Documentof The World Bank FOR OFFICIA L- USE ONLY AM/ 3/7Z-JO Report No. 8190-JO Public Disclosure Authorized STAFF APPRAISAL REPORT HASHEMITE KINGDOMOF JORDAN Public Disclosure Authorized INTEGRATEDPHOSPHATE PROJECT JANUARY8, 1990 Public Disclosure Authorized Industryand Energy OperationsDivision CountryDepartment III Europe,Middle East and North Africa Region Public Disclosure Authorized This document has a resticed disibution and may be used by recpints only In the performance of their offiiul dutHs Its conteus may not otherwise be dicosed without Wodd Bank authorizaton. HASHEMITEKINGDOM OF JORDAN INTEGRATEDPHOSPHATE PROJECT CURRENCYEQUIVALENTS Currency Unit - Jordan Dinar (JD) JD 1.00 - US$1.54 JD 0.65 - US$1.00 FISCALYA January 1 - December 31 WEIGHTSAND MEASURES 1 cubic meter (m3) - 1.308 cubic yards 1 metric tonne (t) - 2204.6 pounds 1 metric tonne (t) - 1,000 kilograms (kg) 1 kilometer (km) - 0.62 miles ABBREVIATIONSAND ACRONYMS ARC - Aqaba Railways Corporation BCM - Bank Cubic Meter DAP - Di-ammonium Phosphate JEA - Jordan Electricity Authority JFI - Jordan Fertilizer Industries JPMC - Jordan Phosphate Mines Company, Ltd. MIS - Management Information System mt - million metric tonnes mtpy - million metric tonnes per year ROM - Run-of-Mine t - Metric Tonne TCP - TricalciumPhosphate TPC - The Aqaba Port Corporation tpy - Tonnesper Year FOR OMCIAL USEONLY HASHEMITEKINGDOk OF JORDAN INTEGRATEDPHOSPHATE PROJECT STAFF APPRAISALREPORT TABLE OF CONUENTS I. INTRODUCTION.................................... 1 A. Background 1 B. Bank Role and Sector Lending Strategy .1 C. Rationale for Bank Involvement. 2 II. THE JORDAN PHOSPHATEMINES COMPANY, LTD. (JPMC). 3 A. History. 3 B. Organizationand Management. 3 C. Manpower and Training. 4 D. Current Operations. 5 E. Markets and Marketing. 8 F. Sector Development........................................ 12 G AccountingArrangements and Audit......................... 13 III. THE MARKET FOR PHOSPHATEROCK AND PHOSPHATEFERTILIZERS ....... 13 A. PhosphateFertilizer World Demand/Supply.................. 14 B. World PhosphateRock Demand/Supplyand World Trade........ 15 C. PhosphateRock and FertilizerPrices ...................... 17 D. The Market for JordanianPhosphate Rock and Fertilizer.... 18 IV. THE PROJECT - INTEGRATEDPHOSPHATE PROJECT . 20 A. ProjectObjectives .. 20 B. Phasing of Shidiya Developmentand Sector Strategy .. 20 C. Project Description .. 21 D. Detailed Features .. 22 1. BeneficiationPlant .................................. 22 2. FertilizerPlant Rehabilitation...................... 25 3. InfrastructureDevelopment at Shidiya................ 25 4. Manpower............................................. 27 5. EnvironmentalImpacts ........... ....................28 6. TuchnicalAssistance ........... .................... 30 7. Project Costs........................................ 30 8. FinancingPlan ............................. 32 9. Procurement& Disbursement........................... 33 10. ProjectManagement & Implementation.................. 35 This report was preparedby Messrs. C. Wardell (ASTEG)and R. A. Mertz (EM3IE),with the assistanceof Messrs. L. Borin and M. A. Pearson (EMTIE), L. Pritchett (CECTP)and J. Cape (Consultant),and word processingassistance was provided by Ms. M. Cuffley (ASTEG). This document has a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. V. TRANSPORTAND PORT INFRASTRUCTURE .. 37 A. Land TransportArrangements ............................... 37 B. Aqaba Port................................................ 38 VI. FINANCI ANALYSIS ............................................ 39 A. Past and Present FinancialPerformance .................... 39 B. FinancialProjections .. 42 1. MiningUnit ..................... 43 2. FertilizerUnit ..................... 47 3. JPMC ConsolidatedFinancial Position ................. 52 C. FinancialRates of Return and SensitivityAnalysis .. 55 1. BeneficiationPlant Component........................ 55 2. FertilizerPlant RehabilitationCompouent ............ 57 D. ProjectRisks ............................................. 59 VII. ECONOMICANALYSIS ............................................. 60 A. EconomicRat.e of Return and SensitivityAnalysis .. 60 1. BeneficiationPlant Component........................ 60 2. FertilizerPlant RehabilitationComponent ............ 62 B. ForeignExchange Balance and Employment . 63 VIII. AGREEMENTSTO BE REACHED...................................... 63 Recommendation............................................ 64 ANNEXES 2-1 JPMC OrganizationChart .65 2-2 JPMC Rock Export Sales.66 3-1 PhosphateFertilizer Long-Term Supply/Demand .67 3-2 PliosphateRock Future Demand.68 3-3 PhosphateRock ProductionForecasts .69 3-4 PhosphateRock and DAP - Price History and Forecasts.70 3-5 PhosphateRock Import and Export Levels.72 3-6 PhosphateRock Export Shares and RegionalRock Imports.73 4-1 JPMC TentativeProduction/Export Plan .74 4-2 BeneficiationPlant - TCP Weight Balance.75 4-3 BeneficiationPlant - Water Solids Balance.76 4-4 BeneficiationPlant - Flow Diagram.77 4-5 BeneficiationPlant - ArrangementDrawing .78 4-6 ProcurementSchedule .79 4-7 DisbursementSchedule .80 4-8 JPMC - ConstructionOrganization Chart .81 4-9 ImplementationSchedule .82 6-1 JPMC HistoricalFinancial Statements .83 6-2 ConnolidatedFinancial Projections .87 6-3 BeneficiationPlant - FinancialRate of Return Analyss .90 6-4 FertilizerPlant - FinancialRate of Return Analysis.93 -iii- ANNEXES(Cont'db 7-1 BeneficiatlonPlant - EconomicRate of Return Analysis........ 94 7-2 FertilizerPlant - EconomicRate of Return Analysis . 97 7-3 BeneficiationPlant - ForeignCurrency Balance . 98 7-4 FertilizerPlant - Foreign CurrencyBalance . 99 8-1 DocumentsAvailable ln the Project File . .............100 IBRD 21619 IBRD 21620 Industry and Energy Operations Division Country Department III Eurcpe, Middle East and North Africa Region January, 1990 viv- HASHEKITEKINGDON OF JORDAN INTEGRATEDPHOSPHATE PROJECT IOAN AND PROJECT SUMNARY aorrow4Fr: Jordan PhosphateMines Company, Ltd. (JPHC) Amount: US$25 million equivalent. 'lerms: 17 years, including5 years of grace, at standard variable interestrate. JPMC will bear the foreign exchange and interestrisk. Project Description: The Project is an importantsecond step in the developmentof the Shidiya phosphatedeposit, which will enable Jordan to increase its export of phosphaterock and to increase foreignexchange earnings. It will also rehabilitatethe fertilizer plant at Aqaba. The project will financebeneficiation plant equipment,including a washing and flotationplant; phosphateore and producthandling, storage, reclaim and loading facilities;townsite expansion; industrialinfrastructure, including power distributionand water supply;and fertilizerplant equipment. The Project'stechnical assistance component will ensure effectiveproject management of the fertilizerplant rehabilitation. EstimatedCosts: Local Foreigzn Total ---------(US$ million)-------- Millsite Equipment 7.1 39.6 46.7 Support Equipment 1.1 4.8 5.9 Fert. Plant Equipment 3.7 21.1 24.8 Civil Works & Infrastructure 10.4 12.8 23.2 Dust Control Equipment 0.3 2.2 2.5 Engineering& Tech. Assist LZ 1.2 Base Cost (October1989 Prices) 24.8 8.5 106.3 PhysicalContingencies 1.4 9.2 10.6 Price Contingencies 6.2 10.3 16.5 InstalledCost 32.5 101.0 133.5 IncrementalWorking Capital 0.7 15.5 16.2 Project Cos !/ 332116.5 149.7 InterestDuring Construction 0.0 12.0 12.0 Total FinancingRequired 128.5 161.7 / The Project is exempt from import duties and taxes. -V FinancpiDPlan LQ£1 Egreignotal ---------(US$ million)- Arab/KuwaitFund Loans 9.5 61.2 70.7 IslamicDev. Bank Loan 9.0 9.0 IBRD Loan - 25.0 25.0 JPMC . 351 Total Financing 128.5 161.7 EstimatedDisbursements of Bank Loan: Bank -FY 1991 19 ma 19 1995 --------------US$ million----- Annual 2.2 6.7 8.1 4.8 3.2 Cumulative 2.2 8.9 17.0 21.8 25.0 Economic Rate of Return: 26% - BeneficiationPlant Component 28% - Fertilizer Plant Component INTEGRATEDPHOSPHATE PROJECT 1. INTRODUCTION A. hackmwi 1.1 The Jordan PhosphateNines Company Ltd. (JPMC),in which the Government of Jordan is the majority shareholder,has requesteda Bank loan of US$25.0 million equivalentto help finance the IntegratedPhosphate Project. Phosphate is the most important of Jordan's mineral resourcesand provides substantial foreign exchange earnings (US$211 million gross in 1988) through the export of phosphaterock and therebymakes a substantial contributionto Gross National Product (GNP).A portion of p1osphateproduction provides feed to JPNC's Industrial(fertilizer plant) Complex at Wadi II on the Gulf of Aqaba coast and the export of fertilizerproducts and aluminiumflouride by-product yield additionalforeign exchange earnings (US$142million gross in 1988). The project has two components,the second stage developmentof the Shidiyadeposit, which containsvast reserves of phosphaterock, and rehabilitationof the fertilizerplant at Aqaba. The projectwill increasephosphate rock production at Shidiya from the 1.75 million tonnesper year (mtpy)planned under the ShidiyaPhosphate Nine Project (Loan 2902-JO),to 3.23 mtpy by 1996; and will provide replacementtonnage for the decliningphosphate production at existing mines (whichare reaching the end of their economic life) while permittinga gradual increasein the level of phosphaterock exports from a planned level of 7.0 mtpy in 1996.to 8.2 mtpy in 2000. Rehabilitationof the fertilizerplant at Aqaba will raise the level