructions at the Gafsa Training Center, on-the-job training isan important part of GAFSA's training effort. The company expects to reachby these measures about 850 employees per year; this includes in particular

ANNEX 2-7Page 5

525 underground workers who require basic instructions and/or an increaseof skill-level.

10. GAFSA's training program is still in the formulation and trial stage.Nevertheless, it is essential that this training program is not considered asa short-term effort necessary solely for underground mechanization. In con-trast, if GAFSA wants to maintain a stable, motivated and productive laborforce, a continuing training program, which includes upgrading of all skill-levels and follow-up training, will be prerogative.

4. Future t,anpower Requirements

1 1. At the request of the Bank GAFSA has studied its future manpowerrequirements and current surplus labor in order to quantify tne goals of anecessary manpower development aad reduction program. The study includes the1974-1979 period and takes into account (i) the present surplus of unproductivelabor, (ii) projected manpower reductions due to mechanization of M'Dilla,Redeyef and Mletlaoui, as well as the phased closing of the Moulares mine,(iii) natural attrition by retirement at 55, and (iv) the additional manpowerrequired fo ' full production at Sehib and M'Rata. However, the projectedmanpower supplies detailed below does not yet account for auditional laborneeds for Kef Esclhfair, which may start production during the 1977-1979 period.

THE GAFSA COTMANY - MANPOWER SURPLUS (1974-1979)/3Total

1974 1975 1976 1977 1978 1979 1974-1979

I. Surplus Manpower

Redeyef -0- 97 10 100 70 75 352.foulares 53 410 1,000 25 25 -0- 1,513Mt'Dilla 34 -0- 5 75 10 75 199Metlaoui 60 128 90 30 -0- 20 328DEM 14 25 25 50 50 50 2L

sub-total 161 660 1,130 280 155 220 2,206

II. Natural Attrition 81 163 227 159 172 160 962

III. New NManpower Needs

Sehlib 1 180 300 100 -0- -0- 581M'Rata 128 75 -0- -0- -0- -0- 203

sub-total 129 255 300 100 -0- -0- 784

IV. Net Surplus 'Manpower(I) - (II + III) -49 242 603 21 -17 60 360

Cumulative -49 193 796 817 800 860 860

/1 daily and weekly paid employees/2 retirement age - 55 years/3 not including manpower needed for Kef Eschfair

ANNEX 2-7Page 6

12. GAFSA expects a net labor surplus of 860 men over the 1974-79 periodwhich reaches its peak in 1975 and 1976 with excess employment of 242 men and603 men, respectively. Alternative employment opportunities for GAFSA'ssurplus labor is a major problem, since GAFSA is the dominant employer in thesouth and nearly all concerned workers are unskilled and will not find readyemployment abroad or in other parts of Tunisia where un- and underemploymentrates range generally between 25%-40%.

13. At the request of the Bank, and in cooperation with the Government,che company is formulating an action program for orderly manpower reductionwhich would provide for alternative jobs, compensation, retraining and earlyretirement. In particular, GAFSA is currently exploring the feasibilityof an early retirement sclieme and creaLing employment through constructionand mnai.ntenanice crewis.

ANNEX 2-7Page I

TUNISIA - GASFA PHOSPHATE PROJECT

Table 1

PERSONNEL

1966 1967 1968 1969 1970 1971 1972Mines

M'Dillal/ 2,479 2,094 2,372 2,294 2,293 2,141 2,029Moulares2/ 1,890 1,920 1,969 2,191 2,106 2,131 2,257Redeyef 1,317 1,283 1,248 1,724 1,632 1,683 1,681Metlaoui 924 888 809 1,132 1,327 1,169 1,144

Sub-total 6,610 6,185 6,398 7,341 7,358 7,124 7,111

Benefication Plants

Metlaoui 223 224 222 294 284 277 276Redeyef 99 102 102 103 99 101 121Moulares 87 74 67 80 73 66 7&MWDilla 165 160 150 147 131 170 149

Sub-total 574 560 5t1 624 587 614 624

Other Surface Facilities 2,087 2,262 2,212 2,178 2,312 2,326 2,372

Professionals 57 54 61 72 63 63 76

TOTAL MINES 9,328 9,061 9,212 10,215 10,320 10,127 10,183

Sfax - Loading Facilities n.a. n.a. n.a. n.a. n.a. 245 244

Head Office n.a. n.a. n.a. n.a. n.a. 199 200

TOTAL GAFSA CO. n.a. n.a. n.a. n.a. n.a. 10,57 10,627

1/ Including Sehib2/ Including M'Ratan.a. - no information available


ANNEX 2-7

Page 8


Table 2

ABSENTEEISM 1/

I. Underground Workers

1972 METMAOUI REDEYEF MOULARES M'DILLA

May 22.4% 14.2% 13.6% 22.1%June 21.8% 16.6% 12.9% 29.3%July 39.6% 17.1% 45.1% 26.5%August 18.5% 38.7% 21.8% 36.7%September 27.5% 14.3% 12.61 26.5%October 22.4% 16.0% 14.0% 39.6%November 27.5% 19.5% 11.0% 30.6%December 20.8% 14.6% 10.3% 24.3%

II. Face Workers

1973

January 23.7% 18.6% 17.9% 38.5%February 23.2% 17.4% 13.2% 34.9%March 18.4% 19.9% 14.0% 30.5%April 16.6% 24.3% 18.3% 36.6%M¶ay 19.4% 25.3% 15.1% 32.8%June 21.7% 28.6% 15.4% 59.8%July 32.4% 27.4% 11.7% 53.7%August 29.6% 41.2% 33.8% 31.5%September 20.2% 21.7% 17.3% 37.1%October 19.7% 27.1% 22.4% 41.6%

1/ including vacation and sick leave


ANNEX 2-7Page 9


Table 1

PERSONNEL

Oct.1969 1970 1971 1972 1973

I. METLAOUI

1. Mine - Underground 997 1,147 1,003 1,015 9142. Mine - Surface 101 180 166 154 1783. Plants & Others 607 685 653 644 7654. Central Services 693 714 733 759 789

Total 2,39 2 2,555 2,572 2,646

- workers 1,913 2,183 2,015 2,029 2,061- employees! [ 485 543 540 543 585

IT. REDEYEF

1. Mine - Underground 1,667 1,522 1,591 1,539 1,5492. Mine - Surface 57 110 92 122 1213. Plant & Others 530 492 508 476 532

Total 2,___ 2,124 2,191 2,137 2,202

- workers 1 2,052 1,918 1,954 1,898 1,944- employees- 202 206 237 239 258

III. MULARES

1. Mine - Underground 1,904 1,663 1,554 1,476 1,4492. Mine - Surface 177 195 228 248 2213. Plant & Others L63 483 450 431 415

Total 2:23 2,232 2,155 2,085

- workers 1/ 2,298 2,117 2,003 1,936 1,861- employees- 246 224 229 219 224

IV. M'DILLA

1. Mine - Underground 1,946 1,913 1,755 1,686 1,5472. Mine - Surface 367 340 304 268 1943. Plants & Others 559 509 525 596 579

Total 2,619 2,61 9 2_=1

- workers 1/ 2,513 2,500 2,366 2,236 2,013- employees- 234 240 253 253 268

V. SEHIB-/ 50 205 212

2/VI. M'RATA- 60 180 240

VII. STA-FF - ProductionDepartment 72 63 63 76 72

"AtL (I - VII) 10,f1% 9,9Q4 °,770 9,Rlh 9,738

VIII. SFAX - LoadingFacilities n.a. n.a. 245 244 248

IX. Direction Generale n.a. n.a. 199 200 208

GRAND TOTAL n.a. n.a. 10,214 10,258 10,194

1/ Personnel on monthly salary, excluding staff2/ Estimates


ANNEX 2-8

TUNlSIA - GAFSA PHOSPHATE PROJECT

THE CAFSA COMPANY - HISTORICAL INCOME STATEMENTS-(1969-1973)(DT million)

Year Ending December 31 1969 1970 1971 1972 19736/

PRODUCTION '000 tons) 2,398 2,761 2,991 3,267 3,273SALES (000 Fens) 2,315 2,593 3,084 3,134 3,124

I. Sales Revenues

Phosphate Sales n.a. 11.94 14.08 13.62 15.o6Less: Export Tax 1.08 1.18 - - _

Rebates n.a. .42 .41 .34 .449.95 10.33 13.67 13.26

II. Cost *f Goods Sold

Materp!!;. Sulpplies, UtiLi/ties 4.95 5.42 4.44 5.85 6.63Labor? 4.96 5.37 6.53 7.23 7.89Inventory Changes (.75) (.19) .92 (.3 ) (1.02)

III. Gross Profit (loss) (.79) (.27) 1.18 0.42 1.12

IV. Operating Exenses

Indirect Taxes .11 .16 .11 .15 .22Transport & Port Hlandlinm 2.39 2.80 2.91 2.81 2.75Selling & Administration5/ .42 .4-6 .39 .49 .25Social Budget .16 .08 3/ 3/ 3/Depreciation .98 .97 1.01 1.09 1.22Amortization- .47 .50 .85 O.h9 .21

V. Operating Profit (Loss) (3.75) (5.25) (3.49) (4.81) (3.53)

Other Income./ 1.66 1.98 1.47 2.31 2.27Financial Charges .34 .42 .43 .36 5

VI. Income (Loss) before Taxes (2.44) (3-69) (2.45) (2.86) (1-79)

Exceptional Profit (Loss) plusadditional Profit (Loss)of prior exercise (.13) .02 (.61) (1.87)Taxes - __ ___-

VI. Net Income (2.60) (3.67) (3.06) (3.96 (3.66)

1/ including operating expenses of the Direction d'Exploitation Miniere2/ not including expenses of the Direction d'Exploitation Miniere3/ after 1970 included in general positions4/ amortization of deferred charges, fees and miscellaneous expenses

m/ management fees STEPHOS, and dividends on investments in SIAPE fertilizer plantg/ unaudited statement.

Industrial Projects DepartmentJuly, 1974

ANNEX 2-9


THE GAFSA COMPANY - HISTORICAL BALANCE SHEETS (1969-1973)(DT million)

Year Ending December 31 1969 1970 1971 1972 1973 /

ASSETS

I. Current Assets

Cash .29 .22 .74 .25 .52Receivables 6.33 7.46 8.25 9.21 4.02Inventories 3.10 3.29 2.37 2.76 3.77

Sub-total 9.72 10.97 11.36 12.22 5.31

II. Fixed Assets

Equipment, Buildings, Infrastructure 17.14 19.19 21.21 32.33 31.72Concessions 2.38 2.38 2.38 2.38 2.38Construction in Progress .89 1.33 1.46 1.98 .98

Gross Fixed Assets 20.41 22.90 25.05 26.69 28.36Less accumulated depreciation 10.33 11.33 12.35 13.43 14.S4

Net Fixed Assets 10.08 11.57 12.70 13.26 13.72

III. Deferred Charg.s

Gross Deferred Charges 1.00 1.64 2.09 3.32 4.87Less Accumulated Amortization .56 1.04 1.49 2.18 2.33Net Deferred Charges .44 .60 .60 1.14 2.54

IV. Other Assets 4.01 4.06 3.40 3.39 3.08

TOTAL ASSETS 24.25 27.20 28.06 30.01, 27.66

LIABILITIES

I. Current Liabilities

Accounts Payable 8.70 12.57 12.91 9.92 5.43Short-term Debt 4.18 4.61 3.28 8.82 6.22Others - - 1.12 1.73-

Sub-total 12.88 17.18 17.31 20.47

II. Long-term Debt 1.37 2.39 3.20 5.9 11.96

III. Other Liabilities2/ .25 .20 .18 .L8 1.90

IV. Capital

Equity 5.00 6.35 9.35 9.35 8.85Reserves & Retained Earnings 8.71 4.75 4.75 0.01 .92

Sub-total 13.71 11.10 14.10 9.36Less: Cash Loss (Profit) 1.60 2.70 2.05 2.86

Depreciation & Amortization .98 .97 1.01 3.09 1.Deferred Losses 1.32 - 3.67 _ - 3.96

Net Capital 9.75 7.43 7.37 3.41 r73

TOTAL LIABILITIES 24.25 27.20 28.06 30.01 27.66

RATIOS

Debt/Equity Ratio-3 12:88 24:76 30:70 64.36 8b5=,Current Ratio 0.75 0.64 0.66 0.60 0.7,

1/ Frais drEtablissemnt as defiried by the French accounting system (exploration, research, pre-operating .ndstart-up expenses, fees for oapital increases and interest during construction).

2/ Including rei ssion of investment taxes and insurance funds.T/ Unaudited statement.


AN1i EX 3-1

TUN71CTA: CGAFSA PHOSPITATE PROJECT

THE MARKET

A. TORTLD SUPTPY AND TJNANDI

1. 'l'orld Reserves2. WcJrld Supply3. ,.Torld Trrade4. World Demand5. WJorld Supply and Demand Balance

EJ. LOADING COST, FREIGHT AND PRICE STRUCTURE

1. Loading and Shipping2. Freight Rates3. Phosphate Price Evolution-4. Tunisian Phosphate Prices - Post Development and Future Prospects

C. Tli. 'ARKET FOR TUNISIAN PHTOSPITATE ROCK

1. Characteristic; of Tun1isian Phosphate Rock^. The Tunisian Share of World Market3. Marketing Organization and Policies of GAFSA

ali e No.

1. I.'rld Resources for Phosphate Rock (1971)2. World Capacity and Production3. Trade Matrix 1965 and 1972-. Trade Matrix 19755. A. Consumption of Phosphate Rock5. '.- Average Growtlh Rates6. Ccnsumption by End-Use Sector7. Preight Rates - SfaxS. Solubility and P205 Content of Phosphate Rock9. Chemical Aralysis of Phosphate RockiC. Sales of Tunisian Phosphiate Rock11. Export Development by Country12. M"arket Projection for Tunisian Phosphate Rock

ANNEX 3-1Page 1

A. World Supply and Demand

1. W,i'orld Reserves of Phosphate Rock

1. Thel world reserves of phosphate rock are generally believed to beuniderestimated. In 1971 the world resources of phosphate rock were esti-mated at 292 billion metric tons for 45 BPL 1/ grades and above; excludingrocks grading 45 BPL and less which may be assumed to he uneconomically ex-ploitable. Total reserves grading 52 BPL and above are estimated to amountto 172 billion tons in 1971 (Table 1). A recent study 2/ commissioned bytl'e Bank- puts fonTard 120 billion tons in terms of saleable concentrates. (i.e.7, of 172 billion tons, corresponding to recovery ratio.) Or Ucli>d allrock with ^ grade above 45 BPL and assuming a weighted average grade of 53EPL the 292.2 billion tons of phosphate rock wvould be equivalent to 154.8billion tons of BPL; or 71 billion tons of P205 equivalent distrihuted ashoIn h,elow. Because of the confidentiality of data pertaining to ore reservesand grade, the above figures can only be considered order of magnitude esti-mates.

Estimates of W!orld Phosphate Peserves (1971)(billion tons P2 o5 equivalent cumulative)

BPLCouintry COver 63 65 62 52 45

r ccL) 0.4 2.1 9.3 15.5 22.3U"A I.lP 1.4 2.0 4.6 22.6.7 r SR, 1.0 4.1 5.0 5.4 6.4Spnnish Sahara 1.0 3.1 8.3 8.n 10.6Tunisia /1 0.2 0.4 1.4 1.0 2.4Asia /2 0.9 1.5 2.8 3.3 4.6Other countries 0.2 0.5 0.7 1.6 2.1

Total 4.5 13.1 29.5 41.2 71.0

Source: rUS Bureau of M¶ines, 1971

/1 see Annex 2-4 for latest estimates on reserves./2 Asia - see Table 1.

1' L = -,one Pliosphate of TAine -- refers toi the Tri4-alcium Phosph,4tC ofLine (TP!) the principal chemical component of the miiieral. One unitoF TPf. (or "'PL) is eqtivalent to 0.46 units P2 0 5 or 0.20 unit elementalpo3. )t1 :p&l; r<4 u T P.

Rt>iji) ron Pllv<sphate Rockl Supply iDe,urunl Trcn4rs by Pertilizer Co u tancy

L. 'Nierals Industry Studici:. Associated \vith the BriLish Sulpihur Corpora-tf0ii, Fe+ruary 1974 - llereinafter referred to as Briti-Th Stulphur Reportreb. 1974.

NTNEX 3-1Page 2

2. The above table indicates that ?,brocco holds 38% of world phosphatereserves grading over 52 BPL according to the available data, followed bySpanish Sahara with 22%s, the IJSSR (13%), and the USA (11%). Tunisia holds'.. of the world reserves for over 52 BPL rock. The USSR and Spanish Saharaeach hold 22,% of the richest reserves grading 68 BPL and more; Morocco holds

' (400 million tons) and Tunisia 4.5% (200 million tons). Reserves are more! u'eqtiate for more than 100 years life.

2. World Supply

3. Pour principal areas (USA, IJSSR, North Africa and Australasia) pro-duce 90%' of the world's current phosphate rock output. The US, the USSRand Ilorocco alone accounted for 80% of the world's production (Table 2), in1972.

Phosphate Rock - Domestic and Export Sales -1972(Million tons)

Total Export as a Percentage,ountry Exports Domestic Production of Total Production

U .s.A. 12.6 24.4 37.0 34.0 %'TSS 6.3 13.4 19.7 32.0 Zi'orocco 13.5 0.9 14.4 93.8 %Tunisia 2.3 1.0 3.3 69.7 ,Others 8.7 5.9 14.6 59.6 %

Total 43.4 45.6 89.0 51.2 °.;

Source: British Sulphur Corporation, February 1974.

Preliminary estimates for the 1973 world production amount to 97 million tons,ain increase of 9"' over 1972. Whereas Iforocco is essentially an exporter ofrock, the US and USSR have large domestic markets and Tunisia is in theprocess of transforming larger quantities of phosphate rock locally (37% ofproduction or 1.1 million tons in 1973 as compared to about 20% or 0.5 million.:ons in 1965).

Production of phosphate rock grew on average at 7.0;' per annum,ic.2H 1960 rind 1972 rising from 39.8 million tons in 1960 to 89.0 million

ronq in 1972. Growth was particularly rapid in the USSR (10.9% per annum).

ANNEX 3-1Page 3

Installed capacity 1/ rose from 45.6 million tons in 1960 to 98.4 million tonsin 1972. Capacity is often difficult to estimate and figures are usuallyconfidential. The production constraint is not always at the mine level butfrequently at the inland transportation and harbor facilities levels. Worldcapacity utilization has fluctuated since 1960 (Table 2) reflecting thevariations in the world supply/demand situation. (See para 11).

5. The expected major additions to existing capacities between 1972and 1977 will be in Morocco, Spanish Sahara, the U.S. and USSP. Morocco isoxpected to increase its capacity to 25 million tons of rock. The SpanishSahara -- a new supplier of high grade 75 BPL -- started production in 1973and is likely to have an installed capacity of 6 million tons by 1977; theU.S. and the USSR's objectives are to reach 50 and 30 million ton capacities,respectively, by 1977, but the lack of information makes it difficult toascertain% whether this objective can be attained. In particular, for example,the likelv future IJ.S. rock production is difficult to assess because: (i)the cnverage grade produced is decreasing which might affect export potentials;(ii) environmental protection and land reshaping obligations might increasethe production cost of rock and reduce production in marginal mines.

3. 11orld Trade

6. 1World trade increased from 29.2 million tons plhosphate rock in1965 to 43.4 million tons in 1972. The major exporters of phosphate rockare Morocco: ITSA, TJSSR and Tunisia. Those four countries account for about80% of world exports. About 65% of the world imports of phosphate rock goesto W1est, South and Eastern Europe. Canada, Japan and Brazil also import sub-stantial quantities of rock. The trade matrixes for 1965, 1972 (Table 3)show that world trade is expanding rapidly (an average growth rate of 6Z perannum). In the 1965-72 period, the share of the IJ.S. in world trade increasedfrom 24% to 30% whereas the share of Morocco and USSR remained stagnant (30%.and 15" respectively). Tunisia's share amounted to 5% of the world phosphatetrade in 1972 and is declining as its sales have been stationary in theperiod considered. However, it should be pointed out that Tunisia's salespotential has been constrained more by its production possibilities than bymarket outlets; nonetheless Tunisian phosphate producers remain secondaryexporters on the world market.

1/ In--dalled caT)arity in the oontext of this report is a comprehensive con-cept whicl includes, (a) mine production capacity, (b) rock transportationsystenr capacity from mine to beneficiating facilities, (c) processingcapacity of the beneficiation plants, and (d) capacity of transportation"InI -3din- systens for .;aleable concentrates. The capacity of productioni: dofined as the optimum annual level of output of saleable concentrateswhichj thc aforementioned set of prodtiction, processing and transportationsystemis is capable of generating. In consequence while world phosphaterock production capicity at the iine level may be very high and easilv,Ypanded for open pit mines for instance, the inland transportation and-arhor lclading systems which are less flexible constitute a major liif,ita--1-5 to i'st1lcd sapacity.

ANNEX 3-1Page 4

Major Exporters of Rock(Million tons)

1972 1973

CCo2ntry Quantity 7 Quantity

Morocco 13.5 31 16.1 33Florida 12.6 28 11.9 24UTSSR 6.3 14 6.3 13Tunisia 2.3 5 2.2 5Others 8.7 22 12.2 25

43.4 100 48.7 100

,'l Preliminary figures.

Source: British Sulphur Feb. 1974.

7. In the late sixties the emergence of the IJ.S. as a major exporterof rock had caused some changes in trade patterns. North African exportshad been increasingly directed to Eastern and South Europe and to some devel-oring countries where markets were expanding faster. Western Europe obtained"s' of its phosphate roclk requirements fror 'Uorth Africa in 1965 and only 447'in 1972. -owever, since 1973 the export policy of US producers has beenalterec 1 gradually. The major reasons are, on thne one hand, an effort of INpnroducers to maintain prices vis-a-vis rising costs for environmental pro-tection in Florida and increasing freight rates 1/; on the other hand, a moreconservative export policy of the US Government in view of (i) improving thebalance of payment, (ii) an increasing awareness to minimize a country'sdependence on foreign raw material sources, and (iii) the growing US demandfor phosphate based fertilizer. In the future the US is expected to maintainits export in absolute terms, but to be able to cover a diminishing share ofthe international phosphate trade gap.

8. A tentative Trade Matrix for 1975 (Table 4) shows: (i) a likelydecreasing share of the US in the world trade; (ii) an increased share ofMorocco (to about 37% of the world trade) which is likely to remain theleading exporter in view of its locational advantages and the average highquality of its rockl; and (iii) at the best a likely stagnant share for theUSSR. The Spanish Sahara will, however, become a major exporter and the mostimportant competitor of Morocco, particularly because its sales will beconcentrated on high grades (75 BPL and above) and directed to the sanemarkets.

! '.%lti. recer. 'y freight rates represented upward of nn,. of the deliveredrock yri&; .althotigh this proportion may have declined in respect of the200%' i nerease in FAS rock price, it still remains a major addition for[IS producers of lower rock grades. (See para. 17 for mre details).

ANNEX 3-1Page 5

4. World Demand

9. Table 5 shows past and projected consumption of rock on a regionalbasis. Rock consumption doubled between 1960 and 1970 and is likely to doubleaaain between 1970 and 1980. However, developing countries, which consumedless than 10% of the world total in 1960, raised their share to 12.5% in1970 and 15% in 1972, and are likely to increase their share further to 19%ln 1980:

Consumption of Phosphate Rock(Million tons of product)

1960 1970 1972 1975 1977 1980

Developed countries 35.7 70.9 77.7 97.0 107.3 125.4Developing countries 3.9 10.1 13.6 18.1 22.1 29.7

World Total 39.6 81.0 91.3 115.1 129.4 155.1

The world consumption grew at about 7.3% per year over the 1960-1972 period(11% for developing countries and only 7% for developed countries). Worldconsumption is expected to increase by 7.5%7 per annum in the 1972-1975 periodand by 6.1" per annum thereafter. The manufacture of fertilizers has accountedon the average for 86% of all phosphate rock demand between 1968 and 1973(Table 6). Since a high rate of capacity utilization in existing finishedP205 manufacturing units is projected, the demand for phosphate rock willmostly result from high levels of operations in additional phosphoric acidcapacity that will come on stream in the next five years. Such largephosphoric acid units can have a marked impact on the pattern of phosphaterock imports since each unit can consume up to 1 to 1.5 million TPY of rock.

10. The medium term demand of phosphate rock for fertilizer production'7ill depend on the lead time for delivery of fertilizer processing plants;furthermore the impact of rising petroleum prices on the cost of steel andplants -uhen compounded with the recent major increase in phosphate rockdeliverecl price is very likely to provoke a downward trend on roclc demand.The following table was established in June 1973 and may not be operationalany longer, it is given lhere to display the potential demand stemming fromincreased fertilizer processing capacity.

ANNEX 3-1Page 6

Phosphate Rock Demand Generated by NewFertilizer Projects (1972-1975)

(Thousand Tons)

lTominal Capacity Probable Impact on Rock Demand

Counta P205 Tnock 1973 1974 1975

France 396 1320 - 400 600Greece 35 115 - 60 55?oland 220 720 240 240 120Romania 580 1350 - - 500Bulgaria 200 300 200 300Yugoslavia 50 165 - 65 100brazil 675 2340 50 200 650

Sub-Total /1 2156 6810 290 1165 2325

T'SA 2079 11700 800 1800 2200ather countries /2 3375 10345 1880 1640 1590

Total 7610 28855 2970 4605 6115

Source: ',ritish Sulphur Corporation, June 1973 (Study commissioned by theCCAFSA Company).

/1 These countries are traditional markets for Tunisian phosphate rock./2 Do not include USSR and Asian Centrally Planned Economies.

5. I!orld Supply and Demand Balance

11. Production and sales of phosphate rock have been generally closelyin line with one another durinp the 1960-70 period. Between 1964 and 1969production exceeded sales by a cumulative qaggregate of 11.5 million tons,mostly accounted for by additions to producers' stockpile in Florida. Since1970) sales have outstripped production and stock withdrawals have suppliedalr.ost 6 million tons reducing stockpiles to a level generally considereddangerously low. In 1972 worldwide stockpiles were depleted further by 2million tons to accommodate a rapidly growing market. The main factor behindthis situation was the Florida producers' inability to operate at nominalcapacity rates of production (35 million tons a year); this situation wasworsened by the impact of a number of technical problems that considerablyslowed down production.

ANNEX 3-1Page 7

World Supply and Demand of Rock (million tons)

1970 1972 1973 /1 1975 /2 1977 /2 1980 /3

Capacity 91.5 98.4 102.4 122.1 142.0 180Production 81.1 89.0 97.0 115.1 129.5 166Consumption /4 81.0 91.3 100.8 115.1 129.4 155.1 /2Capacitylltilization 88.6% 90.0% 94.7% 94.7% 91.1% 92.2%

Source: British Sulphur and Bank estimates and projections.

/1 Preliminary estimates./2 Bank projections./3 British Sulphur forecasts, February 1974./4 See Table 5, Annex 3-1 for breakdown of consumption.

12. In 1973, preliminary estimates show that world production and salesof phosphate rock both rose by some 8 million tons, a 9% increase over 1972;stockpiles were depleted for a third year in a row. The tightening supplydemnand situation was in effect aggravated in 1973 by major transportationbottlenecks in the Florida rock industry, and by the failure of the SpanishSahara to fulfill its 1973 production target of 2 million tons, producingonly 700,000 tons. These two factors and the USSR's stagnation left Moroccoas the only major producer disposing of enough flexibility to increase itsexports to meet world requirements and at the same time to influence phosphaterock FOB prices. The medium term (1975-76) demand for phosphate rock willinclude a rebuilding of the depleted world stockpiles. The projected addi-tional capacity for 1974 previously put at 11 million tons has now been re-vised downnward to a more probable 6 million tons in view of the uncertaintiessuirroundinR the Spanish Sahara and the Florida industry. The additionalcapacit:- for 1974-1976 is expected to keep in line with additional demandtaking into account stockpiling requirements.

13. In 1977 and beyond, additional new capacities are expected to easethe tigllt supply/demand situation and to reverse to a more rational market1behaviour. It slhoulcd be stressed haowever thaat presently no reliable forecastis either availalle or even possible. Phosphate consumers in the fertilizerindustry are eagerly accepting conditions imposed by suppliers in fear ofsccinu- thcir plants idled by laclc of raw materials. Tne future price leveland freight structures will not just depend on a balanced supply and demandor a-i ovorcapacity sittuation for phosphate rock. Other factors, such aspetroleu.n and other cormodities price levels, as well as political and eco-noaic consicerations in phosphate producing developing countries (includingXpanish Sahara) will be determinant.

ANNEX 3-1Page R

B. Loading Cost, Freight and Price Structure

1. Loading and Shipping

14. Phosphate is delivered dried and requires covered storage whereverthere is risk of rain. Such a requirement limits the tonnage to be trans-ported to about 20-25,000 tons owing to limited storage space in recoveryports. Storage for over 50,000 tons is exceptional. Mediterranean ports forinstance, except the future port of FOS, are unable to receive phosphatecargo of more than 20-25,000 tons. Buyers prefer to order small quantitiesin order to save on stockpile cost.

15. Nearly 75% of the GAFSA Company's phosphate rock shipments relyon 3-5,000 dwt ships, although the port of Sfax accommodates vessels of25,000 dwt. Considering the location and compodtion of its clientele theCompanv helieves that the advantages of smaller ships outweight the relativelyhigh freight cost/ton. Particularly, smaller ships can

(a) reach many small Mediterranean ports close to the customers,

(b) avoid costly stockpiling at the destination.

16. The Company maintains loading facilities in the port of Sfax.Shipments are handled by the Chartering Party "AFRICANPHOIS" which chargesas of January 1, 1974:

(a) US$0.55/ton for cost of loading (up from $0.25 in 1973),

(b) US$0.16 CRT/day for demurrage (GRT Gross Rail Ton),

(c) TJS$0.08/CRT/day for despatch money, and

(d) agencv fees of

US$60 up to 99 metric tons loadedUS$90 from 1,000 up to 2,499 metric tons loadedUS$125 from 2,500 up to 4,000 metric tons loadedUS$160 from 5,000 up to 7,499 metric tons loadedUTS$200 from 7,500 up to 9,000 metric tons loadedUS$250 from 10,000 up to 14,000 metric tons loadedUS$310 from 15,000 up to 19,999 metric tons loadedUS$370 from 20,000 metric tons loaded and upwards

2. Freight Rates

17. Freight rates have an important effect on the cif price of phosphaterock since freight amounts to upward of 100% of the fob Costs. Freight rateshave been fluctuating widely depending on size of ships, charter arrangementsand shipping route: (see Table 7 and the following summary):

ANNEX 3-1Page 9

Typical Freight Rates for Phosphate Rock(US$/ton FIOT /1)

1971 1972 1973 1974 /3

Tampa: Rotterdam 4.35 n.a. 11.50 /2 17.50Antwerp n.a. 3.50 11.50 17.50

Casablanca: Rotterdam 3.25 3.60 6.50 /2 5.0/8.0Sfax: Rotterdam 4.10 4.50 9.84 11.81

Marseilles 3.95 4.05 5.90 8.37

/1 Fixed basis loading and discharge costs included./2 September 1973./3 January 1974.

Source: GAFSA Company Marketing Department, STAR and AFRICANPHOS.

The freight rates under the impact of new high levels of petroleum priceshave registered a major increase in the past ten months reaching $17.0/metricton in the US Atlantic route in January 1974 versus $7.50/ton in June 1973,and 511.50/ton in September 1973; the North Africa-Europe route has alsoregistered a more than 100% increase between 1972 and 1973. This increase infreight rate has further deteriorated the competitiveness of US producers.Comparing freight rates between Casablanca and Sfax, respectively and North-european ports the Moroccan route is now from $6.0 to $4.00/ton less expen-sive. On the other hand Tunisian phosphate producers have an equivalentfreight advantage when shipping to Mediterranean ports. The increasingfreight rates should not affect Tunisian phosphate rock competitiveness asover 0,'% of its exports are carried to Mediterranean ports.

3. Phosphate Rock Price Evolution

17. The major factors affecting the price of phosphate rock are:(a) its quality (P205 contents, CaO content, impurities), (b) the internation-al supply/demand situation, (c) the requirements of end users and (d) freightcharges. Since practically all the rock traded in the world is under shortand medium-term contracts whose terms are kept confidential, prices can onlybe estimated. The industry publishes listed FOB prices which are indicativeof world prices and were close to actual prices in 1973/74. Those prices aresummarized in the table below:

ANNEX 3-1Page 10

Listed fob Export Prices for Phosphate Rock(in US$/ton of product)

1973 1974Suppliers Grade BPL 1966-72 January March January July

Phosrock/Florida 68 7.58 8.56 9.74 19.6872 8.88 9.86 11.32 23.6273 9.15 10.14 11.81 25.00 /475 10.02 11.00 12.89 27.00

OCPI/_orocco

Youssoufia 70 10.15 11.15 12.30 37.50 /1Khouribga 72 11.00 12.00 13.30 40.00 /2 /4

75 11.75 12.75 14.20 42.00 /2

GAFSA-lunisia

FAS Sfax 65 8.5 /3 11.00 36.00 42.0062 - - 32.00 38.00

Source: British Sulphur, Companies (OCP, GAFSA).

/1 FAS Safi./2 FAS Casablanca./3 Average price 1969-1971.,4 A 50X increase above January 1974 price levels were announced.

19. During the 1966--1972 period, surplus capacity in the world encouragedthe concession of substantial discounts (up to 20% of the listed price).Listed prices nave remained stagnant during the period because of an over-supply situation. Rock supplies became tighter in 1972; prices are now closerand probably equal to the listed ones. In the middle of 1972, the US producersraised their listed prices by $1.00 per short ton after having formed (in 1971)an export organization ~Phosrock" whose purpose was to reduce the competitionar.ong exporters. The increase in US prices was followed by a similar increase

s er ton) in -Moroccan prices by late 1972. The 1972 price recovery can;e attributed to bothi a tighter supply/demand ratio and a better understandingamong producers. Using the early 1973 listed US prices, the price per BPLpercent was 12.64/BPL percent/ton for 68 BPL rock and 14.7i/BPL percent/tonfor 75 iPL rock.

20. In 1973, phosphate rock prices increased sharply world wide. In?arch 1973 fob prices increased by US$1 - 1.5 per ton. Further major priceiicr.c,ses were announced in November 1973 for 1974; prices increased 2 times

for Florida rock, and about 3 times in the case of lMorocco over their Mlarch1`73 level. The main reasons were: (i) a current tight supply/demand situationin Lhe world; and (ii) an understanding among major producers to realize a

ANNEX 3-1Page 11

necessary price recovery to improve the profitability in the sector followinga lasting depressed prices situation over most of the last decade. The levelof actual rock prices (delivered to Europe) remained constant in current termsover the period 1963-1973. Prices in constant US$ therefore dropped over theperiod, though fluctuations in prices (plus or minus US$1 - 2) were recordedduring the period and a two to three years up and down price cycle seems tohave been in force:

Long-Term Trends in Rock Prices (current US$/ton)

1963 1965-66 1968-69 1970-71 1972 IMid-1973 1974 /1

Y P + 2 P P - 1 P P + 3 3P

/1 Tne impact of increased freight rates on delivered prices cannot beas yet assessed; in consequence the 1974 trend is very approximate.

4. Tunisian Phosphate Prices - Post Development and Future Prospects

21. The development of prices for the GAFSA Company generally followedthe international price cycle. The 1972 US dollar price increase has beencompletely absorbed by the US dollar devaluation. As a result average DTprices between 1971 and 1972 declined. however, the Company benefitted fullyfrom the rising price trend by 1973: to counterbalance the Miarch 1973 dollardevaluation the Company signed all contracts (i) with French and Belgiancompanies in FF: (ii) with German, Austrian and Swedish firms in their localcurrency and (iii) included renegotiation clauses in case of parity changesin British contracts; due to the tight supply/demand situation, all companiesfrom clearing countries accepted an 11.25/ price rise after the devaluation.

ANNEX 3-1Page 12

Development of Prices/1 (FAS) for 65/68% BPL GAFSA Phosphate Rock (1969-73)(DT/Ton and $/Ton)/2

1969 1970 1971 1972 1973DT $ DT $ DT $ DT $ DT $

Countries withConvertible /3Currencies 4.7 8.93 4.4 8.36 4.4 8.36 4.02 8.36 4.65 - 10.5

ClearingCountires 4.8 9.12 4.7 3.93 4.6 8.73 4.30 8.97 4.99 11.35

Domestic .!arket 4.7 3.93 4.5 8.71 4.45 8.53 ( 4 . 6 )/- (5.1) -

Average 4.73 8.98 4.51 8.71 4.45 8.53

/1 1969-1971 prices are averages, compared to weighted averages for 1972-1973. Considering the trend 1969-1971 prices are therefore overstated.

2 1969-1971 Si = 0.52 dT; 1972: 1$ = 0.48 DT; 1973: $1 = 0.44 DT/3 not includinig the Turkish contract ($7.90/ton) which is currently

renegotiated./4 ;iDe prices for the domestic market are overstated. Contracts with

domestic users stipulated average export prices.

Source: GAFSA Company .'arketing Department.

22. Following Mkorocco's lead, thie Gafsa Company increased the price of75/06 3PI, phosphate rock from a 1973 average $10-11/ton to $36.00/ton fobSfax 1/ effective January 1974, for all contracts, domestic as well as foreign.tna the spot market, prices reach upward of $40.00/ton. Listed prices wereincreased againi in June 1974 to $42.00 f.o.b. Sfax for 65/68 BPL phosphaterocK, and $38.00/ton of 60/62 BPL ground rock for direct application. Distinc-tioris between domestic, clearing and non-clearing rmiarkets liave been abolished;al] contracts are quoted in convertible currencies and foreign exchange risks-re asst,ted by purchasers.

_3. Plhosphate rock may Lhave different levels of utilization valuesin relation to its end use and to the type of industrial unit using it. Inarticular, some European units form captive markets for North African'. nospnates because of the grinding and filtering equipment used. Under abal.ln.ced supply situation average parity rates, incorporating quality, gradeain utilization values are therefore, in most cases, worked out for each cus-Coner. ueiivered reference prices may be determined for specific consumption

TI 60162 'BPL ground rock for direct application: $32.00/ton fob Sfax.

ANNEX 3-1Page 13

areas where leading prices are likely to be related to the large trade of70/72 BPL; in particular, Europe, the world major rock importer has played an

important role in the formation of world prices. In the long run, futuredelivered prices of phosphate rock in Europe will depend on: (i) the growthof the demand by types of rock; (ii) the ability of the US producers to ex-port substantial amounts of rock which in turn depends to a large extent onthe status of the US domestic market; (iii) the build-up of the exports ofSpanish Sahara; and (iv) the price policy among the different producers.

24. Considering a future price level for Tunisian phosphate rock, thefactors affecting future world supply and demand levels (paras 10-12) shallbe determinant, although the direction of effect is not always clearlyidentifiable. It still remains to be seen, whether the repercussion ofincreasing raw materials prices on the production cost of fertilizers,and hence on the selling price of the latter, will be accepted lightly byfarmers the world over. In other words phosphate prices may be rolled backshould the demand for phosphate fertilizer products register a sharp decline.Such an eventuality would further enhance the local processing industriesutilizing available phosphate rock at a premium price in Tunisia, 'Morocco and

other North African producing countries.

25. The following fob and fas price projections in current US dollarsmust be considered only tentative. The impact of petroleum prices on steel

and fertilizer plant costs, and on freight rates has not yet been firmly

assessed; the future price of phosphate based fertilizers and the likely

switch to substitute nitrogen and potassium based fertilizers will also play

a major role in the determination of future rock prices whatever the supply

and demand relationship of the latter may be. Finally the future world mone-

tary situation will determine the marketing policies of the rock producers in

developing countries.

Projected World Rock Prices in 1977-78(in Current US$/ton)

Grade (BPL) fas Morocco fob Florida

70 28-30 22-2572 30-32 25-2875 32-35 28-32

fas Sfax

65/68 25-2962/65 20-2560/62 18-22

ANNEX 3-1Page 14

'6. It is estimated that the world rock supply and demand are likely

to balance from 1977 onwards, in particular owing to (i) renewed interest in

investing in phosphate rock mining, (ii) the coming on stream of major addi-

tional facilities in Florida, .Iorocco and Spanish Sahara, and (iii) a likely

slight relative drnp in th-,e use of phosphate based fertilizers in favor of

nitrogen and potassium based fertilizers. Under the combined pressure of these

tllree factors, rock equilibrium prices are expected to stabilize at about 20%o

to 30, below the January 1974 price levels and to increase thereafter at a rate

close to the prevailing world inflation rate. For the Tunisian 65/68 BPL grades

which account for 80% of total sales, fas Sfax prices are expected to stabilize

at a minir,um $25.00/ton 1/ in current terms in 1977-78 and to increase there-

after as indicated above.

C. The Market for Tunisian Phosphate Rock

1. Characteristics of Tunisian Phosphate Rock

27. Crade: BPL content of Tunisian phosphate rock varies from 40-66

3PL for run of mine ore and averaging 58-60% BPL for the present mines.

Higher grade rock vields certeris paribus higher productivity in fertilizer

production and is sold at a premium.

composition: Besides the relatively low grade, the Tunisian rock

has two major disadvantages:

(a) The CaO/P205 ratio is higher than in other phosphates (Table 9),which results in higher consumption of sulphuric acid for

phosphoric acid production.

(b) The rock contains organic matter (about 3%) which impedes thefiltrability of the phosphate by sulphuric acid and produces a

great amount of foam. To overcome this difficulty CFRPHOS 2/ has

developed and tested a flocculant process which improves the

filtrability and the clearness of the phosphoric acid. The process

has been applied satisfactorily on an industrial scale by SIAPE and

rosts about $0.12/ton phosphate rock.

28. In contrast, Tunisian phosphate rock is well known for its:

(a) Softness: This characteristic reduces grinding costs and facilitates

the reaction with certain organic acids compared to the semi-hard

Florida rock and the hard Kola rock. Softness accounts for the

special nutritive power of GAFSA Company ground phosphate for direct

application.

1/ Minimuim $20.00/ton for 60/62 BPL.

_X CERPHOS: Centre de'Etudes et de Recherches des Phosphates Mineraux,

Paris. (Phosphate Research Center.)

ANNEX 3-1Page 15

(b) Peactivity: This quality accelerates on the one hand the processof phosphoric acid production; on the other hand, the reactivityof ground phosphate directly applied as fertilizers is excellentwith acid and neutral soil.

(c) Solubility: In citric acid and formic acid, none of the competingphosphate qualities give a comparable solubility (Table 8) , andtherefore can be used as direct fertilizers with such high effici-ency. The solubility increases with finer grinding. The phosphaterock from the Redeyef and Moulares mines reaches the highest degreeof solubility and has been sold as ground phosphate for direct ap-plication.

29. Tunisian phosphate rock is considered the world's best phosphatefor direct application because of its softness, high reactivity, solubility.It can be used directly in acid soils (pH content less than 7), tropic, sub-tropic, sandy and clayish soils, but should be dissolved in water if appliedon limestone and soils with a pH content of more than 7. Paddy fields,pastures and forests have been reacting well to the GAFSA ground phosphate.The Tunisian ground phosphate can be mixed with potash- or nitrogen-basedfertilizers without loss of reactivity and efficiency.

30. Quality of Phosphate Rock Sold: The company sells traditionally astandard quality of 65/68% BPL rock which accounts for about 90% of salesvolume.

Quality of Phosphate Rock Sold(000 tons)

QualityBPL(°%) 1966 1967 1968 1969 1970/1 1971 1972 1973 1974/1-

60/62 - - - - - - 173 347 -62/64 - - - - - - 7 2 -65/68 2,177 2,045 2,473 1,851 - 2,785 2,375 2,994 -67/69 185 162 134 221 - 43 112 12 -Epure 365 440 430 326 - 255 25 24 -

Total 2,727 2,647 3,037 2,398 2,587 3,083 3,132 3,379 3,888

/1 No breakdown available; 1974 contracts only.

Source: CGASA Company Marketing Department.

ANNEX 3-1Page 16

' Epure" quality is a 70/73% BPL rock which is enriched by phosphoric acid.The process has been discontinued. The company emphasizes now the groundphosphate market (58/63% BPL and 65/68% BPL qualities) and does not intendto compete in the high grade market segments. Small quantities of "epure"are still produced for sale to an old Austrian customer. Phosphate rock soldto the domestic fertilizer manufacturers is classified as 65/68% BPL. Chem-ical analyses, however, show an average of 62.5% BPL (Table 9).

2. The 'riinisian Share of the World Market

31. Tunisian phosphate rock dominates the market segment for groundphosphate since it is undoubtedly the best quality for direct application.In 1972, the GAPSA Company supplied about 0.8 million tons of rock for directarplication out of a total market of 1.5 million tons. The future of theground phosphate market seems promising. In the recent past world demand forground phosphate has been determined by:

(a) "rice fluctuations and demand/supply cycles of fertilizers; over-supply in developed countries had a decreasing effect on groundohosphate demand because developing countries could or had to buyfertilizers through bilateral aid arrangements;

(b) The closure of the Suez Canal; ground phosphate is applied verysuccessfully on paddy fields in Southeast Asia: however, as longas the Suez Canal remains closed, prices are not competitive com-pared to Japanese or foreign aid supported fertilizers;

(c) Tegal restriction in user countries; for example, FR of Germanyand Austria require a minimum P205 content when ground phosphateis applied to neutral soil.

32. Recent Developments: After the sharp production and sales drop in196q due to a devastating flood, the Company reached again in 1971 the 1968sales volume of 3 million and sales increased to 3.3 million tons in 1973.'Tne company signed contracts for deliveries of 3.8 million tons in 1974.

Sales to Major Markets(Million tons)

1968 1970 1972 1973

.on-cleating countries 1.2 40% 0.9 35% 1.3 42% 1.5 46%Clearing countries 1.0 33% 0.9 35%7 0.8 26% 0.7 21%Domestic market 0.8 277 0.7 30% 1.0 32% 1.1 33%

Total 3.0 100% 2.5 100% 3.1 100%" 3.3 100%,

ANNEX 3-1Page 17

Vie major recent development is the increasing dor.estic uJse of phosphate rock.Considrcring the exp)ansion plans of local Fertilizer companies, about 42°,' ofGAFSA's saleable rock (2.1 million tons) will be sold domestically by 1978.Whereas exports to clearing countries have been maintained at about 1/4 oftotal sales, the boost of the domestic market counterbalances the decliningdemand for Tunisian low grade phosphate for fertilizer manufacturing inWestern Europe.

33. In addition to changes in total export patterns among clearing andnon-clearing countries during the past 9 years, structural changes amongareas and customer countries occurred (see Tables 10 and 11).

(a) Of the primary importing countries in 1966 (France, Greece, Italy,India, Yugoslavia) only France and Greece are important in 1973.Prance will continue to be the first ranking export country for theCompany; deliveries of 400,000 tons/year are projected solely fora new customer of ground phosphate (TIMAC). Yugoslavia prefershigher grade rock which the Company cannot supply, whereas exportto India has been fluctuating and might cease permanently after theopening of the Rajasthan phosphate rines.

(b) Exports to South America, i.e. deliveries of rock to Brazil andUruguay for direct application increased since 1970 and accountedfor 9% of total exports in 1972; however this market registered aslight decline in 1973, accounting only for 6% of total exports.

(c) Amona the clearing countries, the exports to Czechoslovakia increasedwqith decreasing sales to Yugoslavia. At the same time the companyhas established new regular supply patterns to Bulgaria, Rumaniaand German DR.

34. The Company considers at least 40% of its exports as captive markets.This includes: (i) Greek customers using the SIAPE process (265,000 tonsin 1973); (ii) Poland which imports phosphate rock (184,000 tons in 1973) inexchange for sulphur deliveries to Tunisia; (iii) A Danish firm using20-30,000 tons of M'Dilla rock per year; (iv) Phosphate rock for direct appli-cation. Major consumers are TIMAC (France) and the Reno group which maintainsbranches in FR of Germany, Austria, France, Great Britain, Brazil, Uruguay,Chile, Cambodia and Indonesia. The ore must be ground or granulated beforesold as ground phosphate; (v) Several old customers (fertilizer companies) inFrance which import up to 20,000 tons per year.

35. Market Projections: lncertainty about the Company's future produc-tion level impedes meaningful sales projections. The company may produce3.6-4.9 million tons of saleable product in 1975 depending on the success ofthe mechanization experiments and opening of new mines; up to 1980 a maximumproduction level of 5.0-6.0 million tons per year is projected.

ANNEX 3-1Page 18

Market Projections(Million tons saleable rock)

Actual OECD GAFSA Company I/1973 1975 1975 1978

Min. Max. Min. Max.

Exports

Western Europe 0.9 0.5 1.2 1.3 1.65 1.80Eastern Europe 0.7 1.2 1.1 1.3 1.90 2.15Southerr Europe 0.5 1.2 0.5 0.55 0.70 0.80South America 0.2 - 0.3 0.30 0.55 0.55Asia 0.0 0.3 0.1 0.1 0.20 0.30

Total Exports 2.2 3.0 3.20 3.55 5.00 5.60Domestic Market 1.1 1.8 1.50 1.55 2.10 2.1

Total 3.3 4.8 4.70 5.10 7.10 7.70

/1 These projections do not reflect sales forecasts but market projectionssubject to no constraint in Tunisian phosphate production.

Source: OECD and GAFSA Company Marketing Department.

In the short to medium term (i.e. 1976-77) sales prospects are deemed verygood for Tunisian phosphate rock for the following reasons: (i) the pres-ently tight world supply demand will not ease before 1976 when new miningand processing facilities are expected to come on stream; (ii) the probablereopening of the Suez Canal by the end of 1975 combined with the traditionalfreight advantage of Tunisia will make it possible to recapture SoutheastAsian Markets lost in 1967 and to secure new outlets; (iii) the local phos-phate processing industry in Tunisia is likely to develop its productioncaoAcit-ies at a faster pace in order to enter the promising market of phosphate

nl--;:-dia._s (MAP, DAP); (iv) captive processing industries in theMediterranean Basin are expected to increase their production capacities usingthe same phosphate rock. The prospects for greatly increased ground rocksales in V'estern Europe and South American appear good: in W. Europe thereduction in basic slag supplies will he the most important factor in thenext 6 to 7 vears. In South America it is expected that a growth rate of

n,c per annum will be achieved during the 1974/1980 period. Elsewhere salesof ground rock and rock for grinding will be determined by the promotionalefforts deploved by phosphate rock producers. 1/

1/ British Sulphur, December 1973.

ANNEX 3-1Page 19

36. The present high level of phosphate rock price make investments inheretofore marginal mines quite attractive. However mining and beneficiationcosts are expected to be much higher in these new facilities, and the rockproduced will be of lower average grade. The competitive position of thesenew mines will depend on future rock price behaviour. The Tunisian industrywhich is a high cost industry is currently undertaking a reorganization andmodernization of its production and management systems, and is expected tobe in a better position in 1977 to face the new competition as its cost ofproduction should be more competitive with the new mines.

37. Mlarket projections above and in Table 12 reflect possible contractsand indicate a market for 7.0 million tons by 1978. Clearly, Tunisian phos-phate sales are restricted by production and not by insufficient marketoutlets. In view of a maximum production level of 5 million saleable tonsper year and a domestic demand of 2.1 million tons per year by 1978, the Com-pany should have no difficulties to allocate and export about 3 million tonsper year among its traditional customers.

3. Marketing Organization and Policies of GAFSA

38. In 1930 the three Tunisian mining companies (GAFSA, STEPHOS, CIPHOS),together with the Moroccan (OCP) and Algerian producers, formed a marketingorganization (Comptoire Phosphatier d'Afrique du Nord) with headquarters inParis. The organization determined the terms and conditions of salesagreements and restricted the export quota of the Company and CIPHOS to 1.5million tons/year and 0.3 million tons/year, respectively. When OCP (Morocco)decided in 1960 to directly commercialize its phosphate rock, the Tunisian,Algerian, Toga)esandSenegalese mining companies established a separate mar-keting organization (Union Phosphatiere Africaine - UPHA). In 1965 GAFSA andthe other Tunisian producers left the UPHA <nd started direct marketing.Despite the transfer of the Company's headquarters to Tunis in 1962, theComranv maintains a marketing office (TUNIFOS) in Paris. GAPSA stresses theimportance of its Paris office, since (i) France has traditionally been thelargest customer, (ii) all African phosphate mining companies are representedthere, and (iii) contacts to Eastern European and Asian countries have beenestablished in Paris.

39. Marketing Policies: Prior to the recent price increases ofphosphate rock, which became effective in January 1Q74, the GAFSA Companyimplemented a sales and marketing policy geared to three different types ofmarkets: (i) Countries with convertible currencies; (ii) Clearing countries;and (iii) Domestic market.

40. Sales to these markets were made through annual contractsrenegotiated in October/November and valid for the calendar year. Contractsfor domestic and clearing countries provided for preferential fixed priceswhich resulted in (i) price differentials between customers of clearing and

ANNEX 3-1Page 20

non-clearing countries ranging from $0.15 to $0.50/ton; (ii) price subsidiesto domestic customers who benefited from prices lower than in the world marketfor comparable consumers.

41. Since January 1974 all long-term and fixed-term contracts withdomestic as well as international customers were denounced by the Goverrnentof Tunisia for clearing countries and the local processing industries, and bythe GAFSA Company for non-clearing customers. All domestic, clearing and non-clearing countries are put on the same footing and international buyers mustpay their purchases in hard currencies and assume all exchange risks. Pricedifferentials are suppressed and only one price is quoted for all customers.Ouantities to be delivered and previously agreed upon are not affected.

42. Contracts: The new sales contracts, although valid only for sixmonths can be renewed for another six months upon notification by the customerand acceptance by the Company. This policy reflects the uncertainty surround-ing the present level of phosphate rock prices, and the Conpany's concern notto be tied up by prior commitments in the likely event of another price hike.More than 90% of total sales is contracted on FAS basis. Exceptions aredeliveries to Austria (cif). The Company relies on agents for sales toBulgaria, Yugoslavia, Austria and Greece. Average commission now amounts to$0.25/ton.

43. The Company uses a standard contract which stipulates among otherconditions:

(a) Quality: At the time of shipment, the phosphate shall contain inthe natural state, about:

69.5% of tricalcium phosphate for the quality 'epurd'64% of tricalcium phosphate for the 65/68% quality55% of tricalcium phosphate for the 58/63% quality

which is to say in the dry state approximately 71%, 65%, 57.5%. The contentof sesquioxide of iron and alumina combined shall not exceed, in natural state1.50% for the "epure" and 65/68% qualities and 2% for the 58/63% quality. Itwill not contain more than 3% moisture for the "epure" quality, and not morethan 5% moisture for the 65/68% and 58/63% quality.

(b) Penalties and Allowances: Should the arbitral analysis, performedon the sample drawn during the loading, show that the content of tricalciumphosphate in the natural state falls:

below 69.50% in the natural state for the "epure" qualityor below 64% in the natural state for the 65/687 qualityor below 557 in the natural state for the 58/63%> quality

ANNEX 3-1Page 21

the buyers will nevertheless take delivery of the goods unless this content

should be below:

68% in the natural state for the "epure" quality62% in the natural state for the 65/68% quality53.5% in the natural state for the 58/63% quality

but a price rebate will be made to them on the basis of 2% of the sellingprice per unit:

below 69.5% in the natural state for the "epure" qualityor below 64% in the natural state for the 65/68% qualityor below 55% in the natural state for the 58/63% quality

and proportionately for fractions.

On the other hand, should the arbitral analysis show the content intricalcium phosphate in the natural state exceeds the minimum guaranteed, theprice stipulated as basis would be increased by an amount calculated onsimilar basis to the one indicated hereabove for the reckoning of the allow-ances. Should the arbitral analysis show that the content of the sesquioxideof iron and alumina combined exceeds the maximum stipulated the buyers wouldnevertheless take delivery of the phosphate, unless this content should behigher than 3%, but a rebate would be made to them on the basis of 4% of theselling price per unit of sesquioxide of iron and alumina combined above thesaid maximum and proportionately for fractions. Should the arbitral analysisshow that the content of moisture of a parcel exceeds the maximum stipulatedthe buyers would nevertheless take delivery of the phosphate, but a rebatewould be made to them on the basis of 2% of the selling price per unit overthe maximum stipulated and proportionately for fractions.


ANNEX 3-1Page 22


Table 1

WORLD RESOUTRCES OF PHOSPHATE ROCK(Million tons - Cumulative)

Grade in BPL %more than 68 65 62 52 45

U.S.A. 2,400 4,590 7,040 19,300 94,000South America 330 700 725 1,730 2,000U3SR 3,300 13,800 17,400 22,490 26,000

Africa

Algeria 130 350 725 3,460 4,000Morocco 1,300 6,900 32,600 64,875 92,000Rio de Oro 3,300 10,400 29,000 37,195 43,500Tunisia 660 1,400 5,080 7,785 9,000Other 35 70 115 160 200

Sub-Total 5,425 38,210 67,520 113,475 148,700

Asi a

China 660 1,380 2,175 3,460 4,o00iforth Vietnam 1,300 2,080 2,900 4,325 5,000Israel 330 690 1,815 2,165 2,500Jordarn 330 350 725 1,300 1,750Other 330 690 2,175 3,460 5,750

Sub-Total 2,950 5,190 9,790 13,710 19,000

Cceania

Austral.ia - 350 725 1,300 1,600Cither 50 70 75 120 250

Sub-Total 50 420 800 1,320 2,050

'ther Countries 80 70 120 220 450

TJOTAL 14,535 43,890 103,395 172,245 292,200

Source: U.S. Bureau of Hiines, 1971.

IndustriAl. Projects Departanent?iarch 1974

TUlMISIA - GAFSA PHOSPHATE PROJECT

Table 2

Phosphate Rock: World Capacity and Production by Main .reas(in million tons of product)

Actual Projection1960 1965 1970 1972 1975 1977

Produc- Capa- Produc- Capa- Produc- Capa- Produc- Capa- Produc Capa- Produc- Capa-Country tion city tion city tion city tion city tion city tion city

US 17.8 22.0 26.7 30.0 35.1 41.5 37.0 41.5 42.7 45.6 46.5 5 ccUSSR 5.8 5.8 11.5 11.5 17.9 18.o 19.7 21.0 26.2 26.2 29.5 30.0Morocco 7.5 8.4 9.8 10.9 11.4 12.0 14.4 16.0 21.0 22.0 24.0 25.0Tunisia 2.1 2.4 3.0 3.5 3.0 3.5 3-.3 3.5 3.9 4.5 4.0 5.0

Spanish - - - - - - - - 6.0 7.0 9.0Sahara37

Australasia 2.6 3.0 3.0 3.5 2.6 4.0 1.9 4.1 14.3 4.5 4.5 6.oOthers 4.0 4.0 6.3 6.3 11.1 11.1 19.7 12.3 13.3 13.3 14.0 17.0

World Total: 39.8 45.6 60.3 65.7 81.1 90.1 89.0 98.4 115.1 122.1 129.5 142.0

AverageCapacity 87 92 89 90.4 94 91Utili zation (%)

World Con-sumption 1/ 39.6 62.0 81.0 91.3 115.1 129.5

Source: British Sulfur Corporation (February 1974) and International Superphosphates Manufacturers Association.Projections have been made by the Bank.

1/ From Table 5.


\j |-.


Table 3

Phosphate Rock: Trade Matrix by Origin and Destination (1965 & 1972)

Non-,loSt ation North Latin West South East Communist Commsunist2/ Percentage

America America Europe Europe Europe Africa Asia Asia Japan Australasia Total BreakdownZQu 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972 1965 1972

USA 1.4 2.7 0.5 1.7 1.4 3.3 0.9 1.0 0.3 - - 0.2 1.4 - - 1.7 2.0 0.8 - 6.9 12.4 24 30

USSR - - - - 0.9 2.1 - - 2.6 4.1 - - - - - - - - - - 3.5 6.2 12 14

Morocco - - - 0.4 6.4 6.4 1.4 3.7 0.6 1.8 0.1 - 0.1 0.1 0.6 0.8 0.3 0.4 - - 9.5 13.6 32 31

Tunisia _ _ - 0.2 1.1 0.7 0.6 0.5 0.4 0.8 - - 0.3 - - 0.1 - - - _ 2.4 2.3 8 5

Spanish - - - - - -Sohara 1/

Africa (south 1.2 2.9 0.1 0.2 - - 0.1 - - 0.1 - - 0.3 0.2 0.2 - 1.9 3.4 6 8of Sahara)

Middle East - - - - - 0.3 0.2 0.4 0.6 0.2 - - 0.2 0.6 - 0.1 0.1 0.2 - - 1.1 1. 4 4

Christmas/ - - - . - - - - 0.1 - - 0.1 - 0.1 2.4 2.7 2.5 2.9 9 7Nauru

Others 0.1 0.1 0.1 - 0.3 0.1 - - 0.2 0.2 - - 0.3 0.2 0.1 0.2 0.1 - 0.2 - 1.4 0.8 5 1

Total 1.5 2.8 0.6 2.3 11.3 15.8 3.2 5.8 4.4 7.4 0.2 - 1.2 2.4 0.7 1.3 2.5 2.9 3.6 2.7 29.2 43.4 100 100

Source: ISNA.

1/ In 1972, Spanish Sahara exported 73,000 tons and made trial shipments to Japan (22,000 tons) and Spain (28,000 tons).2/ Including Peoples Republic of China, North Vietnam.

Industtial Projects DepartmentMarch 1974

ANNEX 3-1.

Page 25

'TNISIA: G(AFSA PHOSHIATE, PRtOJECT

Table 4

PHOSPHATE ROCK TRADE MAT-RIX 1975 TET1TATE FORECAST)

Spanish West lIiddle Chri s.mr-tsr rigin USA USSR Morocco Tunisia Sahara A:frica East Nauru TCTAl.

Destination

lith . AMnerica 3.8 - - - - - - - 3.*

Latin 14inerioa 2l.4 - 0.4 0.1 0. ? - _ _ 3.1

;rest Europe 2.1 2.1 9.5 0.7 0.8 3.2 - -

South Europe 0.8 - 3.6 0.8 1.9 0.3 o..4 -

East Europe - 4.3 3.4 0.8 - - o.6 .1

Africa - - - - - - 0.1

Asiai/ 1.4 - 0.6 - 0.2 - 0.9 - 3.1

Asia'-' - 1.0 - - - 0.5 -

japan 1., _ 1.5 - 0.3 - - 0.1 3.

Australasia - - - - 0.1 - - 3.L

TOTAL 12.0 6.h1 20.0 2.[4 3.5 3.5 2. 5 l.o <a.

PERCENTAtMI 22 12 37 5 6 6 5

1/ Centrally Planned Economies excluded

2/ Centrally Planned Economies only.


ANNEX 3_1Page 26

TUTN,ISIA - GAFSA PHOSPHATE PROJECT

Table 5

Consurmtion of Phosphate Rock(In million tons of product)

Actual Projection1960 -1-965 1970 1971 1977- 1975 1977 19i0

Jeveloped Countries -

T'orl-h Aierica 14.2 21.1 26.8 27.6 29.4 36.5 40.2 46.6,iest & South Europe 10.7 15.5 18.2 19.0 20.8 24.7 26.9 30.4i;astern Europe 1.6 2.9 7.2 7.6 8.4 9.7 11.0 13.4

5.0 10.4 12.2 13.0 13.4 18.9 21.6 26.6.ustralasia 2.1 3.5 3.3 3.2 2.7 4.0 4.3 4.9

.Janan 2.1 2.5 3.2 3.0 3.0 3.2 3.3 3.5

35.7 55.9 70.9 73.4 77.7 97.0 107.3 125.4

re;elo YC C owntrie s

Sr-ca 1.1 1.7 2.9 3.2 3.9 5.1 6.3 8.60 .5 C.7 1.8 2.1 2.6 3.5 4.3 5.9

.- 2.3 3.7 5.4 6.5 7.1 9.5 11.5 15.2

r.ctal 3.c 6.1 1o.1 11.8 13.6 18.1 22.1 29.7

..*:-! o',^al 39.6 62.0 81.0 85.2 91.3 115.1 129.4 155.1

P. Average Growth Rates per annum (percent)

Developed DevelopingCountries Countries World

6.8 11.2 7.31 co-196 5 9.4 9.3 9.41 9<65-1970 4.1 9.7 4.719 970-1 272 7.4 19.7 9.01'770-1980 6.3 11.9 7.1i 72-1?75 7.2 9.2 7.51 '75-1 98( 5.3 10.4 6.1

zource: British Sulfur Corporation and ISMA for Actual Consumption, (February 1 974)Bank estimates for Projected Consumption.

Triustrial Projects Department;arch 1974

ANNEX 3-1Page 27


Table 6

_-

WORLD PHOSPHATE ROCK CONSUMPTION BY MID-USE SECTOR(million tonnes)

1968 1969 1970 1971 1972 1973-

Phosphoric acid- 23.9 26.6 27.5 33.4 37.7- aTmonium phosohates T4.2 13 T7.7 21.9 2- triple superphosphate 6.o 6.5 7.1 8.0 9.0- others3 2 3.7 3.7 2.6 3.4 3.8

Other fertilizers 36.8 36.6 38.5 38.1 40.4- single superphosphate _27 7 -21T.8T TT 2- triple superphosphate (sec) 3.3 3.6 3.9 4.2 4.7- nitrophosphate 2.8 3.0 3.7 3.7 3-9- oTiherc4J 8.1 8.2 8.8 8.9 9.3

T0TALQ/ 60.7 63.2 65.9 71.4 78.2 85.7

TECHNICALPhosDhoric acid 5.8 5.9 6.4 6.4 6.5Flemen,al phosphorus 2.8 3.9 3.9 4-1 443Others5/ 1.4 1.6 1.7 1.8 2.1

OTAL& 10.1 11.3 12.0 12.3 12.8 13.3

1/ Consumption in this table is derived from an evaluation of end-use industries,and may not correspond with apparent consumption (i.e. deliveries) shown inother tables.

2/ Includes thermal acid used for fertilizer manufacture in USA and USSR; thecorresoonding amounts are excluded from the elemental phosphorus (technical)category.

3/ Includes merchant acid.

1/ Includes ground rock phosphate, fused phosphate, dicalcium phosphate.

C/ Includes dicalcium phosphate, defluorinated Dhosohate, phosphate rock useddirectLy as feed additive and for metallurgical purposes.

6/ Totals may not add, due to rounding.

7/ Preliminary estimate.

Source: British Sulphur Co., February 1974.

ANNEX 3-1Page 28


Table 7

FREIGHT RA.TES(US$ /long ton.! and f.o.b./)

1971 1972 19733/ 19743/

SFAX - Atlantic Ports

Le Treport 4.75 - _ _Rouen 3.95 4.25 9.84 11.84Lorient - 4.40 - -St. Nazaire 3.93 4.09 - -liantes 3.93 4.09 9.84 11.84St. Malo 4.00 3.73 - -La Palice 3.98 4.35 _Bayonne 4.04 4.10 - -Rotterdam 3.90 4.30 9.84 11.84

Average 4.06 4.16 9.84 11.84

SFAX - Mediterranean Ports

Sete 3.53 - 5.90 8.37Laronte 3.39 3.70 5.90 8.37M3rseille 3.72 3.85 5.90 8.37

Average 3.54 3.77 5.90 8.37

1/ long ton = 1.016 metric ton.

2/ i.o.b. and f.a.s. differ by US$ 0.25.

3/ Pased. on average 5,OOOT shipments; January 1974.

Souv'ce: Gafsa Co. Marke-ting Department


ANNEX 3-1Page 29

TUNISIA: GARSA PHOSPHATE PROJECT

Table 8

SOLUBILITY AND P2 05 CONTENT OF PHOSPHATE ROCK

Citric Solubility Formic SolubilityPHOSPHATE ROCK ORIGIN - P205 P2O5 Soluble P205 Soluble

GRADM TotalP2 05 Total P205 Total

Redeyef air classified 65/68 29.57 43.3 71.2Moulares air classified 65/68 30.00 40.5 65.1M'Dilla air classified 65/68 29.27 41.3 C 65.9i4etlacui washed 65/68 29.69 42.6 70.7

M4oulares unshed 67/69 30.95 39.5 64.2Souatir air classified 67/69 30.63 38.0 63.7Moulares Epure 70/73 31.89 38.5 65.8

I4DID11a Fpure 70/73 31.65 36.8 56.8Youssoufia 70/72 31.22 33.4 60.8Hatane Hord a, 72 32.84 32.4 54.3Maroc 75/77 34.00 31.0 55.7Mlaroc 80/82 36.30 24.5 26.21%aroc oalcined 35.66 16.2 14.0Djebel Onk Calcined, 75/77 35.13 16.1 12.4

Floride 70/73 33.65 22.6 22.1

Christmcs Island 1 74 34.06 11.1 26.0Christn.as Islend 2 80/82 37.49 26.5I1akatea 1 80 36.45 26.8 21.6Makatea 2 80 37.60 20.3 23.1cur.- cao 70/73 32.68 37.6 42.8TaibLa 80 37.07 13.2 15.8Togc 80 37.25 24.9 _Kola 82 38.69 8.5 18.8Jordan 72 33.45 18.0 51.1Ier:+e 65 30.00 36.7 58.7Feru 65 30.60 50.2 69.4

Source: Gafsa Company Marketing Department.

Industrial Projects DepartmentM,arch 197b

TUN I IhA: 93FL'A PHOSPIAT PROJ.]rC'G'

Table 9

CHMIICAI. ANALYSES OF PHOSPHA'lE ROCK

North Western FloridaCharacteristics Gafsa Khourihga Oafi Jordan Taiba Carolina Togo Kola US 68BPL 72BPL 75BPL

P205 30.1 34.0 32.6 32.8 37.5 30.6 36.7 38.9 30.8 31.2 32.9 39.4

CaO 49.1 51.7 51.2 50.7 52.1 48.8 52.3 51.4 46.75 45.6 47.0 48.6

SiO2 1.8 2.45 1.9 3.0 2.6 3.0 3.2 1.5 8.6 8.7 7.7 4.4

Fe2 O3 0.48 0.30 0.25 0.20 1.2 0.70 0.9 o.6 1.02 1.41 1.1 0.93

AL203 0.47 0.38 0.36 0.35 0.9 0.38 1.1 0.91 1.12 1.22 1.4 1.16

MgO 0.5 0.40 0.43 0.58 0.10 o.60 0.1 0.40 0.90 0.36 0.3 0.30

F 3.5 4.04 4.1 3.63 3.3 3.67 3.75 3.2 3.1 3.7 3.78 3.8

s03 2.7 1.50 1.28 o.65 0.17 1.6 0.42 0.05 1.4 0.9 0.7 0.5

C02 6.0 3.75 4.96 4.98 1.34 5.65 2.0 0.3 4.18 3.6 3.25 2.7

Na2O 1.4 0.70 o.68 - 0.17 0.76 0.28 0.12 - 0.3 0.23 0.29

K20 0.14 0.08 0.07 - 0.03 - 0.05 - - 0.1 0.08 0.09

CaO weight 1.58 1.48 1.55 1.52 1.35 1.57 1.4 1.28 1.45 1.43 1.37 1.36p2os ratio 1/

CDL~

1/ The CaO analysis used in the ratio is the total CaO reported in the rock less than CaO equivalent to thesurface content of the rock.

Source: DORR-OLIVER, '966.

Industrial Projects Departmentmarch 197

ANNEX 3-1Page 31


Table 10

SALES OF TUNISIAN PHOSPHATE ROCK(000 tons)

1966 1967 1968 1969 1701 1971 1972 1973A. Gafsa Company

Countries with Convert-ible Currency

Western Europe 792 713 806 588 595 574 707 860South Europel/ 574 398 384 324 255 300 226 455South .merica 45 43 29 36 72 103 165 132Other 12 11 30 42 37 290 221 20

Sub-Total 1,423 1,164 1,248 990 929 1,267 1,319 1,467

Clearing CountriesEastern -uroPe 185 455 556 423 734 898 616 719South EuroDej/ 249 354 355 242 191 20 73 23Asia 308 70 134 - - 128 103 12

Sub- rotal 742 879 1,o045 665 925 1,046 792 754

Total Exnort 2,166 2,043 2,293 1,655 1,853 2,313 2,112 2,221

Interncl MarketSIIlPE 290 323 415 366 438 459 430 451ETEC 55 3 18 54 28 6 9 57

IigK 242 279 314 239 272 295 313 274ICM - - - - - 10 269 371

Total Internal Market 587 606 747 659 738 770 1,021 1,155

r0.L 2,753 2,650 3,040 2,315 2,592 3,084 3,132 3,374

- tephos 247 208 191 217 277 120 223 (250)

Lotal tIfisian PhosphateRock Sales 3,000 2,858 3,231 2,531 2,869 3,203 3,355 3,3741/

1/ Italy, Spain, Greece, Turkey.

2/ Yugoslavia.

3/ Totall includes 250 tons for STEPHtS.

cource: Gafsa Company Marketing Departmert.


ANNEX 3-1Page 32


Table 11

EXPORT DEVELOPMENT BY COUNTRY (1966-1973)(000 tons)

1966 1967 1968 1969 1970 1971 1972 1973Countries with Con-

vertible CurrencyFR Germany 122.9 129.4 96.6 62.3 50.6 63.0 61.3 83.3Austria - - 56.3 41.6 44.9 36.3 59.8 62.0Belgium - - - - 7.1 - - 56.0Denmark 20.9 21.4 31.4 24.9 27.4 37.5 28.8 18.6France 562.1 526.3 575.0 412.8 400.6 413.9 449.6 513.0o/Great Britain 44.0 26.0 43.8 43.7 63.0 83.4 105.1 127.3S¢witzerland 1.2 2.4 1.2 2.4 - 1.2 1.2 -

Sweden 39.7 5.2 - - - - - -

Italy 285.0 180.1 124.0 82.8 47.7 29.8 30.3 36.0Greece 266.2 204.5 236.8 226.8 177.8 270.3 196.0 265.oSpain 23.9 14.0 24.2 15.0 - - -

Brazil, Chile - - - 4.9 32.28 40.5 63.3 132.0Uruguay 45.0 43.0 29.6 31,1 39.1 63.1 102.7 -Cambodia - - - 50 - - -0Japan 12.1 11.3 6.4 _ - - -_Leb&non - - 23.5 27.1 - 15.3 8.3 -Turkey -- - 9.7 37.4 212.2 196.8 154.0German DR - - - - - - 16.0 -

Sub-Total 1,423.0 1,163.7 1,045.6 990.2 928.5 1,266.7 1,319.4 1,447.2

ClearirQg CountriesGerman DR - - 68.5 14.2 90.8 82.8 16.2 64.1Bulaaria - 57.7 46.8 73.0 61.5 103.3 54.4 205.0Poland 139.6 246.9 329.3 277.2 429.9 412.5 348.6 184.6Romania - 79.6 15.0 29.3 52.5 88.8 - 10.7Czechoslovakia 45.8 72.6 95.8 25.7 98.5 210.7 196.5 243.0.- ,,I il; - 41.5 - - - - - -

Yu;oelavia 248.6 312.1 355.3; 242.0 191.9 20.5 73.5 23.0Lninp 78.9 58.7 86.7 - - 24.0 103.1 11.5

r.-z? 229.5 10.5 48.0 - - 104.1 - 19.7ALier. a - - - 3.1 - - - -

2:tn_,0tal 742.5 879.5 1,045.6 665.0 925.2 1,046.8 792.2 761.8

total Export 2,165.7 2,043.2 2,293.5 1,655.3 1,853.7 2,313.5 2,111.6 2,209.0

1/ Of which 304,000 tons for direct application - TIMAC and Groupe Reno.



ANNEX 3-1

Page 33


Table 12

MARKET PROJECrIONS 1974-1978 FOR TUNISIAN PHOSPHATE ROCK

(000 tons)

1974 1975 1976 1977 1978ActualContracts Minimum Maximum Minimum Maximum Minimum Maximum Minimum Maximum

Countries with Con-vertible Currency

German DR' 85 100 100 100 100 100 100 100 100Austria 50 100 100 100 100 100 100 100 100Brazil2/ 110 200 200 400 400 400 400 400 400France 2 / 200 200 200 200 200 200 200 200 200Uruguay-/ 105 100 150 150 150 150 150 150 150Timac (France)2/ 250 500 550 600 700 700 700 750 800France 100 150 200 200 250 200 250 200 250Great Britain-/ 150 180 200 300 300 300 350 300 350Greece 262 300 300 400 400 400 400 400 400Yugoslavia 30 150 200 300 350 300 400 400 400Turkey 200 - - - - - - - -Italy 100 200 250 300 400 300 400 300 400

Sub-Total I 1,642 2,180 2,400 3,050 3,350 3,150 3,350 3,300 3,550

II. Clearing Countries

Poland 200 350 400 400 450 450 500 500 550Bulgaria 225 200 250 300 350 300 350 300 350Romania 30 100 100 200 200 200 250 250 300Czechoslovakia 225 250 250 250 250 250 250 250 250German DR 50 100 100 100 100 100 100 200 300China - 100 100 200 300 200 300 200 300

Sub-Total II 730 1,100 1,200 1,450 1,650 1,500 1,750 1,700 2,050

III. Internal Market

SIAPE 500 500 500 500 500 500 500 500 500ICM 500 500 550 650 700 1,000 1,000 1,100 1,100NPK 350 400 400 400 400 400 400 400 400STEC 50 100 100 100 100 100 100 100 100

Sub-Total III 1,400 1,500 1,550 1,650 1,700 2,000 2,000 2,100 2,100

GRAND TOTAL 3,772 4,780 5.150 6;150 6,700 6,650 7,100 7,100 7,700

1/ The projections reflect probable contracts without considering undue production constraints, and includeSTEPHOS (about 250,000 tons/year). Due to the closure of the Suez Canal possible exports to SoutheastAsia have not been considered (300-500,000 tons),

2/ Phosphate rock for direct application.



ANNEX 3-2

TUNISIA: GAPSA PHOSPHATE PROJECT

THE TINISIAN PHOSPHATE INDUSTRY

A. Structure of the Industry

1. Mining2. Processing

B. Contribution of the Phosphate Sector to the Tunisian Economy

1. Production and Sales2. Export Earnings3. Employment4. Value of Production5. Profitability of the Industrv

C. Future Development of the Industry in Tunisia

1. Investment2. Production Increases3. Exports4. Employment

ANNEX 3-2Page 1


TIIE TUNISIAN PHOSPHATE INDUSTRY

A. Structure of the Industry

1. The Tunisian Phosphate Sector consists of two mining companies,one phosphoric acid producer and five fertilizer manufacturers.

1. Mining

2. The mining sector is dominated by the state controlled company,Compagnie des Phosphates et du Chemin de Per de Cafsa (CAFSA) which currentlyproduces between 3 - 3-1/2 million tons per year of beneficiated product,from six mines in the Gafsa area. A wholly state-owned company, SocieteTunisienne d'Exploitation Phosphatieres (STFPHOS) produces about 250,000 torisof beneficiated rock phosphate (6-7% of Tunisian production) from two minesnorth of Kasserine. 1/ STEPHOS is managed by GAPSA. All mines except forthe Kalaa Djerda open pit mine operated by STEPHOS and a small surface depositmined by open pit methods by CAFSA are underground mining operations.

2. Processing

3. Six companies share this activity: Industries Chimiques Mahgrebines(ICM) in Cabes: Societe Industrielle d'Acid Phosphorique et d'Engrais (SIAPE)in Sfax; NPK Engrais in Sfax; Societe Tunisienne d'Engrais Chimiques (STEC)in Sfax; Societe Tunisienne Industrielle de Produits (STTPCF) in Tunis, andGranuphos, the most recent firm.

4. ICM was incorporated in 1962 as a mixed company with 45% foreignownership and 55° Tunisian public ownership: anc brought into production inFebruary 1972 a phosphoric acid plant with a rated capacity of 220,000 tons/year of 54%" P205 phosphoric acid (120,000 tons of P205). STAPE, formed in1049 by GPFSA as a societe anonyme, was originally owned 88% by GAFSA withthe remainder foreign private ownership. GAFSA nows oxwns 73% of the equityin SIAPF w1hich started production in 1952, producing 260,000 tons of TSP in1972. STAPE produces chiefly for export, but sells small cuantities fordomestic use, and some phosphoric acid to GAFSA for upgradinp 65/687 BPL rockto Epure 70/72% BPL. Ilowever, the production of Epure is being discontinued.v'r:, formed in the early 1960's, as a joint venture between Tunisian Governmentand Swedish interest, began operations in 1964, producing 160,000 tons of TSP(45% P2 C5 ) in 1973. NPK produces solely for the export market. STEC formedin 1968 aF a joint venture between CAFSA, Moroccan and German interests producedF0,0O0 tons of pulverized hyperphosphate, 50,000 tons of SSP, and 8,000 tons

1/ See Map IBRD 10003 for locations.

ANNEX 3-2Page 2

of complex fertilizer in 1973. SEPC1, a subsidiary of STEC located in Megrine,produced 6,000 tons of complex fertilizer in 1973. STIPCE, formed in 1954,

oroduced 4,000 tons of complex fertilizer in 1973 and 1,500 tons of organicfertilizer. Granuphos, a subsidiary of STEC, will produce 90,000 tons/yearof granulated phosphate by 1975 replacing the pulverized hyperphosphate fromSTE C.

3. Contribution of the Phosphate Sector to the Tunisian Economy

While Tunisia is, in world terms, a small producer of phosphaterock and its derivatives (accounting for about 4% of world production), thephosphate industry has an important place in the Tunisian economy. This isvery particularly the case in the regional context, and the phosphate industryis of crucial importance to the poorly endowed regions of the south wherephosphate production is virtually the only source of employment outside ofagriculture.

1. Production and Sales

6. As indicated in Table 1 of this Annex, total mine output ofsaleable rock has fluctuated between 2.6 and 3.4 million tons over the past8 years. Over this period exports remained constant at 2.3 million tons ofphosphate rock, while domestic consumption has almost doubled, being morethan 1.1 million tons in 1973. Production of hyperphosphate decreased overthe Deriod to negligible quantities while that of superphosphates increasedat an average annual rate of 10% almost reaching 500,000 tons in 1972. The1973 production decreased to 419,000 tons owing to a month long shutdown atNPK in IMarch 1973.

2. Exnort Earnings (Table 2)

7. Export earnings from the phosphate sector have declined slightlvsince 1967, despite the increase in exports of superphosphates and the factthat exports of rock have remained constant. The contribution of thePhosphate sector to the total Tunisian export earnings declined from 25-30%to less than 20'%. This situation can in part be attributed to a drop int}e export nrices of both nhosphate rock and fertilizers bv more than 207over the period 1966 to 1972. With the recent start up of the TCM phosphoricocid plant, and the overall increase in phosphate price levels, the exportearnings improved in 1973 to the order of 27-28 million dinars (US$65 millionequivalent) and will reach a record high in 1974.

3. Emplovnent

S. As indicated in the following table, the total phosphate sectorprovides employment for more than 13,000 persons; 11,000-11,500 by the twomining companies; and 1,800-2,000 by the phosphate processing plants.

ANNEX 3-2Page 3

Fmployment in the Phosphate Sector

Year 1961 1963 1965 1967 1969 1971 1972

Mining Companies 7,917 7,714 9,761 10,093 11,086 11,389 11,535Processing Plants 1,036 1,270 1,638 1,707 1,618 1,864 n.a.

Total 8,Q43 8,984 11,399 11 ,8no 1_2704 13,253 n.a.

M4ost of this employment (10,000) is located in the south near Gafsa, providingthe onlv emoloyment opportunities in this area other than agriculture. Employ-ment by the mining companies over the 1960's increased significantly withlittle increase in production. Hence, productivity declined substantially.Emplovment in the fertilizer plants increased in the early part of the 1960'swith the increase in productive capacitv, but levelled off towards the end ofthe decade. Further increases are noted in the earlv 1970's with the com--issioning of the ICII acid plant.

4. V7alue of Production

9. The value of the output by the phosphate sector remained constantat about 23 million dinars between 1966-71, while the GDP grew at 9-10%/year,reducing the contribution of the phosphate sector to the GDP from 5-1/2% in1966 to 3-1/2% in 1971 and about 3% in 1972 and 1973.

5. Profitability of the Industry

10. Inadequate information was made available to the mission for anoverall evaluation of the profitability of the industry. Mowever, on thebasis of the data collected, it would appear that: (a) for the period1965-66 both the mining and processing facilities operated with small profits--a period of high export prices; (b) during the period 1967-73 the minesoperated at a loss with losses averaging DT 2.0 million/year; and (c) forthe period 1967-70 the fertilizer plants operated with losses but showedimproved profitability with surpluses in 1972-73 almost cancelling out thlelosses of the mining companies. This put the overall industry at close toa profit breakeven position. With the planned increases in production, therecent increases in prices, and reductions in the ming production costs,the industry can in the future be expected to show increasing profits, andhence be considered a viable and competitive industry, particularly in theshort-term with the present high prices.

C. Future Development of the Industry in Tunisia

11. The potential for future development of the sector is significantwiith numerous opportunities for investment. In the following paragraphs andTables 4 and 5, the investmient and production plans for the 5-year period1972-76 are summarized on the basis of data obtained from the Ministry ofPlan and the companies.

ANNEX 3-2Page 4

1. Investment

12. Plans for investment in the phosphate processing sector call fortotal investment of 18-1/2 million dinar over the 1973-76 period, of which2.3 million is for equipment replacement, 12.4 million for new and expansionprojects already approved and 3.8 million for new and expansion facilitiesstill in the early planning stages (Table 4). Over the same period, invest-ment in mining and beneficiation facilities are expected to be in the orderof 29-30 million dinars; 18 million for the Sehib Project (GAFSA); 10-11million dinar for the GAFSA modernization program; and 1-2 million forequipment replacement in STEPHOS.

2. Production Increases

13. If conducted according to plan, this investment should result in35, increase in the production of TSP by 1976 over the 1972 production, adoubling of the phosphoric acid production capacity plus some increases inthe production of hyperphosphates and complex fertilizers (see Table 5).This will double the domestic consumption of phosphate rock by 1976 (to 2million tons). Sone very tentative plans for installing an MAP plant would,if carried forward, increase domestic consumption even further, and restrictrock exports to below 2 million tons.

14. hate: While having a productive capacity for 75,OW0 tons/year of pulveizd7hyiphosphate, STEC's output in 1972 barely reached 10,000tons due to marketing difficulties which have resulted from the closing of theSuez Canal. This position was, however. reversed in 1973 and the output reached60,000 tons. A recent market study conducted by the company has indicatedthat an export market of between 50,000-70,000 ton/year of granulated hyper-nhosphate is available, hence STEC set up Granuphos as a subsidiary to installfacilities to convert the output from pulverized to granulated hyperphosphate.Bv doubling sulphuric acid storage facilities and installing an additional£'rinder, STEC expects to increase single superplhosphate (SSP) capacity to50,0n0 tons from 40,000 tons in 1972. All SSP can be sold on the domesticmarket. In addition, STEC plans to increase its production of complexfertilizer.

ir. Triple Superphosphate: Modifications to both the SIAPE and NPKplants should increase production of TSP by about 25w' by 1976. .ew productivecapacity at ICM will increase total capacity a further 10%. By 1976, totalproduction of TSP is expected to reach 570,000 tons of which 45,000 tonsshould be absorbed by the domestic marlet, leaving 525,000 tons for the exportmarket. With the implementation of ICM3 or SIAPE2, two projects now in thevery preliminary planning stage, the productive capacity for TSP could reach760,000 tons by 1977/78 (NPK 220,no0; SIAPE 1 300,000; ICM2 75,000: IC?13 orSIATPF2 165,010).

ANNEX 3-sPage 5

16. Complex Fertilizers: Each of the producers of complex fertilizershave nlans to increase productive capacity. STEC will increase productionfrom 6,000 tons/year in 1972 to 30,nO0 tons/year by 1976, mainly by install:Lngnew facilities to produce granulated fertilizer. SEPCM will double the 1972capacity of 6,000 tons to 12,000 tons, and STIPCE will add 10,000 tons toits capacitv for powder fertilizers. All complex fertilizer is produced forthe domestic market, hence active production will depend upon the absorptioncapacity of this market. In 1972 existing capacity was underutilized.

17. Phosphoric Acid: Modifications of the existing ICM1 plant willincrease acid capacity to approximately 140,000 tons of 547O P205 acid by1975. The new ICM2 plant now under construction is expected to come on-stream in 1975, reaching full capacity of 130,000 to 140,000 tons by 1977/78.If, in addition, the ICM3 or SIAPE2 projects go ahead, the acid capacitycould be increased a further 50-60,000 tons by 1977/78.

13. MAP: Several possibilities are now under consideration for thepossible production of mono-ammonium phosphate (MAP). Several alternativeprojects have been considered: Windmill of 'rance, a subsidiary of CentralResources Corp.isconsidennga project for the production of 100,000 tons ofMAP; ICM3 could possibly be designed to produce 100,000 tons of MAn startingwith 30,000 tons in 17V'1; NPK have considered the installation of a 200,000tons year plant;U.S. Steel have indicated interest in a MAP or DAP plant.Thp maximum MAP capacity by the late 1970's could be about 400,000 tons.M!AP would be manufactured exclusively for export. Plans for MAP productionare at present very tentative and would have to be based upon importedammonia which will influence considerable their economic and financial in-ability.

10. tMJhile appearing ambitious this growth rate can realistically beachieved because much of it will be the result of past investment (i.e., IC41)and of investment decisions already taken. The above projects mentioned(paras. 14, 15, 16 and 17), if implemented, will require a maximum demand for2.1 million tons of rock by 1976, and if the present level of exports is tobe maintained at about 2.3 million tons (a ready market exists for this quan-tity), then mine production must increase to 4.5 million tons or by 1.5 milliontons (almost 50%) by 1976. If ICM3 and MAP projects are also implemented, themine production will have to be expanded by up to 1 million tons more, if ex-port levels of rock are to be maintained.

3. Exports

20. The domestic market for phosphatic fertilizers plays a very minorrole, hence, most of the increase in production will be destined for exports,representing an average annual growth in export sales of 10-15% (in constantprices), compared with the zero growth situation between 1966 and 1972.

ANNEX 3-2Page 6

4. Employment

21. The new investment in phosphate processing facilities will provideadditional job opportunities for 200-250 people, most of which are accountedfor by the ICM2 facilities (120 people), and the expansion of STEC facilities(50 people). On the other hand, the modernization of the mining facilitieswill over the long term result in a reduction in employment by up to 1,000people, so that in the future, despite the large increases in capacity, thephosphate industry will provide less jobs than at present. Total jobs areexpected to be reduced to about 12,500 versus 13,200 now provided.


ANNEX 3-2Page 7


THE TUNISIAN PHOSPHATE INDUSTRY

Table 1

Historical Production of Mines and Processing Plants

1966 1967 1968 1969 1970 1971 1972 1973Entity / Product (000 tons - saleable product)

A. MINES1. Production

GAFSA (Phosphate Rock) 2,885 2,583 3,153 2,398 2,761 2,991 3,150 3.275STEPHOS ( " ) 261 227 251 201 262 171 218 220-Sub-total 3,146 2,810 3,404 2,599 3,023 3,162 3,368 3,495

2. SalesExport 2,394 2,234 2,460 1,855 2,109 2,410 2,306 2,225Domestic Sales 581 621 768 677 755 793 1,050 1153Sub-total 2,975 2,855 3,228 2,532 2,864 3,203 3,356 3,378

B. PROCESSING PLANTS1. Production

ICM (Phosphoric Acid) - - - - - - 50 96SIAPE (Superphosphate) - - - - 230 260 250 259NPK (Superhosphate) - - - - 153 162 172 160STEC (Hyperphosphate) ( ) 10)

(SSP) (40)(Complex Fertilizer) ( Data not available ) 6) n.a.

STTPCE (Complex Fertilizer) ( ) 2)SEPCM (Complex Fertilizer) ( ) 4)

Sub-total-Acid 7 10 10 9 7 1 50 36TSP 267 324 377 333 372 424 467 419SSP 33 31 34 33 33 36 38)Hyperphosphate 54 2 20 58 28 7 9) n.a.Complex Fertilizer ( Data not available ) 8 12)

2. SalesExport-Acid - - - - - - 50)TSP 169 382 347 302 356 415 430)Hyperphosphate 75 - 22 57 28 7½ -)Complex Fertilizer - - - - - - -)

Domestic- ) n.a.Acid - - - -TSP ( Data nct available ) 49 31 -)SSP 33 31 34 33 32 36 38)Complex Fertilizer ( Data not available ) 8 12)

I/ EstimateSource: Ministry of Plan, companies


ANNEX 3-2page o



Table 2

Value of Euorts.T-Current Prices)

1966 1967 1968 1969 1970 1971 1972- -(rilions of dinar 3

PhosDhate Rock 12.5 12.5 12.2 9.2 10.5 11.6 10.1Ouperphosphates 5.2 11.2 10.0 8.2 8.6 9.6 9.9Hyperphosphates 0.6 - 0.2 0.5 0.3 0.1 0.1Phosphoric Acid - _ - - - _ _

Sub-Total 18.3 23.7 22.4 17.9 19.4 21.3 23.1

TotalTunisLarl Exports 73.5 78.4 82.8 87.0 95.8 113.3 146.5

Phosphate SectorExports as % ofTotal Exports 25% 30% 27% 21% 20% 19% 16%

(DT/Ton)Average Unit ExportPricesPhosphate Rock 5.22 5.59 4.95 4.95 .4-97 4.8&1 4.38Superphosphates 30.76 29.31 28.81 27.15 23.24 23.13 23.02

Source: Tableaux Statistiques, Ministere de Plan & Budget Economique 1973.


ANNEX 3-2TUNISIA: GAFSA PHOSPHATE PROJECT Page 9


Table 4

Planned Investment in the Phosphate 'ector (1973-76)

Total1973 1974 1975 1976 (1973-76)

(o00Dr) -

A. MINING OPERATIONS1. GAFFA - Modernization 4,000 3,000 3,000 500 19,000

- Sehib 300 5,650 2,053 250 27,000

2. STEPHOS na na na na na

Total Mining 4,300 8,650 15,053 750 46,ooo

B. PROCESSING FACILITIES1. SIAPE

-Equipment Replacement 515 100 100 100 815-Sulphuric Acid PlantY/ 20 250 900 330 1,500-Port Improvement2/ 350 440 - - 800-Office Building27 350 - - - 350

1,235 790 1,000 430 3,465

2. NPK-Equipment Replacement 200 200 300 300 1,000-TSP Expansion2/ 445 305 - - 750-Ecology 6ontrol2/ 20 30 - - 50

665 535 300 300 1,800

3. ICM-Equipment Replacement 120 120 120 120 480-Expansion Project

(Acid) (ICM)/ 5,767 5,158 476 145 11,5465,887 5,278 596 265 12,026

4. STEC-Granulated Hyperphosphate

Projectl/ 600 270 - - 870-Acid Storage Faci1it4es2/ 45 - - - 45-Bagging Plant2/ 65 - - - 65

710 270 - 980

5. SEPCM-Expansion2/ - 90 - - 90

6. STIPCE-Drying Plantz/ 8 - - - 90-Granulated Fertilizer2/ - 100 - - 100-Supplementary Equipment2 / - - 15 20 35-Equipment for Pesticides 7 - - - 7

17 1 -17 20 0150

Total Processing 8,512 6,973 1,91L 1,015 18,421

1/ Investment projects approved.2'/ Investment projects sti~ll in the planning stages - not yet approved.

NA: Not Available.

Source: Ministry of Plan, companies, mission estimates.

Industrial Projects DepartmentMn?tr%h 1 Q7h

ANNEX 3-2

Page 10



Table 5

Planned Production Targets in the Phosphate Sector (1973-76)

Increase1973 1974 1975 1976 1973776

(000 tons of rock)A. MINES

1. GAFSA 3,300 3,400 3,800 4,350 1,35o2. STEPHOS 250 250 250 250 -

Sub-total 3,550 3,650 4,050 4,600 1,350

B. PROCESSING FACILITIES (000 tons fertilizer/acid)1. Hyperphosphates

STEC- Pulverized 60 - - (10)Granuphos- Granulated - - 50 90 70

2. Single SuperphosphateSTEC- 50 50 50 50 10

3. Triple SuperphosphateNPK 150 180 200 220 45SIAPE 250 275 290 300 50ICM2 _ - 30 50 57Sub-total 400 455 520 570 152

4. Phosphoric AcidICM1 110 120 140 140 90ICM2 _ - 75 110 110Sub-total 110 120 215 250 200

5. Complex FertilizersSTEC- Pulverized 8 10 10 10 4

- Granulated - 10 15 20 20STIPCE 4 9 14 16 14SEPCM 6 8 10 11 7Sub-total 18 37 49 57 45

C. DOMESTIC DEMAND FOR PHOSPHATE ROCK1. HyperphosphatesYr 20 30 50 70 602. Single Superphosphatel/ 30 335 35 35 103. Triple Superphojyhatel/ 710 830 920 990 2504. Phosphoric Acid- 1/ 395 472 849 975 7055. Complex Fertilizers- 11 22 29 34 29

Sub-total 1,166 1,387 1,874 2,104 1,054

D. PHOSPHATE ROCK AVAILABLE FOR EXPORT 2,280 2,263 2,176 2,396 296

1/ Depending upon the grade of the rock, the rock consumption is:a) 1 ton of hyperphosphate requires 1 ton of phosphate rockb) single superphosphate requires 0.6-0.7 ton of phosphate rockc) triple superphosphate " 1.7-1.8 " d) phosphoric acid 3.7-3.9 ite) " complex fertilizer 0.4-0.8

Source: Ministry of Plan, companies, mission estimates.


ANNEX 4-1


TECHNICAL DESCRIPTION OF THE SFHIB PROJECT

A. Geology and Ore Reserves

1. Geological Reserve2. Recoverable Reserve

B. Mining

1. Selection of Mining Methods2. The Longwall Method3. Mining Program4. Mine Development Schedule5. Mine Production Schedule6. Results of Trial Panel7. Personnel Requirements

C. Beneficiation

1. Basic Concept2. Selection of the Process3. Process Design and Expected Performance4. Plant Location5. Personnel Requirements

D. Service and Maintenance

F. Infrastructure

1. Water Supply2. Electric Power3. Roads4. Rail Facilities5. Ilousing

F. Evaluation and Recommended Modifications

Chart 1: Sclhematic Diagram of Sehib Mine DevelopmentChart 2: Schematic Flowsheet of Washing Plant

ANNEX 4-1Page 2

A. Geology and Ore Reserves

1. Geological Reserves

1. The Sehib is the western continuation of the M'Dilla deposit andextends into the Djellabia deposit beyond which there is the M'Zinda field.The formation dips northwards, initially at 10-15° and flattens to 7-8°.Of the nine seams in the phosphate structure, only 1 and 2 are consideredworkable on the grounds of thickness and grade, and they constitute the orereserves, as indicated below.

Geological (In Situ) Reserves

No. 2 Seam No. 1 Seam(Upper Part) (Lower Part)

Million Thickness Million Thicknesstons meters tons meters Total

Sehib-East 17.1 2.2 - - 17.1

Sehib-West 11.7 2.0 - - 11.7

Total Sehib 28.8 - 28.8

Djellabia 16.6 1.8 20.7 37.3

Total 45.5 20.7 66.1

2. Criteria used for reserve estimates were briefly:

(a) Only seams or parts thereof, from which a 65% BPL product couldbe produced by washing were considered workable. This appliedonly to Seam 2 and the lower part of Seam 1 in the Djellabiafield;

(b) Seam thickness should be greater than 1.50 m. Seam 2 met thiscriteria over the entire field along with the lower part ofSeam 1 in the Djellabia field;

(c) The seams are divided by a layer of marl of varying thickness.The upper or lower part of the seam was considered workableonly if the ratio of thickness of phosphate in that part/thickness of marl layer is higher than 1.5. This qualifiedall Seam 2 in east Sehib and the lower part of Seam 1 inDjellabia. However, following the early results of the triallongwall, it was decided to only exploit the upper part ofSeam 2 over the entire Sehib deposit.

ANNEX 4-1Page 3

(d) The reserves are limited bv the estimated location of the watertable, very conservatively taken at 100 meters above sea level,even though drilling has revealed that water only appeared atthe 73 meter level.

3. This rigorous criteria has led to a very conservative reserveestimate. Exploration of the Sehib field entails 22 drillholes at 500 metercenters, supported by some tunneling and shafts. Recent mine developmenthas confirmed the drillhole results. Exploration on the Djellabia fieldentails 25 drillholes at 800 meter intervals, which should be supported withadditional drilling and/or tunnelling.

2. Recoverable Reserve

4. The reserve estimates provided above refer to "In Situ Reserves"(i.e., reserves that can be exploited). Ilowever, no provision is made forthe method of extraction and the inherent recovery losses. The long wallmethod selected for exploitation requires large areas without any majortectonic disturbances. This reduces the area exploitable particularly inThjellabia where many faults are known to exist. The proposed use of conveyorsnecessitates panels with rigid geometry which do not always fit the faults,pillars and seam characteristics, resulting in additional loss of reserves.eIoreover, the lonR-wall equipment now proposed will not permit exploitationof seams more than 2.3-2.5 meters thick. Consequently, the tonnage in theseams is reduced in areas where this thickness is greater. Pillars requiredto protect the inclines and work places result in additional loss of reserves,as does a pillar 100 meters wide, underlving the non permanent river (OuedDjemel) running across the northern part of Sehib. This pillar is left toavoid flooding of the workings during the rainy season. lhile the abovemeasures can be considered conservative, the consultants further assumed a2rC' logs of reserve as a result of problems during exploitation. This hasled to a very conservative estimate of "recoverable losses" as shown below,which accounts for 34%, and 75% of the in situ reserves of Seams 1 and 2,respectively, or 607 and 50% of the Sehib and Pjellalia fields, respectively.

Recoverable Reserves

(Million tons BTS)

No. 2 Seam No. 1 Seam Total

Sehib 16.6 - 16.6

Djellahia 11.3 7.2 1P.5

27.9 7.2 35.1

ANNEX 4-1Page 4

5. These figures wqhich ensure a mine life of 17 years are very conser-vative, and there is little doubt that the reserves will be extended toprovide rore than 20 years life.

6). The average grade of the run of mine ore is 60-62% BPL in the upperpart of the deposit (Seam 1 and 2) near the outcrop, decreasing to 58-60% BPLas it nears the water table.

B. Mining

1. Selection of the Mining Method

7. ^ fully rechanized mining method--the lon-wall method--was selectedbv the company for exploiting tlie deposit. Vhilc no detailed evaluation wasmade of the alternative mining methods, the mission supports the selection ofthe longwall method. The two major alternatives, namely: room and pillar miningusing, scrapers; and fully mechanized room and pillar mining with continuousminers, iJere ruled out on the following grounds:

(a) Poom and pillar, using scrapers, still has many of the nitfallsof the traditional manual room and pillar methods. ExplosivesIre used for breaking the rock. Productivity is relativelylow compared to the longwall method and operating costs areconsiderably higher.

(b) Room and pillar, with trackless continuous miners, even thoughcompetitive with longwall methods in coal and other ores, hasrot proven to be satisfactory at the tests conducted in theI' Dilla mine.

(c) Longwall methods have an extraction rate of 80o, compared to(.0 for the room and pillar methods. With Sehib being anremiun quality ore by GAFSA standards, this is important butit does not take into account the large reductions in recoverablereserves which result from the selection of the longwall method(see nara. 4 above).

A' test has been underwav for two years using the longwall method.

2. The Longwall Method

8. The proposed nlan of extraction is as follows:

(a) Tnclines will be driven from the surface 1,200-1,400 meters to a(lepth of 150-180 meters, at 1,200 meter intervals. One inclinehas already been completed for the experiment.

ANNEX 4-1Page 5

(b) Two sub-levels at 100 meter intervals will delineate the panels.The panels will be 1,000 meters long, with pillars of 20 metersbetween the panels.

(c) Each panel is extracted by opening up a 100 meter longwallface up the dip of the deposit between the 2 sub-levels. Thelongwall equipment will consist of: a plow which cuts therock from the face with a plane (chisel) like action; a100-meter double chain armoured conveyor; and hydraulicpowered self-advancing shield-type support. The hydraulicprops grouped 3 per unit are located along the face at 1 meterintervals supporting the roof with steel caps. After severalpasses of the plow and props are walked forward. As the faceadvances, the roof is collapsed behind. Ore from the faceconveyor is loaded onto a retractable conveyor in the bottomsub-level of the panel, and in turn onto the main inclineconveyor.

(d) It has been estimated that 4 oDerating longwall faces, loadingonto 2 inclines, will be able to attain full production of2 million tons BTS run of mine ore/year (see comments inparas. 21 and 22).

(e) An overhead monorail system is proposed for material supply tothe working face.

(f) All inclines and sub-levels will be driven in the ore by conti-nuous miners loading onto retractable conveyors, feeding ontothe main incline conveyors.

3. Mining Program

9. The Sehib and Djellabia fields extend laterally 6 km to the eastof the treatment plant conveyor and 5 km to the west, respectively (seeChart 1).

10. The proven ore reserve has been divided into 8 ore blocks of whichfive constitute the Sehib section. They are numbered I to V from east towest starting at the dividing line. The Djellabia section is made up ofthree ore blocks, denoted 6, 7, and 8 from west to east. The ore blocksare of similar dimensions, approximately 1,000 m wide and extending down-dipfrom below the outcrop line to the presumed water table level. They containthe following reserves of mineable ore (million tons BTS).

ANNEX 4-1Page 6

Proven Ore Reserves

Seam 1 Seam 2 Total

Sehib

Block I - 3.4 3.4Block II - 2.3 2.3Block III - 3.0 3.0Block IV - 4.6 4.6Block V - 3.3 3.3

Sub-total 16.6 16.6

Dj ellabia

Block VI - 2.4 2.4Block VII 2.9 3.2 6.1Block VIII 4.3 5.7 10.0

Sub-total 7.2 11.3 18.5

Total 7.2 27.9 35.1

Source: HEUIRTEY Renort.

11. In the Sehib sector, the western incline of each ore block willserve as outhaul adit while in the Djellabia field the ore will be hauledout through the inclines to the east of each block. In broad outline, themining program stipulates for the extraction to proceed from the outcrops tothe water table level, and from the lateral extremities towards the centraldividing axis along which the mine-plant conveyor is located. The start-upof full production will be based on simultaneous operations in Sehib Eastand West, respectively. In the east, two longwall machines will extractadjacent panels of ore block V, and in the west, ore block II will be minedthe same way (see Chart 1). After block II has been extracted (in 2-1/2 -3 years), the two teams move westwards and start mining block I. Block Iis estimated to take 3-1/2 - 4 years after which the two teams will move to!,lock ITTI. The two teams operating in block V will complete the block in 4';ears lefore moving to block IV. Blocks III and IV will take productionthrough to the 10th and 11th years. Mining activity will then move into theDjellabia Field. A modification of this scheduling is now being considered.

12. The outhaul inclines will not be driven to the bottom from thestart but will be extended downwards in stages. Similarly, the main levelgathering conveyor will be displaced down dip according to operating require-ments, probably in two stages. Its effective length will also vary with thelocation of the ore blocks being mined.

ANNEX 4-1Page 7

4. Mine Development Schedule

13. To reach full capacity, the following development work is required:

(a) Drifting (Refer to Chart 1)

Inclines B = 400 m (initial)C = 400 m (initial)F 200 m (extension)

Total LevelDevelopment 1,_000_ m

Level in Block V 2,000 m Trial face - Longwall 12,noo Tn Lonpwall 22,000 m Longwall 1 - Second Panel.

Level in Block III 2,000 m Longwall 32,000 m Longwall 4

Total LevelDevelopment 10,000 m

Panel Faces at 100 m 400 mVentilation X Cuts 200 m

Total Drifting 11,600 m

(b) Ventilation Shafts 450 m

(c) Conveyor Installation

Each longwall stope is serviced by its own level conveyor,carrying the broken ore to the outhaul incline. To attainfull production, one level conveyor in addition to thatinstalled for the trial longwall is required for block Vin Sehib East, and two new installations for bloclr TI inSehib WTest wqhere an outhaul incline conveyor is also requiredfor mine adit B (Chart 1). In addition, each developmentheading will be serviced by a retractable conveyor, linkingupt with the adjacent main level convevor.

Incline conveyor 400 rLevel conveyors (3) 3,nOO mDevel-opment conveyors 1,6n0 m estimated

Total 5,000 m

ANNEX 4-1Page 8

The initial drifting, sinking and conveyor installations will be

executed over a period of 4 years to have all four faces equipped and

operational.

14. This development work currently being carried out with 2 Alpine

continuous miners will be stepped up with the purchase of a third and, perhaps,

fourth Alpine. Past experience has shown that the Alpines average 150 meteradvance per month, hence 77 machine months are required to advance minedevelopment sufficient for the installation of the 4 longwalls.

15. As discussed below under "Results of the Trial Panel" the first ofthe four longwalls will be installed on a trial basis by the end of 1974/

early 1975. The development work for this panel will be completed by the

third quarter in 1974. The development for the second longwall on Incline E

is scheduled to be completed by early 1976, ready for installation of the

second longwall equipment when it is delivered on site in the second quarter

of 1976. For the remaining two longwalls on Incline B the schedule callsfor completion of the development by mid-1976 to allow installation of the

third and fourth longwalls in the third quarter and fourth quarter of 1976,respectively. This provides total lapsed time of 24-25 months for developmentdrifting, hence, at least 3 alpine machines are required. A fourth machinewould provide added assurance that the schedule will be met.

16. Apart from the initial development needed to bring the mine to full

production, development is a continuing exercise, with each longwall requiring,

somewhat more than 2,200 meters of gallery--15 machine months of work. Thatis one and one half Alpine machines will be required for each longwall unit,meaning that at least 6 plus a standby will be needed to maintain fullproduction.

5. Mine Production Schedule

17. On the basis of the above mine development schedule, the mineproduction schedule is tentatively estimated as follows:

ANNEX 4-1Page 9

Mine Output

(000 tons BTS)

Actual ProjectedProduction Unit 1972 1973 1974 1975 1976 1977 1978 1979 1980 onwards

Trial.Longwall Unit 219 144 200 200 - - - -

LongwallUnit 1 - - - 300 350 400 450 470 470Unit 2 - - - - 200 350 400 450 470Unit 3 - - - - 120 350 400 450 470U1nit 4 - - - - 20 300 400 450 470Sub-total 219 144 200 500 690 1,400 1,650 1,820 1,880

DriftingUnit1 ) ) 40 40 40 40 40 40 40Unit 2 ) 20) 21 30 40 40 40 40 40 40Unit 3 - - 10 40 40 40 40 40 40Unit 4 - - - 20 20 20 20 20 20

Sub-total 20 21 80 140 140 140 140 140 140

Total MineOutput 239 165 280 640 830 1,540 1,790 1,960 2_020

Rock Ulsed forBeddingStock Piles - - 60 120 120

'ine Production

Available forProcessing 239 165 220 520 710 1,540 1,790 1,960 2,020

18. The existing trial longwall will complete the panel; it is presentlyworking but its future operation is as yet undetermined, hence, no productionis shown for 1976 onwards, even though it could continue to produce in thosenanels along the outcrop. The new trial longwall to be installed in early1975 can, if the trials are successful, be expected to continue on a fullDroduction basis. The other 3 units will 1e installed as mentioned under themine development schedule in mid-late 1976. As indicated, some of the earlierproduction will be used for bedding the stockpiles, and depending upon thefree capacity available processed in the M'Dilla plants; the remainder willbe stockpiled until the Sehib washing plant comes on stream in late 1976.

19. It is planned to produce 2 million tons/year BTS or (2.35 milliontons of wet run of mine ore), which amounts to 7,017 tons BTS/day for a 285work day/year. The mine will work 4 shifts/day (3 production, 1 maintenance),6 days/week or 312 days/year less 12 days for holidavs leaving 300 days less

ANNEX 4-1Page 10

15 days for unforeseen closures due to strike or flooding of roads leaving285 work davs/year. Allowing 300-400 tons/day from development work (3-4Alpines producing 120-150 tons/day), this means a daily production from thelongwall faces of approximately 6,700 tons BTS (or 1,700 tons BTS per face/day). This compares with a maximum figure of 1,500 tons BTS/day achievedwith the trial longwall. However, based upon detailed studies of the perfor-mance of the trial longwall, the manufacturers have undertaken to install anew trial longwall system with modified support using a plow instead of ashearer, free of charge, and guarantee a daily production of 2,000 tons,for a period of two months. At this rate, a typical panel 100 m x 1,000 mwould be worked out in 180-200 work days (360,000-400,000 1/ tons t 2,000 -180-200). The breakdown and reassembly for each move requires (25-40) days,meaning that each panel requires a total of 210 to 240 work days (i.e., anaverage daily production of 1,600-1,700 tons BTS).

20. In summary, to produce 2 million tons BTS per year with 4 longwallunits, the longwall units must be able to consistently produce 2,000 tons/day. According to the manufacturer, the plow should advance along the faceat 1.5 to 1.7 meters/second or take approximately 50-70 seconds/cut of 2 cmto 10 cm, expected to average 5 cm. With an average cut of 5 cm, 20 cutsare required to advance 1 meter or 30-35 minutes cutting time. The remainderof the hour would be used for moving forward the supports, providing atheoretical advance of 1 meter per hour. An advance of 6 meters per day(6 hours) is required to obtain the 2,000 tons BTS/day. Even with the sloweradvance of 1.5 m/sec and a cut of 2 cm with 50% cutting time, 50% supporttime, the required 6 meter advance could theoretically be achieved in 12-14hours. Theoretically, therefore, the target of 2,000 tons BTS/day appearsconservative, but past performance with the shearer and experience of thelongwall in Morocco indicate that a realistic target figure and performanceof more than 80-90% of this figure should not be counted on for the earlyyears of operation. After sufficient experience has been gained in the use ofthis equipment in Sehib production in excess of 2,000 tons/day is a reasonableexpectation.

21. As indicated in para 17, 70-80% of rated production is expected inthe early years 1976, 1977 increasing in 1978 and 1979 until full capacity isreached by 1980.

6. Results of Trial Longwall

22. The longwall method has been well tried and provided in coal mines,but its use on harder rock such as phosphate is limited. Two longwall faceshave been used for 5 to 6 years in Moroccan Phosphate mines. For this reason,GAFSA purchased the necessary equipment and began operating a trial 70 meterlongwall face in December 1970. The experiment continued to October 1972,with several interruptions to modify equipment. After a stoppage for equip-ment modification, a second trial face 120 m long was started in February1973. After a further stoppage, the second trial face was shortened to 50 min early 1974 and the trial continued.

1/ Assuming an average height of 2 meters and a density of 1-8 tons BTS/m3

ANNEX 4-1Page 11

23. The major problem experienced during the trials was roof control.A 20-25 meter layer of marls and phosphates lies above the phosphate seam,topped in turn bv a 20-30 meter bed of hard limestone. After extractionthe marl caves as soon as the props are walked forward. However, the lime-stone breaks only after some time creating high pressure at the face. Earlyin the trials excessive pressure caused caving at the face and sliding ofthe support, endangering the safety of both personnel and equipment. However,after replacement of the 70 ton props with 100 ton and 150 ton props, theconditions improved and fewer problems were experienced during the operationsin the first nanel. When opening up the new 120 m panel roof, problems wereagain encountered. The marl beds was crushed into small blocks above thesupports and caved between and from the front of the caps onto the cuttingmachine and face conveyor, making it necessary to stop the operation toclear away the marl. 1/ An attempt at installing cribbing on top of the capseffected marginal improvements, but the problem remained and it was decidedto shorten the face to 50 m. This effected an increase in the rate of advancereducing the roof problems considerably; however, poor floor control lead toriding up of the face conveyor and further stoppages.

24. While roof control constituted the major problem, some mechanicalproblems were also experienced. Breakdown of the shearing machine due toabrasivity of the phosphate halted production for many weeks during the earlypart of the trials because of unavailability of spare parts not normallyrequired in coal mining operations. However, increasing the stock of partsimproved performance. Installation of large motors and other modificationsalso improved performance. The results of the trials are briefly summarizedin the following table.

I/ Professor Wohibier and Dr. Natau of the Clausthal Technical Universityand Professor Tincelin from l'Ecole de Mines, Nancy, visited the siteto conduct extensive rock mechanic tests.

ANNEX 4-1Page 12

TABLE 1

Production Results of Trial-Longwall

A. Stope Tl from January 1971 to October 1972

Year Month Face Advance Production(000 tons BTS)

1971 January 27.0 11.2February 21.0 8.1March 5-4 2.4April - -MayJune - -July 17.7 7.9August 25.1 10.5September 50.8 20.3October 66.8 28.2November 66.2 29.1December 60.8 25.5

Subtotal 340.8 143.2

1972 January 52.8 27.2February 37 15.0March 53.8 22.0April 70.9 18.9May 74.3 30.0June 90.4 35.1July 41.2 15.4August 67.1 25.9September 65.2 25.4October 11.9 4.1

Total for ctope Ti 901.)h 369.p

B. For Stope T2 from Nvrch 1973 to Juiy 1973

Year Month Face Advance Production(000 tons BTS)

1973 March 36.7 23.1April 23.7 15.3May 26.3 16.5June 26.8 17.1July 5.9 3.7

Stoppage

ANNEX 4-1Page 13

25. The major conclusions of the trial are that the longwall is asuitable method for exploiting Sehib but that modifications to the initialequipment design are needed:

(a) a system of closed supports (shield) with double acting posts,rigid caps and a flexible front bar will provide better roofsupport, eliminating the problem of having the marl cave ontothe equipment;

(b) a plow will replace the shearer as cutting machine. Theshearer was originally selected over the plow because itwas hoped to mine the Seam II selectively cutting the layerof marl separately. This was not found practical, hence,it has been decided to only mine the top part of the seam.The plow is simple, more easily maintained and operated thanthe shearer, and it is capable of better floor control. InMorocco, better results were obtained in phosphate with theplow than with the shearer; and

(c) the conveyor will be strengthened and made narrower (a widerconveyor is needed for the shearer) for better control.

26. Westfalia have signed a contract to equip and operate a longwallusing this modified equipment for 2 months. Westfalia will provide directassistance of 1 engineer and 6 mechanics. The equipment is to be deliveredat the end of October 1974, and requires 2 months for shipping and instal-lation. Start-up will be in early 1975. Westfalia have guaranteed an averagedaily production of 2,000 tons BTS over a 2 month period or the equipment will,at the option of the Company, be dismantled and shipped back to the manufac-turer free of charge. Preliminary results of this trial face will not beknown until March/April 1975.

Personnel Requirements

27. The faces are planned to be operated at 3 production shifts and 1maintenance shift/day. Since shift rotation is envisaged, it is planned totrain personnel of each shift in such a way that they can perform productionoperations as well as maintenance.

The personnel per shift would be:

Function Number

Supervision 1Plough operator 1Plough operator helper 1Electrician 1Hydraulician 1Support advancers 3Top gate road-workers 3Bottom gate road-workers 3Conveyors attendants 2Pump attendant 1

17

ANNEX 4-1Page 14

The daily requirements with 4 faces operated on 4 shifts would be4 x 4 x 17 = 272.

Requirement for drifting would be 6 men/shift on 4 shifts, i.e.,24 men/heading. Since 6 headings would have to be operated simultaneouslythe requirements would be: 6 x 4 x 6 = 144.

In addition to the people on actual production some 40 will beneeded underground and 60 for the mine surface installations. This bringsthe total for the mine to:

Longwall faces operations 272Preparatory workings 144Various underground 40Mine surface 60

Total 516

C. Beneficiation

1. Basic Conceot

28. The ore is delivered from the mine by the incline conveyors onto6,000 ton (2 days' production) stockpiles from where it is delivered to the100,000 ton stockpile (2 weeks' production) at the entrance of the plant,over 6 km of belt conveyors. The ore will then be passed through a conven-tional washing plant (see attached flowsheet Chart II); crushed to 10 mm;snlit according to size by screens and cyclones, filtered, dried and stock-piled for shioment to Sfax. Covered storage of the washed ore will be 30,000tons (6 days' production) to compensate for railway deficiencies.

2. Selection of the Process

29. Selection of washing for upgrading the Sehib rock was decided afterextended tests on a semi-industrial scale and can be supported both on economicand technical grounds. While washing is twice the cost of air classificationmethods, air classification could not produce a product fitting into the65/68% BPL market except from the higher grade ore near the outcrops. Inaddition, a higher recovery of the ore body is obtained with washing, hence,the Bank supports the selection of washing over air classification. However,washing requires considerable amounts of water, a scarce resource in the Sehibregion. Nevertheless, according to the information obtained by the Bank,the use of the water sources proposed would not compete with agriculturaloperations because of the high salt content of the water. The company hasdiscussed this issue with Government authorities and obtained assurances forobtaining the exploitation rights.

29. GAFSA has in the past conducted considerable research into thepossibilities of calcining the Tunisian phosphate rock and clearly provedthe technical feasibility of calcining. With calcination of the washed

ANNEX 4-1Page 15

Sehib ore a product of 75/76 BPL can be produced--a readily marketableproduct. However, the economics of the proceeding with this course ofaction appear doubtful. The incremental benefits gained from upgrading thewashed ore are estimated to be less than the incremental costs.

3. Process Design and Expected Performance

30. Design of the washing plant closely follows that of the well provenMetlaoui plants, but with several major modifications; a trommel will replacethe longwasher, a double deck shaking screen will replace the traditionalfixed screen, automatic weightometers, density and flow meters will beinstalled for improved process control, and better cyclone and thickenercontrol will improve water recovery from the slimes. Laboratory tests haveshown that a product with a grade in excess of 65 BPL can be readily producedwith a weight recovery ratio (washed product/BTS) of more than 80% (an over-all P205 recovery of 85%). This is a weight recovery ratio equivalent to68° washed product/wet run of mine ore. Laboratory and pilot plant testsindicate that while 80% or even higher weight recovery is achievable undercloselv controlled conditions, the Bank considers that a 77-78% weightrecovery is a more reasonable expectation under normal plant conditions.

4. Plant Location

31. The plant is located directly over the deposit between the Sehiband Djellabia fields but slightly north of the mine limits, making itnecessary to leave a large pillar in the ore to protect the plant from soilsubsidence. This choice of location was based on the need for a large con-venient surface, relative closeness to the center of the field to minimizeore transport over the expected 20 year life of the mine, and most importantlyon the accessibility by a railroad spur line. While the evaluation of thealternative plant locations was poor, the Bank finds the location selectedacceptable.

5. Personnel Requirements

32. Personnel requirements for all surface installations, besidesadministration and workshops, are estimated to be 110 workers, plus 13 super-visors and 4 engineers. Because of the similarity between the plant designand that of the Metlaoui washing plants, the availability (or lack of)suitably skilled labor is not expected to pose a problem. Nevertheless,some training to upgrade skills would greatly assist in improving operationalefficiency over that of the existing plants.

D. Service and Maintenance

33. The project includesworkshops for hydraulicand electrical repair. These facilities would be located near the treatmentplant. Other maintenance will be carried out in the central Metlaoui work-shops.

ANNEX 4-1Page 16

34. It is estimated that 52 people will be required for maintenanceand service and 15 for general administration.

E. Infrastructure

1. Water Supply

35. At present, GAFSA can consider 3 alternative sources of water forSehib. At Tarfaoui, located 16 km from Sehib, the Company has drilled down700 meters to intersect water bearing strata. Preliminary electrical loggingindicate a potential supply of 30 liters/sec per hole. Pumping tests arebeing conducted to confirm this. This would, therefore, require 5 holes inthe area to supply the needed 150 liter/sec. The second alternative sourceis Gouifla some 32 km southwest of Sehib. At this location, drilling doneby the Ministry of Agriculture, clearly demonstrates the adequacy of supplies.One hole produces an artisian flow of 75 liter/sec (a pumped draw off couldbe double this). A second hole produced 75 liter/sec through pumping tests.That is 2 holes in Gouifla would more than adequately meet the Sehib require-ments. The third alternative, not yet given serious consideration by GAFSA,is to drill a deep hole on the Sehib site to intersect water bearing strataat 1,700 meters below the surface. This same aquifer produces more than 200liter/sec/hole in Algeria to the West of Sehib and in an area 50 km inlandfrom Sfax to the East of Sehib.

36. In each case, the water has a high salt content and is unsuitedfor agriculture use and, at present, has no alternative use. The Ministryof Agriculture gave assurances that they would issue water rights to GAFSAwhen the source has been selected. Because the source at Gouifla has assuredsupply and is the highest cost alternative, it is used as the basis forappraisal, pending final selection of source. This alternative, estimatedto cost DT 1.3 million, includes pumps, reservoirs, a 34 km pipeline, elec-trical transmission facilities and access roads.

2. Electric Power

37. The power consumption for Sehib is expected to be as follows:

Categories Kwh/h

Mine 1,730Mine-Plant Conveyor 900Plant 1,750Facilities 550Pumping 830

5,760

Hence, a planned installed capacity of 8 MVA should provide a sufficientsafety factor.

ANNEX 4-1Page 17

38. The public power company, STEG, will have no problem meeting thisdemand. STEG will supply 30 KV to the Sehib plant site from the substationat Metlaoui. This would mean installing new 150,000/30,000 volt trans-formers at Metlaoui, plus 2 km transmission lines to Sehib. GAFSA willfinance the required transformers and transmission lines.

39. STEG operates on indefinite term contracts with negotiated tariffs.The tariffs are adjusted periodically by the Government. STEG indicated thatthey have no intention to incr(izue tariffs in the near term because of theincreased fuel costs.

41. Power requirements during construction can be supplied throughGAFSA and M'Dilla.

3. Roads

42. At present, a 9 km dirt road from M'Dilla provides the only acessto Sehib. M'Dilla is linked to GAFSA and thence to Metlaoui by a pavedhighway system. New road requirements include the provision of a permanentall-weather highway between M'Dilla and Sehib-Djellabia and an access roadfrom Sehib to the water source on the Tarfaoui. A new direct highway fromSehib to Metlaoui would be highly desirable and even essential if some ofthe personnel and services are based on Metlaoui. The present travellingdistance from Metlaoui to Sehib, via Gafsa and M'Dilla, is 70 km. Thiswould be nearly halved by a road link from Sehib to the Metlaoui-Gafsahighway, 12 km to the north.

4. Rail Facilities

43. A 13 km spur line will link the Sehib plant to the existing MetalouiL-Gafsa track. SNCFT has completed a full study and the design of this spur,but has yet to make arrangements for financing the track. It is importantthat steps be taken to arrange this finance.

44. Additional investments required to service the Sehib project are:

(a) railway and loading station at Sehib;

(b) 450-489 ore cars; 1/

1/ 1.6 million tons, 24 ton/car with 2-1/2 day turn-around time (1.6 million-t 24 (350 -t 2.5) = 450 - 480 cars).

ANNEX 4-1Page 18

(c) locomotives (the number needed is still under question); and

(d) main track upgrading; additional signalling and communicationsystem; additional passing loops.

44. Financing for this equipment is being arranged through theAfrican Development Bank.

5. Housing

45. The project will provide houses for 83 employees at a total esti-mated investment cost of DT 446,000. 19 houses for engineers at a unit costof DT 10,000 and 64 houses for other employees costing DT 4,000 each havebeen planned; however, the project includes no quarters for workers. Sehibwill not be developed as an urban center but the required accommodations willbe built in M'Dilla since (i) M'Dilla is located only a few kilometers north-west of Sehib; (ii) the total Sehib labor force at 660 men would not justifythe required investment in utban infrastructure; and (iii) the route andrail link between M'Dilla and Sehib which is included in the project willprovide sufficient means of transportation between the centers.


TUNISIAGAFSA PHOSPHATE PROJECT

SCHEMATIC DIAGRAM OF SHIB MINE DEVELOPMENT

I Washing Plant |

.4 Djellatha ) 4 Sehib West No Sehib East

Assumed Water Table Level

No MZinda 1 km - | | M'Oilla b..Field Field

Vill Vtt Vl I I1 111 IV V

12-1 400m _i b<<**

Panels t_ 17- g>| 1976-7

1977~~~~~~8 I ~~~1976-71977-8 ~~~~~~~ ~~~1975 -6 T3

II 1976-7 ~~~::=== ~~~~~~~~1973-A T2

I 1976-7 lIT 1972 TI

Outcrop -- , ___ i . . . _ Outcrop__F1 H A B C D

I-VilI Ore Block Numbers

Inclines. A, B, C

Development Wo;k Completed

De.i,,Pfrwpe Wo,rk RAmqu,red to Reach Full Production

Palels Wrkep OutWorld Bank-8623

Industrial Projects DeparttnssstMarch 197h

TUNISIA: GAFSA PHOSPHATE PROJECTSCHEMATIC FLOWSHEET OF WASHING PLANT

Crude Oxe

- - - - - - - - - ~~... .. ..... .... .. .. .......... .......... .

INDEXPHOSPHATE

-......... ........REJECTS

1 = CRUSHER ......... CYCLONE 430mm2 =10mm VIBRATING SCREEN 8 -CENTRIFUGE DRYER3 TROMMEL 9 = FILTRATE RECOVERY4 =3mm VIBRATING SCREEN 10 = FLUIDIZED BED DRYER5 = DECANTER 11 THICKENER, 60m6 = CYCLONE 600mm

d Umk _ m

Industrlal Projects DepartmentMarch 1971t

2=10mm VIBRATING SCREEN 8 - CENTRIFUGE DRYE

ANNEX 4-2


THE SEHIB PROJECT - MANAGEMENT AND ORGANIZATION

A. The Corporate Structure

1. With the present organization, the identification, study, financing,construction and implementation of new projects is the responsibility of theDevelopment Department, and the project is only turned over to the ProductionDepartment after it reaches full commercial production. The actual timingand criteria for the changeover is not clearly defined, and may as exDressedin Annex 2-2 create some difficulties if not carefully handled. Nevertheless,because of the shortage of qualified staff in GAFFA, the division of responsi-bility will help to prevent the diversion of engineers to other company oper-ations and may serve to advantageously stabilize the management of Sehib.

B. Management of the Construction Phase

2. Organization Structure: The major responsibility for supervisingthe construction and start-up of Sehib will be contracted to an outside comr-pany; since GAFSA does not have sufficient staff resources to assign full tiiaeto Sehib, and the GAFSA staff can be more usefully assigned to implementationof the modernization program. The proposed organization for managing theconstruction phase is presented in Chart 1 below.

3. Contractor: The French consulting firm 1EUnI'wL' will be the contractorfor the Sehib project. HEURTEY has considerable experience and is adequatelyqualified in supervising the construction of processing plants but has littleexperience in underground mine development, hence assistance from anotherFrench consulting group SOFREMINES will be sought. HEURTEY will provide anexperienced construction engineer as Project Director.

14. Engineering: HEURTEY undertook the feasibility study and preliminaryengineering a`sign of the project with some assistance from SOFREMINES andwill be responsible for completing the detailed engineering and design. rhiswork is well advanced and will be carried out in their ?-is office. No diffi-culi>T is seen in the timely completion of the engineering design as now proposed.H-TRE2Y ,ill be assisted in detailed equip-ment specifications by the equipm;'mtsuppliers who will be required to provide such d-ata as a part of their supoIycon;ract.

5. Procurement: HB-EURTEBY will supervise and control the procurement ofall goods and services for the project; all of which will be subjected to com-petitive bidding. HEURTEY's role includes preparing the bid documents, invit-ing bid proposals, evaluating bids, awr6rding contracts (after consultatioinwith the GAFSA company), and follow-up on purchase contracts. HEU' IEY hbsconsiderable experience in internabional bidding procedures and has beer. aler;edto the Bank requirements. HEURTf-i will also act as expediters of equipmentdeliveries and has inspectors visit the manufacturers to ins-pect specif.cations,schedules and costs.

,%W 4-2

ORGANIZATION FOR SUPERVISING THE CONTRUCTION OF SEHIB

THE COMPANY

r------- ------- - ----.---- --- L- -___-_-_- __--_-_

0I[ PROJECT DIRECTOR

I~~~~~~~~~~~~~~~~~~~~~~~~

* ,3ETARY CONTROL SC=L1Ai0

I __ ____- _____________

I-------- --

I I Ish.lllc.lC sa, i

j! ~ ~~~ENGIlNEERING PRCRMN3PCAIE

I ENi~~~~~~,NEERINi., I ON ~~~~~~~~~~~~SITE SUPERVISION

0 | SP~~ECGIALST PROCU REMENT MIE PLNT, NDES O

I ~ ~ ~ ~ ~ ~ ~ ---- ~~~~~idd-- t-I * 'ligillreltilg Sptcaliits~ ~ ~~~~~~Proainm,irI I M i*rigale EitnnPleri CoPiao St Maae

5r-el i'Vzrk El-,i-icl hq dc men,i MiningEnier

I IaV0t,t5 MnrzrSioca Ettg.olIrntrical Engier; eglers,rig Equlalnenl ; a ~~~~~Bd E,,luatWon Mi,0-i-cl Engineer

C._.I. .___-_ _

I~~~~~~~~~~~~~~~~ Iolo fIvie oeeI _______~~~~__ _ __ _ _ ShOigIouet _ _S_e_____or

I SPECIALISTS OFF~~~~~~~INPCEORSENIERPR

fill wer fvill9 * : Co~~- Pree arti onr of I lekairloto ivlPe nd,1 docuiments 3 viEliner

3~~~~~~~~~~~~~~~~~~~~~~upbr Stel Cor Elctrca

I design staodardt etc~~~~~~~~~~~Age t

O i

IzKbtrii Pmet Deatn

i March_1974

I TSI Corr{oIsrsInoes, I* I,d s h d l I I

Sn troigdc uensite Samepor

Shllipmqents ect Clrs

I~~ ~ ~~~~~~~~~~~~ - Osrp osre lfospeardin 5

II ______________ I________ I

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l Ban 861

Itt1s1 ~~~ InJet Iq^thh~~~ ~~ I I

ANNEX 4-2Page 3

6. On-Site Supervision; On-site-supervision will be effected by acombination of GAFSA company and contrac-tor personnel. A Site M4anagerexperienced in similar projects -will be provided by tho. Contractor. TheSite Manager will be assisted by specialized engineers (with discplines inmining, civil, structures, electricity and mechanics) who will be providedboth by the company and the contractor depending upon the availability ofthe company staff. This will more particularly apply to the undergrounddevelopment. These engineers will be supported by junior engineers, super-vision foremen, site surveyors, draftsmen and clerks.

7. cuDoliers Assistance: The suppliers will be required to provideon-site assis- ̀anceT6Lr erection and more importantly start-up and testing ofthe equipment. In general the suppliers will provide training for operatorsand maintenance crews; particularly for the long-wall equipment undergroundwhere extensive assistance will be required from the supplier, not only duringinstallation, but also for start-up and the first year of operation.

Training: Starting early in the construction phase the engineeringand supervisr s aff for the operstional chase will be engaged to participatein the construction phase: particularly in the mining activities. Selectedengineers and suoervisors will be sent for short periods of training in thelong-wall mines in France and Germany. Training of the maintenance crews willtake place during construction under the supervision of the supplierts repre-senta tives. Training of the surface workforce will be in the form of on-the-job training during start-up and is not expected to pose a problem. Trainingof the underground workforce is alread]r well in hand with the past twqo yearsoperation of the trial face. Underground development wrill be stepwise inwhich each new long-wall will be staffed by experienced and inexperiencedoperators. An active on-the-surface training program is planned for theseoperators before they are taken underground. All training will be coordinatedwiv.h tLe training center in. Gaf sa.

C. Manageo,ent of the Operational Phase

9. Organizational Structure: In the initial years of operation theSe.hib project sill fall under the control of che Development Department. Itwill later be transferred to the control. of the Production Department. Th.

*r>;nizction structuare will be as shosn in Chart II below.

1. This is considered to be a suit.ble organization for the oper-tionof tehio; the crucial issue being more the recruitment of adequately qua-lifiedpersorinel.

Personnel Requirements and Recruitment- Ais shown in the orga-nizationchirt, three senior en-ineers -will b ireu d, supported by five junioren3tneers. Mr. Ben Ali presently responsible for the tri.l face will fill oneof the three top positions, the other two have yet to be recruited, eitherextern.lly or from the Production Departmnent. Either way they should be ex-periencedi and it may be necessary to obtain some outside technical as. stancefor assis-tance at this level. The five junior engineers will be recrt ted,to the extent possible from Tunisian graduates, as early as possible; hopefullyby la-te 1974. These engineers will be trained both on-the-job by ass'sting inthe supervision of nine and plant construction, and by site visits foreign_nstaltations; particularly for the mining engineers.

OROANIZA1IEN OF SFH18 OPLRA [ION%

N-mber

3 C |.0 P.- |

r- '- ".

5 M a 2, 3 -- 1 4 ...

C 0X z- K -___Sg 1,jILI IC

577 62 62 ( 3 6? 59 3 33 9 3

WOF K FOECE

lndtriol P-j-t.cJeo Dep.rt_nW

March 1974

AM4EX 4-2Page 5

12. Perhaps the most crucial element is to obtain sufficiently qualifiedSection Foremen for overall supervision of the underground production faces,development headings and maintenance. These people (nine in all) are notavailable weithin Tunisia and will therefore have to be recruited from outside.GAFSA has established contacts with the French State mining company for thepurpose oV obtaining experienced personnel on three to five year contracts.The next level of supervisors, the face supervisor, development supervisor,safety supervisor, maintenance foreman, shift supervisors, etc. (64 total)will be recruited from the existing workforce within GAFSA, and trained on-the-cbh aY suppliers representatives and at the Gafsa training center. Ex-natri .tes sill be contracted if found necessary.


TUNISIA: GAFSA PHOSPHATE PROJECTSehib Project - Implementation Scheduie

1973 1974 1975 1976 1977

J F M A M J J A S O N D J_ F M A A J MO J J A I S I N1 N I D J F I M I A J JASON D F M |J|J|A| S IO N D

A SUMM-ERY

Preliminary DesignDetailed Design U IIII mIIIII 11111 IV VA .. mK

PROCUREMENTEl

Preparation of Bid Spec,ificationInvitation to BidReceipt of RidsPlacement of Orders m *m *m m * I

Ecsuipment Delivery

Engage Conrctor

Mite DevelopmentJul ong-II 11-Longm-II 2 U U

-Long,,all 3 I r1W. V*Loegmall 4

Surface Installations-Off ices/Worksh.pstetc.-Mine-Plant Conveyor-Crude ore Storage-Ore Preparation-Washing Plant-Product Storage

INFRASTRUCTUREWager SupplyHousingElectricity (STEG)Ralalay (SNCFT)m Um

World B..k-8625(R),


ANNEX 5-1Page 1


SEHIB PROJECT - CAPITAL COST ESTIMATES (1974 - 1977)

---------DT 000---------- ------US$ (ooo)---------

Local Forei-/ Total Local Foreign Total

1. Buildings & Civil works

Plant 1,835 - 1,835 4,092 4,092Housing 446 - 446 995 - 995Others 418 - 418 932 932

(sub-total) 2,Z __ 2,699 6,609 6,019

2. Mine Development 741 240 981 1,652 535 2,187

3. Equipment

Underground 480 6,712 7,192 1,070 14,968 16,038Plant 422 3,695 4,117 942 8,240 9,182

Misc. Surface Installations 295 1,020 1,315 658 2,275 2,932

Spare parts 58 575 633 129 1 282 1 411

(sub-total) 1,2 12,002 122,799 %97, i

4. InfrastructureElectricity 60 140 200 131 307 438Railway on site 80 - 80 178 - 178%,ad M'Dilla-Sehib 250 - 250 558 - 558

Water - Gouifla 350 938 1 288 781 2,092 2,873(sub-total) 71 1T.81 2,399 X,0o7

5. Transport & Erection 781 675 1,456 1,742 1,505 3,247

6. Duties & Taxes 315 315 702 702

7. Pre-operating, Start-up &Engineering Expenses

Engineering 171 399 570 381 890 1,271

Supervision 191 128 319 426 285 711

Training 39 338 377 87 754 841(sub-total) 401 865 1,266 rY 1

ITEM 1 - 7 -- 63.932 348.58

8. Physical Contingency 537 1,318 1,855 1,198 2,939 4,137

9. Price Escalation 860 2,315 3,175 1,918 5,162 7,080

TOTAL FIXED ASSET 8.129 18493 26.822 18,572 41,233 5- 80

Incremental Working Capital 608 250 858 1,357 556 1,913

PROJECT COST 8,937 18.743 27.680 1292 789 61.718

Interest duringConstruetion - 1,094 1,94 - 2,517 2,517

TOAL rTWANCTTO RQUIRED 8,937 19,837 28,774 19,929 hb,306 64,235

l/ The foreign exchange cost had been estimated byHEURTEY in French Francs and reconverted in DTat 1 DT - 10.6 FF., it includes the direct foreignexchange component only.


ANNEX 5-1Page 2


SEHIB PROJECT - CAPITAL COST ESTIMATES

A. PROJECT COST ESTIMATE

Building and Civil Works (Item 1)

1. The original cost estimates which had been established in September1971 on the basis of local competitive bidding have been revised in February1974. Following inquiries among potential Tunisian contractors a 25% priceescalation has been applied increasing the capital cost for buildings andcivil works to DT 2,699,000 as detailed below:

Buildings and Civil Construction

DT '000

1. Plant - Civil Work 514- Metal Work 183- Building 715- Other 423

Sub-total 1,835

2. Miscellaneous Surface installations 418

3. Houses for Employees 446

Total (Item 1) 2,699

Mine Development (Item 2)

2. Cost of the remaining mine development in Sehib have been estimatedat DT 981,000 of which DT 741,000 (76%) will be local currency. Mine develop-ment includes primarily:

DT 000Foreign Local Total

Incline Development 132 330 462Panel Development 63 290 353Miscellaneous 45 121 166

Total (Item 2) 240 741 981

ANNEX 5-1Page 3

Equipment (Item 3)

3. In 1971, HEURTEY had invited and evaluated bids according to inter-national competitive bidding procedures. The resulting cost estimates havebeen revised in January 1974 based of quotations from potential Europeansuppliers. A detailed equipment cost breakdown is given below.

DT 000Foreign Local Total

Equipment Cost (CIF Sfax)

1. Underground Equipment

Shearing Mtachine (Plough) 698 - 698Armored Conveyor 298 - 298Hydraulic Support 1,735 - 1,735Drifting Equipment 155 - 155Incline Conveyors 1,701 330 2,031Electrical Equipment 400 33 l 33Others 1,725 112 1,837

Total 6.712 480 7L192

2. Washing Plant

Crasher 340 - 340Dryer 476 24 50OThickener 190 - 190Machine Tools 443 - 443Transport and Handling Equipment 1,168 247 1,541Electrical Installations 383 55 ,38Others 695 96

Total 3.695 422 L l',

3. Miscellaneous Surface Installations

Stockpile 388 - 38FConveyors 360 275 63Electrical Installations 231 20 25Others 41 -

Total 1 020 295 1,315

4. Spare Parts

Underground 313 35 348llashing Plant 213 19 232Miscellaneous Surface Installations 49 4 53

Total 575 58 633

ANNEX 5-1Page 4

Infrastructure (Item 4)

4. Infrastructure requirements for the project include (i) rail linkswhich will be provided by SNCFT (for details see Annex 4-1, paras. 37,43), and (ii) water, rail, road and electricity connections which will befinanced by the GAFSA Company. The cost estimate for the railway betweenthe mine, plant and SNCFT loading facilities is based on information obtainedfrom SNCFT in late 1973. The investment estimate for roads includes an asphaltroad of about 12 km between M'Dilla and Sehib. As to water, the cost estimatetakes into account the investment for pumping facilities and water supplyfrom Gouifla, about 34 km west of Sehib (see Annex 4-1, para. 35). STEG, thenational electricity company will supply sufficient power for Sehib after GAFSAhas installed the required tranwformers and transmission lines.

DT 000Infrastructure Local Foreign Total

Electricity 60 140 200Railway on site 80 - 80Route M'Dilla-Sehib 250 - 250Water - Gouifla 350 938 1288

Total (Item 4) 740 1078 1818

Transport and Erection (Item 5)

5. A transport cost of 3% cif value Sfax of all equipment items hasbeen added and amounts to DT 321,000. According to experience with similarplants in Tunisia, erection cost amounts to about 21% of the CIF equipmentcost (DT 1,135) million, of which about 41% (DT 460,000) is in local currency.Eerection cost for under ground equipment includes only installation ofincline conveyors and fixed electrical equipment to the extent as expensesare not added as operating costs.

Duties and Taxes (Item 6)

6. According to an agreement dated June 21, 1973, the GAFSA Companyhas been exempt from duties on materials, supplies, and equipment for a ten-year period starting 1971; however, the Company pays a 2.5% administrativecharge.

Pre-operating, Start-up and Engineering Expenses (Item 7)

7. This item includes only costs which will be incurred after December 31,1973 (para. 10) and are unrelated to the current production in Sehib. Thequoted detailed engineering and construction supervision estimates are basedon the contract GAFSA is currently negotiating with HEURTEY, a French consult-ing firm.

ANNEX 5-1Page 5

Pre-operating, Engineering and Start-up Expenses

DT 000Local Foreign Total

Engineering 171 399 570Construction 191 128 319Training 39 338 377

Total 401 865 1,266

It has been assumed that 70% of the engineering cost and 40% of thecost of construction supervision are in foreign exchange.

Contingencies (Item 8)

8. Physical contingencies of 10% of the civil works, mine developmentequipment and infrastructure cost have been added to the capital cost estimate.Project preparation and engineering are well advanced, so that a 10% physicalcontingency should be sufficient to cover errors and changes in projectdesign.

Price Escalation (Item 9)

9. Annual price increases of 10%for local items and 13% for importedgoods and services have been assumed and applied to the following paymentschedule:

DT 0001974 1975 1976 1977 Total

Local Cost 260 2,000 4,210 402 6,872Price Escalation - 100 652 108 b60

Sub-total 260 2,100 4,862 510 7,732

Foreign Cost 480 4,300 9,420 520 14,720Price Escalation - 280 1,900 135 2,315

Sub-total 480 4,580 11,320 655 17,03-

The annual rates give a total price escalation of 8.5% for local.cost and 17.5% for foreign currency investments. GAFSA has already placedorders for one longwall "Westfalia" in December 1973 and expectes to si-,nthe remaining contracts before the end of 1974. Consequently, the pricecontingencies should be adequate.

ANNEX 5-1Page 6

B. PAST SEHIB INVESTMENTS

10. The capital cost estimates detailed on page 1 reflect only invest-ments during the 1974-1977 period. However, a pilot longwall has beeninstalled in 1970/1971, and a new hydraulic support system added in February1973. Total past investment includes:

DT

1. Geological Survey 4,0672. Engineering, Studies 143,6403. Technical Assistance 72,8594. Mline Development 100,9125. Panel Tl; longwall equipment (shearer,

armored conveyors, props, hydraulicsupport for 75 meter and 100 meter) 639,083

6. Panel T2; (50 mm support, armored conveyor,replecement equipment) 427,679

7. Continuous miner & car park 102,2998. Other equipment 321,005

Total 1,811,544

For financial projections and rate of return calculations, theinvestment costs during 1970-1973 are taken into ascount at the end of 1976(i) at their depreciated value of DT 400,000 for equipment and mine develop-ment investments, and (ii) at their total cost of DT 220,566 for studiesand technical assistance which had not yet been amortized.

C. REPLACEMENT INVESTMENTS

A major part of the underground mining and handling equipment willhave to be renewed periodically and a 5-year replacement period has beenassumed. Costs (including erection, taxes and transport at 1973 prices) areestimated as follows:

…-----------…(DT 000) -- …_Local Foreign Total

Underground

1. 4 longwalls (plough, conveyors,hydraulic support) 185 2,455 2,640

2. Drifting Machines (continuousminer, waggons) 73 210 283

3. Handling Equipment 75 210 285Sub-total 333 2,875 3,208

Surface

4. Transport & Handling Equipment 11 204 215

Total (1973 prices) 344 3,079 3,423

ANNEX 5-1Page 7

Equipment for one longwall and miscellaneous rolling stock totallingDT 780,000 (at 1973 prices) has to be replaced in 1979, 1984, etc. Theremaining equipment estimated at DT 2,643 million will be replaced in 1981,1986, etc. For the purpose of financial projections (i) DT 100,000 (at 1973prices) has been added for miscellaneous replacement investment beginning1978 and (ii) the costs given above are inflated by 10% p.a. until 1976,and 7.5% p.a. thereafter.

D. DJELLABIA

The Sehib deposit is expected to be exploited by mid-1980, so thatthe adjacent deposit "Djeliabia" will be developed during the 1981 - 1983period. The investments include:

Year of ---- - -- (DT 000)------…Ipvestment Local Foreign Total

Mine Development 1981 205 120 325Underground equipment 1982/83 64 846 910Surface Installations 1985/86 185 1,037 1,222

Total (at 1973 prices) 454 2,003 2,457

The requirements for new surface installations are relatively highsince storage facilities at the Djellabia mine entrance and transport equip-ment to the washing plant will have to be installed. The quoted 1973 invest-ment costs are inflated by 10% p.a. until 1976 and 7.5% p.a. thereafter.


TUN]l IA: GAFSA PHOSPHATt. PFOJECT

SEHIB PROJECT - ESTIMTED WORKING CAPITAL REUIRBEMENTS

(19~7I D 0~00

1973/1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

PRODICTION (000 BTS) 280 640 830 1,540 1,790 1,960 2,000 2,000 2,000 2,000 2,000 2,000SALES (000 tons saleable

product 1/) 145 340 370 1,230 1,430 1,570 1,600 1,600 1,600 1,600 1,600 1,600

I. Cash on Hand 100 150 200 200 200 200 200 200 200 200 200 200

II. Cash Expenses

1. Material, Supplies 45 95 180 280 308 327 333 333 333 333 333 3332. Utilities 20 25 55 60 67 73 73 73 73 73 73 733. Labor 35 40 11X0 1140 2140 140 140 140 140 140 140 °1404. Administrative &

Sellirg Expenses 18 20 5o 77 77 77 77 77 77 77 77 775. Transport Sfax 24 56 68 234 272 300 305 305 305 305 305 3056. Loading Sfax 1 4 6 16 18 21 21 21 21 21 21 217. Financial Charges 1/ 10 9 13 102 185 172 162 150 138 120 105 90

Sub-total __ _v M 09 i ___i7 10 1,069 1= I,039

III. Cash Workirg Capital (I) & (II) 253 399 712 1,109 1,267 1,310 1,3:U 1,299 1,287 1,269 1,254 1,239

IV. Incremental Cash WorkingCapital (at 1976 prices) - 146 313 397 158 43 1 2) (12) (18) (15) (1)

Note: Projections calculate cash working capital, i.e., actual expenses and minimum cash on hand required for operating at fullcapacity. Cash working capital requirements are less than working capital calculated according to the (current assets minuSaccounts payable) concept and avoids financihg of the profit margin included in accounts receivable.

1/ not incluiing interest during construction

Assumptions: Accounts psyable: Iabor, Loading Sfax: 1 week; Materials, Supplies, Utilities, Transport: 4 weeksAccounts receivable: Phospbate Sales: 12 weeksTime lag: Mining--Transport Sehib: 1 week; Transport Sehib - fob Sfax: 1 week |Required coverage: Materials, Supplies, Utilities, Administrative Expenses: 10 weeks

Labor: 13 weeksLoadirg Sfax: 12 weeksTransport Sfaxs 9 weeksFinancial Charges: 12 weeks

The required coverage for each type of expense is determined by subtraoting the payment term for each expense fromthe sum of time lags for production, transport to Sfax ancd payment by the client.

Industrial Projects DepartmentOul7, 1974

ANNEX 5-3


SEHIB PROJECT - IBRD FINANCED EQUIPMENT AND SERVICES-/

Equipment Dr 000

1. Underground Equipment:

Incline Conveyors 1,701Electrical Equipment 400Others 1 725

Sub-total

2. Washing Plant 3,695

3. Miscellaneous Surface Installation 1,020

4. Spare Parts

Underground 100Washing Plant 213Surface 49

Sub-total 362

Total Equipment 8,903

Transport (foreign) 200

Price Escalation 897

10.0-00


ANNEX 5-4

T¶NISIA: GAFSA PHOSPHATE PROJECT

SEHIB PROJECT - DISBURSEMENT SCHEDULE/(IBRD Loan of US$ 23.0 million - in 000 USi equivalent)

Amount UndisbursedTear Disbursment Outstanding Amount

1975

I Quarter 1,300 1,300 21,700II Quarter 1,000 2,300 20,700

III Quarter 1,200 3,500 19,500IV Quarter 3,300 6,800 16,200

1976

I Quarter 4,ooo 10,800 12,200II Quarter 5,000 15,800 7,2001II Quarter 4,200 20,000 3,000IV Quarter 2$000 22,000 1,000

1977

I Quarter 700 22,700 3001I Quarter 300 23,000


ANNEX 6-1Page 1


SEHIB PROJECT - ASSUMPTIONS FOR FINANCIAL PROJECTIONS

1. The financial projections are based on the Sehib production planoutlined in Annex 4-1, para. 17 and begin in September/October 1976 when thewashing plant is scheduled to start operations. To account for the pilotproduction up to September 1976, the sales, operating, and investment costshave been included in the company's financial statements of the relevantperiods (Annex 8-1, 8-2, 8-3). The investments in the Sehib mine prior toJanuary 1, 1974 are depreciated as required by law and enter the Sehibfinancial rate of return calculation with its residual value as of end 1976(Annex 5-1, para. 11). In order to adequately reflect the projects realrate of return as well as the company's future cash flow position, all projec-tions are given:

a) in 1976 prices, i.e., real terms andb) in current prices, i.e., nominal terms.

2. Net Sales are given net of 3.5% rebates for export sales; the totalSehib mine production will be exported assuming the following prices (Annex 3,para. 24 - 30):

Phosphate Rock Prices

Quality 1974 1975 1976 1977 1978 and Thereafter

Jan June65/68 BPL 36 42 36 30 25 3% p.a. price escalation over60/62 BPL 32 38 32 26 20 the 1977 prices.

3. The Sehib operating costs are detailed in Annex 6-2. All costsare inflated from 1973 figures as follows:

Haterials and supplies: 12% in 1974, 5% p.a. thereafter.

Utilities: 10% for the 1973-74 period, 5% p.a. thereafter.

Labor: 3% p.a. for 1973-76, 1978-79, 1981-82 and1984-85; 10% p.a. in 1977, 1980, 1983.

Administrative expenses: 5% p.a.

Transport Sfax: 0.95 DT/ton for 19741.15 DT/ton for 19751.25 DT/ton for 1976-781.45 DT/ton for 1979-811.65 DT/ton for 1982-841.85 DT/ton in 1985

ANNEX 6-1Page 2

Loading Cost: 0.05 DT/ton until 19750.055 DT/ton in 1976 and5% p.a. cost escalation thereafter

Long-Term Debt

4. IBRD loan for the Sehib project of US$23 million equivalent for15 years including 3 years of grace, at 7-1/4% interest plus a 1-3/4%guarantee fee payable to the Tunisian Government. Loan effectiveness -October 1, 1974. Repayments of principal and interest in 24 equal semi-annual installments commencing January 15, 1978.

Sehib - Interest During Construction - IBRD Loan(US$ 000)

1975 1976 TotalApril Oct. April Oct. Dec.

Disbursement 1,300 3,500 13,200 22,000 23,000 --

Undisbursed Amount 21,700 19,500 9,800 2,300 - --

Interest (7-1/4%) 47 127 479 796 417 1,866Interest (1-3/4%) 11 31 116 192 101 451Commitment Fee (3/4%) 81 73 37 9 - 200

Interest duringconstruction 139 231 632 997 518 2,517

Of which in foreignexchange 128 200 516 805 417 2,066

6. Depreciation follows the legally required rates of 10% for equip-ment, 20% for rolling stock and 5% for buildings and civil works. The Sehibdepreciation schedule is based on the following capital cost breakdown(Annex 5-1):

DT '000

Rolling Stock 2,630Physical and Price Contingencies 432

Sub-total 3,082

Equipment 10,922Transport and Erection 1,456Physical and Price Contingencies 3,001

Sub-total 15,379

Buildings 2,699Mine Development 981Infrastructure 1,618Physical and Price Contingencies 1,269

Total 6,567

ANNEX 6-1Page 3

7. Deferred Charges include the following items (in DT '000) whichare amortized over 5 years:

Prior toSEHIB 1974 1974 1975 1976 Total

Engineering 221 200 370 - 791Construction Supervision - - 112 207 319

Training - - 85 292 377Escalation on above - - 45 83 128Interest during Construction - - 160 934 1,094

Total Deferred Charges -Sehib 221 200 772 1,516 2,709

8. Financial Charges - see notes 4 and 5 above.

9. Fixed Asset - see Annex 5-1 for the Sehib project and Annex 7-3for the modernization program.

10. Working Capital requirements - see Annex 5-2.

11. Taxes - As part of the last "assainissement", GAFSA received a taxexemption for all major taxes including corporate income tax, taxes onproduction and services as well as duties and import taxes. The exemptionbecame effective 1971 and has been extended for a ten-year period.

Generally, industrial enterprises in Tunisia pay a corporate income tax of40.1% on profits, of which 1% of gross sales is payable at the end of thefiscal year as direct tax. However, there are a number of special tax advan-tages which may be applicable to the GAFSA Company during the implementationof the Sehib project and modernization program, if the present tax exemptionwere not in effect:

a) if the investment is approved by the Government, the40.1% income tax applies only to that portion of grossprofits which is not reinvested;

b) a 5-year income tax exemption according to the 1968 lawfor investments in the south;

c) a 5-year income tax exemption on the basis of a "lettred'etablissement";

d) 3-10 year income tax exemptions according to the TunisianCode des Investissement;

e) partial income tax exemption of enterprises which exportmore than 20% of their sales.

ANNEX 6-1Page 4

All Tunisian enterprises can carry forward 3 years of cash losses and 5 yearsof depreciation and amortization allowances.

For the purpose of the financial projections, it has beenassused that:

(A) no corporate income tax will be due until 1981; thereafter,no income taxes on the reinvested portion of profits but40.1% on profits on domestic sales and 10% on profits onexport sales will be paid;

(B) the maximum income taxation, i.e., 40.1% on the portion of theCompany's profit which is not reinvested.

No assumptions have been made as to the possible level of otherdirect taxes and duties for which the Company has received a 10-year taxexemption.

12. Dividends - Although no dividend policy has been decided, it hasbeen assumed for illustrative purposes that a dividend equal to 10% of paid-incapital, will be paid out after the company has fulfilled its financial obliga-tions under the loan agreement and the "Statutes": the "Statutes" require apayment of 7% of the annual projects to the members of the conseil d' Adminis-tration.


ANNEX 6-2Page 1

TIUNISIA: GAPSA PHOSPHATE PROJECT

SEHIB PROJECT - OPERATING COST PROJECTIONS

Table 1: Summary of Operating Cost Estimates

A. OPERATING COST PROJECTIONS PRIOR. TO START-UP OF THE SEHIBWASHIING PLANT

B. OPERATING COST PROJECTIONS AT FUILL PRODUCTION

1. Labor CostElectricity

3. Fuel - Surface4. Material and Surnplies5. Administrative and Selling Expenses6. Transport and LoadinR Expenses

ANNEX 6-2Page 2


Table 1

Summary of Operating Cost Estimates at Full Production(2 million BT/year - 1.6 million tons saleable prodiucts/year)

A. COST BREAKDOWN

1973 Prices 1976 PricesDT 000 DT/ton DT 000 DT/ton

Labor 510.65 .319 558.00 .349Electricity 348.10 .218 382.91 .239Fuel 253.30 .158 6818.09 .LL Supplies 1,143.00 .714 1,411.38 .883

Production Cost 2,255.05 1.409 3.C O4.38 °.0E16

Administrative Expenses l00,000 .250 460.00 .288Transport Sfax 1,520.00 .950 1,760.00 1.100Loading Sfax 80.00 .050 88.00 .055

Unit Onrrating Cost FOB Sfax 4,255.05 2.659 5,348.38 3.342

B. FIXED AND VARIABLE COST (1976 PRICES)

Fixed Cost Vari.able CostDT 000 DT/Ton DT 000 DT7ton

Labor 558.00 .349 - -

Electricity 76.60 .048 306.31 .191Ruel n_97.B 089 675.35 .356Supplies 423.30 .264 988.o8 .618

rrcducticn Cost 1,l95.52 *,50 1 9¼4' .26,

Picj,.e: ,'or assumptions see Annex 6-1

industrial Projects Department~-e lw ?'l

ANNEX 6-2Page 3

A. OPERATING PROJECTIONS PRIOR TO START-UP OF THE SEHIB WASHING PLANT

1. Until the start-up of the Sehib washing plant scheduled for September/October 1976, the entire Sehib output will be treated at the M'Dilla washingplant or used for bedding stockpiles at the Sehib mine and plant sites.Based on the GAFSA Company budget for 1974, the following operating scheduleis projected:

Jan-Sept.1974 1975 1976

PRODUCTION (000 BTS) 280 640 830Stock Pile (000 BTS) 60 120 120Sales (tons saleable product) 145 340 230

An average weight recovery ratio of 66% has been assumed for theM'Dilla washing plant, whereas a 80% ratio is expected at the Sehib plant,thus improving considerably GAFSA's unit cost after start-up of the Sehibfacilities.

B. OPERATING COST PROJECTIONS AT FULL PRODUCTION

2. Labor cost, as summarized in Table 1, includes cost items for thepersonnel working productively in the mine or surface facilities. The wagebill for maintenance, repair and administrative personnel (72 men) areallocated to materials and supplies and administrative and selling expenses,respectively. Assuming 285 work days/year, average daily wages of DT 2.-forworkers and DT 3.5 for foremen, average monthly salaries of DT 250 forengineers and other staff as well as 35% social social charges, total laborcost of DT 510,650 at 1973 prices has been estimated as detailed below:

Sehib - Annual Labor Requirements and Cost at Full Capacity

Underground Surface TotalNumber Cost (DT) Number Cost (DT) Number Cost (DT)

Workers 417 319,500 110 86,000 527 405,500Foremen 41 55,200 13 17,500 54 72,700Staff 3 12,200 5 20,250 8 32,450

Total 461 386,900 128 123,750 589 510,650

ANNEX 6-2Page 4

II. Electricity

4. The power requirements for the planned electrical installations breakdown as follows:

Sehib - Electricity Needs

Power Operating KWH/KW Hours Year

Surface Installations

Stockpiles 550 1,500 825,000Transport (mine - plant) 906 5,800 5,255,000Washing and Water Supply 2,390 7,000 16,730,000

Underground 2,070 5,800 12,006,000

Total 5,916 20,100 34,916,000

At the present tariff of 0.01 DT/KWH the average annual electricityconsumption of 34 million KWH will cost 348,000 DT.

III. Fuel

5. The 1973 fuel cost of DT 253,300 includes annual petrol require-ments for the car park and 25,600 tons at 9.2 DT/ton of a special fuel tooperate the dryer of the washing plant. The recent increases in fuel priceis expected to increase fuel costs (in 1976 prices) to DT. 688,000/annum.Fuel cost for underground equipment has been estimated as part of materialsand supplies (para. 6).

IV. Materials and Supplies

6. These include materials and supplies for:

DT

Surface Installations

1. Plant 185,0002. Transport on site 82,0003. Workshop 70,0004. Others 50,000

Total (at 1973 prices) 387,000

ANNEX 6-2Page 5

DT

ITnderground Installations

1. Long7all equinment

-- maintenance, repair, spare parts 222,7g0-- others 12n, 0o

Sub-total 343,590

2. Driftinc enuinment

--spare parts, maintenance, repair 1n6,140--shear head 20,500--lubricants, oil 70,000--metallic and wood supnort 1On ,00O--others 20270

Sub-total 298,910

3. Incline

--maintenance & renair 31,175-- others 7,690

Sub-total 38,865

4. Transport 35,820

5. Ventilation 13,020

6. Electrical Distribution 25,8(5

TOTAL 756,000

V. Administrative and Selling Expenses

7. Administrative & Sellinp, ExDenses incur (i) at Sehib, (ii) atM1'Dilla which nrovides Sehib's social infrastructure, (iii) at Metlaoui(Direction d'Exnloitations 1'4inieres) with its central workshons, prodtuctionplanning and control, training, cost accounting and general services, at(iv) the Company headquarters (Direction Generale) at Tunis and (v) at Paris -

Tunifos, GAFSA's marketing oraanization. It has been assumed that each ofthe 6 mine centers--Metlaoui, Redeyef, Moulares/M'Rata, MtDilla, Kalaa Dierdaand Sehib--will have to cover pro rata (1/6) of the administrative exnenses.In addition, Sehib should supnort about 20% of M'Dilla's overhead exnenses.

ANNEX 6-2Page 6

The Sehib-administrative and selling expenses at 1973 prices will, therefore,cover (rounded figures):

DT

Direction General, Tunis 100,000Tunifos, Paris 20,000DEM, Metlaoui 130,000M'Dilla 50,000Sehib - Mine 100,000

TOTAL 400,000

VI. Transport and Loading Expenses

8. The projections assume a uniform railway tariff of 0.95 DT/tonin 1974, 1.15 DT/ton in 1975 (Annex 6-1) and increases of 0.10 DT - 0.2 DT/tonevery three years, thereafter.

Industrial Projects DepartmntJuly 1974


SEHIB PROJECT - PROFORMA INCOME STATEMENT(DT million - nominal terms)

Year Ending December 31 19760- 1977 1978 1979 1980 1981 1982 1983 1984 1985

PRODUCTION (000 BTS) 210 1,540 1,790 1,960 2,000 2,000 2,000 2,000 2,000 2,000SALES (000 tons saleable product) 140 1,230 1,430 1,570 1,600 1,600 1,600 1,600 1,600 1,600

I. Net Sales-/ 1.76 12.71 15.44 17.80 1, O6 21.00 21.00 22.05 23.14 24.31

II. Cost of Goods Sold3/

Materials, Supplies O-65 1.70 1.90 2.10 2.20 2.40 2.50 2.60 2.70 2.80Utilities 0.10 0.32 0.38 0.44 0.46 0.48 0.51 0.53 0.56 0.60Labor 0.14 0.62 0.63 0.65 0.72 0.74 0.76 0.84 0.86 0.89

III. Gross Profit 0.87 10.07 12.53 14.61 15.68 16.38 17.23 18.08 19.02 20.02

IV. Operating Expenses

Administrative and Selling Expenses 0.10 0.48 0.51 0.53 0.56 0.59 0.62 o.65 0.68 0.72Transport Sfax 0.17 1.54 1.79 2 .28 2.32 2.32 2.64 2.64 2.64 2.96Loading Sfax 0.01 0.07 0.09 0.09 0.10 0.10 0.11 0.11 0.12 0.13Depreciation 4/ 2.53 2.53 2.53 2.65 2.65 2.44 2.44 2.83 2.83Amortization of Deferred Charges 4L 0A14/ Q 0.5 0.54 0-54 -_ _

V. Operating Profit 0.60 4.91 7.07 8.67 9.51 10.18 11.42 12.24 12.75 13.36

Financial Charges . 0.88 0.74 o.69 o.65 o.60 0.55 0.48 0.42 0.36

VI. Profit Before Taxes 0.60 4.03 6.33 7.98 8.86 9.58 10.87 11.78 12.33 13.02

VII. Net Income5/ 0.60 4.03 6.33 7.98 8.86 5.73 6.51 7.04 7.38 7.80

NOTE - For detailed assumptions see Annex 6-1

1/ Three-month operation2/ 3.5% on export sales3 Including maintenance and repair expenses4/ Included in GAFSA Company statement5/ Assuming 40.1% income tax on profits after 1981 t-.



SEHIB PROJECT - PROFORMA INCOME STATEMENT(1976 DT Million)

19761/ 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

PRODUCTION (000 BIS) 210 1,540 1,790 1,960 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000SALES (000 tons saleable product) 140 1,230 1,430 1,570 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600

I. Net Sales

Export 1.81 13.18 15.56 17.08 17.41 17.41 17.41 17.41 17.41 17.41 17.41 17.41Les Rebates2/ 0.05 0.47 0.54 0.60 0.61 0.61 0.61 0.61 0.61 0.61 0.61 0.61

Sub-total 1.76 12.71 15.02 16.48 16.80 16.80 16.80 16.80 16.80 16.80 16.80 16.80

II. Cost of Goods Sold3/

Materials, Supplies 0.65 1.52 1.70 1.85 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90Utilities 0.10 0.31 0.35 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38Labor 0.14 0.56 0,56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56

III. Gross Profit 0.87 10.32 12.41 13.69 13.96 13.96 13.96 13.96 13.96 13.96 13.96 13.96


Administrative and Selling Expenses 0.10 0.46 o.46 0.46 0.46 o.46 0.46 0.46 o.46 0.46 0.46 0.46Transport Sfax 0.17 1.54 1.79 1.96 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00Loading Sfax 0.01 0.07 o.08 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09Depreciation 4/ 2.53 2.53 2.53 2.65 2.65 2.44 2.44 2.83 2.83 2.83 2.72Amortization of Deferred Charges 4/ 0.54 0.54 0.54 0.54 0.54 - _ - - _ -

V. Operating Profit 0.60 5.18 6.83 8.11 8.22 8.22 8.97 8.97 8.58 8.58 8.58 8.47

Financial Charges - u.41 0.74 U.69 o.65 0.60 0.55 o.48 0.42 0.36 0.29 0.22

VI. Profit Before Taxes 0.60 4.77 6.09 7.42 7.57 7.52 8.42 8.49 8.16 8.22 8.29 8.25

VII. Net Income 0.60 4.77 6.09 7.42 7.57 4.50 5.04 5.08 4.88 4.92 4.96 4.94

NOTE - For detailed assumptions see Annex 6-1

1/ Three months' operation2/ 3.5% on export sales3/ Including maintenance and repair expenses4/ Depreciation of 1976 included in Company statements5/ Assuming 40.1% income tax on profits after 1981 |;


fUN IA: GAPSA PHOSPHATE ?3REJ1CT

So1B PROJECT - PRO FBO A SOJRCE AND APLI&CATICN OF FUNDS STATrZPT(DT million - nOnal term)

Year dfing Deemnber 31 l971! 1975 1976 1977 1978 1979 1980 1981 1982 1983 1981 1985

I. SOURCES

Net 'Incom - 0,60 4.o3 6.33 7.98 8.86 5.73 6.51 7.04 7.38 7.80

Depreciation _ - 2.53 2.53 2.53 2.65 2.65 2.44 2.h4 2.83 2.83

Amwtization of Deferred Charges - - O. .h 0.54 0.54 0.54 0 .54

Seiib Cagi Gueration - 0,60 7.10 9.40 t1.05 12.05 8.92 8.95 4.48 10.21 10.63

long-term Debt - 3.oO 6.00 1.00 o

GABEA Retained Earnings 1.15 5.43 11.72 _ -

ITAL SOURCES 1.15 8.43 18.3z 8.10 9.40 11.05 12.05 8.92 8.95 9.48 10.21 10.63

II. APPLICATION

lrvestint in Fixed Assets Q.714 7.33 17.24 2.37 0.15 1.45 0.17 5.52 0.39 2,02 2.02 I.97

Net Wrking Capital Increase 1 0.15 0.31 0.42 0.18 0.05 - - - - - _

lrease in Deferred Charges 0.20 0.77 1.52 . . - . = - -

Rqepa'nt of Long-term Debt-- VWN o.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08

--IBBD - - 0.26 o.56 0.61 0.65 0.70 0.75 0.81 0.87 0.93

---Othrs- 0.22 0.18 0.17 0.0Iz - - - - - - -

Sub-tde al 0.M T 0.25 Z0r9 2073; M 3 0.89 =0.5

TOTAL APPLICATION 1.15 8.43 19.32 3.17 0.97 2.19 0.90 6.30 1.22 2.91 2.97 2.9

SURPLUS CASH (I .00) 4..93 8.43 8.86 II.15 2.62 7,73 6.51 7.24 7.65

3 cash working capital as defined in Annex 5-2

Notes for explanation of term used see Annex 6-1

nludstrial Pro ,> ets Depart en tJuly 1974

ANNEX 6-5Page 1


FINANCIAL RATE OF RETURN AND SENSITIVITY TESTS

Input Data

1. The financial rate of return calculations are based on (i) a financialcost/benefit stream in 1976 (real terus) detailed in Annex 6-5, page 2, (ii) a 15-year production period including 2-3/4 years for construction, and (iii) zero scrapvalue.

2. Sensitivity Tests

Revenue\ ~~~v's Retulrn

Capital Cost,25 25-vs Retum -

0 ~~~~~~~~~~OperatingCosts Vs

Return

40 -20 -10 0 +10 +20

1 - 1% Variations I

$15 $20 $22.5 $25 $27.5 $30

Gross Phosphate Rock Price

CASE CAPITAL COST OPERATING COST REVENUE RATE OF RETURN

1. Base Case 100 100 100 252. 6 month delay)

for project )s 23completion )

3. 110 100 100 244. 100 110 100 245. 100 120 100 246. 120 100 100 227. 100 100 90 228. 100 100 60 79. 100 100 110 2610. 100 100 80 18


TUNISIA: CAFSA PROSPHATE PROJECT

SEHIB PROJECT - FINANCIAL COST/BENEFIT STREAM(1976 DI million)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

I. Benefit Stream . - 1.76 12.71 15.02 16.48 16.80 16.80 16.80 16.80 16.80 16.80 16.80 16.80 16.80 16.80(Net Sales)

II, Cost Streams

1. Operating CostsMaterials, Supplies - - 0.65 1.52 1.70 1.85 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90Utilities - - 0.10 0.31 0.35 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38Labor - - 0.14 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56 0.56Admiristrative Expenses - - 0.10 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46Transport Sfax - - 0.17 1.54 1.79 1.96 2.00 2.00 2.00 2,00 2.00 2.00 2.00 2.00 2.00 2.00Loading - 0.01 0.07 0.08 0.08 0.09 0.09 _0 09 °uq 009 0L 0 09 0-09 0 09 0 09

Sub-total - - 2.26 4.46 4.94 5.29 5.39 _5.39 5.39 5.39 5.39 5.39 5.39 5.39 5.39 5.39

2. Investment CostSahib: 1/

-- Investment prior to 1974- - - - .62 - - - - - - - _ - - - --- Investment 1974-77 0.85 8.00 17.24 2.11 _ _ _ _ _ _ _ _ _ _ _ _

-- Replacement - - - - 0.13 1.17 0.13 3.64 0.13 0.13 1.17 0.13 3.64 0.13 0.13 1.17Djellabia _ _ _ 0.43 0.12 1.09 0.16 0.46 1.00 - - 0.90Working Capital - 0.15 0.31 0.40 0.16 0.04 - - - - - - - - - -

Sub-Lotal -8 875 17.55 3713 0.29 1.21 0.13 4.07 0.2 1 .22 1.33 0.59 =4.64 0.13 =.3 2.07

Total Costs 0.85 8.15 19.81 7.59 5.23 6.50 5.52 9.46 5.64 6.61 6.72 5.98 10.03 5.52 5.52 7.46

III. Net (Cost)/Benefit Stream (0.85) (8.15) (18.05) 5.12 9.78 9.98 11.28 7.34 11.16 10.19 10.08 10.62 6.77 11.28 11.28 9.34

Note: For detailed Assumptions see Annexes 6-1, 6-2 and 6-3

IJ residual value in 1977


ID oa

ANNEX 6-6Page 1

TUNISIA: GAFSA PHOSPHATE PROJECT SEHIB PROJECT-PROFIT

BREAK-EVEN AND SALES LEVEL

Sales1600

1500 - ------ 1500

1200 - - 1200

Q 900 900

* 11 1 * 6 1 3 * 3 1 3 3,is3 r| lssProfit Break-even60 rZ ||||18"" Xs"""118| - i0

300 300

0 _ _ _ _ _ 01977 1978 1979 1980 1981 1982

Year

Industrial Projects DepartmentApril 1974 World Bank --8705

ANNEX -66Page 2

TUNISIA: GAFSA PHOSPHATE PROJECT SEHIBPROJECT-PROFIT BREAK-EVEN

Year 1980

15.0 15.0

5.0 5~~~~~~~~~~~~~~~~~~~~~~~3.0

Loss

0 ___ -_ 0500.0 600 1,000 15,000

1,000 tonsicldustrial Projects Department

April 1974 World Bank-8706

ANNEX 7-1Page 1


MODERNIZATION PROGRAM - TECHNICAL DESCRIPTION

A. Introduction

1. There has been little evaluation of the underground miningtechniques employed in the GAFSA mines since start-up of operations at thebeginning of the century, or in beneficiation technology since the firstplants were set-up in the late 1940's. Underground mining conditions havedeteriorated, work conditions are arduous and safety precautions were almostnon-existent. This has resulted in increasing difficulties finding suitablelabor to work underground at the faces; productivity is low and absenteeismis high. On the other hand more than sufficient laborers are on the payrollfor nonproductive underground and surface functions. Supervision has beenentirely inadequate; the supervisors lack training and are ill-equipped forthe job. Discipline of the workforce has been sadly lacking. In the treat-ment plants, performance has been poor, recoveries are low, process controlis non-existent, maintenance has been poor and downtime is high, hence pro-duction losses have been high. On site infrastructure facilities fall con-siderably short of fulfilling their functions. Bad planning and lack oftraining has lead to inefficient and excessive decentralization of maintenanceoperations. Lack of investment and poor repair leaves the internal railfacilities unable to cope with the existing output, leave along future in-creases. The social facilities have deteriorated and need upgrading.

2. This has led to GAFSA being one of the highest cost phosphate rockproducers in the world, while producing the lowest grade rock. From 1966to 1973 GAFSA operated at substantial losses requiring Government support.In order to improve the operations, the company in 1971 embarked on anextensive rehabilitation and modernization program. Initially this waspursued on an ad-hoc disjointed basis and did not fit into the frameworkof an overall plan, timetable or budget. At the request of the Bank adetailed program of modernization was drawn-up and will form the basis fora rational approach to modernizing the existing GAFSA operations. This,however, still falls far short of an operational program and requires sub-stantial additional work and study; particularly in the economic cost benefitanalysis of each subproject. The program as now prepared forms a goodframework for modernization, but must be supplemented by a series of feasi-bility studies. This will require that additional personnel be assigned toits preparation.

B. Content and Objectives of the Program

3. The overall purpose of the program is to improve the efficiencyand profitability of GAFSA's phosphate production. The program can bedivided into the following major components.

ANNEX 7-1Page 2

(i) Mines

(a) Improving the working conditions in general and provisionof additional hand tools and supplies, improvement of ventilationand haulage, in particular of the operating mines, Metlaoui,Moulares, Redeyeff and M'Dilla;

(b) Mechanization of extraction by replacing hand loading methodswith scraper method; scraper trials were held in Redeyeff and willbe followed by installation of the scraper method in the workplacesof Redeyeff, Metlaoui and M'Dilla mines;

(c) A trial room and pillar extraction in M'Dilla using a con-tinuous miner;

(d) Improving mine haulage by installing conveyors in the mainhaulage inclines of Metlaoui, Redeyeff and M'Dilla, plus automaticcar weigher and dumper in Metlaoui. A program for upgrading thetrack, installing heavy duty granby cars and locomotives orinstalling conveyors on the main haulage level of the 3 abovementioned mines will also be implemented;

(e) Development of the new M'Rata mine to replace the Moularesmine;

(f) Development of the small open-pit deposits near Kef Eschfair;and

(g) Development of Kef Eschfair as a large scale open-pit deposit.

(ii) Treatment Plants

(a) Improving output and efficiency of the washing plants (Metlaouiand M'Dilla plants); modification of process design, equipmentreplacement installation of control devices, and increase capacity;

(b) Improve output and efficiency of air classification plants(Moulares, M'Dilla, Redeyeff); modification of process design;equipment replacement, capacity increase, and installation ofcontrol devices;

(iii) Infrastructure and General Services

(a) Improving maintenance procedures and workshop facilities;

(b) Improving purchasing and warehousing facilities;

(c) Upgrading of internal rail track, replacement of locomotivesand ore cars;

ANNEX 7-1Page 3

(d) Improving loading and unloading facilities;

(e) Installing an intermine communication system; and

(f) Upgrading housing and other social facilities.

C. Project Description and Evaluation

4. Following are very brief descriptions of the subprojects withinthe overall program.

1. tines

(a) Production Efficiency:

5. A program for improving the efficiency of the underground operationswas initiated in 1972 under the supervision of SOFREMINES. In each of theMetlaoui, Redeyeff and Moulares mines one pilot panel was selected and twoin M'Dilla where the operations are supervised by SOFREMINES staff. Theobjective has been to improve the efficiency of the traditional work methods,with some measure of success. Special attention has been paid to:

(a) improving the ventilation by installing fans and ducting,driving raises to the surface and driving additional cross-cuts.A vast improvement has been realized in the underground workplaces,temperatures and humidity have dropped significantly. A systemfor monitoring the underground atmospheric conditions has beenestablished for maintaining this improvement.

(b) improving and straightening the track for the sublevels;

(c) ensuring regular and timely supplies but installing undergroundstores and improved control systems; and

(d) salvaging timber supports and tracks as the workings retreat.

6. This program was supported by training of the underground super-visors and its continued success will hinge upon the adequacy of thesesupervisors. Further training is necessary.

7. The results experienced in the pilot panels indicate some improve-ment in productivities of 15-20% in M'Dilla, 20-30% in Metlaoui, and 5-10%in Moulares. The benefits of the program have been realized by small increasesin production from the existing work places some reduction in undergroundworkforce, and improved working conditions. The inadequacy of the accountingsystem in the past makes it virtually impossible to quantify the net benefitsof this program.

ANNEX 7-1Page 4

(b) Mechanization of Extraction Methods in Redeyeff, Metlaoui andM'Dilla Mines

8. Selection of the Method: A time study of the traditional miningmethod and a cost breakdown (see Annex 2-5) clearly indicates that loadingand haulage to the main levels account for more than 75% of the time andcosts of extraction. Hence, attention was first given to improving themining operations by improving these activities. Several alternatives werereviewed such as; use of bucket loaders, load haul dump machines, scrapers,conveyors, continuous miners and several combinations of these. On the basisof some preliminary engineering studies, cost analyses and trial operations,a method employing the use of scrapers and conveyors was selected. Preliminarytest results of the continuous miner proved disappointing and the existingpanel layouts, adit cross-sections and dip of the deposit make the use ofloaders, and load-haul-dump equipment unsuited without major trials andmodifications to panel layout. The scraper/conveyor system employs thetraditional room and pillar method of mining whereby manual loading intosmall 500 liter Berlins which are hand trammed to the panel incline and thenlowered by winch and/or endless belt to the haulage level is replaced by aslusher and scraper which is used for scraping the rock from the face backalong the sublevel onto a conveyor transporting it to an incline, and intoloading pockets on the haulage level. This method has the followingadvantages:

(a) it is simple, minimizing training requirements

(b) the existing workplaces can be readily adapted without lossof production,

(c) the equipment has relatively small delivery delays and, hence,can be rapidly installed,

(d) the equipment is robust, requiring little maintenance andrequires little training for maintenance,

(e) the investment requirements are low;

(f) work and safety conditions are improved,

(g) production is increased with same number of face workers; and

(h) production can be concentrated in a smaller area of the minesimplifying control and lowering development maintenance costs.

9. Redeyeff Mine: Two trial workplaces using scrapers were set-up inRedeyeff in 1972 and successfully operated to date. From the results of thesetrials a comparison of the scraper method with the traditional manual methodsis presented below - for Redeyeff.

ANNEX 7-1Page 5

REDEYEFF - Production Parameters of Manual and Scraper Mining

Manual Scraper Change

Daily Output (tons BTS) 4,800 6,000 +25%Number of panels required 10 4 1/Mine Labor Force 1,150 970 -16%Productivity (tons/manshift)

:Workplace 8.2 17.3 +110%:Panel 5.6 11.2 +100%:Underground 3.9 6.6 +70%:Mine and Surface 3.75 6.3 +70%

10. Six production crews and 4 development crews will operate perpanel producing 60-65 t BTS/hour and 30 t BTS/hour respectively or 500 tonBTS/shift or 1500 ton BTS/day. These results have been easily exceededduring the trials, with 100 tons BTS and 80 ton BTS being obtained onoccasion. This will require 4 panels to produce 6000 tons BTS per day. Thetraditional panels will be completely phased out.

11. Implementation of the program in Redeyeff will follow the schedule,indicated in Chart I. The equipment for the first panel 1/ has been ordered

for delivery in July/August 1974. Development of the panel is progressingand should be completed sufficiently to install the 10 production units bySeptember/October 1974. Production may reach full capacity late 1974/early1975. Orders for the second panel will be placed in late 1974.

12. M'Dilla Mine: GAFSA also plarsto convert the M'Dilla extractionto scraper mining. The plan is to replace all the traditional work placeswith panels equiped with scrapers. Four panels each producing 1000 tons/daywill be installed, supplemented by production from the continuing trials of

the continuous miner. While the method employed will be the same as thatin Redeyeff, the output per panel is expected to be less because of theinclusion of a marl layer in the seam which necessitates:

(a) blasting the face in two steps; and

(b) hand sorting the marl at the face.

The performance improvement over the traditional method is expected to beas follows:

1/ This includes 10 slushers, 6 for depillaring, 4 for sublevel driving. Theslushers and blocks will be supplied by SAMINA, France. The scrapers andramps will be fabricated in Tunisia. Cables will be supplied from France.The conveyors and electrical equipment have been procured in France.

ANNEX 7-1Page 6

M'Dilla - Production Parameters of Manual and Scraper Mining

Manual Scraper Change

Daily Output/Panel 530 1,000 +88%Productivity (tons/manshift)

:Workplace 4.6 9.1 +98%:Panel 3.9 7.5 +92%

13. Implementation of the program will follow the schedule outlined inChart I. Trial workplaces will be installed using the equipment from theRedeyeff trial. In July 1974 the first panel will be started by driving 2inclines (by traditional methods), followed by development of the sublevels.A preliminary study has been prepared for installing scrapers in M'Dilla andthe plans call for ordering the equipment for the first panel by mid-1974 fordelivery in early 1975, and thus production by mid-1975.

14. Metlaoui Mine: Employing scrapers in Metlaoui may pose otherproblems because of the dip of the deposit and higher roof pressures. Toascertain the extent of these problems scraper trials will be conductedstarting late 1974/early 1975. The traditional work places will be replacedby 2 scraper panels according to the schedule in Chart I.

15. Metallic Supports: An integral part of the mechanization programis the introduction of hydraulic metallic supports in place of the woodenprops now used. Metallic supports have two main advantages: (a) the size ofthe sublevels and workplaces can be increased, and (b) the recovery ratiosare much higher. Some preliminary estimates indicate only minor costs savings,but the change is needed to realize the full benefits of the scraper operations.

(c) Continuous Miner

16. The earlier trials with the continuous miner did not prove success-ful, with costs rising above that of the traditional mining methods due toexcessive problems and costs of supporting the rooms. Some of the problemscan be attributed to inappropriate panel layout and excessive machine break-downs. The trials will continue.

(d) Mine Haulage

17. The major bottleneck in underground operations is that of haulage.To help alleviate this problem, GAFSA in 1970 embarked on a program to installin each mine, outhaul conveyors in the main inclines in place of the ropehaulage. New conveyors were installed in Metlaoui, M'Dilla and Redeyeff.Automatic car weigher and dumps have also been installed. However, majorbottlenecks still exist in the underground haulage levels, and any mechaniza-tion of the extraction method requires some upgrading of the level haulage.

ANNEX 7-1Page 7

The existing track is in poor repair, alignment is poor, it is light weight(some is 15 kg/m, other areas have 25 kg/m track), the ore cars are small(500 liter) and in poor repair as are the underground diesel locomotives. Asthe new panels extend further from the main inclines this equipment will beunable to meet the demand, particularly with the mechanization of the panels.Hence, the need to modernize these facilities.

18. Redeyeff Mine: Redeyeff is a mine with large haul distances andalready experiences underground transport difficulties. Two alternativesare being considered; (a) install new 3000 liter (4 ton) mine cars of theGranby type and new diesel locomotives; or (b) install level conveyors. Toselect the alternative it will first be necessary to conduct a study whichshould take 3 to 4 months, and be completed ready for ordering the equipmentby late 1974. Depending upon the choice of equipment the conveyor would bedelivered late 1975/early 1976 and the mine cars and locomotives deliveredby early-mid 1976. Because of the longer haul distances, track haulage appearsmore likely to be selected. The project would be implemented following theschedule depicted in Chart II. In addition to the purchase of new rollingstock it will also be necessary to (a) install new track in some areas; (b)straighten the drift and in some areas increase the cross-section to providefree passage for the larger cars; (c) develop and install new car dumpingfacilities; (d) install trail phones; and (e) install new loading facilities -as part of mechanization of extraction operations.

19. M'Dilla Mine: A study for solving the haulage problem is underwayand should be completed by June/July 1974. Much of the level roadways willrequire straightening and enlarging, new heavy track is required, a newdumping station is required, plus rolling stock. The proposed implementationschedule is shown in Chart II.

20. Metaloui Mine: The reserves of the Metlaoui Mine are too small towarrant major investment in new haulage facilities, hence, it is proposed tocontinue to operate with the existing equipment and possibly to install someconveyors. This problem has yet to be studied.

(e) M'Rata Mine:

21. This is a new mine located 10 km northwest of Moulares. The mineis being developed to replace the Moulares deposit which is nearing depletion.Both mine and surface equipment have been procured and are mostly in place.A production target of 4,200 ton BTS/day (or 1.2 million tons BTS/year) hasbeen set. This will be produced from 4 mechanized open stopes working thenear vertical seams. This method employs long-hole ring drilling fromsublevels and blasting into draw points above each main level. The methodis reasonably safe and work conditions are much improved over those of thetraditional methods in the other mines. The mine will supply the air cla :si-fication plant at Moulares.

ANNEX 7-1Page 8

22. Development of the mine has been slow, but the full productionlevel should be reached by 1977. (See Annex 7-4).

(f) Small Open-pit Deposits near Kef Eschfair

23. These are presently being exploited by a contractor delivering therock to the Metlaoui Mine, at a rate of one million tons BTS/year. Thisoutput will continue, under contract until the larger Kef Eschfair projectis brought on stream.

(g) Development of Kef Eschfair

24. The company is presently studying the possibility of exploitingthe Kef Eschfair deposit on a large scale. SOFREMINES is conducting afeasibility study of the project, which should be completed by late 1974.

2. Treatment Plants

(a) Washing Plants

25. The overhaul and modernization of the 4 washing plants (3 inMetlaoui, 1 in M'Dilla) was started in 1972 with a study of the process designby SOGREAH. SOGREAH have contracted to modernize the process design: (i) re-placing curved screens with vibrating screens to lower recovery losses, (ii)installing control and measuring devices, (iii) replacing pumps and pipingto provide correct flow rates, fluid speed, hence correct sizing split atthe cyclones: (iv) replacing filters to increase both efficiency and capacity;(v) some modifications of the flow sheet to provide recycling; and (vi) re-habilitating the existing log washers, currently in a poor state of repair.Under the contract SOGREAH guarantees an improvement in weight recovery ofmore than 6%.

26. This program is well underway, the equipment is on order and theproject should be completed by late 1974. The program includes debottleneckingthe Metlaoui plants to provide each line with a 50 ton/hour capacity (saleable),giving Metlaoui total capacity of 250 tons/hour. (Plant I - 50 t/h, PlantsII and III - 100 t/h each).

27. In addition, the program includes:

(a) Expanding and modifying the receiving bins. At Metlaoui lessthan 4 hours plant feed capacity is available. This will bedoubled. For improved control an automatic weightometer will beinstalled;

(b) Replacing some of the screening and crushing facilities toincrease capacity;

(c) Replace some internal plant conveyors to increase capacity;

ANNEX 7-1Page 9

(d) Improve water recovery by use of flocculents in the thickeners.

Tests are presently being conducted at M'Dilla where the watersupply is most critical;

(e) Modify the burners on most of the dryers, to reduce heatlosses, increase capacity, improve dried product, effect fuelsavings, and lower maintenance costs. This will require replacingsome of the burners, and relining with improved refractories ofothers. However, further study is required before any steps aretaken to invest in this program, particularly since the costsenvisaged are substantial;

(f) Improving facilities for heating fuel supply to burners;

(g) Expanding the storage capacity and improving the loadingfacilities for the dried product; and

(h) Replacing the existing system of waste disposal-whereby thecourse tailings are dumped in ore cars for transport to the tailingsdump - with a system for pumping the tailings to the dump as aslurry by pipeline. This requires further study and testing.

ANNE.X 7-1Page 10

28. The benefits from the above subnrojects varv and require considerablymore studv. Overall, the capacitY will be increased, maintenance shouldimprove, downtime should be less. It should be noted that plant capacitywill be in excess of mine capacity. Modification of process design willimprove recovery ratios (a 3-4% increase may be a reasonabte exPectationdespite the 6 % guarantee) which will have verv tangible benefits - addi-tional revenue. Improving water recovery will allow the M'filla washinq plant

to overate on a more contintuous basis, and hence treat more of the M'Dillaoutrut, reducinp the need to use the lower recovery air classification nlant.Modification of the burners, is exnected to reduce maintenance costs anddowntime (i.e. increase life of refractorv from 1 to 4 years), and effectfuel savings of tip to 10%.

29. The SOGRFAH program should be completed by late 1974. A new dryerhas been ordered for the Metlaoui I plant to increase canacitv from 35 t/h to50 t/h. Further study is reouired before the orders will be placed for theother drvers in late 1974/earlv 1975. Deliverv will be 10-12 months, installa-tion 3-4 months, hence, the benefits of the program will not be realized

before mid-1976. After minimal study the orders for the new filter equiDment

could also be placed in late 1976.

(b) Air Classification Plants

30. In 1972 GAFSA with the assistance of CFRPHOS began a program to

modernize the Air Classification plants (Redeveff, Mooulares, and M'Dilla(2)). The No. 2 olant at M'nilla was studied in 1972 bv CrRP101S and is

currentlv beine nut into working condition. This plant, comrpleted in the19h0's never onerated satisfactorily and renuired modifications to process

design. The other air classification plant at M'Dilla is now being studiedhV C(RPHOS. Full studies are also recuired of the Redeyeff and Mfoulares

nlants. A specific stutdy of the Moulares plant is being conducted with theassistance of TTMAC (client) for installing facilities to produce dried rock(without classification). This is exrected to result in the ordering of newdrvers bv mid-1974.

31. Ireliminarv results have nointed to the need to modiVv the process

desirn (flow sheet) of each of the plants, renlace some of the existingeniipnent (cvclones, cones), rehabilitate the existine equinment and installnens,rinrt and control devices. After fuirther studies this program will be

implemented in mid to late 1975. A verv imnDortant separate studv is aboutto start on the problem of dust collection at these plants. Renlacement of

the burners on the dryers is also under consideration.

kNNEX 7-1Page 11

3. Infrastrumcture and C.eneral Services

(a) Workshops

32. Each mine has its own senarate workshop with the Metlaoui WSorkshopacting as Central Workshop. The sittiation is characterized bv lack ofcoordination between the workshops, poor use of the workshop facilities,obsolete facilities and poor training of personnel. Steps are being takento rationalize the maintenance ftnction. This includes, collecting all dataon equinTment, implementing a preventative maintenance program, forming mobilemaintenance teams made up of qualified Personnel based at the central workshonfor trouble shooting a- well as neriodic maintenance, upgrading the skilllevels of the crews located at each mine center, and renlacinz the obsoleteeaiuinment in the workshors with more modern equipment. This prograT will beconducted over a period of 5 years.

(h) Warehousing

33. Excessive downtime due to lack of spare parts, lead to havinqSOTJETEC (Consultant-Tunisia) conduct a study of warehousing and procurementprocedures. A new system has and is being set up, and stens are being takento reorganize the staffine of this function. New personnel have been engagedand automatic inventorv control introduced. The organization is also beinggeared to handle procurement for the modernization and expansion program andnew nrojects.

(c) Internal Transnort

34. See description in Annex 2-7. The equipment is old, in poor renairand undercapacity, forming a maior bottleneck in the comnanv's onerations. Thedifferent size of wagons creates problems at loading points, locomotiveavailability is very low, and the internal track is not heavw enough for thelarge SNCrT locomotives, renuiring shunting by smaller locomotives. It isqtherefore proposed to implement a program for replacinR 2 locomotives pervear for 7 vears (14 locomotives) and 20 ore care/year, along with thereplacement of 2 km of track ner year.

(d) Telecommunications

35. Communication between Metlaoui and Tunis is poor as is that betweenthe different mines. This is the result of equipment absolescence and poormaintenance. To imnrove the situation the companv is planninp the installitionof a microwave system between all operational centers including Tunis. Procure-ment will start in late 1974.

Industrial Projects Department.uly 1 97 4

TUNISIA. D;AFSA PHOSPHATE PROJECT

MODERNIZAl ION PROGRAM TECHNICAL DESCRIPTION

CHART I - SCHEDULE FOR MECHANIZING EXTRACTION OPERATIONS

CALENOAR YEAR $974 1915 f9 - _ 77 1978 1979 _ _ _

A. .EDEYEFE Mil k_I

P.ni 2i 4P.1. 3

P.1Wl 4

2. P,odor1ior (too TST/Dvy)

SO,W PW - 1500 J010 4500 6000 6000 000W

TradithnaI P.n,. 4500 3750 3000 _O -.-

Tot. 4500 5250 8 6000 6COL Wm sow

AnooM Onot 1001 lon1 3TSI 13S00 1w0 77K7 170 1701 7

37 Work Fo UlU -a rou. I I I I I I ISorawr Pa I 1080 201 324 432 432 40T,.diti-I P.,.Ims 5460 32 |450 360 160 -4

G.WWr.k Uo&.w-oU d 610 494 493 56 Su SuT1.W 1|540 1042 10ON 1060 970 970 970

P.w 1 n, ,WiO C)_P-0a 2

P-0. 3P-01. 4 0

2 Producfi-o 4lOor STS/Dvy)

Seorpr P.n-I. I 1000 2000 3000 4000 4000 4000

Trediliona Pndl. | 2000 2.00 1500 ID00 80 SW S00

cotnoos M2.1 300 300 30 300 200 300 20

T.-I 2903250 37W0 4250 ~ 4750 4750 4780

Ann-U Optpt (I00 Io.. BTSI 500 90|) 1100 1200 1300 1300 1300

3. Work Fr (Ud -.rond) I I I I I I Isvw.' P.M. .08 6 324 ~12 432 433

SoraprPanel. _ | 10 2 16 224 11 201 ! !

Tra.ditonl P.an-l. 540 432 324 216 108 108 10_

Co'.n Mn.6

,n 15 1 5 15 15 15 1I5 Is

Gn.1 4 Undngon| 46 4n4 A" 485 337 348

Toual 1 100 w1 l108 10 80w 15ow _ 1low

C METLAOU) WINE

Pe.. 1I- On -

Panel 2

2. Prodocio. o(t STi8Dv

Sorgr1. P.M1.4n 1700 21'00 0100 2100 2100Tradilioal Pa5 eI 2100 2100 1100-

Toral 2100 2100 2100 2100 2100 2100 2100

10-091 Corpon 100 Ion, STE0l6De_ 00o

3 Work Foro (UnrNrgrood)

s-rapo P.n.l, 10rj 20 210 20 210

T,adili.fll Panel, 294 294 147 --

G.ISoee Lodeoo-d 406 48381 342 342 342 342Total ~~~~~~~~~700 700 833 562 582-2 862

-- Prodotion World ftno-8M00


MODERNIZATION PROGRAM - TECHNICAL DESCRIPTION

CHART I- SCHEDULE FOR UPGHADING UNDERGROUND HAULAGE FACILITIES

CALENDAR YEAR 1974 1975 1976 1977 1978 1979 1980

A. REDEYEF

1. ImpleMentation

3000 Liter Ore Cars _

Locomotives

Rails

Trailphone _

Dumping Station __

2. Equipment List

Ore Cars 100 200 300

sMuLLA-> I { ! 112 . z~~I Locomotives 36 it

B. M'DILLA

1. Implementation

3000 Liter Ore Cars I 1 _|0E_

Locomotives w- -_ w _

Rails

TralUphone

Dumping Station--

2. Equipment List

Ore Cars 100 100 50 100 50I IIII

Locomotives 3 3 2 3 2

0 - 9 Ordering - Delivery

I Installation World Bank-8699

MNMEX 7-2Page 1

TUNISIA: GAFSA PHOSPHTATE PROJECT

MODERNIZATION PROGRAM - MANAGEMFNT AND INPLEFMNTATION

1. The modernization program will be implemented for the main partbv the Production Department, but also some components will be carried outunder the Development Department. As mentioned in Annex 2-2 the productiondenartment has been reorganized and strengthened.

2. Under the new organization a division for studies and imDlementationhas been established, to identifv and study projects, co-ordinate planningand implement the different projects of the modernization program. However,GAFSA has some difficulty staffing this new division, and has onlv managed tosecure one full time qualified engineer. Two other people are available ona part-time basis, butt additional staff are urgently needed if the programis to be carried out as planned. This unit was primarilv responsible forpreparing the report on the modernization program with the assistance ofproduction nersonnel, personnel from other divisions in the department andSOFREMINES and CERPROS. GArSA has contracts with these two consultino' grounsfor technical assistance as needed. SOFREMINES now has 6 people located at themine sites, assistinR with all aspects of the program: identification, studiesand implementation. Additional peonle can be made available if requested.CERPHOS have made one man available part-time in the field. Additionalassistance will be required from both these consultant groups to meet theprogram schedules.

3. The study unit headed bv Mr. Budin is responsible for conductingdetailed studies (technical and economic apDraisals) of each subprolect withinthe modernization nrogran. The qualitv of those studies completed to date isadequate. The next step - procurement of eqtuinment and material - will bethe responsibility of the Division of Transnort and Maintenance where procture-ment procedures are undergoing revamping to provide some standardization andimprove delivery time. The final step - implementation of the prolect, equip-ment installation, civil works, start-up, etc. - will be conducted by the pro-duction staff under the direction of the Study Division. However, this isnot yet clear, and there is a verY definite need for GAFSA to decide themechanics for imnlementing these projects. This could be achieved bystrengthening the Study and Work Division by emploving 2, 3 or 4 additionalexperienced engineers, and/or obtaining further assistance from the consultingfirms mentioned above. This group would then assume primarv responsibilitvfor co-ordinating the work, which must nevertheless be carried out by theonerational personnel. Without such steps the program will almost certainlyslip.

ANNEX 7-2Page 2

4. The modernization of the air classification plants, Moulares,Redeyeff and M)'Dilla has apparently been assigned to the Development Denart-ment for study and co-ordination of the implementation. The rational fortaking this responsibility away from the production Department is not clearand such division of responsibility is not recommended. It may, however, bejustified in this case by the unavailability of sufficient adequatelv qualifiedpersonnel to staff the Division of Study as discussed above. This situationshould be reviewed.


ANNEX 7-3


MODERNZATION PROGRAM - CAPITAL COST ESTIMATES

1. The capital cost estimates given in this annex and paras. 7.12-7.13,are very preliminar; estimates. Most of the sub-projects have not yet beenstudied in detail, as various alternatives are still under consideration. Thecapital cost estimates should therefore be considered as an enveloppe or guide-line which indicate the scope and financing required for a 1974-78 moderniza-tion program. During the forthcoming preparation and implementation of themodernization program it is essential that capital costs estimated at the timedifferentiate between local and foreign cost component and give a break-downin civil construction, equipment, transport, erection cost and duties and taxes.

2. The investment schedule presented by GAFSA has been established incooperation with SOFREMINES, SOGREAH and CERPHOS. Cost estimates are based on1973 quotations of potential suppliers and contractors and take into accountactual costs of equipment for the washing plant and the scraper equipment whichhas been ordered in 1973. The 1973 prices have been uniformly escalated by20% in 1974, 10% p.a. in 1975 and 1976, aDdl.7.5% thereafter. Physical Iontingen-cies of 10% have been added. Clearly, it is well possible that the actual costof the modernization sub-projects will fluctuate considerably from the givencost estimate, since (i) some components are in an early stage of preparationand (ii) the long implementation schedule foresees placement of orders forsome items such as additional scraper and railway equipment not before 1976.However overall, conservative or maximum investment estimates and sufficientcontingency allowances have been assumed, so that the total cost for themodernization program (DT 22.57 million) should be adequate and allow flexibil-ity in the final choice and implementation of sub-projects.


ANNEX 7-3Page 2


Modernization Program - Estimated Investment Schedule.1'(1974-78)(1973 DT'000)

Total

1974 1975 1976 1977 1978 1974-78I. REDEYEF

1. Scraper Equipment - 280 280 280 - 8402. Underground Haulage 75 400 620 870 - 1,9653. Modernization of Air

Classification Plant - 225 800 - - 1,0254. Power Station - 50 - - - 50

Subtotal 75 955 1,700 1,150 - 3,880

II. MOULARES

1. Modernization of AirClassification Plant - 466 500 - - 966

2. Telecommunication 1 - - - - 1

Subtotal 1 466 500 - - 967

III. METLAOUI

1. Scraper Equipment - 280 280 - - 5602. Modernization of Washing Plant 600 460 300 - - 1,3603. Telecommunications 4 - - - - 4

Subtotal 604 740 580 - - 1,924

IV. M'DILLA

1. Scraper Equipment - 280 280 280 280 1,1202. Underground Haulage 230 325 260 290 205 1,3103. Modernization of Treatment

Facilities 275 800 400 - - 1,4754. Power and Telecommunications 71 - - - - 71

Subtotal 576 1,405 940 570 485 3,976

V. GENERAL SERVICES

1. Housing - Mines 225 280 280 280 280 1,3452. Wireless Beam 5 10 - - - 153. Railway 200 430 430 530 530 2,1204. Social Infrastructure 250 200 200 200 200 1,0505. Safety Investments 55 25 25 - - 1056. Training Center 25 25 25 - - -757. Central Workshop 45 45 25 25 25 165

Subtotal 805 1,015 985 1,035 1,035 4,875

TOTAL (I - V) 2 061 4,581 4 705 2-.755 1520622

Contingency (10%) 206 458 470 275 152 1,567

Price Escalation-/ 412 1,465 1,154 1,445 913 5,389

TOTAL MODERNIZATION PROGRAM 2.679 6,504 6 329 4,475 2585 2.72

1/ 1974: 20% price escalation; 1975/76: 10% per annum price escalation; 5% per annum thereafter.


ANNEX 7--4


MDDERNIZATION PROGRAM - PRODUCTION AND OPERATING COST

A. Production Baild-up (1973-1985)

B. Operating Cost Comparison

1. Mining Cost2. Beneficiation Plants

B. PRODUCTION BUILD-UP 1973-1983

Mine Output (000 BTS)

Actual1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Redeyef 1,253 1,300 1,500 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700Metlaoui 576 600 600 600 600 600 600 600 600 600 600 600Moulares 862 800 500 200 - - - - - - - -M'Dilla 800 800 900 1,100 1,200 1,300 1,300 1,300 1,300 1,300 1,300 1,300Kef Eschfairl/ 930 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000M'Rata 300 500 900 1,100 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200

Subtotal 4,721 5,000 5,400 5,700 5,700 5,800 5,800 5,800 5,800 5,800 5,800 5,800

Sehib 144 280 640 830 1,540 1,790 1,960 2,000 2,000 2,000 2,000 2,000Total Mine Output 4,865 5,250 6,040 6,530 7,240 7,390 7,760 7,800 7,800 7,800 7,800 7,800

PLANT OUTPUT (000 Tons - Saleable Product)

Redeyef - Air Classification 791 800 930 1,100 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200Metlaoui - Washeries 1,203 1,100 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150Moulares - M'Rata Drying 324 350 350 350 350 350 350 350 350 350 350 350

- Air Classification 293 550 620 550 500 500 500 500 500 500 500 500M'Dilla - Washery 218 250 300 500 500 500 500 500 500 500 500 500

- Air Classification 446 410 650 600 350 350 350 350 350 350 350 350Subtotal 3,275 3,440 4,000 4,250 4,060 4,060 4,060 4,060 4,060 4,060 4 060 4,060

Sehib - Washery - - - 140 1,230 1,430 1,570 1,600 1,600 1,600 1,600 1,600Total 3,275 3,440 4,000 4,390 5,290 5,490 5,630 5,660 5,660 5,660 5,660 5,660

1/ The new development of Kef Eschfair is not included, but it has been assumedthat the present production level is maintained by sub-contracting.

Assumptions - Recovery Ratios

Redeyef - 62% until 1975, 65% thereafterMetlaoui - 76%Moulares - 68%M'Rata Drying, - 77%M'Dilla - washing plant 66% until 1975, 70% thereafter, our classification - 62%Kef Eschfair -treated in the Metlaoui washing plant at 65% until 1974 and 70% thereafterSehib - the ore will be treated at the M'Dilla washing plant until September/October 1976

i.e. start-up of the Sehib plant, recovery ratios at M'Dilla has been assumed at 66%/until 1975; 70% thereafter, and 80% at Sehib.


55a)4

ANNEX 7-4Page 3

B. Operating Cost Comparison

1. The following paragraphs give an operating cost comparison forproduction units such as panels and treatment plants before and after theimplementation of the modernization sub-projects. The costs at 1973 pricesare compared on a per unit basis, since the available data do not allow amore accurate analysis, based on actually used capacity and total cost.Operating cost projections in nominal terms for each mining center have beencalculated on the basis of:

i) the direct unit operating cost after modernizationdetailed below;

ii) the production build-up, given in Annex 7-4, page 2;

iii) the implementation schedule outlined in Annex 7-1; and

iv) price increases as assumed for the Sehib project inAnnex 6-1.

The direct cost reduction effect of the modernization program isillustrated in the data below. However, the modernization program is equallyjustified if one considers the opportunity cost of not investing: the majorpart of the modernization program represents replacement investment whichshould have been undertaken several years ago and by implementing these moderni-zations, the Company counteracts further operating cost increases.

2. Mining Cost

2. Based on the SOFREMINES cost projections and tests in Redeyef for the

installation of scrapers in the mines and the scraper feasibility study carriedout for M'Dilla, the following direct mining costs have been projected. Annualcost projections have been adjusted according to the scraper conversionschedule of each individual mine (Annex 7-1).

Cost Comparison Direct Mining Cost(DT/ton at 1973 prices)

REDEYEF METLAOUI MtDILLABefore After Before After BefoFrg Afterfull conversation Tull conversion full conversion

to scraper to scraper to scraper

ProductionBTS/day 560 1,500 400 1,000 310 1,000

Labor 0.527 0.195 0.620 0.265 0.880 0.295Materials &Supplies 0.350 0.276 0.346 0.393 0.546 0.373

Energy 0.100 0.135 0.180 0.150 0.012 0.140Maintenance &Repair 0.050 0.075 o0o65 0.087 0.062 0.087

Total 0.927 u0.69 1.211 O.95 07W59

Cost Reduction% 26% 26% 40%

ANNEX 7-4Page4

2. Beneficiation Plants

3. Metlaoui: All three washing plants are being rehabilitated toreach a total capacity of 1.6 million tons/year. Cost reductions at fullcapacity will be as follows:

Cost Comparison - Metlaoui - Washing Plants(DT/ton at 1973 prices)

Washing Plant I Washin Plant II Washing Plant IIIBefore After Be ore A ter Be ore A terModernization Modernization Modernization

Depreciation 0.122 0.177 0.157 0.082 0.127 0.194Labor Cost 0.157 0.105 0.150 0.124 0.146 0.109Fuel 0.165 0.140 0.172 0.145 0.158 0.057Electricity 0.082 o.o85 o.o85 0.091 0.154 0.145Maintenance &

Repair 0.050 0.025 0.041 o 021 0.045 0.157Supplies & 0.050 0.025 0.076 0.038 0.105 0.023Other Materials 0.081 0.081 o.o64 0.064 o.o86 0.053Services 0.069 0.035 0.022 0.011 0.028 0.086Car Park 0.012 0.012 0.002 0.002 0.005 0.014Others 0.072 o.o48 0.100 0.083 0.005 0.005

Total =0. _07733 079- O.661 0.930 O7y90

Cost Reduction (%) 15% 24% 9%at full capacity

Capacity (tons/yr) 250,000 350,000 450,000 625,000 400,000 625,000

4. M'Dilla: The capacity of the M'Dilla washing plant will be increased from300,000 tons/year to 525,000 tons/year resulting in an estimated cost reduction of 11%.As to the air classification facilities, GAFSA studied two alternatives: the addition ofa new 300,000 ton/year plant and the expansion of the existing unit to 900,000 tons/year.In both cases, the unit cost of beneficiation would be higher than at the existing plant.After the start-up of the Sehib plant, a treatment capacity of 850,000 tons/year will berequired at M'Dilla. Consequently, the expansion of the washing plant should be suffi-cient to meet future needs.

Cost Comparison - M'Dilla - Beneficiation Plants(DT/ton at 1973 prices)

Washing Plant Air ClassificationBefore After

Modernization

Depreciation 0.097 0.091 0.066Labor Cost 0.197 o.o86 0.106Fuel 0.133 0.121 0.139Electricity 0.152 0.137 0.079Maintenance & Repair 0.025 0.013 0.025Supplies 0.012 0.006Other Materials 0.130 0.130 0.072Services 0.039 0.020Car Park 0.017 0.017 0.036

Total 0.782 0.621 0.523Cost Reductions (%)

at full capacity 11%Capacity (tons/year) 300,000 525,000 600,000

ANNEX 7-4

5. Redeyef: Two alternatives are being considered for rehabilitation ofthe Redeyef air-classification facilities. As illustrated below, modernizationof the existing plant without a notable capacity increase would involve higherunit beneficiation costs. In contrast, if the plant capacity were to be increasedto 1.2 million tons/year, unit treatment costs would decrease by 2%. For thefinancial projections it has been assumed that the FIedeyef plant will be expandedto 1.2 million tons/year.

Cost Comparison - Redeyef - Air Classification Plants(DT/ton at 1973 prices)

Before Modernization After ModernizationCase I Case II

Capacity (tons/year) 850,000 900,000 1,200,000

Depreciation 0.041 0.112 0.107Labor 0.118 0.110 0.083Services 0.001 0.001 0.001Fuel 0.135 0.103 0.113Electricity 0.072 0.075 0.075Maintenance & Repair 0.027 0.118 0.018Supplies 0.064 0.045 0.051Car Park 0.002 0.002 0.002

Total 0 U0.3 0.454

Cost Reduction (%) atfull capacity (-4%) (2%)



THE GAFSA CDNPANY - PROJECTED INCONE STATENENTSCDT million - nominal terms)

Year Ending December 31 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985(Actual)

SALES VOLUME (000 tons) 3,124 3,440 4,000 4,390 5,290 5,490 5,630 5,660 5,660 5,660 5,660 5,660 5,660Domestic 1,150 1,250 1,400 1,750 1,750 1,850 1,850 1,850 1,850 1,850 1,850 1,850Export60/62 BPL 450 650 650 850 850 850 850 850 850 850 850 85065/68 BPL 1,840 2,100 2,340 2,690 2,740 2,780 2,810 2,810 2,810 2,810 2,810 2,810

I. Net Sales 14.62 57.6 60.1 53.3 54.4 56.6 60.2 63.1 65.6 68.0 69.5 71.1 73.2

II. Cost of Goods Sold

Materials, Supplies, Utilities 6.63 8.0 9.5 10.5 12.0 13.0 14.0 15.0 16.0 17.2 18.0 19.0 20.0Labor 7.89 8.8 9.6 9.8 10.2 10.4 10.8 11.6 11.9 12.3 13.5 13.9 14.4Inventory changes (1.02) - - - - - - - - - - -

III. Gross Profit 1.12 40.8 41.0 33.3 32.2 33.2 35.4 36.5 37.1 38.5 38.0 38.2 38.8


Indirect Taxes 0.22 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.5Administrative & Selling Expenses 0.25 2.1 2.2 2.3 2.8 2.9 3.1 3.2 3.3 3.5 3.6 3.8 3.9Transport Sfax )2 3.3 4.6 5.5 6.6 6.9 8.2 8.2 8.2 9.3 9.3 9.3 10.5Loading Sfax ) 2.75 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.5 0.5 0.5Depreciation and 1.22Amortization 0.21 2.1 2.7 3.2 5.4 5.9 6.7 6.8 6.1 5.7 5.7 6.1 6.1

V. Operating Profit (3.53) 32.9 31.1 21.9 16.8 16.9 16,8 17.5 18.7 19.2 18.5 18.0 17.3

Other Income 0.40" 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.6 2.7 2.8 3.0 3.1Financial Charges 0.53 0.6 0.8 1.2 1.4 1.2 1.1 1.1 0.9 0.9 0.8 0.7 0.6

VI. Profit (loss)before Taxes (3.66) 34.1 32.2 22.7 17.5 17.9 18.0 18.8 20.4 21.0 20.5 20.3 19.8

Taxes - - - - - - - - 8.2 8.4 8.2 8,1 7.916.2 12.6 12.3 12.2 11.1

VII. Net Income After Taxes (3.66)

Unit Cost fob Sfax (DT/ton) - 7.3 7.4 7.4 7.4 7.4 7.9 8.2 8.3 8.8 9.1 9.5 9.9

Note: For assumptions see Annex 6-1.

1/ Includes exceptional losses, due to revision of accounts, write off of previous bad debts, etc., of DT 1.87 million.


TUNISIA: OAFSA PHOSPHATE. PROJECT

THE GAFSA COMPANY - PROJECTED SOJRCE AND APPLICATION OF FUNDS STATS-WNT(DT million nominal teri)

SOURCES 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1981

4 1985

Net Inoome 34.1 32.2 22,7 17.5 17.9 18.0 18.8 16.2 12.6 12.3 12.2 11.1

Depreciation 6 Amortization 2.1 2.7 3.2 5.4 6.1 6.7 6.8 6.1 5.7 5.7 6.1 6.1

Cash Gene ration 36.2 34.9 25.9 22.9 Z4.0 24.0 25.6 22.3 18.3 18.0 18.3 17.2

Dquity Increase 11.5 - - - - -

Leng-ters Debt-- IBBD - 3.0 6.o 1.0 _ _ _ _ _ _ _ _

-Kuwait Fund - 1.5 1,5 _ _ _ _ _ _ _ _ _

TOTAL SOURCES (TAXES A) 47.7 39.4 33-4 23.9 24.0 24.0 25.6 22.3 18.3 18.0 18.3 17.2

APLICATION

Investment in Fixed Assets-- Sehib Project 0.7 7.3 17.2 2.4 0.1 1.4 0.2 4.7 0.3 1.8 2.0 1.0

-Modernization Program 2.7 6.5 6.3 4.5 2.6 - - - - - -

-- Others - 0.6 0.7 0.7 0.8 2.2 2.1 2.0 1.9 1.9 2.0 2.1

Sub-total 3MY 76 T 3 237 8.0

Decrease in Accounts Payable 2.0 (0.2) (0.5) (0.5) (0.5) (0.5) (0.6) (0.6) (0.6) (0.7) (0.7) (0.7)

Tacrease il Current Assets-- Cash 0.1 0.1 0.3 0.1 - - 0.1 - - 0.1 - -

--Receivables - - 0.4, 0.7 1.2 0.2 0.4 0.8 0.8 1.1 0.9 1.0

-- Iventories o.6 1.4 2.4 0.8 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4

Sub-total 7 7 T 1 I6 0.8 S 7 - 1 t ; i

Decrease in Short-tems Debt 4.0 -Ihcrease in Deferred Clbrges 0.2 1.1 2.0 - - - - - -

Repayment of Long-term Debt-- S9hib Project 0.2 0.2 0.3 0.4 o.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0

-- Kuwait Fund - - - 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

-- Others 7.2 0.7 0.4 0.1 0.1 - - - - - - -

7.4 *.9 Q 7 0.8 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.3

Dividends and Statutory Contributiors 3.8 3.6 3.0 2.6 2.6 2.7 2.7 2.5 2.2 2.2 2.2 2.2

TOTAL APPLICATION 21.5 21.3 32.5 12.1 8.0 8.2 6.1 12.0 6.0 7.9 8.0 7.3

SURPIM CASH

-- After Taxes 26.2 18.1 0.9 11.8 16.0 15.8 18.5 10.3 12.3 10.1 10.3 9.9

-- Cumwagated 26.2 44.3 45.2 57.0 73.0 88.8 107.3 117.6 129.9 140.0 150.3 160.2

Notes for assumptions see Annex 6-1.Possible investments for Kef Eschfair are not included in this cash flow statement

Industrial Projects DepartsmntJuly 1974


THE CAPSA COMPANY: PROJECTED BALECE -SHEET(DT million - nominal terms)

Year Ending December 31 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985(Actual)

ASSETSI. Current Assets

Cash 0.5 0.6 0.7 1.0 1.1 1.1 1.1 1.2 1.2 1.2 1.3 1.3 1.3Receivables 4.0 4.0 4.0 4.4 5.1 6.3 6.5 6.9 7.7 8.5 9.6 10.5 11.5

Inventories 3.8 4.4 5.8 7.2 8.0 8.2 8.4 8.6 8.9 9.2 9.5 9.9 10.3Subtotal 8.3 9.0 10.5 13.6 15.2 16.4 16.8 17.5 18.6 19.7 21.2 22.5 23.9

Surplus Cash - 26.2 44.3 45.2 57.0 73.0 88.8 107.3 117.6 129.9 140.0 150.3 160.2

II. Fixed Assets

Gross Fixed Assets 28.4 31.0 45.4 69.6 77.3 79.7 83.3 85.6 92.3 94.5 98.2 102.2 105.3Less: Depreciation 14.6 16.0 17.4 19.1 23.9 29.4 35.5 41.8 47.9 53.6 59.3 65.4 72.0

Net Fixed Assets 13.7 15..028.0 50.5 31.3 50.3 47.8 43.8 44.4 40.9 38.9 36.8 33.6

Ill. Deferred Charges

Gross 4.9 5.1 5.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2

Less: Amortization 2.3 3.0 4.3 5.8 7.0 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2Net Deferred Charges 2.5 2.1 1.9 4 0.2 - _ _ _ _ _

IV. Other AssetsIV. Other Assetn 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1

TOTAL ASSETS 27.7 55.4 87.8 113.8 126.8 142.8 156.5 171.7 183.7 193.6 203.3 212.7 220.8

LIABILITIES

I. Current Liabilities

Accounts Payable 5.4 3.4 3.6 4.1 4.6 5.1 5.6 6.2 6.8 7.4 8.1 8.8 9.5Short-Term Debt 6.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2

Subtotal 11.6 5.6 5.8 6.3 6.8 7.3 7.8 8.4 8.0 9.6 10.3 11.0 11.7

II. Long-Term Debt 12.0 4.6 8.2 15.0 15.2 14.3 13.3 12.3 11.2 10.1 8.9 7.7 6.5

III. Other Liabilities 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9

IV. Capital

Equity 8.9 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8Reserves 0.9 0:9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9Retained Earnings (7.6) 29.6 58.2 76.9 89.2 105.6 119.8 135.4 147.9 158.3 168.4 178.4 187.0

Net Capital 2.2 43.3 71.9 90.6 102.9 119.8 133.5 149.1 161.6 172.0 182.1 192.1 200.7

TOTAL LIA8ILITIES 27.7 55.4 87.8 113.8 126.8 142.8 156.5 17L.7 183.7 193.6 203.3 212.7 220.8

RA5-Ios

Debt/Equity Ratio 85:15 10:90 10:90 15:85 13:87 12:82 9:91 8:92 6:94 5:95 5:95 4:96 3:97

Current Ratio 0.71 1.6 1.8 2.1 2.2 2.2 2,1 2.1 2.1 2.1 2.1 2.0 2.0

Note: For assumptions see Annex 6-1

Industrial Projects OepartmaentJuly 1974

ANSEX 9-1Page 1


SEHIB PDJECT - ECONOMIC TRATE OF RETURNAND SENSITIVITY ANALYSIS

A. Assumptions

1. The economic cost/benefit stream has been derived from the financialprojections and cost/benefit stream (Annexes 6-3, 6-5) and reflects costs andbenefits in real value terms. The financial cost/benefit stream should bemodified (a) to replace the commercial benefit stream with one based on theopportunity costs of importing phosphate rock, i.e., at world market prices(cif Tunisian border), and (b) to eliminate taxes and duties from the coststreams. In view of the present and projected economic situation in Tunisiaand the limited floating of the Tunisian Dinar, no shadow pricing of theforeign exchange rate has been employed.

2. Revenues. GAFSA's net sales are valued at world market prices, whichare equivalent to its actual sales prices after rebates. The Company competeson the world market with its export and charges export prices to its domesticclients. Consequently, the financial and economic benefit streams are equivalent.

3. Project Cost. The financial project cost (in real terms) has been re-duced by duties and taxes totalling DT

4. Personnel Cost. No shadow pricing of labor has been nssul l r-Sehib requires primarily skilled labor, vhich is in short supply. Huwefrer,total labor costs have been adjusted by excluding 4% taxes and contributionspaid by GAFSA to the Government.

5. Other Operating Cost Items. To account for indirect taxes, materialsand supplies have been decreased by 10%. No adjustments have been made fortransport costs and other input items, except fuel, since it can be assumedthat they are valued at world market prices,

6. All costs and revenues are expressed in real 1976 prices. The economicrate of return calculations are based on (i) the cost/benefit stream detailedin Annex 9-1, page 3, (ii) a 15-year production and construiction period, and(iii) zero scrap value.

ANNEX 9-1Page 2

II. SENSITIVITY TESTS ON THE SEHIB ECONOMIC RkTE OF RETURN

Revenuevs

Capital Cost Return /

Return

28

+o I~~~~~~~~~~~~c s

- ~ ~~I Reur

. , -g l I N

-40 -20 -10 0 +10 +20

% Variations

Variations in Gross Phosphate Prices

$15 $20 $22.5 $25 $27.5 $30

Case Capital Cost Operating Cost Revenue Rate of Return

I 100 100 100 282 110 100 100 243 100 110 100 254 100 120 100 25 120 100 100 25'6 100 100 90 247 100 100 60 88 100 100 110 329 100 100 80 18


ThN3IA: cAFSA PHOSPEM2E P1VJET

SEHBH PEJEC T- 0ON0MIC WOST/BfEtTE STREAM

19714 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

1. Benefit Streeam-1et-zaissJ -0- -0- 1.76 32.71 35.02 16.48 16.80 16.oO 16.80 16.o0 16.80 16.8D 16.80 16.80 16.80

II. Cost Streams

1. ODeatir aCostsBerSs & bupp.lie - - 0.60 1.45 1.55 1.70 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80

Ulilities - - 0.20 o.60 o.67 0.73 o.73 0.73 73 O.73 O.73 0.73 0.73 O.73 0.73labor - 0.13 0.5O4 0.52 D.54 o.5.4 .54 o.514 0.514 0.544 0.54 0.54 O.54 O.54Admin4Atrative - - 0.10 o.46 0.46 o.h6 0.46 o.46 o.46 o.46 0.46 0.46 O.46 0.46 0.46Transport Sfax 0.17 1.54 1.79 1.96 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00Loading 0.01 0.07 0.08 0.08 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09

Sub-totWl *; X To9 5.47 ;6 5.62 5.62 5.62 5 6 5.62 6

2. lavestmezt CostSehib-s--Thveftmert prior to

1974/ - - - O. 62 - - - - . _ _ _ _ _ _--1zweotment 1976-77 0.84 7.90 17.14 2.30 - - --- Replacement - - - 0.13 1.17 0.13 3.64 0.13 0.13 1.17 0.13 3.64 0.13 0.13Djellabia - -- - 0.143 0.12 1.09 0.16 0.146 1.DOO - -Workdng Capital - 0.15 O 011 O.4O O.16 0.04 - - - - - - - - -

Sub-total &I m ITrr3 r 9 _3 407 =5 122 6 56 0.13 0.13

Total Ccsts 0.84 8.05 71.86 7 5.38 6,68 5.75 9.69 5.87 6.84 6.95 6.21 10.26 5.75 5.75

I1I. Net (Cost)/Henefit Strea- (0.84) (8.05) (11.69) 4.73 9.64 9.80 11.05 7.11 10.93 9.96 9.85 10.59 6.54 11.05 11.05

1/ Residual value

Industrial Projects Depart-entJuly 1974


SEHIB PROJECT - FOREIGN EXCHANGE EFFECT

(DT ALUon)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985(3 months)

I. Net Export Sales 1.76 12.71 15.44 17.80 19.06 20.00 21.00 22.05 23.14 24.31

II. Foreign Exchange Expenses

Materials, Supplies 0.18 0.46 0.53 0.59 0.63 0.66 0.70 0.73 0.77 0.80Labor 0.01 0.06 0.06 0.06 0.04 0.04 0.04 0.04 0.04 0.04Administrative Expenses 0.01 0.05 0.05 0.05 0.06 0.06 0.06 0.07 0.07 0.07Interest 0.88 0.70 0.62 0.58 0.55 0.50 0.46 0.40 0.35 0.30Amortization 0.25 0.38 0.64 0.69 0.73 0.78 0.83 0.89 0.95 1.01

Sub-Total 1.33 1.65 1.90 1.97 2.01 2.04 2.09 2.13 2.18 2.22

Replacement-Djellabia-- - - 0.12 0.16 0.14 4.42 0.31 1.61 1.61 1.58

Total 1.33 1.65 1.78 3.13 2.15 6.46 2.40 3.74 3.79 3.80

III. Net Savings in Foreign Exchange(I) - (II) 1.43 11.06 13.66 14.67 16.91 13.54 18.60 18.31 19.35 20.51

V 80% of investment


IBRD 10003.MARCH 14?74

TUNISIA GAF$ATPHOSPHATE PROJECT

MINING1 POW-ERTUNISIA

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-- v AS PIPELINE \ - PO/NILBOUNDARY

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public disclosure authorized report no. 482-tun appraisal...

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