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                                                                          Document
                                                                                 of
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                                                                 FOR OFFICIAL USE ONLY

                                                                       04 4j.      SS          2   2

                                                                                                                   Report Ne. 5842-ZR
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                                                                   STAFF APPRAISAL REPORT
Public Disclosure Authorized




                                                                                ZAIRE


                                                             GECAMINES REHABILITATION PROJECT




                                                                        March    27,    1986
Public Disclosure Authorized




                               Industry   Department



                               This document has a restricted distribution and may be used by recipients only in the perfonnance of
                               their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
                                        ZAIRE

                        GECAMINES REHABILITATION PROJECT


                                     FISCAL YEAR

                                January 1 - December    31

                                 CURRENCY EQUIVALENTS

                        Currency Unit     =     Zaire (Z)
                        Z i               =     US$0.02
                        US$1.00           =     Z 55 (February 1986)


                                 WEIGHTS AND MEASURES

         Metric System                                       British/US System
         1 meter                                             3.281 feet (ft)
         1 kilometer                                         0.622 miles (mi)
         1 kilogram (kg)                                     2.205 pounds
         I metric tor.ne (t)                                 1.1 short ton (st)


                      PRINCIPAL ABBREVIATIONS AND ACRONYMS

CCCE                      -    Caisse Centrale de Cooperation Economique
CPE                       -    Countries with Centrally Planned Economies
EEC                       -    European  Economic Community
EIB                       -    European Investment Bank
GECAMINES                 -    La Generale des Carrieres et des Mines
GECAMINES/Holding         -    Holding Company
GECAMINES/Exploitation    -    Metals Production (The Company)
GECAMINES/Commerciale     -    Metals Marketing
GECAMINES/Developpement   -    Other Activities
GOZ                       -    Government of Zaire
LAFB                      -    Libyan Arab Foreign Bank
MIBA                      -    Societe Miniare de Bakwanga
SGM                       -    Societe Generale des Minerais
SMK                       -    Societe Miniere de Kisenge
SMTF                      -    Societe  Miniare  de Tenke-Fungurume
SNCZ                      -    Societe Nationale   des Chemins de Fer Zairois
SODIMIZA                  -    Societe de Developpement Industriel et Minier
                                 du Zaire
SOMINKI                   -    Societe Miniere et Industrielle du Kivu
SOI ATRAD                 -    Socjit6 Nationale de Trading
SOZACOM                   -    Societe Zairoise de Commercialisation
                                  des Ninerais
SYSMIN                    -    EEC's Minerals System Facility of ACP Mineral
                                  Producers
UMHK                      -    Union Miniere du Haut Katanga
UNTZA                     -    Union Nationale des Travailleurs Zairois
                                                                             FOROmCAL USE ONLY

                        ZAIRE-GECAMINES REHABILITATIONPROJECT
                                STAFF APPRAISAL REPORT


                                      Table    of Contents

                                                                                               Page No.

   I.    INTRODUCTION ..........................                                                      1

  II. THE ZAIRIAN MINING SECTOR
                              ................................                                        1

         A. Role of the Mining Sector in the Economy................. 1
                                                                0
         B. Mineral Resources and Reserves...........................3
         C. Structure the Sector..................... ........
                    of                                                                 .6...         4

 III. THE METALS MARKETS.,                        ....................                               8

         A. The     Copper Market         ....................          8
            1.      InternationalSupply and Demand...................   8
            2.      Copper Prices..,,,,,,,,,,,,,,,,, ...      .,,,,.., 10
         B. The     Cobalt Market                                      11
                                ........................................
            1.      InternationalSupply and Demand,..,,,,,,,,,s..,..,  11
            2.      Cobalt Prices............                          12

                             .
  IV. THE GECAMINES GROUP. .........................                            ,        ,          ,,,, ,,13

         A.   Gecamines/Exploitation.........,,.........,,,,,,,     14
              1. Organizationand Management...,,,,, ..... ,.,,.... 14
                                                ............. ,...
              2. Mining and Processing Facilities                   15
              3. Manpower and r-aining................................
                                                                    17
              4. Past Performance.... .............................                            ..   19
              5. Production Costs ...................                                               21
                                                                   25
            6. Past Financial Results...............................
         B. Gecamines/Commerciale.   ...                           29
                                              ................................
            1. Background and Organization......
                                               .................   29
               2,   Activities and Sales              .           ........                          30
            3. Sales Strategy.............                            31
            4. Transportation  Routes.   ....                    e, 32
                                                     ........................
         C. Societe Nationale de Trading............................. 34
         D. RehabilitationProgram.       o .....
                                               gr.,,                  35




This report has been prepared by Messrs. P. Lietard, S. von Klaudy, and
Mesdames M. Kutcher and M. Garrity of the Industry Department, Mr. C.
Tran-Luu of the Eastern and Southern Africa Projects Department,and Mr.
R. Rodger (Consultant). Preparation of the text and word processingwas
done by Ms. Nga Nguyen.



 This document has a rered distributionand may beused by recipientsonly in the      performance
                            contents may not otherwise be disclosedwithout World Bank authorintion.
 |oftheir oficial duties. Its
                                                  -ii-

                                                                                                                       Page No.

   Ve    THE .......................................                                            . ..                        37

         A.   Gecamines' Long-Term Strategy.........      ... eeeec.........                                                37
         B.   Objectives of the Rehabilitation Project..... ,,, cecse..e                                                    39
         C.   Project Description.....e..ses....e...eseeee.c..                                                              40
              1. Mining and Plant       Replacement              and Rehabilitation
                   Component    sm                                                                                          40
              2
                 , Training Component..e         ..          ...                                                            41
              3.   Pre-investment and Technical Studies 000    g0    cc..sses60090,,.                                       42
         D.   Project Implementation and Schedulee,,,o..e,,,, ,e,,.,,,...                                                   42
         E.   Safety and Environmental Aspects      ,      ,      .,                                                        43

  VI.                                            AND
         CAPITAL COSTS, FINANCINGPLAN, PROCUREMENT DISBURSEMENT                                                             44

         A.   Capital Costs. e c.
                             ,            .. c.. ,,,                                                                        44
         B.   Financing Planc..........                                                            ..c..s.             .    46
         C.   Procurement      ..  .    .    .e..                                 ......                                    47
         D. Allocation and Disbursement of IBRD*.,,.,,,,.,.,eeo                                                ....         48

 VII.    FINANCIAL ANALYSIS           .      .............
                                                         e... .                          .,     ....               e        49

         A. Revenues.......                                                                                                 49
         Be Operating Costs..      ...                                                                                 ee   50
         C. Financial Projections      .........                                                        cc......       c.   51
         Do Breakeven Analysis........e.ssc..
                               e                        c                                      ....            .. c         53
         E. Sensitivity Analysiseo ... .eecc..e.c ,,,                                         .....c       ,.,e..           53
         Fe Financial Covenants ..       .. scs........c...                                                      .s         54
         G. Auditing and Reporting Requirements                                                    ,,                       55
         H.   Financial Rate of Return and Sensitivity Tests................ 55
         I. MajorRisks      ..   es.... ss.....          ce.ec.............cmsc...........s                                 56

VIII. ECONOMIC ANALYSIS                                                                                                     57

         A.   Economic Rate of Return                                                                .....
                                                                                                    eecc,.                  58
         B.   Foreign Exchange Benefits                                               ................c, m
                                                                                           ...........     s                58
         C.   Other Benefits ....                                  e......scscms                                            58

   IX.   AGREEMENTS REACHED AND RECOMMENDATIONSS......                                  ... s.eo..oos                       59


TABLES

  Zaire - Mineral Production, 1 9 7; 4
                                    58          ......                    ...         .... m,   2
  Gecamines - Geological Ore Reserveso..c     .eo...c.c.o..scsec.cs.sem.....                    4
  LME Copper Prices,    l 3 8 Sc.ec..     ...                ,                        .   .s   10
  Gecamines - Local and Expatriate Work Force, 1974784gcseem4e..cc"c                           17
  Gecamines  - Ore Stockpiles, 1974-84. .......-            cc.55..           8. gm...
                                                                                   .4        e 20
  Gecamines - Cost Structure, 1979-84..........       00eece.             e.g.....         ,..
                                                                                      ........ 23
  Gecamines  - Tax Payments, 1         4m4...                                                  25
  Gecamines - Shares in Metal Revenues, 1978-1984                .........................26.
  Gecamines - Summary of Financial Performance 1978-1984c.ss.scc.eeem                          27
                                          -iii-

TABLES (Continued)

  Zaire - Mineral Exports via Various Routes, 1978-84...............33
  Comparison of Gecamines' Copper Export Routes, 1984...............33
  Synopsis of Key Policy Elements in Gecamines Rehabilitation           Program 36
  Summary of Capital Cost                                                       45
                                                      Estimates.............................
  Financing                                 Pa                                  46 ...............
  Allocation and Disbursementof IBRD Loan..........................             48
  InternationalInflation, 1986-95... o.....                                     49
  Gecamines - Metals Sales, 1985-90.................................            50
  Price Assumptions,1985-95. .......... .....  *.*.....................         50
  Gecamines - Summary of Financial Performance, 1985-91.............52
  Gecamines - Breakeven Prices for Copper, 1986-90.................453
  Gecamines - Sensitivity Case Key Indicators.......................            54
  Switching Values of Critical Variables............................            56


ANNEXES

  2-1    Non-CopperMining Activities
  3-1    The Zinc Market
  4-1    Gecamines/Exploitation     Organization       Chart
  4-2    Gecamines General Process Flow Sheet
  4-3    Gecamines/Exploitation    Manpower and Training
  4-4    Gecamines Accident Statistics, 1975-84
  4-5    Gecamines Production    Statistics,       1974-84
  4-6    Gecamines Audited Income Statements
  4-7    Gecamines Audited Balance Sheets
  4-8    Gecamir.s Copper and Cobalt Sales,           1981-84
  4-9    SOZACOM Audited Income Statements
  4-10   SOZACOM  Audited Balance Sheets
  5-1    ImplementationSchedule
  6-1    Project  Cost Estimates
  6-2    Analysis  of IBED Financing
  6-3    Disbursement   Schedule for Bank Loan
  7-1    Assumptions for Financial       Projections
  7-2    Gecamines/Exploitation     Projected      Income Statement
  7-3    Gecamines/Exploitation     Projected     Funds Flow
  7-4    Gecamines/Exploitation     Projected     Balance Sheet
  7-5    Cash Flows for Financial      Rate of Return
  8-1    Cash Flows for Economic Rate of Return
  8-2    Foreign Exchange Effect


MAPS

  IBRD 19111 (Zaire-Gecamines        Rehabilitation    Project)
  IBRD 19112 (Zaire-Transport        Connections)
                                       -iv-


                            AVAILABLEIN T'HE PROJECT FILE
                    DOCUMENTS

A.           INVESTMENT
     GECAMINES        PROGRAM

     1.   Audit Technique Programme Quinquennal   d'Investissement       (1984-1988)
          Nines/Roche;  June 1985.

     2.   ProgrammeQuinquennal d'Investissements (1984-1988);Gecamines;
          Dept. de la Planificationet Gestion des Programmes;May 1984.

     3.   DescriptionGeneerale
                             des Budgets d'Investissements(1983-1988);
          GecaminesApril 1985.

     4.   Budget Quinquennald'Investissement(1984-1988).Dossier de
          Synthase; Gecamines,June 1984.

     5. Programme Quinquennal (1984-1988);Financement des Investissements;
        Gecamines; mars 1985.

     6.   Budget Quinquennald'Investissement(1984-1988);Hypothese1-750;
          Gecamines;juin 1984.

     7. Etude de Pre-Faisabilitedu Raffinage du Cuivre Blister des Usines
        de Lubumbashi; Dept. Planificationet Gestion des Programmes;
        Gecamines;janvier 1985.

     8. Programme Quinquennal d'Investissement(1984-1988); necessite
                                                           La
        d'investir 748 million dollars pour que l'entreprisepoursuzivre
                                                                      ses
        activites normales. Gecamines; 26 octobre 1984.


B. GECAMINES INSTALLATIONS

     1. Mine de Kipushi; InaugurationComplexe Concassage- Extract-on
        Puits V, 1150. Gecamines;August 1983.

     2. Gecamines;Description des Installations       de la Gecamines;     November
        11, 1982; Ref.: 32.563/PRD.

     3. Descriptiondes Installationsde la Gecamines;Mai 1983; Dept.
        Planificationet Gestion des Programmes;No. 780/PGP.


C.   GECAMINES FINANCIAL INFORMATION

     1. Nouveau Regime Fiscal - a M. le President-Delegue
                                                        General de la
        Gecamines;Lubumbashi; 5 novembre 1983.

     2. Note a DFI/DIR;Memorandum Sur L'Evolutiondes Frais Generaux et
        des CofutsOperatoires (Periode 1974-1983);Lubumbashi; le 11
        juillet 1984.
                                                  -.
                                                  V




D.           (SOZACOM,GECAMINES/COMMERICALE)
     MARKETING

     1.   Protocole    d'Accord,      Kinsasha,        le   15 novembre     1984.

     2.   Convention de Commercialisation  des Produits Miniers de la
          Gecamines; La Generale des CarriAres  et des Mines; Lubumbashi,                           le 6
          aofit1982.

     3.   Sozacom - Rapport        Annuel, 1982; Societe             Zairoise    de
          Commercialisation        des Minerais (3).

     4.   Etats   Financiers       au 31-12-84;        Gecamines     Commerciale.

     5.   Societe Zairoise    de Commercialisation                des Minerais - SOZACOM;
          Enterprise  Publique-Kinsasha;     Etats             Financiers   au 30 juin 1984;
          Price Waterhouse.


E.          DEVELOPMENT
     MANPOWER

     1.   Gecamines - Exploitation; Centre de Formation des Cadres                          et Agents
          de Maitrise; Planning des Sessions de Formation; 1985.

     2.   Gecamines - Exploitation;          Formation         a   la Securite      du Travaill   Pour
          la Maitrise.

     3.   Rapport Annuel - 1984; La GCnirale des Carriares et des Mines
          Exploitation, Centre de Formation des Cadres et Agents de Maitrise;
          Kolwezi; le 21-03-85.
                              I.   INTRODUCTION

1.01      The Government of the Republic of Zaire and Gecamines (La GEnerale des
Carriares et des Mines) have requested Bank Group financing of US$110 million
equivalent to finance part of the foreign exchange cost of a US$703 million
medium-term program to rehabilitateGecamines'facilitiesand to rationalizeits
operations. This rehabilitation   program is crucial to maintain Gecamines'
competitivenesson the world market and to ensure its future financial
viability. It is also vital for a stable development of the Zairian economy,
since the mining industry accounts for over 20% of Zaire's GDP and around 65% of
its foreign exchange earnings, and is Zaire's major modern sector employer. As
such, the Government is dependent on metals revenues to finance its investment
programs, to develop other sectors of the economy and to diversify  the country's
economic base. The proposed loan would be the third financing extended by the
                        1
Bank Group to Gecamines./

1.02      The proposedProject addresses the technical,management and human
resource problems which, in conjunctionwith recent depressedcopper and cobalt
prices, have undermined the technical efficiency and the financial position of
the Company. The Project is comprised of three components: (i) a replacement
and rehabilitation program for equipment and spares to rehabilitate Gecamines'
existing mine and plant facilities; (ii) a training program to upgrade skills of
the local technicaland supervisory personnel;and (iii) technical studies
including those for preparation of investments after the Project period.

1.03                                                                    of
          The Project was identifiedand prepared during imnlementation the
Gecamines technical assistanceproject starting in 1984. It was appraised in
May 1985 by a mission consisting of Messrs. P. Lietard and S. von Klaudy of the
IndustryDepartment and Messrs. R. Rodger, M. Allard, P. Boudreault,and L.
Imbeau (consultants,. The training componentwas appraised in July 1985 by Mr.
C. Tran-Luu, of the Eastern and SouthernAfrica ProjectsDepartment. Contact
was also maintained during the appraisal process with representatives the
                                                                      of
potential cofinanciers.


                       II. THE ZAIRIMA MINING SECTOR


A.   Role of the Mining Sector in the Economy

2.01      Mining is a key sector of Zaire's economy. Between 1981 and 1984,
mining activitiesaccounted for about 20% of the country's GDP, and contributed
an average US$1.2 billion per year, or 65% of merchandise export earningswith
crude oil and agriculturalexports accountingfor most of the remainder.
Moreover, the sector plays an important role in generatinggovernment budget
revenues with an average share of over 25% in the past de.ade, of which
Gecamines accounted for 20%. The sector also contributessubstantiallyto
industrialemployment,energy and _.ransportation  demand and provides numerous
social services and training. Zaire is the world's leading producer of

1/   In 1975 the Bank approved a loan of US$100 million for the
     Gecamines Expansion Project (Loan 1090-ZR,of March 8, 1975 amended
     November 16, 1979) and in 1983 approved a credit of US$7 million for
     the GecaminesTechnical Assistance Project (Credit 1336-ZR,of October
     26, 1983).
                                             -2-


industrial diamonds and cobalt; the fifth largest producer of copper; and a
significant producer of tin, zinc, and gem diamonds. However, Zaire's mining
activities and potential extend far beyond these principal products, and other
minerals currently mined include gold, tungsten,manganese,silver, cadmium,
columbium-tantalum, and lignite.

2.02      Zaire's mineral production has shown substantialfluctuationsover the
past decade as shown in the following table.

                                               Productin,
                                   Zaire Mineral
                                       -                1975-84


        Cqpwx     Cdblt     Zinr Cahbm        Silver  Cold   Cassiterite Ore                 Dianonds
                                             (tomes) (tones)                                (mlncarts)
 1975     496      13.6     65.6    0.3        71.3    3.2       6.4     308.5                 12.8
 1976     444      10.7     60.6    0.3        60.7    2.8       5.3     182.2                 11.8
 1977     48D      10.2     51.0    0.2        85.0    2.5       5.1      41.0                 11.2
 1978     424      13.1     43.5    0.2        89.1    2.4       4.4       -                   11.2
 1979     399      14.0     43.7    0.2        91.9    2.3       3.5       -                    8.8
 198D     459      14.5     43.8    0.2        78.8    1.3       3.2       6.6                 10.2
 1981     505      11.2     57.6    0.2        83.3    2.0       3.3      17.6                  6.8
 1982     503       5.6     64.4    0.3        54.5    2.0       3.2       -                    6.1
 1983     509       5.3     62.5    0.3        31.9    5.2       2.5       -                   12.2
 1984     501       9.1     66.1    0.3        48.0    3.3       3.2       -                   18.5

The state-ownedgroup, Gecamines, produces more than 90% of the copper, all of
Zaire's cobalt, zinc, and cadmium production as well as small quantities of
gold, and silver. The remainder of the copper productioncomes from one other
company which is producing about 35,000 tonnes per year.

2.03          The important fluctuationsof copper production reflect various
factors    which in the past have affected        Gecamines' performance,       most importantly
the 1978 invasion      of Shaba province which resulted         in major disturbance      of
operations     of its main copper production       center at Kolwezi.       Gecamines'
performance     over time is reviewed in more detail         in Chapter IV. The fluctuation
of cobalt production       reflects   largely  the ups and downs of the international
cobalt market, including         the impact of Zaire's    own marketing policy since it
contributes     about half of world production.         Production    of zinc has remained
stable while that of silver         decreased largely as a result of the declining
silver   content    of ores mined by Gecamines.        Gold and diamond production        has been
subject     to wide fluctuations     due to the Government's      unclear   policies   towards
small scale mining and marketing, and to supply and logistical difficultiesof
the two main producing companies. Since ]983, however, following a complete
liberalizationof trade and introduction            of a floating    exchange rate,     recorded
gold and diamond productionhas surged to considerably               higher levels.       The
decline in cassiteriteproductionhas been due to a lack of investment                     while
manganese ore productionwas stopped after the closure of the Benguela railway,
the only economic export route.
                                         -3-


2.04         The mining sector, and particularly        Gecamines, has been the major
factor in Zaire's recovery following the period of civil unrest and economic
decline between independence(1960) and 1965. The sector was also at the origin
of the economic boom in the late 1960s and early 1970s, when copper and cobalt
prices soared and generated substantial foreign exchange revenueswhich in turn
helped other sectors, particularlyagriculture, to improve their performance and
contribute their share to economic recovery. During the period 1968-73 the
mining sector grew by 7.5% per annum (p.a.) compared to a GDP growth of 7.1%
p.a. The sudden and drastic decline of the copper and cobalt markets in 1975,
the ill-conceived     Zairianizationand nationalizationof many transport,
agricultural,manufacturing,and trade enterprises, and the closure of the
Benguela railway caused a rapid deteriorationof Zaire's economic situation
leading into an economic crisis from which the country has so far not been able
to recover completely. During the period 1973-79 the mining sector declined by
2.7% p.a. and total GDP decline was 1.4% p.a. However, the temporary
improvementof copper and cobalt markets during 1979-81 and Gecamines' efforts
to recover from the consequencesof the 1978 Shaba invasionhave resulted in
restoration    of previous   copper productior.    levels and improved export
performance,    and have thus contributed       to a slight  economic turnaround   since
1979, reinforced     by a variety   of economic policy measures introduced       in 1983 by
the Government that aimed at liberalization           and at the promotion of
entrepreneurialinitiatives. Between 1979 and 1984 the average growth rates of
both the mining sector and GDP have again been positive,at 4.2% p.a. and 1.2%
p.a., respectively.

B.   Mineral Resources and Reserves

2.05      Zaire has an area of 2,345,000 km2 (IBRD Map 19112) and is well
endowed with mineral resources. The copperbeltsof Zaire and Zambia contain 12%
                               2
of the world's copper resources /, or 131 million tonnes of copper out of the
1,100 million tonnes of copper in land-baseddeposits, with Zaire holding 73
million tonnes, or 7% of the world's total. In addition,Lhese copperbelt
deposits contain the largest known resources of cobalt: of an estimated 9.9
million tonnes of cobalt in land-baseddeposits, Zaire has some 3.1 million
tonnes, or 31% of the world's total.

2.06      In the Shaba province of south-easternZaire, the copper-cobalt
deposits form one of the richest metallogenicareas in the world and have high
copper (4.7%) and cobalt (0.41%) contents. Unlike the porphyry copper deposits
of North and South America and of the Pacific, which generallyaverage about 1%
or less copper, they are stratiform deposits in sedimentaryrocks which have
been considerablyfolded and faulted. There are generally two ore strata 5 to
20 meters thick, separated by 13 to 22 meters of waste. The ore occurs as
sulfide minerals, whi-h have been altered by weathering in portions of the
deposits close to surface. The weathering varies considerablyin depth from one
deposit to another (80 to 450 meters) and results in oxide, carbonate,silicate
and phosphateminerals. This combinationof oxide and sulfide ores, together
with a transitionzone of mixed ores in between, results in the need for complex
treatment processes.


2/   Geologicalresources are defined as mineral occurrenceswhich have
     acquired or may acquire economic value in the future.
                                           -4-


2.07                                   3
          Total geologicalore reserves/ in the Gecamines concessionalone are
estimated at 571 million tonnes containing an average of 4.7% copper and 0.4%
cobalt, equivalent to over 40 years of productionat present production levels,
as shown in the table below.

                        Gecamines - Geological Ore Reserves a/
                                   (million tonnes)
                        Oxide % Cu Mixed % Cu Sulfide % Cu Total X Cu % Co

Western Group     116.4          5.4   173.4     4.6   182.7   4.7 472.5    4.8   0.4
Central Group      19.2          4.1    14.5     3.8    10.5   4.0 44.2     4.0   0.3
S.-.thernGroup b/  31.3          4.7     5.5     4.5    17.4   4.5  54.2    4.6   0.4
                  166.9          5.1   193.4     4.5   210.6   4.6 570.9    4.7   0.4

a/   13.8 million   tonnes    of high grade cobalt ores not included.
b/   Includes   9.7 million    tonnes of sulfide  ore containing 4.7% Cu and 7.2% Zn.

Source:    Gecamires.


Over the past 10 years, discoveries    of new ore reserves   at Gecamines have added
more copper than was mined during the same period, and indications       are that vast
tonnages of ore resources   exist within and around the Gecamines concession:      for
example, ore reserves   at SODIMIZA (para.  2.15) are estimated   at 20 million
tonnes of 4% copper, and exploration is currentlyunderway to expand these
reserves.

2.08      While copper and cobalt are Zaire's major mineral resources,there is
a diversity of other known mineral deposits.  Tin metal resourcesare estimated
at 600,000 tonnes, or 6% of the world's total. Manganese, gold and diamond
resources are substantial,and there are significantundeveloped resources of
iron ore, bauxite,phosphate,and uranium. Zaire also has resources of
industrial materials,including limestone which is quarried for production of
cement and lime. Lastly, petroleum is produced offshore in small quantities.

C.    Structure of the Sector

2.09      The technicalsupervisory agency of the mining sector is the Ministry
of Mines and Energy. However, because of the significanceof mining in the
economy and of the predominance of Gecamines in the sector,   this ministry is
only one of numerousgovernment institutionsthat maintain direct or indirect
interest and influence over the sector. Among these, the President'sOffice had
during a certain period direct supervisory responsibility   for Gecamines; the
Ministry of Finance subsequentlyassumed that role to oversee design and
implementation of fiscal regulations applicableto the sector; the Central Bank
controls most external financial transactionsof the largely export-oriented
mining sector; the Ministry of Portfolio holds all government property,
including shares in mining companies; and the Ministry of Foreign Trade oversees
mineral exports as well as the important imports for operationsand
investments. The Ministry of Planning also plays an important role in the
design of sectoral investmentplans and mobilizationof financing.


3/    Reserves are mineral occurrenceswhich are economicallyand
      technicallyexploitable.
                                      -5-


2.10                                                               4
           The history of mining in Zaire is largely that of copper. ! Mining
in the Zairian copperbeltwas initiated in 1911 after completionof the rail
link with South Africa in 1910. Production of copper grew from 7,400 tonnes in
1913 to a peak of 498,600 tonnes in 1974, after creation of a second small
copper company in 1969. Zaire's total production increased to a new peak of
509,000 tons in 1983. Cobalt productionstarted in 1924 and reached a peak of
17,500 tonnes in 1974. Union MiniAre du Haut-Katanga (UMHK), a Belgian company
and Gecamines' predecessor.was founded in 1906 by the Comite Special du Katanga
and the Tanganyika ConcessionLtd. After initially working gold deposits, the
Company started  mining copper near Lubumbashi in 1911. Gradually, production
and social facilitiesexpanded to three mining centers around Lubumbashi
(Southern group), Likasi (Central group), and Kolwezi (Westerngroup). By 1960,
the Company had a workforce of 20,000 and was producing annually 300,000 tonnes
of copper, 9,000 tonnes of cobalt, 100,000 tonnes of zinc concentrates,and
small quantities of cadmium,germanium, radium, gold and silver.

2.11        The Congolese Government nationalizedUMHK's assets in 1967 and
transferred   them to a new state-owned   company La Generale Congolaise  des Mines
(GECOMINES), which subsequently     ir 1971 was renamed La Generale des Carrieres et
des Mines (Gecamines).    A technical   cooperation agreement dated January 1967 and
amended in February 1969 between the Government,Gecamines, and Societe G&enrale
des Minerais (SGM), an affiliate of UMHK, regulated the compensationquestion
and provided for continuing technical assistanceby SGM and marketing of
Gecamines'mineral products. The nationalizationwas thus of little practical
consequence for Gecamines'operations since continuityof management and
marketing remained assured. In April 1974, a further step was taken to increase
Zaire's independencein mineral activities through conclusionof a revised
agreement between the Government, Gecamines, and SGM, which provided for (i) a
final compensationpayment of about US$100 million to SGM by March 1975; (ii)
increased copper refining in Zaire; and (iii) marketing of Gecamines' production
by a new Zairian marketing company, the Societe Zairoise de Commercialisation
des Minerais (SOZACOM).

2.12      Gecamines productionexpanded further to reach a present production
capacity of about 470,000 tonnes per year (tpy) of copper; 15,000 tpy of cobalt
and 70,000 tpy of zinc. Apart from cadmium of which about 300 tpy are produced
in Shaba, the remainder of the output (mostly precious metals) has, so far, been
refined primarily under tolling arrangements in Belgium. Gecamines' workforce
has grown to about 36,000 and is the principal economic base of most of Shaba.
The number of employees and their families living directlyon its salaries are
estimated at about 250,000 but indirect employment and income creation due to
its mining activities is substantiallyhigher. The Company also plays a major
role in maintenance of transportation,communicationsard social infrastructure
and provision of social services.

2.13      Gecamines operated under the direct supervisionof the President's
Office until 1981, at which time this responsibility was transferredto the
Ministry of Finance. SOZACOM, however, has operated under supervision of the
Ministry of Foreign Trade and its relation with Gecamines has been strained
resulting in frequent frictions because of Gecamines' inability to control the

 4/ Zaire's non-coppermining activitiesare presented in Annex 2-1.
                                              -6-


marketing of its production,SOZACOM's high marketing fees, and financial
irregularities. In mid-1982, a new Marketing Agreement between Gecamines and
SOZACOM gave full ownershipof mining products to Gecamines up to the final
                        as
sale, with SOZAUOM its sole sales agent, and gave Gecamines increased
influence    in defining   the strategy     for the marketing of its production.      Despite
these rearrangements,      however, neither the financialnor the commercial
relationshipswere completelyclarified and disagreementscontinued. In July
1984, the Government decided to abolish            SOZACOM and reestablish  Gecamines'
complete marketing authority. Intensive discussionswere held thereafteron the
merits    of various alternative     organizational    setups to harmonize production    and
b:las.     These discussionscentered in the creation          of a marketing subsidiary   to
Gecamines, or the integration                                  as
                                     of the former SOZACOM a department         of
Gecamines.

2.14          In November 1984, the Government decided to reorganize the Gecamines
group as follows:      a new entity,     Gecamines/Holding,         was constituted    to oversee
all Gecamines activities,thus replacing the Ministries of Finance and of
Foreign Trade as direct       supervisor   of the group. Gecamines/Holding             in turn is
supervised     by a committeeconsisting of the ministers of Mines and Energy, of
Finance and Budget, and of Portfolio,           and the governor of the _entral           Bank.
Gecamines/Holdinghas three independent subsidiaries: Gecamines/Exploitation,
in charge of all metal production         activities     of the former Gecamines;
Gecamines/Commerciale,      in charge of all the marketing activities for copper,
cobalt,    zinc, and other minerals      and staffed     mainly with former SOZACOM
employees;     and Gecamines/Developpement, charge of all non-mining activities
                                                    in
of the former Gecamines, mostly agricultural             activities     in Shaba, formerly
organized     under a Gecamines subsidiary,         the Agro-Industrielle        du Shaba (AGRIS).
7 airian executiveswere appointed at the top of each of the four companies,
underlining,as in other sectors, the political will to replace expatriates by
Zairian nationals. The new organization became effective in January 1985.
Details    on Gecamines/Exploitation      and on Gecamines/Commerciale            are presented in
Chapter IV.

2.15          Societe de D^veloppement Industriel      et Minier du Zaire (SODIMIZA) is
Zaire's    second copper producer with an annual production           capacity    of about
35,000 tonnes.       It was created in 1969, started      production     from one mine in
1972, and opened a second mine in 1977. Until 1983, SODIMIZA was 85Z-owned by
Japanese interests       and under Japanese   management with copper concentrates            being
shipped to Japan.        In 1983, the Japanese   shares were sold to the Government.
SODIMIZAconcentrates        have since late 1984 been processed        at facilities      of
Zambia Consolidated       Copper Mines Ltd (ZCCM), a short distance          across the
Zambia-Zaire     border.    SODIMIZAis currently     managed by a Canadian team
contracted     by the Government.     It appears to be well run and does not encounter
major problems of equipment and materials         availability,      or foreign     exchange.


D.    Prospects   of the Sector

2.16        The mineral sector is dominated by Gecamines, and this dominance can
be expected to continue in the future   because the Company's known geological ore
reserves   are sufficient for at least 40 years at the current  rate of
                                           -7-


production. Nonetheless, the potential of the rest of the sector is very good,
although largely unrealized: for example, tin reserves are estimated at 6% of
the world total, and yet production in recent years has amounted to only 1% of
annual world mine production. Much of the country is relativelyunexplored
geologically,and basic geologicalmapping and explorationfor new deposits are
below levels needed to tap the sector's potential effectively.

2.17          Since the mid-1970s, shortages of foreign exchange, skilled labor and
fuel, increasing transport bottlenecksand unstable economic conditions have led
to a decline in productivityas well as to a growing decapitalization all             of
mining companies. The performance of the sector has been affected not only by
unpredictable      events beyond the control        of Zaire (metals price fluctuations,
transport     route closings,     Shaba invasions),     but also by government policies     in
the areas of taxation,        financial  and personnel management and the role of
foreign   capital.      Although production     results    do not in all areas reflect   the
sector's increasingdifficulties,the factors mentioned have prevented its
regular development and have initiated a progressive decline which eventually
has resultedor will result in production decreases.

2.18       In spite of the common factors    affecting    sector development in the
past, there have neverthelessbeen substantial differences in the economic,
financial  and management environment   between Gecamines and the other mining
companies.   One difference has been the ability       of Gecamines to get relatively
good access to foreign exchange in order to maintain         its productive   capacity.
Although not continuously sufficient, foreign exchangewas never quite as scarce
as for the other minirg companies and for other commercial and state enterprises
in the country in geaLeral. Also, Gecamines' personnel policy has been
relatively less prone to direct government interventionssuch as tight
restrictionson the number of expatriates employed. Finally, Gecamines has
benefitted in southeasternShaba from a relatively urbanized area of Zaire with
good climate and acceptable infrastructureand communications,            which have
substantiallyfacilitated recruitment of qualified personnel.

2.19       The other mining companies have also been much more seriously affected
by the general degradation of the transport and communicationsinfrastructure
which set in during the rebellion years 1960-1965and was reinforcedby the
Zairianizationmeasures of the early 1970s. This deteriorationcoupled with
more severe foreign exchange shortage and lower political and commercialclout
of the smaller companies resulted in more pronouncedscarcities of materials,
parts and consumablesand thus more frequent interruptionsof operations. In
addition, the smaller companies suffered during the past 10 years of economic
decline from a policy attaching  priority to Gecamines considering its importance
for the country's foreign exchange and budget revenue generation.

2.20       Recent signs, however, of a cautious economic recovery, supported by
government measures to reestablish business confidenceand to promote
investments,provide hope for a revitalizationof the non-Gecaminessector, and
for an increased   inflow of commercial funds and concessional   foreign aid, to
support various rehabilitation     programs. While the Government'sforemost
priority would still    be to secure Gecamines' financial  needs for priority
                                              -8-


investments,which the proposed Project is designed to support, rehabilitation
of the other mining companies should become a key element of the Government's
future development objectivesof diversificationof the mining sector. In order
to initiate such a recovery program effectively,various issues will need to be
addressed, including the viability of the different subsectors, the financing
needs for investmentsand operations, the personneland management policies, the
ownership options and the possible role of foreign investors, the need for
improved infrastructure       and communications,and the requiredmarketing
arrangementsfor the mineral production. Since the Government's long-term
objective   is to reduce Zaire's       dependence on copper and cobalt,     a crucial  issue
today is how to arrest       the decline    of the non-copper   sector and maximize the
sector's  contribution     to economic recovery     and growth.     In order to assist  the
Government in assessing        the sector's prospects and rehabilitation       needs, the
Bank organized    a sector mission in January 1986 which reviewed constraints           as
well as options     for the sector's development.


                                   III.   THE METALSMARKETS


3.01        The international     copper, cobalt and zinc markets are the major
determinant    of Gecamines' financial      health and its contribution      to the Zairian
economy.    The uncertainty     of these markets is consequently       a major source of
financial   risk for Gecamines and for the proposed project.            This chapter
summarizes the key world market factors,          including   current  and projected   prices,
for copper, cobalt and zinc, which together           account for 90% of Gecamines'
revenues,   and presents    an assessment    of Gecamines'market position. Details of
the zinc market are presented        in Annex 3-1.     A presentation   of the copper and
zinc markets was made in -Price Prospects          for Major Primary Commodities-
prepared by the Economic Analysis         and Projections    Department (Report No. 814/85,
dated September 1984).        A more recent study is -The Changing Structure         of the
World Copper Industry and its Future Prospects"            Draft, World Bank, November
1985.

A.    The Copper Market

      1.   International    Supply and Demand

3.02          The supply of copper comes from two sources - primary (mine)
production     (85%) and secondary       (scrap) production      (15%), and was 7.2 million
tonnes in 1984. Copper mine production              is concentrated        in the developing
countries     whereas secondary production        occurs almost entirely          in the
industrialized       countries.    Although refining      capacity     in LDCs has been
expanding,     about two-thirds      of world copper production          is presently     refined in
industrialized       countries.    In 1984, LDCs accounted for 68% of world copper mine
production     outside countries      with centrally     planned economies (CPEs), and 80% of
their production       was exported    to industrialized      countries.        Zaire is the third
largest    LDC copper producer with 7% of world production                 in 1984, all of it
exported.      Chile contributes      about 16% and Zatubia 7%, with Peru, the
Philippines,     Papua New Guinea, Mexico and Sou.;.          Africa accounting        for most of
the remaining LDC production.            CPEs are largely     self-sufficient        in copper
representing     about 18% of world mine production           and exporting       less than 50,000
                                         -9-


tpy to market economy countries. During the 1970s, the developing countries'
share of primary production  increased and a structural    shift occurred in mine
production  away from the industrializedcountries,where production actually
declined. Production dropped most sharply in the USA from 1.6 million tonnes in
1970 to 1.1 million tonnes in 1984. By comparison,      mine production in Chile
increased from 0.7 million tonnes in 1970 to 1.3 million tonnes in 1984, the
most dramatic increase among developing countries. However, production
increased by different amounts also in other LDCs with the exception of Zambia
where it started declining in 1974 for various reasons including depletion of
deposits. The major factor behind these substantialshifts has been the
discovery and exploitationof new copper deposits with higher ore grades,
favorable productionand marketing conditions, or by-productswhich resulted in
vast differencesin production cost up to a factor of 3, and entailed
considerablechanges in competitive advantages over time.

3.03          Unlike supply, copper demand is geographically        concentratedin the
industrializedcountuies which accounted for 83% of world refined copper
consumption in 1984. US consumption representedabout 27Z of the total,
equivalent to about 2.0 million tonnes. Copper is easy to use in manufacturing
compared to many other metals requiring higher precision technology. Copper has
important electricaland thermal conductivityand corrosion-resistance
characteristics. The electrical sector accounts for about 502 of copper
consumption,and other important sectors are machinery(20%), construction(14%)
and transportation      (10%). World copper consumption grew strongly at 4.2% p.a.
from 1960-70, but the consumptiongrowth rate fell off to 2.4% p.a. during
1970-80,and declined by about 2% p.a. during 1980-83;it rebounded dramatically
by more than 10% in 1984 not only in countries with ztrong economies but also in
depressed countries of the developing world, particularly            Latin America. This
overall decline is related, in part, to lower economicgrowth rates in
industrializedcountries,and also to a decline in the intensity of use in
specific applications,reduction in unit weight of finished goods (e.g., smaller
automobiles)ard loss of markets to substitutes (e.g., aluminum and plastics).
In future, some further reduction in intensity of use is to be expected in
certain    automotive   and information  technology   applications    and additional losses
may occur to aluminum for automobile        radiators  and plastics    in building
construction.       Such losses may be partly counterbalanced       by gains in new markets
such as solar energy applications       and electric vehicles.

3.04      Because of the changing demand patterns describedabove, the
structural changes on the side of the producers, long lead times in opening of
mines and slow production responses to changing market conditions, the copper
market is subject to sharp fluctuationsin the supply-demandbalance and has
been characterizedby four-to-fiveyear cycles of growth and decline for the
past several decades. During the 1970s, copper booms occurred in 1973-74 and
1979-80. Outside of these years, however, the copper market has been very
depressed. It collapsed in 1975 following the oil crisis and since then has
experienced excessive inventories and oversupply due to the reluctanceof many
producers to cut back production in line with poor demand recovery. Today, the
industry is faced with substantial excess production capacityand nearly 1.0
million tonn-s of mine capacity are operating on a reduced schedule or have been
                                                   -10-


temporarily    closed or placed on a care and maintenance basis due to lack of
demand.     Even so, total commercial stocks of refined copper at end 1984 were
estimated    at over 1.2 million tonnes down from a peak of 1.7 million     tonnes at
the end of 1983, but high compared with normal levels of 0.8-1.0      million    tonnes.

3.05       Long-term demand prospects       for copper in the mid to late 1980s and in
the 1990s will be determined       not only by the world economic outlook but also by
other factors,    such as substitution     with competitive      materials, changes in
intensity   of use of copper, the availability          of copper scrap and the development
of new applications    for copper.     Substitution      trends from competing materials
are expected to have a major influence         on future     copper demand. World
consumption of refined copper is projected          to grow at 0.7-1.9% per annum during
the period 1985-95 to reach 8.0-9.2 million           tonnes in 1995.

3.06            Present primary and secondary production             capacity    is estimated      at
about 9.3 million tpy indicating            that the only requirement           for additional
capacity      is to replace mine closings.          According to industry          estimates,     a large
number of small projects          are presently     under construction        or have a high
probability        of being implemented over the next decade.               Such projects
could provide up to an additional             1.5 million    tpy capacity with a break even
cost in the range of 55-65 cents/lb.               Nearly half of these projects             (about 0.8
million     tpy capacity)     would be implemented        to replace mines that are expected to
close in the next 10 years due to depleted                ore reserves,      and the balance would
be net incremental         production.     While progress     will be influe.iced         by future
prices    and market conditions,       much of this capacity          is expected to enter
production       based partly on the expectation          of lower production         costs than
existing      high-cost    producers.     It is expected,      therefore,     that without
substantial        further  mine closings     and a major cutback in industry             investment
patterns,       there will be continued       over-capacity      at least until the 1990s.

      2.    Copper Prices

3.07        The bulk of international   copper trade, including  Gecamines'
exports,   t kes place at London Metal Exchange (LAiE) prices.    LME copper
prices   ha. historically   shown large fluctuations,   but with the exception
of upswings in 1973-74 and 1979-80 copper prices have been depressed        for
most of the past decade, as shown in the table below.

                                          IMECopper Prices,  1973-85
                                            (US$/lb-cLarrent terms)

             1973 1974      1975   1976     1977    1978   1979   1980   1981   1982   1983    1984   1985

 UfEPrice 0.81      0.93    0.56 0.64      0.59     0.62   0.90   0.99   0.79   0.67   0.72   0.62    0.64

3.08           In 1984, copper prices averaged 62.5 cents/lb,        their         lowest in
real terms at any time in the post-war period.             By comparison,          industry
sources estimate that average industry        production     cash costs in           1984 were
about 58-63 cents/lb       (including by-product   credits    and interest,           but excluding
depreciation),      and that about 30% of the copper industry        in the         world (excluding
CPEs) was not able to cover direct        cash costs.
                                          -11--


3.09          After a strong consumption upswing in 1984, stocks in LME warehouses
declined    from a peak level of 436,000 tonnes in December 1983 to 115,600 tonnes
in July 1985. Nevertheless,       during 1984 the copper price remained at a low 62.5
cents/lb,     to some extent because of the strength     of the dollar.     Since the
market is likely     to continue being oversupplied through the end of this decade,
the price of copper is not expected to break out of its present historical              low
range for a long time. In the face of the depressed           market conditions
experienced after 1980, average copper production costs in US dollar terms have
decreased substantiallyin most countries. Average direct cash costs declined
by about 15 cents/lb between 1980 and 1984. This was a result of (i) drastic
cost cutting measures; (ii) phasing out of high-cost mines; and (iii) various
currency devaluationsby major copper-producingdevelopingcountries                which had
let their currenciesappreciate up to 1981 and are now under debt-servicing
pressures. Since, in several of these countries, includingZaire, these
pressures are not expected to ease soon, they are likely           to continue   to follow
exchange rate policies      that will result in maintainingor increasingthe
competitiveness     of their export sectors,   including   copper.    As a result of
actions   taken by Gecamines' management and the Government, the Company's
competitiveness     has increased  in the past few years:      its production    costs were
estimated clsse to the industry average in 1982, but now range in the lower
third of all producers. In North America, where internationalcost
competitivenesshas been further eroded by the strength            of the dollar,   the
high-cost mines are likely to remain closed and many of them may be abandoned
completely.

3.10      There is little consensus regarding the timing or strength of future
price increases until 1990, when the oversupply problem could start to
mitigate. The LME price is expected to fluctuate around an average of 65
cents/lb (in 1985 dollars) and such fluctuationsmay be quite large. By 1995,
the industry is expected to have adjusted to the slow-growingconsumption trend,
with the bulk of the high-cost capacity closed and new additions to production
capacity being efficient and competitive at lower cost levels. Because of an
expected net reduction of capacity coupled with moderate demand growth the
oversupplysituation should turn around and the average price can be expected to
rise moderately, reaching 74 cents/lb (in 1985 dollars) by 1995. The financial
projectionspresented  in Chapter VII of this report have been prepared on the
basis of these price forecasts.

B.     The Cobalt Market

       1. InternationalSupply and Demand

3.11         Cobalt is obtained as a by-product from primary mine production of
copper, nickel, and other ores, although a small (6%) but increasingquantity is
obtained from secondary (scrap) production. Zaire and Zambia account for two
thirds of the primary production,and five other countries (Australia,Canada,
Finland, New Caledonia and the Philippines)for most of the balance of
production. Zaire holds 60% of the economicallyand technicallyexploitable
reserves    of cobalt,   and has historically supplied half the world mine
production,    which was 22,000 tonnes in 1984.     By comparison, total production
capacity    is currently   estimated at about 35,000 tpy.
                                          -12-


3.12           In contrast to supply, cobalt demand is concentratedin the
industrialized       countries with the USA, Western Europe and Japan accounting     for
94Z of consumption in 1984. Cobalt's properties of heat and wenr resistance             and
magnetism make it a strategic       metal used in high technology  areas.    Super alloys
used in aerospace applications accounted for close to 40Z of consumption,wvile
permanent magnets accounted for 12%, cutting tools 15% and chemicals 35%.
Cobalt is most prone to substitution in magnets, where consumptiondeclined
significantlyin the late 1970s when prices rose dramatically.            In its other
uses, cobalt is practically not substitutablewhich makes long-term demand
inelastic      to price movements but highly reactive  to perceived or real supply
shortages which can lead to exaggerated stockpilingand temporary price surges.

3.13        Due to these factors the cobalt market has in the past been subject to
sharp fluctuations   in supply-demand    balance,  with demand highly responsive   to
short term business    cycle conditions.     On the supply side, cobalt production    is
more dependent on copper and nickel production than on market conditions.
Nonetheless,Zaire, as the dominant producer, has historicallymaintained a
balance by adjustments in production and inventories. In recent years, Zaire
has sharply reduced metal production by stockpiling cobalt in hydrate form.
However, the growing number of producers in recent years has weakened Zaire's
influence to a certain extent. Moreover, high price periods provide incentives
for treatment of scraps and residues and other forms of recyclingwhich compete
with establishedmine production.

3.14         From the trough of 15,000 tonnes in 1981, demand has increased at 8%
p.a. to 19,000 tonnes in 1984. This growth rate is lower than historical rates,
and long-termdemand growth is expected to increase at an average annual rate of
3 to 4% to reach about 22,000 tonnes in 1990 and about 27,000 tonnes in 1995.
Given a production capacity of some 35,000 tpy, an oversupplysituation is
likely to exist for the rest of the decade. Depending, however,on the
perceived price and supply situation, short-termdemand may fluctuate
considerablybecause of stockpile movements. As an indication,commercial
stocks at the beginning of 1984 amounted to about 15,700 tonnes, or about 82% of
that year's demand, but decreased to about 12,800 tomnes by the end of 1984, or
68% of demand. Stockpile figures, however, are uncertain because of incomplete
reporting and unclear dividing lines between metal and ore stockpiles. In
addition, stock movements may have been influencedby a higher supply certainty,
speculations    on price movements, or increase in consumption which could not be
satisfied    by increasedmine and smelter production.

      2. Cobalt Prices

3.15      Historically,the producer price for cobalt has been set by UMHK, and
subsequentlySOZACOM, and this price has been utilized by most other producers.
A free market price, covering less than 10% of world production,from smaller
producers and secondarymetal, is established by merchants and is quoted in
metals publications. With the apparent supply shortages in 1978-79 and
surpluses in 1980-81, the free market price became dominant. However, in the
past year, Zaire and Zambia have re-establishedthe predominanceof the producer
price and the free market price has remained slightly below the producer price,
                                           -13-


where it has been historically. Cobalt production costs are difficult to
estimate  since cobalt is generally   considered  a by-product without specific
mining costs,   although some of the processing   costs can be allocated  to the
metal.   To the extent that estimates    can be mgde, costs (up to final  delivery)
are considered to be lower for Zaire and Zambia, than for other producers.

3.16        The frequent supply/demandimbalances notwithstanding,cobalt prices
remained quite stable up until the late 1970s. The producer price (in nominal
terms) increased steadily from US$1.50/lb in 1960 to US$4.44/lb in 1976. During
this period,   cobalt prices   increased    by 1.4% p.a. in real terms, which were
comparable to real increases      in prices   for nickel and other metal substitutes.
With the Shaba invasions     in 1977 and 1978, a perceived     shortage led to panic
buying, driving    the free market price up to US$45/lb at the end of 1978 from
US$6/lb at the beginning     of the year and the producer price to US$25/lb from
$6.40/lb  during the same period.        With the economic slowdown in 1980-81, and
excess supply, the free market prices fell as low as US$4/lb in 1983, and the
producer price system was abandoned temporarily. In 1984, Zaire and Zambia
re-establishedthe producer price at US$6.50/lb increasingit to US$11.70/lb
during 1985. Due to continued oversupply on the internationalmarkets, the
producers are unlikely to be able to sustain the current price level. An
additional dampening effect on cobalt prices would be exerted by implementation
of the recent proposal of the US Government to decrease its strategic stockpiles
by about 11,000 tonnes over a five-year period which would result in an
additional 10% oversupply of the market. A price assumptionof US$7 to US$8 in
1985 terms is used in the preparation of the financial projections of Chapter
VII.


                                 IV. THE GECAMINES GROUP


4.01       The companies of the Gecamines group emerged from the recent
reorganization     of the Gecamines-SOZACOM group as the successor to the previous
Gecamines with exclusive       responsibilities      for metals mining and processing     and
with a substantial      role in the definition       of metal marketing strategies (para.
2.14). The recent reorganizationhas created a uu!que institutional                 link
between Zaire's copper industry and the political and economic decision-making
centers since a full-time coordinatingbody (the Holding), reporting to a single
supervisory Committee comprising the ministers of Mines and Energy, of Finance
and Budget, of Portfolio,       and the governor of the Central Bank, has now been
established. The Holding is concentratingon external representation                  of the
Gecamines group, on contacts        with the authorities,      and on coordination    amDng the
subsidiaries     of the group, without getting involved in day-to-day management or
presentinga sizeable financial and bureaucraticburden. The Holding operates
under a Board chaired by the President of the Holding, and includes the chief
executives of the three subsidiariesand four representativesof the
Government.      The new structure     has also permitted improved integrationof the
production     and marketing functions        of the Gecamines group over that of the past
                                             -14-


decade, since the production and uarketing subsidiariesno longer operate
separately under different Boards of Directors and under the supervision of
different Ministries.

4.02        In order for the Gecamines group to continue playing its key role in
Zaire's economy in the short and medium term, it is important that a stable
organizationalset-up be maintained to create the clear and rational business
environment    that is vital    to the group's      future performance. In the past,
Gecamines has been affected        by repeated    reorganizationsand frequent
replacementsof top level executives, and given the disturbing influence of
these changes, and the suitability of the new holding structure, it appears
essential   that it be left in place,        unless    significant    changes in the economic
environment    justify   adjustments     or modifications,       and that the frequent  turnover
of top executives      be avoided.     The Government has agreed to consult with the
Bank prior to any decision        affecting   the organization       of the Gecamines group.

A.    Gecamines/Exploitatior

      1. Organization and Management

4.03                            5/
          Gecamines/Exploitation reports to the Holding. Its Board of
                                                                 6
Directors consists of 7 members all appointed by the Government./ The Board
meets twice a year, defines the Company's general policy and provides overall
guidance and supervision to the Company's operations.  The Chairman of the Board
is the Company's chief executive (PresidentDelegue General) and is appointed by
PresidentialOrdinance; the Financial Director and Deputy Director General
(Operations)are also Board members. The remaining members include
representativesof the President's Office, Shaba province, and parastatal
institutionsrelating to Gecamines.

4.04      The organizationalstructure is characterizedby functional
centralization and geographicalseparation of tlcee production groups at
Lubumbashi,Likasi, and Kolvezi. The organizatiunof the Company (Annex 4-1)
consists essentially of 3 main departments responsiblefor all production
activities in the 3 production groups; for finance; and for other activities
such as planning and research, supplies, social programs and personnel and for
the Brussels office. A marketing division, reporting directly to the Director
General, is in charge of defining and supervising all commercialactivities.

4.05      As organized under the 1974 Bank-financedexpansion project of 1974
(Amended in 1979)7/,Gecamines has used the services of Currie, Coopers and
Lybrand, of Canada to review the adequacy of its organizationalstructure,

5/ Unless noted otherwise later in this report, Gecamines will be used in
   short for Gecamines/Exploitation.
6/ As of March 1986, the Boards of the Gecamines companies had not yet
   been appointed.
7/ Appraisal  Report No. 576a-CK, dated December 26, 1974.
                                         -15-


recommend appropriatechanges and establish a framework for improved personnel
practices. The consulting firm indicated in its report of November 1981 a
growing lack of control and information flow within the Company, disparity
between authorityand responsibilityof various organizationalunits, an
inadequate delineationbetween staff and line functions and an unnecessarily
high degree of functionalcentralization. Furthermore, it emphasized that
non-productiveactivitieswere using up valuable financial and human resources.
To overcome these organizational       weaknesses, the consulting firm proposed a
major reorganization      scheme, which was accepted by Gecamines' Board in December
1981 and is now well under implementation: it includes a complete
decentralizationon a cost center basis and the installationof a comprehensive
control   system for top management and for the cost centers.      The 1983
IDA-financed    technical   assistance  project (Credit No. 1336-ZR) 8 ! is presently
assisting this reorganizationeffort, particularlyin the Finance Department,
and generally to strengthenGecamines' management in the production, financial,
marketing and legal fields.

4.06         Gecamines' top management has been affected         in the past by frequent
government interventionsand repeated changes of chief executives. Gecamines
has known 4 Directors General in less than 3 years. It is important that this
rapid turnover of top executives be avoided in the future so that the Company
benefits from the management stability required           for effective    conduct of its
production, commercialand financial business. The Company also suffers from
increasing    number of vacancies      in management positions    occupied mostly by
expatriates    who retired,   particularly     in the Production    and Finance
Departments.     These positions     must be solidly establishedon a long-term basis,
which implies both the immediate recruitment and intensive trainingof Zairian
nationals suitably qualified to fill         the vacated positions.

4.07      A major weakness in Gecamines' management structure has been the
absence of an appropriate long-term planning group to help conceive and design
the Company's corporate strategy. While the present planning group, inherited
from the UMHK organization,is handling detailed project planning, the important
area of corporate planning has not been sufficientlypromoted since
nationalizationand consequentlyGecamines has remained dependent in its
strategic decisions on external expertise. Also as a result of the history of
the Company, both expatriateand Zairian staff at Gecamines have to a large
extent been mostly technically oriented, focusing on production and investment
targets, with less concern for analysis of commercialand financial options and
hence without the sufficient flexibility to react quickly to changingconditions
in the Company's financial and commercial environment. In order to initiate
long-term strategic planning, Gecamines has agreed to establish a unit by
September 30, 1986 reporting to the Director General, and for which terms of
reference were submitted for Bank review.

     2. Mining and Processing Facilities

4.08      Gecamines' production complex is an intricate matrix of operations
spread over 300 km in the Zairian copperbelt,and grouped in three separate
geographic areas in Kolwezi (West), Likasi (Center)and Lubumbashi (South) (Map
IBRD 19111). A simplifiedoperations diagram is presented in Annex 4-2.

8/   President'sReport No. P-3474-ZR, dated March 3, 1983.
                                        -16-


Details of Gecamines' facilities are available in the Project File. Gecamines
has currently    a concentrating    capacity of 530,000 tpy of copper and a smelting
and leaching    capacity   of 470,000 tpy; the mining capacity,  however, has in
recent years been only about 450,000 tpy because of a lag in overburden removal
resulting    from weak management in the open pit mines and low equipment
availability. Also, Gecamines' copper refining capacityis limited to 250,000
tpy, and a good part of Gecamines' copper productionis refined overseas. In
addition, Gecamines has production capacitiesfor 15,000 tpy of cobalt and
70,000 tpy of zinc.

4.09       Mining Operations. The Western Group represented77Z of the Company's
total ore production   of about 16 million  tonnes in 1984 and is spread over 8
open pit mines and one underground mine. Ore reserves in five of the open pit
mines will be depleted over the next 3 years, and will be replaced by ore
production from 3 large open pits namely Dikuluwe, Mashamba and a new large open
pit mine (KOV). The ore bodies of the Kamoto undergroundmine flatten out at
depth, and the mine exploitationis in a transitionphase from sub-level caving
and mechanized cut ard fill    to a room and pillar  mining method.  The Central
Group represents   14% of the Company's ore production.    The Kambove underground
mine will be closed in 1987 and replaced    by the Kamfundwa open pit mine where
mine preparation is well advanced. The Kakanda open pit was exhausted last
year, and ore is now being mined from a series of small pits spread over 30 km.
The rest of the ore (9%) produced comes from the Kipushi undergroundmine in the
Southern Group, which yields a zinc-copper ore from a massive sulfide deposit.
With depth, the copper-richores are expected to be depleted over the next 10
years but reserves of high grade zinc ore are substantial. The average ore
grade in 1984 amounted to about 4.1% copper (with the Western group producing
above the average at 4.4% copper) and 0.3% cobalt.

4.10       ProcessingFacilities. Processing the oxide, sulfide, and mixed
copper-cobaltores requires complex ore dressing and metallurgicaloperations.
The ores are first concentratedin different         concentrators located  close to the
mines in each center: 4 in the Western Group handling 13.7 million tonnes of
ore in 1984, two in the Central Group handling 2.2 million tonnes of ore and one
in the Southern Group producing copper concentratesand zinc concentratesfrom
1.6 million tonnes of ore. Total ore feed to the concentratorshas in the past
5 years exceeded ore production from the mines, resulting in reduction          of ore
stockpiles  (paras.    4.20 and 4.22).   The Company's total concentrate production
in 1984 totalled    1.8 million   tonnes containing   29% copper and about 2% cobalt,
and 0.13 million tonnes containing 57% zinc.

4.11      Most of the sulfide concentrates are fed to the Lubumbashi smelter, a
pyrometallurgical plant built in 1911 and modified repeatedlythereafter and
whose technologyand equipment reflect  essentially the 1930s.   The concentrates
are sintered, smelted and finally converted, to yield blister copper ingots.
Oxide concentrates,togetherwith small amounts of sulfide and dolomitic
concentrates,are treated in the hydrometallurgical   plants at Shituru (Likasi)
and at Luilu (Kolwezi). After leaching by sulfuric acid, the solutions are
subjected to electrolysisto yield electrowon copper and cobalt cathodes. Part
of the copper cathodes (about half of the Company's production)are fire-refined
                                             -17-


at Shituru. Another refinery was constructed under the Gecamines'expansion
project to produce about 100,000 tpy of high grade cathodes, but is now only 80Z
complete. The zinc concentrates from Kipushi are roasted at Shituru to yield a
zinc oxide calcine, as well as sulfur dioxide gas for the production of sulfuric
acid. The zinc calcine is then treated in the zinc hydrometallurgical  plant
near Kolwezi to produce zinc metal ingots, with cadmium as a by-product.

4.12       While the concentratorsare generally adapted to the ore production in
each productiongroup, both with regard to capacity and ore types, the
metallurgicalplants are not: as a result concentratesfrom the Western group
are shipped to the Center and South for metallurgicaltreatment and zinc
concentratesfrom the South are processed in the Center and West. The Western
group accounts for nearly 80Z of the Company's ore output but only for 36% of
metal production.

4.13          With its present        facilities,      Gecamines has little     choice but to try to
maintain     the present      oxide/sulfide/mixed         balance of ores that corresponds to the
characteristics        of its processing          facilities. This is an important element of
long-term     mine planning,       since the deposits        generally   contain oxide ores close
to the surface, and sulfide and mixed ores at greater depths and since the open
pits of the Western group are becoming increasinglydeeper. The open pits and
the Kamoto undergroundmine in the West could continue to produce the present
ore mix for at least 10 years but with the Center mines running out of oxides
within 10 years, a substitute oxide ore source would have to come into
production by 1995, if supply of oxide concentrates is not to become a
bottleneck      necessitating      a redesign       of the metallurgical    plants.   The most
obvious oxide source which could be developed over that horizon is the Tenke
deposit. The overall composition of Gecamines' ores and in particular of those
of the Western open pits at greater depths will also determine the justification
of the constructionof a flash smelter at Kolvezi which could not only decrease
the costs of concentrate transports,but also provide much needed flexibility
for the Company to adapt to higher quantities of sulfide ores. While Gecamines
produces currently about 70% of its sulfuric acid needs, existing zinc roasting
facilities are obsolete, and a flash smelter at Kolwezi could contribute the
remainder and thus eliminate in the future the need to import sulfur for acid
production.

      3. Manpower and Training

4.14      Gecamines is the largest employer in Shaba province,with a total work
force of 36,100, as presented below.

                                -      and
                         Gcaxines Local Bcprqiate        1974-84
                                                WorkForce,

                        1974     1976     1978    1979      1980     1981    1982     1983     1984

  Supervisory Staff
    - Zairan           1,240     1790    1,924  2,099  2,260        2,293  2,275  2,314  2,322
    - Exqetriate       1,520     1232      663     773    999       1,052    960    849    719
  Workers             31,597   32,149   31,660 32,946 35,149       34,910 34,410 33,823 33,058
                      34,357   35,171   34,247 36,818 38,408       38,260 37,645 36,986 36,099



  Source: CGwamnes
                 Anxml Reports.
                                    -18-


The absorption of a number of companies into Gecamines in 1974, including
METALKAT (operating the zinc hydrometallurgical plant) and Minoterie of Kakontwe
(operating farms and a flour mill), substantiallyincreased Gecamines'workforce
that year. From 1974 to 1981, the increase continued,primarily in service
functions. The implementationof the new organizationalstructure resulting
from the recent organizationalstudy (para. 4.05) and more effective personnel
control, has reversed this trend and the size of the work force has been
reduced, primarily by attrition, by about 2,000 since 1980.

4.15      The Zairian workers are members of the Zairian Labor Union (UNTZA)
which negotiates a labor agreement every two years, covering wages and other
benefits. Wages have not kept pace with inflation over the past 10 years,
primarily because of Government-imposedwage freezes. The result was occasional
short illegal strikes. The Company provides generous fringe benefits, such as
free housing, schooling, and medical care as well as subsidized food, and total
personnel costs amount to about two to three times the wage bill proper for the
Company's workers. Absenteeism,which had traditionallybeen low, at about 3%
in the early 1970s, increased to over 10% at present, as the generous fringe
benefits keep workers on the payroll but low wages-have reduced the incentive to
report to work and have led to increased moonlighting,and theft of diesel fuel
and other saleable goods. Lcw salaries have also increased the difficultiesin
recruiting Zairians to certain skilled positions, such as mechanicalor
electrical engineers and technicians who have alternativeemployment
opportunitiesin constructionor other industries. Gecamines has agreed to
prepare by December 31, 1986 a plan to implement its stated policy of gradually
increasingwages over the next several years (includingincentive scheme) and of
reducing fringe benefits (in particular subsidizedfood), in order to counteract
the negative effects of low wages and generally reduce absenteeism.

4.16       The percentage of Zairian supervisory staff has increased from 28% in
1970 to 76% in 1984, and is expected to reach 85% in 1988. Although one of the
objectives of the nationalizationwas to increase the number of Zairian
nationals in higher positions, the policy of replacement of expatriates is still
determinedmostly by considerations of continuityand efficiency of operations.
Gecamines' promotion of Zairian nationals has generally met the objectivesset
by the Zairianizationprogram of the early 1970s, and was overall better
conceived and implemented,  than in other large industrial businesses. However,
accelerated replacementof expatriates at Gecamines followed the 1978 Shaba
invasion: whereas before 1978, the gradual staff changes had little impact on
operations, the events of that year and the quick replacement of expatriates
resulted in increasingproblems given the lack of training and experience of the
Zairians who took the vacated positions. This led to poor maintenance practice,
substantial delays in overburden removal from the Kolwezi open pit operations
and decrease in ore stockpiles. The number of expatriates increased again until
1981 to compensate for the insufficient number of qualified local staff and has
since then decreased regularly as Zairian nationals acquired the skills and
experience  to replace them.

4.17      Meanwhile many Zairians have been actively promoted and have reached
high positions in the Company including the current Director General. Shortages
in qualified local staff, however, persist and training requirementsfor the
                                                   -19-


future are substantial. While these requirementsapply to all areas, they are
more obvious for the middle level technical staff and for the financial staff.
Training  of Zairians  at all levels will therefore become particularlyimportant
in the next few years as more expatriates        at different     levels retire  and
Zairians  are expected to take their positions. Organizinga concerted effort to
identify and train successors    for expatriates       is therefore    an urgent priority
together with preparationand implementation          of the manpower and career
development plan. In designing such a plan, the Company should reduce its
over-relianceon engineeringas a background for its senior staff, towards a
more broadly varied group of disciplines       required     to operate the Company.
Manpower and training   policies  are further      detailed   in Annex 4-3.

4.18          Gecamines plans to increase            the number of Zairian supervisory              staff
from 2,300 in 1984 to 3,600 in 1992.                 During the same period,           the number of
expatriate      staff    is expected to decline         to about half its present           level of 700.
If these goals are to be achieved effectively,                     existing   staff constraints        have
to be taken into accGunt and appropriate                  training     needs defined so that the
planned transition         can be achieved without impairment of the Company's
efficiency.         For this purpose Gecamines has agreed to prepare not later than
December 31, 1986 a comprehensive              manpower development program for its
supervisory       staff that would take account of the stated policy of accelerated
Zairianization.          The program should include a detailed               plan of retrenchment         of
expatriates       and at the same time establish             a clear recruitment         and promotion
policy for its local staff,            together     with an appropriatemerit system.
Gecamines would also be requested              to prepare a comprehensive            training    program
which is a prerequisite          for the success of the proposed Company personnel
policy,     and should be oriented         to improving the skills           of Gecamines personnel          in
the following        three main areas:        (i) management:          to develop management
programs,     and adap. the existing center for staff training; (ii) technical                           and
vocational:       to improve technical        skills    of Zairians       to replace expatriates         at
technical     level and to face the requirements                of changing production         methods and
different     equipment;     and (iii)     plant training        centers:      to standardize
curricula,      and upgrade training        methods and teachers.

4.19        Accident prevention       has traditionally        been an important    part of
Gecamines' personnel     policy.     Direct responsibility         for accident   prevention  lies
with the Safety Department,        which provides       training   in accident   prevention  for
workers and supervisors:      technical     services      for monitoring   of plant and
equipment;   and inspection     services    to investigate       accidents and their causes.
Gecamines' performance has in general           been satisfactory       and has shown a
significant   improvement over the past decade.               The change in mining methods at
the Kipushi mine from labor intensive           top-slicing      to mechanized mining accounts
for much of the improvement in underground mines during the period 1975-78.
Accident statistics over the past decade are summarizedin Annex 4-4.

       4. Past Performance

4.20      Production statistics for the mines, concentratorsand metallurgical
plants are presented in Annex 4-5. The capacity of Gecamines'metallurgical
plants is a nominal 470,000 tpy of copper. The plants have produced close to
                                                  -20-


this level over the past 4 years.              Production    in 1984 was 223,500 tonnes of
copper wirebars        (99.95% copper (Cu)), 156,500 tonnes of blister                  copper (98.5%
Cu), 84,700 of electrovon           cathode copper (99.5% Cu).           In addition,       the plants
produced 9,100 tonnes of cobalt metal in the form of fire-refined                         granules,
cathode,     and refined metal;        66,100 tonnes of zinc ingots,            and minor quantities
of cadmium.       Small quantities       of precious    metals were also recovered             from
blister     copper refined      in Europe.     Gecamines' mining activities             have over the
past decade been affected           more than its processing         installations       by shortages     of
spare parts,      supplies,     inadequate    maintenance,     insufficient        replacement
investments,      and poor mine planning,         and by shortcomings         in management due to
insufficient      training.      As a result,    mine output has hardly been sufficient                to
reach the capacity         output of 470,000 tpy and mine production                had to be
supplemented      by stockpiled      ore in order to maintain metal production.                   Moreover,
copper ore grade decreased           from 4.9% in 1978 to 4.1% in 1984, necessitating
increasing     ore production       for the same amount of metal contained.                Decreasing
average ore grade was principally             due to mining of lower grade ores at Kipushi
and Kambove but also to inadequate             mining practices        in the open-pits        at Kolvezi.

4.21          The open-pits      at Kolwezi (Siege Kolwezi Mines-SK1) have encountered
more severe problems than all other operations                 of Gecamines over the past
decade.      Given their complexity        they were more seriously         affected     by lack of
qualified     personnel,    shortages     of spare parts and supplies          in the wake of
insufficient       foreign exchange availability         after 1975, and delays in equipment
and spares delivery        after    the closure   of the Benguela railway.            The problems
were aggravated        in 1978 after    the Shaba invasion,        when many expatriates        left, of
whom only a part were rehired.             The weak link between short-term            planning    at
Kolwezi and long-term         planning    at Lubumbashi has presented          a further    obstacle
to effective      mining operations      at SKM. Finally,         eroding discipline       and
motivation     because of low wage levels and inadequate               incentive     systems have
contributed      to SKN's mounting technical        difficulties.

4.22         The combination   of the adverse factors       described    above resulted     in
continued    problems of utilization      of the truck fleet,      which in 1984 spent about
40% of the time in workshops and only 60% on site.              Since, however, the truck
fleet   is not fully utilized      even when available,     the overall     utilization    rate
was less than 50%. This had a detrimental            impact on excavation        which since 1975
has lagged behind Gecamines' targets          of overburden removal and ore production.
As a result,     Gecamines' total copper mine production         fell behind its total
annual output and the Company had to use its intermediate               (buffer)     stock of
mined ore in order to maintain         copper production    at the target      levels as in the
following    table.
                         Gecamines - Ore Stockpiles,       1974-84

                                         1974       1976      1978       1980       1982       1984

Copper Ore ('000 tonnes)     15,399              12,694     11,780    11,774     10,731      8,760
Grade (ZCu)                      4.8                 4.4        4.7       4.1        4.1        3.9
Copper Content ('000 tonnes)     743                 553        553       487       439         340


Source:     Gecamines.
                                          -21-


Gecamines estimates the accumulatedshortfall in total overburden removal at SKM
at about 10 million m 3. With the mining plan calling for excavation volumes
increasing      up to 40 million m3 by 1989, even under assumptionsof increasing ore
grades (due to opening of the KOVmine and mining in greater depth) and improved
concentrator      recoveries a solution to SKM's problems remains the highest
priority     for Gecamines in order to maintain the Western group's contribution to
overall    copper production   at about 80%. Gecamines has agreed to present    by
December 31, 1986 a plan to reorganize      its mine planning  (short, medium and long
term) at all mining divisions,and particularly        at the Kolvezi open-pits.

4.23      The other open-pitsand the underground mines have been substantially
less affected by the various problems outlined above. Nevertheless,aging
equipment, insufficientspare part supplies, lack of trainingand poorer ores in
parts of some depositsalso hamperedoverall productionof the Company.

4.24          The problemsGecamines faced in mining were compounded by low and on
the average decreasingcopper recovery rates in the concentrators,                particularly
at Kolvezi and Kamoto in the Western group. In order to reduce ore feed
necessary for these concentrators, study was carried out by Lakefield
                                            a
Research of Canada in 1982-83on improving recovery rates at the concentrators
of the Western group. Modificationsrequiring minimal investmentimplemented
after that study have already increased copper recoveryat the Kolwezi
concentratorfrom 71% in 1982 to 76% in 1984 and by smaller percentages at the
Kamoto concentrator.         Further increases     in recovery would contribute
substantially      to relieving    SKM's constraint    and to cost reductions    in mining in
general,     since production     of one tonne of copper requires      some 30 tonnes of ore
and 90 m 3 of ex,avated       volume in open-pit     mines.   Every increase   of 1% in
concentrator      recovery rate thus reduces the required         volume of excavation   by
about 0.7 million i 3 , or 2.5% of the current volume. Given the problems in
open-pit mining and the possibilities           for reduction   of ore feed, the
concentratorsare also a high priority area for Gecamines.

4.25        The decline in metal recoveries in the metallurgicalplants has
paralleled the experience in the concentrators. At Luilu, copper recovery has
averaged 89% over the past three years, a marked improvementfrom 83% during
1977-80 but still far from the 93U level in 1972-74. Similarly,copper
recoveries at Shituru were 89% in 1984 after a low 86% in 1976 and a subsequent
improvement to 94% in 1979. The decline at the Lubumbashismelter has been
virtually uninterruptedfrom 95% in 1972 to 90% in 1982, but recovery improved
to 92% in 1984. Additional     investment would serve to eliminate  bottlenecks,    to
replace  old, obsolete  equipment and to reinforce   weak sections of these plants.
While moderate improvementsin copper recoveriescould be expected, the most
significantbenefit would be to assure the metal production.

     5.   ProductionCosts

4.26      Productioncost figures prepared by Gecamines have to be considered
with caution as Gecamines does not yet have an accurateand comprehensivecost
control system and informationon cost developments is based solely on
approximatedata. Moreover, the zaire currency has been overvalued  most of the
                                            -22-


time until 1983. Under these conditions, cost control and calculationis very
difficult     and comparisons over time and with other companies become skewed.
However, certain       recent developments     have already improved the situation.
First,     the monetary reform of 1983 virtually         liberalized    the exchange rate
regime and as a result Gecamines'         income statements        and cost figures   in 1984
provide a considerablymore realistic picture of Gecamines' cost performance.
Second, since 1984, IDA-supportedtechnical assistanceto Gecamines' Finance
Department (Credit No. 1336-ZR) has been put in place and includesa complete
reorganization      of its Accounting Division       and the introduction      of revised
accounting     systems, including    appropriate     cost accounting      as well as design and
implementation      of effective cost control systems. A fully comprehensivecost
data base should be completed by 1986 and, by the end of that year, the revised
systems should essentially be in place. A training program for local accounting
staff is also planned but is expected           to take longer in implementation         than the
design of systems because of the low level of primary and secondary education.
Third, the highly variable        and arbitrary    tax regime applied to the Company
until     1982 resulted in tax charges in very substantialamounts and large
variations,     even if this was also coupled with a variety of arbitrary rebates
(mostly in the form of tax reimbursements).

4.27      Based on Gecamines' accounting informationand on average official
exchange rates, the Company's cost structure and unit costs per pound of copper
have been calculatedover the last six years. Costs have been allocated to
copper on the basis of its share in metal revenues since a breakdown of costs
into those for copper and for other metals is artificialfor certain production
steps (up to the metallurgicaltreatment) and is not well monitored for circuits
thereafterwhere the distinction could be made. The results are summarized in
the following table.
                                                  -23-


                                  Geadnes    -    Cost Scture,      1979-84
                                                  (Z M11.o)
                                                                                                   1984
                                         1979         1980        1981    1982     1983     1984     x
 WagesandSalaries                                       W
                                                      -i7          8W    17T      13,M     4,3     -- JI1
 Otber Services                           191          425         764     935    1,518    4,934     15
 MaterLals andConunables                  494        1,258       1,806   2,031    4,151   11,165     35
 Transport                                189          402         772     880    2,312    50D44     16
 DerecLation andlPrvisio.                 186          448         313     990    2,304    4,438     14
 Indirect  TaxesIes Rebiats               852          448         211      73      221      509      2
 Other Chaiges                             50            -           -       -       34     598       2
 Met interest                             125          210         436     367      476      635      2
   Subtotal                             2,464        3,758       5,186   6,353   12,939   31,648    100

 Minus: Costs of Works                      311        312        293     2D5      520    2,888
  emated by CGC,  and
  deferred aurges

   Total        Cost
        Productim                       2,153 3,446 4,893 6,148 12,419 28,760

 Excaze Rate(Z/ES$)              1.7  2.8   4.4   5.8   12.9  36.1
 TotalProduction (US$
              Cost    Million) 1,267 1,231 1,112 1,060 963.8 796.7
 UnitCost(UScents/Lb-prorata)     62   84    63    79     72   55
 UnitCah Cost(USaents/lblrvorata)a/
                                  55   73    60    68    62    47


 4 Total
       production
               costs
                   lessdepreciation inclndig
                                 but       debtrepayxmt.

 Sources: Gecamiries Reports
                 Amnnl     until    Gecamxns
                                1983;             statemtsfor 1984.
                                           finranial


4.28        Until 1982 costs were poorly controlled and Gecamines'sproduction
costs were adversely affected, when expressed in US dollar              terms, by the
continuous   overvaluation     of the zaire currency.       It is true also that lack of
proper cost control      in the operations     and at head office resulted        in increasing
unit production     cost, even with the benefit       of increasing    production    between
1979 and 1982. Cost cutting        measures introduced      by Gecamines' management in
1982 reduced costs significantly        by 1983, particularly       at head office.      Also,
the IDA-financedtechnical assistance to the Finance Department has permitted
improved knowledge of cost levels and trends by operations;               the cost accounting
introduced,    following   a consultant    study, to measure cost for the Kamoto
underground mine has been implemented and is being introduced                to all Company
operations   to permit immediate actions        to reduce costs by managers and
supervisors   at all levels.      These measures,    as well as the zaire currency
realignment,engendered a considerablereduction in unit costs (both total
productionand cash costs) between 1982 and 1984.

4.29      Gecamines' total copper production cost for 1984 amounted to about 55
cents/lb, including depreciation,finance charges and marketing costs up to-
delivery in Europe. About 80% of this is production   cost up to the final
product at the metallurgical plants, and 20% is marketing cost of which about
                                    -24-


two thirds transportand one third commissionsand refining charges in Europe.
Cash operating costs excluding depreciationand provisionsbut including debt
repayment, amount to 47 cents/lb. The total foreign exchange component of about
451 of productioncosts makes Gecamines vulnerable to shortages in foreign
exchange allocationsby the Government, as happened in the periods 1975-76 and
1980-81.

4.30       The most important cost item is materials and consumables,
representingover a third of the Company's costs and over half of its foreign
exchange costs. Further discussion of this cost item is presented in paras.
4.55-4.58 in the context of the creation of SONATRAD. However, Gecamines' cost
breakdown does not reflect the importance of total personnel costs which are
estimated to amount to about double the wage bill when various fringe benefits
such as health care, housing, education and subsidizedfood are included. These
items appear in Gecamines'accounts as services. A more realistic cost
allocationwould show total personnel costs, at about 302 of total costs. The
share of wages and salarieshas fluctuatedlittle over time ranging between 15%
and 18% during the period 1979-84 with total personnelcost estimated to be
fairly constant at around 30Z. With the exception of 1979 (i.e., after the
Shaba invasion),  the share of materials  and consumablesranged between 32' and
35% and that of transport   ranged between 8% and 18%. The share of depreciation
charges has increased from 81 in 1979 to 17% in 1984 after the 1982 asset
revaluation and its impact on depreciation(para. 4.36).

4.31       The cost item which changed most drasticallyis that of taxes
reflecting the erratic and often arbitrary fiscal burden imposed in the past on
the Company. To improve on the situation, the Government agreed at the
Amendment of Loan 1090-ZR in November 1979 to carry out a study on a tax
reform.   As a result of the study's recommendations, Gecamines' tax regime was
changed in September 1983. The new tax regime involves,   in addition to the
corporate  profits tax of 50%, two ezport levies:  a basic royalty at a
proportionatead-valoremrate of 7% on the total of Gecamines' exported
production deductiblefrom the c- porate tax, and a progressiveexport duty on
sales of copper based on a threshold price, fixed so as to permit a reasonable
profitabilityfor the Company without overtaxingit in periods of low prices;
the surtax is deductiblefrom the taxable base. The new system has worked well
and has stabilizedGecamines'tax payments, and ensured regular tax income for
the Government. The Government has agreed to consult with the Bank before
making any changes to the tax regime governingGecamines' finances. In
addition, Gecamines'costs include other substantial indirect tax payments,
principally import duties. The Company's total tax payments broken down by
major category are shown in the following table.
                                             -25-


                                   Geacmines Payments,
                                          - Tax      979-84
                                              (ZNi111on)
                                             1979       1980     1981     1982      1983      1984


 TIlirect  Turns ixcluied otber
                         in    CostItems 179     362    513  428  1,385 1,849
   of Wichd  (Import Dbties)            (104) (246) (354) (255) (1,113) (1,150)
 IndLirect TaxesShan as CostIten         852   1,550    718  299   221     505
   of Which  (Export Levies)            (800) (1,481)  (608) (33)   -       -
 Cozporate  IneoeTaxaJ                   289       1    443    1   444   2 838
   Total                                       TI     T7S
                                                      T3M    75                  w
 TaxReB1uenumrts Subsides
                 and                            -      1,102     508       228         -        -
 NetTaxesPald(Z miloio)T                     1,321      811     1,167      500     2,049     5,192

 NetTaxesPaid(E$ milion)                       777       290      265       86       159       144

 a/ Iwci ingExport fram
                 Tax   1983.

        Geomdne Armal Reports.
 Snource:


4.32       Variable (direct)costs represent about 45% of Gecamines total costs.
Ore productionfrom mining operationsaccount for about half of such direct
production   costs and as Gecamines'mines become progressivelydeeper, mining
costs per unit of ore have a tendency to increase,             and hence mine planning         and
mining methods have to be adjusted         to help contain operating      costs.      Ore
concentrationaccounts for 22Z of direct            production costs and the metallurgical
treatment  for the remaining 28%. While plant costs are less significant                    than
mining costs,    plant performance      can have a significant     impact since improved
recoveries   can be achieved at little       additional   cost, but with substantial
impact on mining unit costs.         Fixed (indirect)   production    costs have increased,
both as percentageof total cost (from about 33% in 1974 to about 55% in 1983)
and in real terms, and became the obvious target for the cost reductions
Gecamines started     in 1982. A breakdown of costs by geographical              production
center is not available      but would be essential      for the future in order to direct
effectivelythe Company's cost control measures to the areas of high priority.
Given the importanceof cost cutting measures and the reorganization                   of the
accounting   system currently     under way Gecamines has agreed that it would submit
for the Bank's review by December 31, 1986 a program for cost control and cost
reduction  by production     center.

      6.   Past   Financial   Results

4.33        Audited financial     statements  for Gecamines during the period 1978-84
are presented    in Annexes 4-6 and 4-7 and are summarized on the following      page.
Gecamines' accounts are audited annually         by an international audit firm (Coopers
& Lybrand), and auditing      arrangements   and proceduresare satisfactory.
                                     -26-


4.34      Gecamines'metal revenues have been subject to large fluctuationsover
the past few years following the ups and downs of copper and cobalt prices.
Favorable cobalt and copper prices resulted in revenues from metal sales around
US$1.4 billion p.a. between 1979 and 1981 while sharp decreases in copper and
cobalt prices caused a drop in metal revenueswhich declined to below US$1
billion p.a. in 1983 and 1984. Copper is now the predominant product
representing70% of total revenues, although cobalt has in the past during the
cobalt boom period played a greater role in Gecamines' revenues,as presented in
the following table.

              Gecamines - Shares in Metal Revenues, 1978-84 (in %)

                    1978    1979     1980    1981    1982    1983    1984
     Copper          43      40       64      58      77      77      68
     Cobalt          54      54       32      36      14      13      26
     Others           3       6        4       6       9      10       6

These shares are unlikely to change substantiallyin the medium term given the
relatively stable outlook for the copper and cobalt markets. Over a longer
period, however, the contributionof other metals is expected to decline because
decrease in productionof precious metals.

4.35        Between 1978 and 1981 Gecamines'financial situationwas characterized
by high metal prices, increasingcopper productionand high cobalt production,
as well as relativelylow levels of depreciationdue to inadequateassets
valuation, showing good levels of net income and internal cash generation.
In 1981, with copper prices starting to decline and the cobalt market collapsing
(in quantity   and price),  even with a stable copper production   Gecamines'
revenues decreased    by about one third.   At the same time, costs were allowed to
increase and the overvalued zaire currency continued to exert its distorting
effects on Gecamines'accounts. These combined factors resulted in a sharp drop
in the Company's profitability. After the 1982 assets revaluationand its
impact on depreciation,Gecamines showed substantial net losses of about US$316
million in 1982 and US$111 million in 1983. The combined effect of cost cuttlng
measures, recovery of the cobalt market, and stabilizationof the tax regime in
1983 improved the Company's financial result substantiallyin 1984, showing a
net income of about US$42 million and an intern.l cash generationof US$210
million.
                                                                         -27-


                                     Gacmx.s    -   &xnury of FlzwElal 1erf                       d, 1978-14
                                                           ln Z Million)

Year ere      December31,                           1978         1979            1980              1981            1982         1983                 1984
                                                            _ __
                                                               __       __       --         -(inlitai)        -                     -------------
Pr&aictio (000 tim)
   Copper                                           391.3       369.8           425.7             468.2           466.4        465.8                 464.0
   Cobalt                                            13.1        14.0            14.5              11.1             5.6          5.4                   9.1
   Zinc                                              43.5        43.7            43.8              57.6            64.4         62.5                  66.1

Tln      Statewit
   CQpper Re_ea                                      n.a          959           2,473             3,612           4,592        7,791                22,021
   Cobalt Revem_s                                    nea.       1,313           1,206             2,231             864        1,312                 8,385
   Oter Metal Re'ue                                  n.a.          165             159              441             550          953                 2,169
   Oter   Reve                                        na.         147             275                350            237          S90                 1,483
         Toal Revenues                                977       2,584           4,113             6,636           6,243       10,646                34,058

  COsts Before D1preiaticn          and Mao          569          914           2,38D             3,790           6,222        5,898                21,259
  Depreciation                                        59          137             231                137          1,355        4,128                 6,089
  Total Tames Paid                                   204        1,321             811             1,167             500        2,049                 5,192
  Net Incom After Taxes                              145          212             691             1,542       (1,i)           (1,429)                1,508
                                                            -                         m                            w~           w                      -~~~~~xw~
cashFlo Statement
   Interi a Cah Generatim                             204         349             922              1,679            (479)      2,699                 7,597
   Capiral Expexlitures                                95         229             493                368             117         935                 2,140


      Assets
        Cwt     Assets                                851       2,970           6,178              8,901           6,429      17,069                25,479
        Net Fi,ed Assets                              480          *.0          1,318              1,550          10,886      37,314                43,706
        Other Assets                                    2           16             30                 31               11        679                   899
          Total Assets                              1,333       3,926           7,526             104             17,326      55,06                 70,085

      labilities   and Equity
          rrent LiabdlIties                           352       2,033           2,499             4,193            3,263       9,044                 9,744
        l.org-term Debt ard liabilities               205         361             751             1,113            1,064       4,581                 5,886
        Deferrnd Reyenues                               -           -           1,890             1,167                 31           99                   66
        Provisiors                                     97          160             196               249             564       2,030                 4,122
        Net Capital                                   679       1,372           2,190              3.760          12.404      39,308                50,267
          Total Liabilities     &Equity             1,333       3,926           7,525             10,482          17,326      55,062                70,(85

Ratios
   brRhae Rate (Z/UIS$)                              0.9          1.7            2.8               4.4              5.8        12.9                   36.1
   C.rrent Ratio                                     2.4         3.5             2.5               2.1              2.0         1.9                    2.6
   Quick Ratio                                       1.6         1.1             1.8               1.6              0.7         1.1                    1.4
   LT Debt/Equlty Ratio                             23:77       21:79           26:74             23:77             8:92       10:90                 10:90

Notes:     (a)   Startir      In 1982, revm    acouxg
                                                e           wa cduhgad, in                 oc            with tlh         _                         Marketig
                 Agret.
           (b)   Startivg In 1982, metals in tarmdt are aouted      as ientories       8es reiivdbles
                                                                                     (as                                                       bes re),      in
                 accordanre with the _       S     am Mazkekit Agreemr.
           (c)   Starting In 1982, special prefinanclng arrant8s      wee grlually elialratal.
           (d)   In 1982, G es      revalue its grss asts      and depreation    albffAmop_


Source:     Gecmines AmimalReports until 1983; Finandcal Statetats                        1984.
                                                 -28-


4.36        In the past, allowances     for depreciation     provisions   were limited     by
the method of assets valuation      on a historic     cost basis (although     a limited
revaluation   of assets was carried     out in March 1976), and Gecamines was unable
to set aside sufficient     funds for the replacement      of its fixed assets.        This
necessarily   led not only to high levels of profit        tax obligations     but over the
long run threatened     the capital  structure    of the Company. Effective         1982,
Gecamines' assets were revalued on the basis of full replacement              value.

4.37           Gecamines' balance sheet has in general been sound in the past.
The main feature         has been the low long-term        debt to equity ratio which
despite     inadequate     assets valuation       remained under 30:70 until       1981. The
asset revaluation         of 1982 resulted      in a corresponding      adjustment   of the
Company's equity and a reduction             of the debt to equity ratio to less than
10:90 in 1982, even with the new debts contracted                 that year.      The Company's
equity,     including     reserves,   representing      more than 70% of total liabilities        and
equity,     reflects     a sound capitalization.         The current ratio has been
satisfactory,        ranging between 1.9 and 3.5 although with a declining              trend since
1980, mostly on account of a reduced accounts                receivable     as marketing and cash
management improved.           The quick ratio has been fluctuating           between 0.7 (1982)
and 1.8 (1980) and was 1.4 in 1984, which is above 1.3, as stipulated                      by the
Loan Agreement for the expansion project.                 However, improved cash management
measures mentioned earlier          are expected       to maintain it at a satisfactory       level
thereafter.

4.38          Although the income statements            have until 1981 shown high profits,
Gecamines has throughout         encountered       grave liquidity       problems.      The major
reasons behind these have been the inefficiencies                    in marketing and sales
receipts     management to a large extent caused by difficulties                     of coordination
between Gecamines and SOZACOM            and weaknesses      of the latter       in cash management.
At the time of appraisal          of the expansion project           in 1974, the typical         lag
between copper shipments F.O.B. African ports and sales receipts                          was 3 months
for copper and 9 months for cobalt.                Since then these lags increased             to 9 months
for copper and 30 months for cobalt and resulted                   in a near trebling         of accounts
receivable     in real terms 1980. While some of the delays,                    particularly      in the
case of cobalt,        were due to market conditions,           they were attributable           to a large
extent to: (i) SOZACOM's inefficient               handling   and follow-up        of sales;     (ii) slow
inter-bank      cash transactions;       and (iii)     non-Company demands on the foreign
exchange due Gecamines.          These liquidity        problems coupled with decreasing
profitability       reduced Gecamines' ability          to reinvest      at adequate levels between
1981 and 1983 and aggravated           the existing      operational      problems.       Following the
                                                                     in
marketing agreement between Gecamines and SOZACOM 1982, Gecamines' liquidity
situation     improved substantially        even if its cash flow was not sufficient                  to
permit adequate levels of re-investments.                  Moreover, in the context of the
IDA-financed       technical   assistance    project,      a major effort       has been initiated       to
improve the Company's cash management and substantial                     savings are expected to be
achieved,     from better     management of sales receipts             as well as from a reduction
of short-term       credit   in particular    for prefinancing          of metal sales.        On the
other hand, the performance           of Gecamines/Commerciale           (para.    2.14) and its impact
                                             -29-


on marketing delays and short term financing needs cannot be fully assessed yet,
but streamlining   of the relationships      between Gecamines/Exploitation  and
Gecamines/Commerciale    is already    taking place under the supervision   of the
Holding Company.

4.39         In addition to marketing    and payment delays,   inefficient   liquidity
management, and high prefinancingcharges, insufficientforeign exchange
availability    created particular   liquidity  problems for Gecamines in the past.
The Government agreed in 1977 to establish an allocationsystem under which the
Company would receive 45% of its net sales in foreign exchange.            In practice,
however, the actual allocations remained lower until 1981, ranging between 38%
and 41X. Since 1982, they have been kept at the agreed level of 45% partly
                                of
because the implementation the Gecamines/SOZACOM            marketing agreement gave
GecAmines fuller control over its accounts. Assuranceswere given during
negotiations that Gecamines would continue to be allowed to retain from the
Government 45% of its receipts from metal sales net of marketing expenditures.

4.40        Gecanines has in the past been subject         to repeated    interventions      by the
Government resulting          in uncompensated   sales and barter operationswithout prompt
and adequate reimbursement          and payments made or services      rendered upon the
Government's       request became a substantial      burden.   The prominent item is debts
due by the Governmeut to Gecamines from uncompensated              sales which have
accumulated       to an amount of US$125 million until 1984 and now amount to about
US$57 million.         In 1983, the Government agreed on repayment of these debts along
a definite schedule. The schedule has not been strictly respected,but
quarterly      commercial audits     imposed by the Bank in June 1984 to keep track of
financial      irregularities     in the commercial operations     have shown that no further
uncompensated       sales took place after June 1984. In order to prevent future
irregularities        of similar nature,     the Government has agreed that the financial
relations      with the Government would be governed exclusively           by the existing      tax
regulations       and the dividend     policy agreed upon between the Company and
Government, and that no sales without proper and prompt compensation                    would take
place.      This would continue to be monitored through regular             external    commercial
audits.

B.    Gecamines/Commerciale

      1. Backgroundand Organization

4.41         Gecamines/Commerciale    was established in November 1984 to take over
the activities    and part of the staff of SOZACOM,     which had been the sole
marketing agency for Zaire's       mineral production since 1974.   Gecamines/
Commerciale reports to the Holding, and acts as an agent for sales of
Gecamines/Exploitation's     products. This arrangementis the continuationof the
                                                                in
Marketing Agreement signed between Gecamines and SOZACOM August 1982.
Gecamines/Commerciale     is based in Kinshasa with 510 employees, and also operates
an office in Brussels. Its policy is to locate as much cf its activities as
possible in Kinshasa. However, the Brussels office will continue in a key role,
because of its proximity to the major European markets with easy contact to
metal buyers and sellers.
                                    -30-


4.42      The history of SOZACOM and its troubled relationshipto Gecamines was
presented in detail in the President's report for the Gecamines technical
assistance project (ReportNo. P-3474-ZR). This history was characterizedby
high commissions,slow payments to Gecamines or incompletetransfers of sales
receipts, and a poorly designed cobalt marketing and pricing policy which
resulted in the collapse of the cobalt market in 1980. The critical change in
that relationshipcame about with the signature of the Marketing Agreement in
1982 which gave Gecamines/Exploitation ownership of its mineral productionuntil
final sales, full control over its sales receipts,and a say in the design of
the group's commercialstrategy. SOZACOM's sales accountswere in effect
transferred to Gecamines,a Gecamines representation  was established in
SOZACOM's offices, both companies have started to define a marketing strategy in
common, and Gecamines participatedin new contract negotiationssince 1983.
Gecamines/Exploitation has also established satisfactory control mechanisms that
monitor the strict respect of the Agreement, and since the abolition of SOZACOM
in July 1984, external commercialaudits report quarterly on the functioningof
the controls as well as on irregularities. Since the Marketing Agreement is
essential for maintenanceof Gecamines' financial autonomyand for its effective
financialmanagement, as well as for design of a rationalmarketing policy,
Gecamines/Exploitation has agreed that the 1982 Marketing Agreement between
Gecamines and SOZA0OM would continue to govern the relationshipbetween
Gecamines/Exploitation and Gecamines/ Commerciale,and would not be amended
without prior Bank approval. Assurances were also obtained that Gecamines/
Exploitationwill maintain its controls and that half-yearly external commercial
audits would continue to apprise Gecamines/Exploitation, and the Bank, of
irregularities the implementationof the Marketing Agreement.
               in

     2. Activitiesand Sales

4.43                            is
          Gecamines/Commerciale responsible for sales of all of
Gecamines/Exploitation's export production (the mining company sells small
quantitiesof copper and zinc to local customers). Gecamines/Commerciale   deals
directly with buyers and signs contracts as Gecamines/Exploitation's agent. It
assumes responsibility for metal shipments at the port of export, and as such
deals with ocean freight, insurance, sales documentation, and handling to
receipt by foreign customers- usually on arrival at the receiving port.
Gecamines/Commerciale's income derives from fees of slightly above 1% of sales
receipts for copper, 3% for cobalt, 1% for zinc and cadmium and 0.5% for gold
and silver. In addition,Gecamines pays 0.4% for copper sales and 3.0% for
cobalt sales to other agents. These commissions are substantiallylower than
those charged by SOZACOM; they are still higher than charges by other marketing
ccmpanies. Since the transitionfrom the SOZAC0M conditions is taking some
time, the target fees mentioned above are expected to be acihieved 1988, which
                                                                  by
is reasonable. Gecamines/Commerciale  has agreed to market its products in
accordancewith regular commercialpractice and on the basis of arm's length
arrangements,ensuring that at no time, Gecamines/Exploitation  will receive less
than full ex-works commercialprice (subject to normal trade discounts)for its
products.
                                          -31-


4.44        Gecamines'copper sales have been heavily concentratedin Europe, but
also extend to several North American, Asian, and CPE countries,as shown in
Annex 4-8. The concentrationof sales in Europe (about 85%) represents a
potential   weakness because of lack of diversification        and absence in other
expanding markets.       Copper cathodes and blister   copper require additional
processing,    whsich traditionally   has been done at SGM's Metallurgie       Hoboken plant
in Belgium.     After 1982, there has been a cautious     start   of diversification     to
other refining    companies, and of a total of 240,000 tonnes refined          in Europe in
1985, about 50,000 tonnes were refined outside Belgium.

4.45         Gecamines produces more than 200,000 tpy of refined    copper in the form
of wirebars    and with the phasing out of production    of that particularshape in
other countries,Gecamines has become a major wirebar producerin the world.
Traditionally,    wirebars have been the standard   copper product and the basis for
price quotationsat the LME, but high grade cathodes have increasinglyreplaced
wirebars   in LME contracts. Although an official decision has not been taken yet
to replace wirebars completely     by high grade cathodes at the LME, this product
will increasingly     be limited to a relatively  small market with small customers
and short to medium term contracts. While the market for wirebars is not
expandable, Gecamines could for a period of time maintain a safe and dominant
position if it pursues an active customer-oriented       marketing policy.

4.46      Cobalt sales are more broadly diversified among European, North
American, and CPE countries, as shown in Annex 3-8. The USA is the sinqle most
important buyer of Zairian cobalt, accounting for over 95% of sales in North
America. Japan is also an importantpurchaser, despite the fact that it is a
seller in world markets of metal refined from concentratesand matte purchased
from Australasiancountries. Audited financial statementsfor Gecamines/
Commerciale during the period 1980-84,are presented in Annexes 4-9 and 4-10.

4.47      Productionand sales of zinc and cadmium are relativelysmall, but the
grade specifications are high and no difficulty is encounteredin marketing of
these metals. Nearly half of Gecamines' zinc production is sold to the USA and
about one quarter to Asia. Gold and silver are recovered as a by-product in the
refining of blister copper that takes place in Belgium.

     3. Sales Strategy

4.48       The marketing of copper does not present major difficulties. Normally
                                                           of
annual sales contracts are signed in October/November each year and indicate
maximum/minimum purchase volumes.    Price is based on the prevailingLME
Settlement  Price at the time of delivery  subject   to certain premiums and
charges.   Major buyers place orders generally    on a monthly basis and provide a
mid-year estimate of total purchases for the year. The sales contracts are
negotiated by Gecamines/Commerciale   with the participationof Gecamines/
Exploitation's   Marketing Department, in accordancewith policies established by
Gecamines/Exploitation,   and are signed jointly by Gecamines/Comerciale and
Gecamines/Exploitation.In spite of declining demand for wirebars, Gecamines/
Exploitationhas maintained its sales of this shape by reaching longer term (3
years) understandings   with certain consumers of wirebars in Europe. It has also
diversified the refining of blister copper and electrowon copper cathodes, and
                                    -32-


has initiateddirect sales of small quantities of electrowon cathodes to brass
mills and other consumers of copper for alloyingwhere mechanical strength and
electrical conductivityare more important than high grade. Gecam.nes/
Exploitationhas also initiated sales of high grade cathodes, presently
toll-refinedin Belgium in view of their eventual productionat the
electrorefineryat Luilu. Gecamines/Commerciale  has agreed to present by June
30, 1987, a plan defining its strategy for marketingwirebars in the medium
term, and of progressivereplacement of wirebars.

4.49      Unlike copper, cobalt marketing involvescritical judgments both in
terms of setting selling prices and in terms of finding market outlets. Zaire
sells mostly refined cobalt in the form of cathode chips. A high-quality,
vacuum-refinedcobalt, suitable for super-alloyapplicationsis also marketed.
In addition, Zaire sells lower quality cobalt cathodes from Shituru to
Metallurgie Hoboken in Belgium for refining into high quality refined metal and
for production of special products such as cobalt salts. Since the cobalt
market is in a conditionof severe oversupply,many producers, includingZaire,
are holding large inventoriesof cobalt. Gecamines/Commerciale   has agreed to
present by June 30, 1987, a plan defining its strategy for marketing cobalt in
the medium term.

4.50       Zaire has historicallyfollowed a policy of selling cobalt at a
producer price set by SOZACOM. But in recent years the market price has been at
a large discount    to the producer price causing both Zambia and Zaire to lose
their competitiveness.     The sharp drop in market share during 1980-82 was
largely due to losing customers to marginal suppliers from Japan and Canada who
were selling cobalt at very low prices on the market. With Gecamines'finances
ext-emely sensitive to cobalt prices, and to the extent that these are generally
concrollable,it is important that Gecamines' cobalt pricing policy take account
of the risks that go with unreasonable producer prices and of the need to
maintain the client confidencewhich took several years to reestablishafter the
excesses of 1980. It must be recognized that any increase in market share can
only come at the expense of either Zambia or the marginal producers and, while
genierally pointing in the right direction, Gecamines'strategy is not yet
comprehensivein terms of dealing with the overall mix of pricing, sales terms,
inventory policy, and quality considerationsand may well be less effective in
increasingmarket share than the Company presently anticipates.

     4. TransportationRoutes

4.51       Three main routes are available for the export of Zaire's mineral
products: (i) the Voie Nationale, a multimodal chain of transportcomprised of
the railway line from Shaba to the Ilebo port on the Kasai river, barge
transport from Ilebo to Kinshasa on the Zaire river, rail transport from
Kinshasa to Matadi, Zaire's main seaport; (ii) the Southern route which connects
Shaba to the Southernafrican ports of London and Durban through the railways of
Zaire (SNCZ), Zambia, Zimbabwe, Botswana and South Africa; and (iii) the Eastern
route via SNCZ, water transportation  on Lake Tanganyikaand the Tanzanian
railways to the port of Dar es Salaam. Traffic has been allocated as follows:
                                                -33-


                     Zaire   -   Mineral Exports Via Various Routes, 1918-84
                                            ('000 tonnes)

           Voie        Eastern                 Southern Route
Year     Nationale      Route            (Metal)       (Concentrate)             Air   Total

1978       230.5         34.2              167.5              83.0               0.9   516.1
1979       186.2         16.3              198.1              95.0              10.3   505.9
1980       200.8         38.0              232.6              97.6              10.0   579.1
1981       276.6         34.8              229.4              99.8               1.6   642.2
1982       252.3         43.1              230.4              80.0               0.5   606.3
1983       257.5         64.7              238.6              83.2                -    644.0
1984       242.6         59.1              236.2              65.3                -    603.2


Sources: Gecamines Annual Reports; Zaire Dept. of Mines Annual Reports.


4.52         The above routes are also used for the imports of equipment, spare
parts,    consumables and reagents   for the mineral industry,  as well as general
goods for the mining communities.        Until its closure in 1975 the Benguela
railways to the port of Lobito in Angola was the main foreign route for Zaire
and accounted for 50% of total mineral exports. The road from Dar es Salaam is
also important     to Gecamines because it is the only route with sufficient
clearance     to permit transport  of large mining equipment used in open-pits.

4.53         The Voie Nationale    has experienced       difficulties       because of the age
and poor condition     of railway,   port and river transport           equipment;     deterioration
of the road bed and track on the railway portion,                and low water levels        on the
Kasai river.     The shortage    of operational     railcars      has become an increasingly
serious  problem on SNCZ affecting all users of the railways, including
Gecamines.     As a result   total transit     time on the Voie Nationale           is about 25%
longer than on the Southern route.          Despite these shortcomings,            Zaire's    policy
is to export through the Voie Nationale           on a priority       basis, 1e'zause it is the
cheapest   available   route in terms of foreign exchange and is free from possible
closure due to political      and security     conditions      in foreign countries.          This
policy is supported     by Zaire's   major donors.        Some key figures        on Gecamines
export routes are summarized below.

                                 Ozierison of Geadnes Cper     Exort Raoes, 1984

                                             Vote Nationale            Eastern oites      Southern Rates
 Volume (xraes per muuth)                        20,000                     5,000               19,730
 Distance (km)                                    2,650                     2,715                3,623
 Average transit tine to port (days)                 51                         46                  30
 Average transit time in port (days)                 19                         62                  27
 Average total transit time (days)                   70                       108                   57
 Transport Cost (US$/tonne)                         162                        150                $149
                                           -34-


4.54         Improving the performance        of the Voie Nationale     has been one of the
Government's     main goals in the transport        sector   over the recent past.      This
requires    that Infrastructure       and equipment be rehabilltated      and the institutions
responsible     for the Voie Nationale      be strengthened.       Much work is currently
going on along these lines under 3 Bank assisted              projects,  the ONATRA
Modernization,     Ports Rehabilitation       and Second SNCZ projects 9 /, for a total
cost of US$247 million        equivalent,   of which US$171 million      in?foreign exchange
financed    by various donors (IDA, AfDB, KfW, CCCE and Belgium).              Substantial
improvements in the Voie Nationale's           performance    should follow the
implementation     of these projects,      which will last until early 1987 to late
1988.    Au additionalproject with Regie des Voies Fluviales, the public agency
responsible for maintenance of Zaire's river network is expected to start in
1986. Transport infrastructureand equipment on the Voie Nationale has
deterioratedto such an extent since 1960, however, that continued support from
external donors will be required          co ensure satisfactoryperformancein the long
term.

C.    Societe   Nationale   de Trading

4.55         An important     element in the success of Gecamines' cost reduction
effort is the Company's ability to improve its procurement process,with a view
to obtaining      the best possible    conditions,  minimizing  delays, and optimizing
cash management.        Materials   and consumables costs amount to over US$300 million
equivalent    annually,    or 35% of Gecamines' production     cost.    When equipment for
investment    is added, Gecamines spends about US$250 million          in foreign exchange
annually, or 55Z of its total foreign exchange expenditures,             for consumables,
equipment and spares. This expense category is thus an obvious target for
introductionof increased efficiency and reduced costs, through the introduction
of new procurement procedures         and purchasing methods. At present virtually all
procurement     is done through restrictedconsultation of supplers, with no or
ineffectiveex-post audit; Gecamines' procurement staff is weak in ability to
prepare the technical specifications,in their knowledge of their suppliers, and
in their negotiating skills.

4.56        The Government, aware of procurement problems in all its public
enterprises,addressed them through the creation in March 1985 of a central
procurement   agency, the Societe Nationale de Trading (SONATRAD),to serve all
large public enterprises,    including   Gecamines.      SONATRAD'smandate is to permit
substantial improvements procurement through improved negotiationtechniques;
                            in
grouping orders from several     public enterprises;      standardization       of common
equipment;   elimination  of certain   purchasing    intermediaries,      diversification of
the sources of supply, and promotion of competitive local producers.

4.57        Extensive discussions  have taken place since March 1985 bt.een     the
Government, Gecamines, SONATRAD    and the Bank to develop SONAIRAD into an
institution   that can effectively play its role of improving Gecamines'
procurementpractices,and to have the respective roles and responsibilities           of
Gecamines and SONATRAD clearly    spelled  out in an acceptable bilateral  contract.

9/ Credits 1180-ZR,of March 10, 1983; 1335-ZR, of April 28, 1983; and
   1475-ZR,of August 7, 1984, respectively.
                                       -35-


A draft PurchasingAgreement was agreed as a restt of these discussions,which
elaboratesSONATRAD's role in the following areas: (i) to serve as ' Gecamines'
purchasingagent for a limited number of large contracts (above US$1 million for
1986) and for contracts    of equipment common to several public enterprises        and
where substantial   savings can be expected from grouping of orders;        (ii) to
control  and audit Gecamines' purchasing       practices,   with particular emphasis on
commercial intermediaries,    standardization,       and monopoly situations;and (iii)
to advise Gecamines on purchasing procedures,knowledge of equipmentmarket, and
generally upgrade Gecamines' purchasing skills. The Government has agreed to
a review of the thresholdevery six months and for assurancesthat it could not
be changed without prior Bank's approval.

4.58       The PurchasingAgreement between Gecamines and SONATRADwhich was
approved by the Zairian Government is a satisfactorydocument which adequately
addresses the weaknesses of the present system. The Government has agreed that
the Purchasing Agreement would not be amended without prior Bank approval. The
Government also agreed that Gecamines will monitor SONATRAD performance as its
purchasing  agent and that quarterly external audits would apprise Gecamines, and
the Bank, of the quality of implementationof the PurchasingAgreement.

D.   RehabilitationProgram

4.59      As discussed throughout this chapter, the Gecamines Group has faced
difficult commercial, technical, financialand manpower conditions,that have
damaged considerablyits ability to produce copper economicallybut have also
provided the shock necessary to start a serious series of actions to improve on
its technical efficiency,its financial performanceand its labor productivity.
Several such actions were started in 1982 and are well under implementation,
others are under preparationand are part of Gecamines' proposed rehabilitation
program.

4.60      The necessity for a substantial rehabilitationprogram arose from the
increasing vulnerabilityof Gecamf s to operating difficulties. In the past 10
years, the Company has been able to maintain fairly high productionand sales
levels in spite of numerous obstacles, to a large extent because important
intermediatestockpileshad accumulatedwhich provided the Company with unusual
flexibility and the ability to withstand much buffetingwithout major
consequences. This flexibilityis fast disappearing. On present trends, it
will not be possible to draw much longer on such stockpileswhen mining or
concentrate productionis lagging. In 1974, Gecamines had 19 months of
production in banked ore: this has dropped to 9 months in 1984 and the ore
grade has decreasedfrom 4.8 to 3.9%. Similarly,the concentrate cushion
provided by the startup of the DIMA concentrator in 1980 has now been used up.
The operating flexibilityof Gecamines may thus have completelydisappeared by
1987 or 1988 and serious productionmishaps will then affect sales almost
immediately. Any significant additional delays in either the Kolwezi stripping
program or the implementation of the critical componentsof the Rehabilitation
Program would have a deep and permanent impact on the Company.
                                                                 SThOPSIS ImI POLICY
                                                                       OF           nANIM                                 FIOtZAN
                                                                                                in CgCAuIinS IWRABILITATIOU


I    HdZAC8HCFTF_NSWNKL.ANDnnIZATImI                  IhFtOUI
                                                                             Action Taken up to December 1985                    Action Planned                Completioa Date

     (a)   Stability of preaent       otganization                         The Cecamines Group reorganized to a         Consultation with Bank before          Continuous
                                                                           Holding with three subsidiaries in           change in orgaaniattonal
                                                                           November 1984                                structure

     (b)   Recruitment of top managers ar.; training of                    Recruitment effort underway                  Preparation of emerRency               September 1986
           potential candidates                                                                                         recruitment and training program

     (c)   Creation of Strategic Planning Department                       None                                         Preparation of terme of    reference   January 1986

                                                                                                                        Recruitment and organizatioo of        June 1986
                                                                                                                        Department

     (d)   Manpower development       en1d training                        Prograzs exist but need    improvement       Design of comprehensive    manpowet    December 1986
                                                                                                                        development and training    program

     (e) Change of balance between wages/salaries                          None                                         Preparation  of action plan to         December 1986
         and fringe benefits                                                                                            inerease waxes/salaries   and
                                                                                                                        reduce fringe benefits  to establish
                                                                                                                        more effective incentive systes

2.    uuuarlcus   AD     miuTNAuMC
     (a)   Western Group

           Transfer of medium_ and long-term mine planning from            None                                         Preparation of a decentralization      Decesber 1986
           Lubusbashi to Kolwezi                                                                                        achedule

           Improvesent of equipment maintenance and                        Technical assistance hired in 1984 but       Introduction of new truck dispatch     June 19835
           management                                                      results not yet satisfactory                 and couunication system;
                                                                                                                        continuation of equipment
                                                                                                                        maintenance training

           Studies of inveatmects for new mining equipment                 Only approximative schedules prepared        Carrying out of studies with high
           (truck electrification, in-pit crushing)                        in 1984 and studies not completed            priority:
                                                                                                                        - preparation of study Implementa-     January 1986
                                                                                                                          tion schedule;
                                                                                                                        - preparation of investment
                                                                                                                          achedule                             June 1986

           Optimizatiocn     of open pit    mining operations              None                                         Studies on mining optdiization in      December 19S6
                                                                                                                        selected areas to be initiated

           Acquis tion     of sufficient    mining   equipment   anid       Started In   1984 as part of   investment   Revision of initial plan in            June 1986
           spare parts                                                      program                                     accordance with result of studies
                                                                                                                        on new mining equipment

3.   F3OCCUI33T AeD MU1CHSINGSTSIU

     (a)   Definition      of procurement    responaibilitiea              SONATRAD, created in Hatch 1985, does        Contractual    reeponp.bilitieaof      December 1986
                                                                           not have claar responsibiltties              SONATRAD    and Cacaminea ia
                                                                                                                        procurement to he defined in
                                                                                                                        agreement acceptable to all
                                                                                                                        parties

                                                                                                                        Nonitoring of SONATRAD'a effec-        Continuous
                                                                                                                        ttveaess through regular audits
                                                         TW     0o
                                                              1PSISm   POLIC! UKJTS in CECANINIS            F
                                                                                               CARUSILITATIOUOCUA

(3.   frocurema_t and Purchasing     System Continued)

                    of                    system
      (b) Improvesent requisitioning/ordering                      None                                                                and
                                                                                                                Studyof presentprocedure                  December1986
                                                                                                                             on
                                                                                                                reenomendation improvements

 4.   FINANIL    sIsuU
                   system
      (C) Accounting                                                       assistance
                                                                   Technical        htredIn 1985                Complete            to
                                                                                                                        reorganization Improve            December1986
                                                                                                                                      data
                                                                                                                relabilityof accounting
      (b) Coat control                                                      1982/83
                                                                   Introduced     with consultants'                      of
                                                                                                                Broadening systemoverwhole                December1986
                                                                   assistance                                         and linking revised
                                                                                                                Company         to
                                                                                                                         system
                                                                                                                accounting
      Cc) Training     of accounting staff                         Technical assistance hired in 1985                  seminars
                                                                                                                Training        end on-the-job            Continuous
                                                                                                                trainingfor accountingstaff
                                                                                                                linkedto revisedaccounting
                                                                                                                system

                  forecasting
      (d) Financial                                                Financial
                                                                           forecasting
                                                                                     system designed                               of
                                                                                                                Furtherreftnement system     and          Continuous
                                                                                                                use as management tool and for
                                                                                                                preparation 5-year financial
                                                                                                                forecast

      (a) Tax regime                                               New tax regime         in
                                                                                 introduced 1983                        of
                                                                                                                Stability tax regime                      Continuous
      (f) foreignexchange
                        allocation                                 45X allocation   effective   sitce   1982    Stability of foreign exchange
                                                                                                                allocation.                               Continuous

      (g) Dividendpolicy                                           None                                               of      policyto be
                                                                                                                Desiga dividend                           December 1986
                                                                                                                introduced                                                a

 Se   031       COST MCYIS                                                                                                                                                -

      SocialServiees                                                                transferred
                                                                   Som socialservices          to               Clarification Cecamines'
                                                                                                                            of          role In           December1986
                                                                              and
                                                                   subsidiaries costsfor sose other             socialservicesthroughcomprehen-
                                                                          beingreimbursed Government
                                                                   services             by                      sivereviewof theirextentand
                                                                                                                costs

 Go. COUSCIAL         n WT

      (C) Definition comercial
                   of                   responsibilities           Gecamines/SOZACON MKrketing  Agreement  of   MKrketing  Agreement continue
                                                                                                                                    to                    Continuous
                                                                   August 1988gives Cecamines/Explottation      povern relations between compantes
                                                                   better control over coxmercial strategy      of the Holding

      (b) financial     Autonomy                                   KMrketing Agreementgives Cecamines/          Maintenance of Cecamlnes' financial       Continuous
                                                                   Exploitation full control over sales         autonomy    including Controller's  and
                                                                   receipts                                     Treasurer's   functions; limitation
                                                                                                                of payments to affiliate    companies
                                                                                                                to clearly defined levels; monitoring
                                                                                                                through regular audits of financtal
                                                                                                                transactions
      (c) Coevercial     practices                                 Barter and uncoapensated sales stopped       Strict adherence to normal                Continuous
                                                                   in June 1984                                 corsercial practoces monitored
                                                                                                                through regular commercial audits

      (d) Wirebars markets                                         Options under revtew                         Preparation of Action Plan for            June 1987
                                                                                                                marketing of wirehars and its
                                                                                                                progressive replacement
                                          -37-


4.61       At the same time, with the essential constraintsin Gecamines'
operations being the low operating availabilityof mining equipment in the
Western open-pit mines and low metal recovery rates in its concentrators,        a
large part of Gecamines' investment    effort   has to be devoted to addressing   those
two main constraints,  and to concentrating     on sufficient  reinvestments  at the
open-pits, improvementof spare parts and fuel supplies, decentralization         of
                                              of
mine planning, as well as implementation investmentsto increase recovery
rates in concentrators.

4.62      As part of the preparationof its rehabilitationprogram,Gecamines
prepared in 1984 a five-year investmentprogram, which covered its investment
requirementsduring the period 1984-88,and which directs investmentsto (i)
projects increasingmetals recovery in the concentratorsand in the
metallurgicalplants and (ii) replacementof worn and obsolete equipment to
improve performanceand reduce cost, mainly in the mines. This program is
reviewed in Chapter V. To ensure optimum use of the investmentsproposed,
policy actions are required in a number of areas. These actions have been
discussed in the precedingparagraphsand their key elementsare summarized
in the preceding two pages.


                                       V. THE PROJECT


A.   Gecamines'   Long-Term Strategy

5.01      In view of the changing market and price trends, Zaire must develop
the marketing, productionand investmentstrategies that make optimal use of its
large copper reservesand its good ore grades. In an increasinglycompetitive
market, Gecamines has little choice but to improve its cost competitivenessand
aim at remainingwithin the lower third of world mining operations in terms of
copper productioncost, including transportation and financial charges. In
practice, this means (i) improving the management of each sub-componentof its
operations, (ii) increasingthe efficiencyof its existing facilities, (iii)
improving its overall cost effectiveness, and (iv) diversifyingits product mix
into higher grade products. Appropriatecost consciousnessshould in the longer
term give Gecamines the financialmeans to adapt its level of production to
market opportunities, and restructureits facilitiesto take account of the
closing of old mines and opening of new ones.

5.02      Gecamines'present strategy is oriented towards maintaining its
present productionlevels of about 470,000 tpy of copper, 10-12,000 tpy of
cobalt and 70,000 tpy of zinc, while improving its cost competitivenessthrough
further integrationof mining and processingwithin each of the three
geographical productiongroups (West, Center, South) with the objectives of more
efficient use of the Company's total physical assets, improvementsin
productivity and quality, and reductionof inter-group transportcosts. The
principal components of the long-termplan are the following:

      (i) completion of the electro-refinery  and constructionof a flash smelter
          at Luilu (West), to permit more than two thirds of mine production in
          the West to be processedup to electrowon or high-gradecathodes;
                                            -38-


     (ii)   opening of new mines (Tenke) in         the Center and replacement      of current
            concentration    capacity  at Likasi      (Center) by new concentration
            capacity    commensurate with the      requirements     of these mines, to
            maintain    Gecamines' balance of      oxide/sulfide/mixed      ores because of the
            high oxide content of ore from         the new mines;

   (iii) decreased processingof concentratesfrom the West at the Lubumbashi
         smelter (South) and use of part of its capacity for processingof
         concentratesfrom SODIMIZA; and

    (iv) installationof a zinc roasting plant, a sulfuric acid plant, and a
         zinc metallurgicalplant at Kipushi (South), which is expected to
         produce zinc exclusivelyin about ten years, to supplementpresent
         installationsin the Center and West.

5.03       Although the long-term plan would add about 100,000 tpy of copper to
Gecamines' metallurgicalcapacity, actual net copper metal productionby
Gecamines is expected to increase by only 20,000 tpy of copper since processing
of Gecamines concentrates  would be reduced at Lubumbashi by an amount close to
the capacity of the new flash smelter,   while Lubumbashi would principally    treat
SODIMIZA's ore production. Another feature of the long-termplan would be
expected self-sufficiency Gecamines in sulfuric
                           of                        acid production   because of
the expected productionfrom new acid plants Unked to the new zinc processing
facilitiesand to tne flash smelter.

5.04          The Tenke deposit has been retrocededto Gecamines,and perhaps
eventually the Fungurume deposit. These new opportunitiesraise several
questions about the Company's longer term choices: first, whether as proposed
earlier by Gecamines and as implied in the present plan, Tenke should only be
developed to replace costlier deposits presentlyin production,within the
existing capacity limit of 470,000 tpy of copper, or whether a production
potential of at least 100,000 tpy of copper should be added to such capacity;
and second, whether Gecamines should sell concentrates              or increase    its own
metallurgical      plant capacity in order to market the additional          blister    or
electrorefined      cathodes.     Finally,   the prospects   of expanding Zaire's      copper
production     raise a number of issues        about the role of Government in the
developmentof Zaire's copper industry. On the one hand, expandingexisting
Gecamines'mines would offer prospects of quicker and larger returns than
opening new private mines (Gecamines' cash generation             would allow it to sustain
a substantial investmentprogram); on the other hand, Zaire's large copper
reserves and high ore grades would give the Government an excellent bargaining
position in negotiating at the appropriate time with international                 mining
companies so as to allow the private sector to become a motor of expansion and
development in the sector.           In the short term, and in view of the poor past
performance      of foreign   investment   in copper in Zaire, Gecamines constitutesan
irreplacable      source of investment     for the copper sector.      In the long term,
however, Gecamines should seriously consider the option of associatingprivate
foreign partnerswhich would bring not only financial resourcesbut also their
technical,managerial and marketing know-how, to its mineral diversification                   or
other new projects.
                                              -39-


5.05          Substantialwork has been done already by Gecamines to define its
strategic options, particularlyto prepare scenarios for the next 10 years, but
many longer term alternativeshave yet to be imaginedand analyzed. While in
the end it is the Government'sresponsibilityto define an overall long-term
strategy for the development of Zaire's copper sector, Gecamines will also build
up within its organizationa corporate planning capacity to keep track of
developmentsin the world metals market, to identifymarketing opportunitiesfor
Zaire, to organize coordinationbetween the various functions of the enterprise
(notably     commercial, production   and finance),    and to guide Gecamines' management
in deciding     on medium- and long-term    investment   and production  options within a
longer term context (para. 4.07).        The Government and Gecamines have agreed to
discuss with the Bank its expansion       investment    plans and the structure  of the
partnership     (including  foreign private investors)envisaged for its new
investments.

B.        Objectivesof the RehabilitationProject

5.06         Gecamines' rehabilitation         program which has been extended to 1990
because of the low level of execution             in the 1984-85 period (the object of the
proposed Rehabilitation       Project)     is an important     link to its long-term      strategy;
its main features and conditionsof success were presented in Chapter IV. The
main objectives      of the Project     are to improve Gecamines' efficiencythroughout
the whole chain of production          and commercialization       of its metals products,       to
raise    the Company's productivity        at the mines and in the surface plants           and
hence, while maintaining       production      capacity at its present      level of about
470,000 tpy during the 1986-90 period, assure the continued f JW of the
principal    source of foreign exchange earnings            to Zaire.    The Project   also aims
to increase     Gecamines' profitability        and ability    to transfer   resources    to the
Treasury,    consolidate   its position      in the world copper market, and to integrate
its operationswith other economic activities in Shaba. As such, it would be a
main ingredientinto Zaire's economic recovery program. Specifically,the
Project    would aim at:

       (i)    maintaining  metals production  at the Company's nominal              capacity    to
              achieve optimal use of existing   installations;

     (ii)     increasing    metal recoveries at concentratorsand metallurgical                 plants
              to reduce    quantities of ore to be produced at the mines;

  (iii)       reducing operating      costs at the level of concentrators           and
              metallurgical   plants,     and containing mining costs;

     (iv)     diversifyingthe Company's product mix through            production         of high
              grade cathodes;

       (v)    improving    the Company's management and efficiency of operation;and

     (vi)     preparing Gecaminest long-term strategy through various exploration,
              research and study works.
                                          -40-


5.07       Gecamines' 5-year Investment Program covering the physical invegtment
of the rehabilitation   program was first discussedwith the Bank in February
1984, and after several amendments,was formally presented to the Bank in
October 1984. It consisted essentially of overdue investmentswhich Gecamines
had not carried out in recent years or investmentswhich would be part of a
normal program of replacement to preserve good operating conditionsof its
production facilities. A Bank mission visited Zaire in May 1985 to conduct,
with the help of outside consultants,   a full technical audit of Gecamlones'
Investment Program in order to (i) verify    that Gecamines 100-odd sub-projects
were consistentwith the overall objective of maintenanceof production,
improvementof productivityand reduction of cost and with its medium- and
long-term investmentplans; and (ii) review and assess the technicaland
economic justificationof each sub-project. The auditing team visited all
Gecamines' productionunits to assess the productionperformanceand physical
state of the facilities,as well as the units' ability to implement their
proposed investments. Also, particularattention was given to intra-unit
relations,and to the consistencyof their proposed investmentsand hence to the
optimizationof Gecamines' total physical assets. The proposed Project takes
account of all reviews that took place and changes that have been introduced to
further optimizeGecamines' investment over the coming years.

C.   Project Description

5.08      The Project would cover high priority investmentsduring the period
1986-90 for replacementof old equipment and rehabilitation componentsof
                                                           of
plant facilities,required to improve Gecamines' performance. The Project would
also include reinforcementof the Company's trainingdepartment to upgrade
managementand supervisorypersonnel;and technical assistanceand studies to
improve weak performancein certain areas (supply organization,truck dispatch,
short-termmine planning)or to carry out measures necessary for preparationof
investmentsafter 1990. The Project consists of three major components: (i)
investmentsin existingmining and plant facilitiesfor equipment replacement
and rehabilitation, aiming at improved maintenance,productivityincreases and
reduction of operatingcosts; (ii) a trainingprogram to upgrade skills of
technical supervisoryand managerial personnel;and (iii) pre-investmentand
technical studies including those for preparationof investmentsafter the
Project period.

      1. Mining and Plant Replacementand RehabilitationComponent

5.09      The mining and plant investmentcomponent would consist of a number of
projects designed to maintain the productive capacity of the existing
facilities. It would include replacementof worn and obsolete plant and mining
equipment,and rehabilitation sections of large plant facilities, in order to
                              of
eliminate bottlenecksor improve efficiency. This would include:

     (i)   in the mining operations: replacementof equipment and provision of
           spare parts used in drilling,       loading and transporting     ore, including
           loaders,  shovels, trucks,   drills,     bulldozers,   graders,  cranes and
           forklifts;improvement of communications           and truck dispatch   in
           open-pit mining; partial electrification trucks; installationof
                                                             of
           in-pit crushing and conveying equipment in the KOV open-pit;             and
           renewal and improvementof dewateringand ventilationequipment;
                                                 -41-


                                                  of
        (ii) in the concentrators: rehabilitation grinding and classification
             sections, flotation sections,and tailing retreatmentand disposal
             systems;

       (iii) in the metallurgicalplants: rehabilitation concentratehandling
                                                              of
             systems, leaching circuits,  and tailings   and solutions  treatment
             sections, as well as completion  of construction    of the Luilu
             electrorefinery;

        (iv)    in transport   and workshops:   acquisition     of rail cars for concentrate
                transport;   replacement  of worn rails;    replacement  of light vehicles,
                trucks, and buses; renewal of workshop machines; rehabilitation the      of
                foundry at the Central Workshop in Likasi; and

          (v) at central services: replacement of data processingequipment;
              improvementof telecommunications systems;acquisitionof medical
              equipment; and investmentsfor social servicesand administration.

          2.   Training   Component

5.10            ThL training    component   would   consist   of:

          (i) strengthening  of the Company's training   capability   at the head office
              through the creation  of two new units:  the Training Planning Unit,
              which would be responsiblefor collectingand processingall data on
              training needs and investigatingthe need to boost and assign
              manpower, equipment and financial resources in order to accomplish the
              Company's establishedgoals; the Managerial Level Technical Training
              Unit, which would be responsible for studying and proposing a policy
              and plan for the technical training of managerial     level personnel    and
              for coordinatingall managerial level trainingactivitiesboth abroad
              and in Zaire;

        (ii) at the Training Center for Managerial and Supervisorypersonnel:
             evaluation and reorientationof its activities;training for trainers
             abroad; strengtheningof practical training;organizationof specific
             courses on technical and commercial subjects in Zaire and abroad; and
             study on the creation      of a Technical   Training Center for managerial
             and supervisory     personnel.   Over a period of five years, there will be
             1,350 man-months of training      for managerial     and supervisory personnel;
             12 seminars a year, each lasting on average of 15 days for 15
             management staff and 24 seminars each lasting          an average of 15 days
             for 15 supervisors.       For the training    of top management personnel
             abroad there will be 25 three-month        fellowships   per year for five
             years;

       (iii)    review of on-the-job       training     and plant training    programs to introduce
                modern training      methods and to standardize        courses in centers
                throughout   the Company; trainingwhich will be given to about 3,000
                staff a year would require          additional   staff and materials.       The
                teaching   materials    and equipment will be renewed, particularly             in the
                case of hydraulic      and pneumatic equipment and electric          controls;
                                            -42-


     (iv)    on-the-job training for supervisors      in the open-pit mines under        the
             program developed by the technical      assistance team; and

      (v)    on-the-job theoretical  and practical    training   for   staff   in the
             procurementand purchasing   departments.


Background    and details   o. the training component may be found        in Annex4-3.

                        Studies and Technical Assistance
      3. Pre-Investme'nt,

5.11      The pre-investment and technical studies would supplement and complete
the changes initiated under the organizationalstudy and the mining assistance
carried out under the IDA-financed technicalassistance project (Credit No.
1336-ZR) to prepare for longer term developmentsand to analyze specific
activities with cost reduction potential. This would include:

      (i) provision of inventory managementspecialists,review of the
          requisitioning/ordering and warehousing systess and implementation of
          resulting action plan to reduce lead times in ordering and to improve
          inventorycontrol;

     (ii) provision of purchasing and procurement specialists,review of
          purchasingpractices, and implementation,in cooperationwith
          SONATRAD, of resulting action plan to improve on preparation of bid
          documentation, relations with suppliers, and negotiating skills;

     (iii) optimizationof open-pit mining operationsin selected areas such as
           truck dispatching and short-term (up to two years) planning;

     (iv) explorationwork within Gecamines'concession and feasibilityand
          engineering studies for future orientation of the Kipushi mine and
          developmentof the Tenke deposits;

      (v) a comprehensivereview of the Company's social activities,costs and
          their links to operations;and

     (vi) a comprehensivereview of the copper wirebars and cobalt markets, and
          preparationof a plan of progressivewirebsr replacement.

Draft terms of reference for these studies prepared by Gecamines were submitted
to the Bank for review at the time of negotiations.

D.    Project Implementationand Schedule

5.12      The various components of the Project will be implemented by
respective departmentsin Gecamines. For the replacementand rehabilitation
component, the managements of the different operating departmentswill provide
technical specifications, assist in bid evaluationand sanage all on-site work,
while procurementwill be handled by the purchasing division of Gecamines in
coordinationwith SONATRAD (paras. 6.12 and 6.13). For the trainingcomponent,
                                         -43-


the Department of Training will be responsible. The technical assistancewill
also involve the Supplies and Services Departmentand the Kolwezi production
group and would generally be coordinated by the Department for Planning and
Research. While in a Project of this nature, It is unavoidable that
implementationresponsibilities disseminatedthroughoutthe Company,
                                    be
Gecamines has the ability to carry out all tasks without undue burden on its
organizationalstructure. However, the Project is relativelyambitious and
exceeds past implementation     levels achieved by Gecamines,and the Company will
have to rely more heavily than in the past on outside contractorsfor
constructionand installation. In order to assure implementationof the Project
according to schedule Gecamines has reviewed the impact of outside contracting
on the basis of its own implementationcapacity with particularemphasis on
manpower requirements,and has submitted a proposal for allocation of
implementation responsibilities     to different departments of the Company and to
contractors.

5.13       The Project    activities     described  above represent   about 5 years of
Gecamines' rehabilitation       effort.    An implementation   schedule for the 3 project
componentsis given in Annex 5-1. The training componentwould be initiated in
1986, and the pre-investment         and technical studies componentwould be concluded
by December 1988. The replacementand rehabilitation              component would be carried
out between 1986 and end of 1990.

E.   Safety and EnvironmentalAspects

5.14      General worker protectionin underground and open pit mines is
governed by legislationconcerningoccupationalhealth and safety. Specific
hazards, such as noise, dust and gases, and mine hoisting cables, are the object
of Gecamines' regulations based on standards in Europe and the USA, and are well
controlledfrom health and safety perspective. In the surface facilitiesthe
standard of control is not as high and working conditionsin the old
pyrometallurgical plants are poor.

5.15          Solid Residues. Significant quantitiesof gaseous, liquid, and solid
wastes are generated in the large-scale recovery of metals from ores. Gecamines
utilizes conventionaltechnologyin the applicationof tailings ponds to remove
fine particulatematter and soluble organic residuesfrom tailings slurries.
Some of these tailings ponds cover large areas particularlyin the Kolwezi
region, but are very effectivesolids retention basins. Gecamines has done very
little so far to reclaim open pits, waste rock dumps and tailing disposal
areas. The major mining area at Kolwezi suffers from severe dust storms during
the dry months which present a health hazard to people in the region.      Gecamines
will be requested     to submit by December 31, 1986 to the Bank a plan of action to
help alleviate    this problem.

5.16       Gaseous and Particulate  Emissions.   The sulfur in the concentrates    is
almost totally   oxidized to sulfur dioxide.   In Gecamines' operations,    about one
quarter  of this sulfur dioxide is captured as sulfuric    acid and eventually
reports in solid wastes as calcium sulfate. The other three quarters are
dischargedfrom the stacks at the metallurgical     plants.    The gases and dust
                                         -44-


particles from these stacks disperse over the entire district but of course are
strongestwithin the plant and nearby town areas. The major air pollution
problem is encountered  in Lubumbashi due to low level emissions  of sulfur
dioxide and dust from the blast furnaces.   A project  currently underway will
greatly reduce this impact by use of cyclones and scrubbersand high level
discharge of cleaned gases.

5.17      Liquid Effluents. Large quantities of water and chemicalsare added
to the finely ground ore during concentrationand to concentratesduring the
leaching operations. This water, containingboth soluble and insoluble matter,
flows into neighboringstreams after it has been dischargedinto tailings ponds
or dams. Since 1974, Gecamines has monitored the effluents from their
operations. Typical results of monitoring the flows which discharge directly
from operationsor which drain mine and plant areas, and the river above and
below the operations,indicate that pH is within standards but total suspended
solids are well above. At the Luilu hydrometallurgical  plant proposed plant
improvementswill greatly reduce acid and metal losses. Until plant
improvementsare made at the zinc and acid plants it will be necessary to add
lime tc a pH of about 10 to neutralizeacids and remove soluble metals.
Ignoring the metal content of these suspended solids, while discharges from
plants and mines do not meet US and Canadian standards,the streams and rivers
do.

5.18        While monitoring       of pollution    levels by Gecamines is generally
adequate,   in practice    the quantities       of effluents exceed the limits accepted in
the industrialized      countries.     Gecamines has agreed to meet these standards   in
the future and submit to the Bank regular             reports on pollutioncontrol and
effluent dischargemonitoring, and to discuss with the Bank any further
correctivemeasures required.


      VI.      CAPITAL COSTS, FINANCING PLAN, PROCUREMENTAND DISBURSEMENT


A.   Capital    Costs

6.01      The total financing  required for the RehabilitationProject is
estimated at US$703 million,  excluding incrementalworking capital and interest
during construction,of which US$436 million, or 62Z in foreign exchange. Of
the total base cost of US$567.6 million about US$532 million (94%) will be
needed for the investmentsin physical facilities,US$31 million (5%) for
pre-investment and technical studies component,and US$5 million (12) for the
training component. Detailed Project costs estimates are presented in Annex 6-1
and summarized below.
                                                     -45-


                                         S&==7y of   Cgpital Cost EstmaLtes

                                   - -Z mnl1n-_        --    - - - i$    milUln    - _-- Z of   %Forelg
                                 Local Foreign Total         Local Forein         Total BaseCost &XbWge
 1.    PFehab1itationand
      ReplacCeUntEquipe

        Mlnirg                   4,917     7,172 12,089       89.4      130.4     219.8   38.8     59
        Cbocentrators              660     1,562 2,222        12.0       28.4      40.4    7.1     70
        Hetalluzgical   plants   2,464 3,922         6,386    44.8       71.3     116.1   20.5     61
        Others                    2,926 5,610 8,536           53.2      102.0     155.2   27.4     66
          Subtotal               10,967 18,266 29,233        199.4      332.1     531.5   93.8     62

 2.    Indrg                       138       138       276     2.5        2.5       5.0      .9    50

 3. Pre-lnvestmet and Teclical       Studies

        Pre-lnNTstment Studies     644       957     1,601    11.7       17.4      29.1    5.1     40
        Other Studies and T.A.      22        88       110     0.4        1.6       2.0    0.4     60
          Subtotal                 666     1,045     1,711    12.1       19.0      31.1    5.5     61

          Total Base Cost        11,770 19,393 31,163        214.0 352.6          567.6   100.0    62

      Physical Coitndes            930     1,441     2,371    16.9       26.2      43.1    7.6     61
      Price Contiesi             1,964     3,097     5,060    35.7       56.3      92.0   16.2     61

          Total Project Cost 14,664 23,986 38,648            266.6      436.1     702.7   123.8    62
          of wich    taxes       7,100         -     7,100   129.1        -       129.1   22.8       -


6.02          The capital     cost estimates     were prepared during 1984 by Gecamines'
Planning and Research Department based on previous experience                       with procurement
of similar     equipment, updated suppliers'            quotations     and engineering      studies.
Both base costs and the Project's            implementation        schedule were reviewed and
updated to end-1985.         The difficulty       in the cost estimation         has been to
determine     which equipment items can be considered               as rehabilitation       and
replacement      equipment, as compared to consumables and spares.                    Overall,
estimating     methods have been adequate and the capital                costs estimates        reviewed
extensively      during the May 1985 audit (para. 5.07), are considered                    reliable
particularly       since many of the items are equipment used regularly                   by Gecamines.
Physical     contingencies      of 5% have been assumed for mobile equipment and
equipment with little         installation     requirement      while 10% was estimated           for
investments      with high installation        content.      Price contingencies        are based on
escalation     of 7% each in 1986 and 1987, and 7.5%, 7.7% and 7.6% in 1988, 1989
and 1990, respectively,          both for foreign and local costs since the exchange rate
of the Zaire currency has been assumed to adjust in accordance                        with the
differential       between local and foreign price escalations               as a result       of
continued     Implementation      of the Government's        floating    exchange rate policy.
Consultant     services    for technical     studies     are estimated     on the basis of 160
man-months.
                                       -46-


6.03      About 33% of the investmentsare maintenance investments;59%
represent investments designed to improve productivity and reduce costs, and the
remaining 8% is mostly related to the completion of the electrorefineryaiming
at diversificationinto higher grade products. In response to the priority
needs of the Western group and its importance for the future of the Company,
about 62% of planned investmentsare allocated to this group, against 16% for
the South, 11% for the Center and 11% for not directly allocatable investments
(e.g., social services,telecommunications).

B.     Financing Plan

6.04       The financingplan of the Project is summarized below.

                               Financing Plan
                               (US$ million)

                                 Local        Foreign    Total        %
     Equity
       Gecamines                266.6          150.5     417.1        59

     Debt a/
       Bank                        -           110.0     110.0        16
       EEC-SYSMIN                  -            27.0      27.0         4
       ADB                         -            65.0      65.0         9
       EIB                         -            48.0      48.0         7
       CCE                         -            28.6      28.6         4
       Others (incl. Italy)        -             7.0       7.0         1
         Subtotal                  -           285.6     285.6        41

        Total Financing         266.6         436.1      702.7        100


a/ Additional financing from bilateral sources in the amount of about US$30
   million is expected to F'eavailable.

6.05        The Project would be financed about 59% by internal cash generation
and 41% by external sources. The proposed Bank financing from IBRD would cover
about 16% of the Project's total cost, and 25% of the total foreign exchange
requirements. The European Economic Community (through their Hinerals Systems
facility--SYSMIN),   the African Development Bank (ADB), the European Investment
Bank (EIB) and the French Caisse Centrale de CooperationEconomique (CCCE) would
cofinance the Rehabilitation   Program. The effectivenessof all loans/credits
would be a condition of effectivenessof the Bank loan. Gecamines is considered
capable of meeting its share of Project cost in local and foreign currencies
from internal cash generation (para. 7.05). Should the Project experience a
cost increase,   Gecamines has agreed to finance this increase by borrowing within
a maximum overall 50:50 debt to equity ratio which should not pose any major
problem given G.camines'profitabilityand ability to service debt.
                                           -47-


6.06      The proposedBank loan of US$110 million would be extended to
Gecamines for a period of 15 years, including 3 years of grace aud at the IBRD
interest rate plus a 10% premium -hereofas guaranteefee to the Government.
Gecamines will bear all foreign exchange risk and reinburse to the Government
the commitmentand service fees.

6.07          Althoughdebt service for external financingfor the Project would be
guaranteed by the Government,special trust arrangements                 would be made for the
Bank loan and other loans made directly to Gecamines on commercial terms,
considering     the substantial     amounts of financing      involved.    These would be
similar    to the set-aside     arrangement    established    under the Gecamines expansion
project    that have worked well since 1975. They provide for debt service to be
paid out of a special fund managed by an independent               commercial bank outside of
Zaire, the Union des Banques Arabes et Frangaise              (UBAF), of London.    The fund is
replenished by Gecamines by monthly allocations of 1/6 of the aggregate amount
of debt service due semi-annually,          directly     from export sales proceeds,   and
contain    at all times at least half of the followingsemi-annual debt service
payment due. Satisfactoryarrangementson the second trust fund would be a
                                   of
condition of effectiveness the proposed Bank loan.

C.    Procurement

6.08        Procurementfor all Bank-financeditems will follow the Bank's
procurementguidelines. Procurement of items financed by the other colenders
will follow the respectiveprocurement proceduresof these institutions. The
specific   allocation  of procurement packages was established during the
colenders'    meeting of March 1986.

6.09      The in-pit crushing and cor.veying unit,  the anode preparationmodule,
and the equipmentand spare parts, including transportto Zaire, will be
procured primarilythrough InternationalCompetitiveBidding (ICB) in accordance
with Bank's procurement  guidelines. However, equipmentand spare parts
amounting to about US$10 million, or about 9% of the proposed Bank loan amount
is to be procuredthrough Limited InternationalBidding (LIB) from at least 4
suppliers from at least 3 different countries, to replace or serve existingmine
and plant equipment. This would include    packages costing  less than US$300,000,
up to US$3 million. In addition, approximatelyUS$10 million, or about 9% of
the proposed Bank loan amount will be used for direct purchase of proprietary
equipment which will replace or add to proprietaryequipment already operating
in the mines and plants. Equipment items are grouped into packages designed to
achieve maximum efficiencyand economy under a complex financing package.
                                    -48-


6.10      Trainingand technical studies. Contracting for trainingstaff will
be handled by the Training Department of Gecamines and will be done following
procedures acceptableto the Bank. All technical studies will be contracted
under Bank Guidelines.

6.11      ContractReview. On the basis of Gecamines' list of procurement
packages, the Bank would do a prior review of bidding documents for packages
estimated to value more than US$300,000 each (representing about 98% of
equipment financing).  Packages below US$300,000 would be subject to post review
by the Bank.

D.    Allocation and Disbursementof IBRD Loan

6.12      The Bank loan of US$110 million would finance goods and services as
detailed in Annex 6-1 and as summarized below.

                             Allocation of IBRD
                               (US$ million)

                                   Loan Allocation       % of Expenditure
Categories                         Amount          z      to be Financed

1. In-Pit Crushing and Conveying      65.7      59.7     100% of foreign
                                                         expenditure

2. MetallurgicalPlant                 11.1      10.1

3. Equipment and Spare Parts:
   a. Mining                          13.8      12.6
   b. Mobile and Rail                  1.1       1.0       "
   c. Data Processing                 13.3      12.1       -     -

   d. Training                         0.2       0.2

4.   Training                          2.8        2.5

5. Studies                             1.0        0.9            "

6. Marketing Study                     0.1        0.1      "          "

7. Technical Assistance                0.9        0.8

     Total                           110.0      100.0
                                       -
                                                 -49-


All expenditures     will be fully documented except expenditures            In respect   of
contracts,    purchase orders,     or training    programs valued at less than US$50,000
whlch should be covered by Statement           of Expenditures.     In order to ensure that
funds for the proposed Project would be made available              when needed, a Special
Account to be operated by Gecamines would be established              with an initial deposit
of US$5 million, which would be withdrawn after effectiveness. The account
would be replenished      on the basis of documentaryevidence, to be provided to the
Bank by Gecamines, of payments made from the account for goods and services
required   for the Project.      It is expected      that the account would be used mainly
tor rcyments against      the training     and technical    studies  categories,    and for
equipment packages costing less than US$1 million.

5.13           The disbursement   profiles   for the Project         (Annex 6-3) are based on
estimates      of order placements,     payment schedules,        and expected delivery    times.
It differs      from the standard    country and industry         profiles  as the Project    is a
rehabilitation       project with limited    erection  work       and an implementation    period
considerably      less than a greenfield     project.   The       loan and credit are expected
to be fully disbursed by June 1992.


                                  VII. FINANCIAL ANALYSIS


7.01       Financial projectionsfor Gecamines have been preparedin current
US$ terms based on (i) assumed copper productionlevels of 470,000 tons; (ii)
forecast  capital and operating  costs taking into account the productivity
Improvement and cost reduction   impacts of the investment    program; and (iii)
expected metal prices.   The projections  are based on a prevailing      exchange rate
of Z 55 to the US dollar   (Feb. 1986) and the following   international     inflation
assumptions.

                             International        Inflation,     1986-95

                                             1986        1987     1988      1989    1990   1991-95

         InflationRate (Z p.a.)                  7.0      7.0      7.5       7.7     7.6         4.5

The exchange rate of the Zaire currency to the US dollar is expected to develop
in line with the differential between international and local iu'iation,   based
on the assumption that the Government will continue to implement its liberal
exchange rate policy.

A.     Revenues

7.02        The following    copper,    cobalt     and zinc     sales    volumes are expected:
                                                -50-


                             Gecamines- Metals Sales, 1985-95
                                      (000 tonnes)

                             1985        1986     1987        1988    1989    1990 and after
        Copper Sales          463         473      470         472     470       470
        Cobalt Sales           10          10       10          10      11        12
        Zinc Sales             64          65       65          65      65        65

Copper and zinc sales are based on the assumptionof Gecamines' full capacity
production  while cobalt sales are expected to remain at the relatively    low level
of 10,000 tpy until   1988, given the depressed cobalt market, and to increase    to
and remain at 12,000 tpy after 1990. Sales revenues are the result      of the
projected sales volumes and average metal price levels presented in Chapter
III. The price forecasts used for the projections     are summarized below.

                                 Price   Assumptions, 1985-95
                                            (USS/lb)

                                1985      1986         1987    1988    1989      1990      1995
 Constant Terms (1985)
   Copper                       0.64      0.65         0.64    0.64    0.66      0.68      0.74
   Cobalt                       7.30      6.80         7.40    7.50    7.50      7.80      8.00
   Zinc                         0.39      0.39         0.39    0.39    0.40      0.40      0.40

 Current Terms
   Copper                       0.64      0.67         0.71    0.76    0.84      0.94      1.29
   Cobalt                       7.30      7.00         8.20    8.90    9.60     10.70     13.90
   Zinc                         0.39      0.40         0.43    0.46    0.51      0.55      0.70

B.    Operating Costs

7.03         Operating cost projections      are based on Gecamines'present cost
structure,and the expecteddevelopmentof the different cost categories as a
result of the Project. The principalassumptionsare (i) reduction of
expatriate    labor to about half its current         level;    (ii)  increases    from 2,500 to
3,600 of local supervisory      staff and reduction         of the local labor force by about
8Z over the next 10 years; (iii)        increases    of wages and salaries         of supervisory
staff    by 25% in real terms, and of the labor force by 50% over 10 years, coupled
with a reductionof fringe benefitsreflected in a 15% decrease in costs for
services; (iv) an increase in consumablesand spare parts costs in real terms by
10% over 5 years because of the impact of opening of new open-pits                    and mining at
increaseddepths; and (iv) increasesIn electricityrates by 5% in real terms
over the 10-year projection period. Although the Project includesmeasures for
cost reductionsand productivityincreases in concentratorsand metallurgical
plants    and for more efficientmining, average productioncosts in real terms are
expected to vary only little       because of the cost increasing            impact of opening of
new pits and of mining at continuously          greater     depths.     Without the Project,
however, the production     costs would have increased            in real terms by about 2-3%
p.a.
                                    -51-


C.   Financial Projections

7.04      Projectionsof Gecamines' financial performancefor 1986-95 have been
prepared on the basis of detailed assumptions presented in Annex 7-1. Projected
financial statementsare given in Annexes 7-2 through 7-4 and summarized
overleaf. Gecamines is expected to remain a profitableoperationthroughout the
period, with profits after taxes increasing from US$36 million in 1985 (or 4% of
sales revenues) to US$105 million (or 7% of sales revenues) in 1990, and net
cash generation increasingfrom US$152 million in 1985 to US$258 million in
1990. Financial charges would increasemoderately as a result of the financing
arrangementsfor the Project from US$21 million in 1985 to a peak of US$34
million in 1991. The projectionsalso show continued strong capital and
liquidity positions,with debt to equity ratio remaining at all times below
15:85, the current ratio equal or higher than 3.0 and the quick ratio equal or
higher than 1.2. Debt service coverage ratio after taxes is expected to be
higher than 3.5 at all times; in addition, securityarrangementsoutlinedin
para. 6.07 establish a debt repayment mechanismwhich improves overall debt
service coverage.

7.05      Gecamines is expected to generate a substantialamount of cash, after
adequate levels of reinvestmentsand debt repayment,accumulatingover US$305
million over the period 1986-90.  While Gecamines has never paid dividends in
the past (except for 1984), Gecamines cash flow prospectsindicate that it
should be, largely as a result of the investmentproposed under the Project, in
a position to distributedividends again in the coming years while maintaining a
sound financialstructure. Dividend payments should take place only after
satisfactoryliquidity,indebtednessand debt service ratios are met, and after
taking into account the copper and cobalt market risks, the Company's future
investment program,and the requirementsto build up proper reservesfor
long-term expansionplans. The Governmentand Gecamines have agreed to have a
study carriedout and propose to the Bank by December 31, 1986 on appropriate
policy of dividendsdistributionwhich would, inter alia, determine (i) the
appropriate levels of capitalizationand liquidity ratios; (ii) the appropriate
levels of statutoryreserves; and (iii) the dividends (and form thereof)
payments allowable after taxation and creation of reserves. The proposal, after
Bank and Governmentapprovals,should be implementedstarting in fiscal year
1987.
                                                   -52-

                                 Geczrms   -   Sum.z, of Fin1al Perfome.             1985-91
                                               (US$mt4lw - awrs   term)

                                            19M85         1986     1987      1988       189        1990      1991
Sales (eveaae)

Copper                                     673.7      701.6        734.4    791.7      874.0      969.4   1,046.1
Cobalt                                     160.9      155.2        180.7    196.4      232.4      2839      302.6
zinc                                        54.8       57.6         61.5     64.5       73.0       78.6      833
Oter tals                                   18.2       19.7         24.0     23.1       24.5       26.2      28.0
  Natal Revem,es                           907.6      934.1      1,006    1,075.7    1 ).9      1,5.0     1,460.1
Other Sales                                 38.9       40.3         43.1     46.2       49.7       53.5      56.8
  Total       r~ues                        946.5      9741.      1,tVi3.6 11 21.9    1,25316    1,411.5   1,516.8

Operatit      and h4eting    Costs         826.0      860.6       912.2     %5.6 1,066.2        1,169.0   1,29.1

OperatingT      e120.5                                113.8        131.4    1563       1871       242.6     287.7
Finanaal urg                                20.8       21.4         23.0     26.1       293        33.9      33.5
Corporate l        I d ExpotVM
                            t               63.5       6514         70.0     753        843        95.1     102.2
Net Ine     After TaC                       36.1       27.0         383      54.9       73.8      104.8     127.1

Cash Flow

Internal Cah Generatim                     152.2      1509         160.8    184.6      214.0      257.5     282.9
Capital Eqmexpitxe                         151.0      150.0        160.0    180.0      170.0      108.0     160.0

Assets

Current Assets                           529.9        485.0        468.9     483.0      514.1     5491.     585.9
Acimalated Cbh Surplus/(dicit)            25.7         49.6         90.2     109.7      152.5     330.8     415.7
Net FMd Assets                         1,21814      1,228.0      1,250.6   1,278.1    1,306.3   1,2669    1,278.6
Othe Assets                               19.6         19.6         19.6      19.6       19.6      19.6      19.6
  Total                                1,818.3      182317       1,885.5   1,96914    2,073.1   2,242.1   2,367.6

Liabilitier     and FAiuty

Curreat Liablities                       1469         135.9        129.2     123.9      12D.2    122.2       126.6
Log'Term Debt                            132.5        117.6        145.9     173.5      230.7   285.1       274.2
ProvxiBsio                                76.1         76.1         76.1      76.1       76.1     76.1        76.1
Equity                                 1,440.2      1,467.2      1,505.6   1,560.5    1,634 3 1,739.1     1,866.2
  Total                                1,818.3      1,231J4      1,J85.5   1,96914    2,023.1 2,242.1     2367.6

Ratios

Opecating Ie       d Sal                    12.6          119       12.9     14.3        15.6      17.7      19.5
Net Profit   fSalS                           3.8           2.8       3.7      4.9         5.9       71.       8.4
Qwrent Ratio                                 3.1           3.0       3.0      3.0         3.9       3.9       4.0
QuicklRatio                                  1.5           1.3       1.2      1.2         1.6       1.7       1.7
L-T DEbt:Equity                             8:92          7:93      9:91    10:90       12:88     14:86     13:87
Debt rvi    Covera                           41.           4.0       3.8      3.9         3.8       714       6.6


a/ Estimated.
                                            -53-


D.    BreakevenAnalysis

7.06      Profit and cash breakeven prices have been calculatedfor copper on an
annual basis and are presented in the table below.

                  Gecamines- Breakeven Prices for Copper, 1986-90
                             (USe/lb - Current terms)

                                     1986          1987     1988        1989        1990

Profit breakevenprice (a)             62           64         68         74          80
Cash breakeven price (a)              '5           58         62         68          73
                     (b) -             3           56         59         64          65
Realized price                        67           71         76         84          94

Note:   (a) Under (a) the cash breakeven copper prices are calculatedon the
            basis of a prorata allocationof costs in accordancewith the
            products' shares in revenues.
        (b) Under (b) the cash breakeven copper prices are calculatedwith full
            crediting of co-products sales to copper.

Throughout the forecast     period,   Gecamines is expected to realize    copper prices
above its profit    breakeven point, providing a satisfactorycushion in the event
of a downturn of copper prices.         Cobalt also plays an important role,     since, as
a co-product,it considerably        improves the Company's ability    to sustain    low
copper prices;   this has been Gecamines' experience       in the late 1970s (para.
4.36), when low cobalt sales levels and prices compoundedan already difficult
copper situation    and Gecamines was losing money as a result. It also emphasizes
the need for the Company to define a cobalt productionand marketing strategy
that preserves   this situation     (para. 4.50).

E.    Sensitivity Analysis

7.07        The favorable situation presented above would, of course, be
compromisedif (i) the productivity increases and cost savings do not take place
as expected as a result     of the Project,    or take place with considerable         delays;
(ii) copper revenues do not materialize        because the targetedcopper production
levels cannot be met or copper price decrease further             in real terms; (iii)
Gecamines' cobalt sales revenues decrease         as a result     of uncarefully  planned
marketing approach.    Gecamines' future financial         position   has been examined
considering   (i) a possible   increase   in production     costs in real terms by 10%;
(ii) a decline in copper prices       by 5 cents/lb   until    1990; (iii) a production
decline by 35,000 tpy (from 470,000 tpy); (iv) a stabilization. cobalt       of
productionat 8,000 tpy (instead of 12,000 tpy); (v) and an increase in cobalt
prices by US$3/lb. The results are summarizedbelow.
                                                                          -54-


                                            Gecdzw   -Smuitivity                  Case Key Indicators
                                                (US$ million              -      airrent nu)

                                           1986                                                                      1987
                   High Prod    LowOa      Lw Oa        HighCGo [LOW                      HighProd      lac          LawOCIUHghCOn       LOWrOD
                     Cost       Price       Prod         Price   Pmd                        Cast        Price         Pmd     Prie        Pid

Sales Reens          974.4      963.6       949.1            997.2            958.9          1,043.6    1,020.7      1,010.9   1,092.5   1,007.5
Net Incae
   after 1mx         -59.0         17.2       8.1                  47.3          13.5         -52.9        17.4         13.9      77.6      6.8
Interml Cash
  Geneatio            64.8       141.1       131.9         171.2  137.4                         69.6       139.9  136.4   2D0.0   129.2
Equity             1,298.6     1,457.0     1,448.2      1,563.6 1,453.7                      1,245.7    1,474.8 1,462.1 1,565.1 1,460.5

Current Ratio          3.0        3.0         2.9                   3.0           3.0            3.0        3.0          3.0       3.1       3.0
L[rTDebt:Equity       8:92       7.93        8:92                  7:93          7:93          10:9D       9:91         9.91      9:91      9:91
Debt Servioe
  Coverage Ratio        1.7        3.8        3.5                  4.6            3.7            1.6        3.3          3.2       4.7       3.0
Cash Breaieven
  Cbpper Prlce           59         56         56                    54            56            62             59        60        56       61


        7.08          These indicators         confirm   that the Company's financial             situation     is
        likely     to remain healthy         even under difficult       operational     or market conditions.
        The only exception         is that of the sharp increase            in production       cost which would
        seriously     affect    the Company's financial         situation.        It also highlights         the need
        to keep strict       track of the parameters          it controls      most, namely its production
        costs and its cobalt          sales.      However, even if copper prices           failed      to recover as
        expected     during this period or if the cobalt market remained depressed,                          the
        Company's internal         cash generation      would still      be sufficient       to finance      its part
        of the Project       investments,        as well as replacement        investments,       and maintenance
        after    the Project      period.

        F.     Financial       Covenants

        7.09        In order to ensure the necessary                                financing  for the Project  and
        its completion    in a sound manner, agreement                               was reached on the following   financial
        covenants.

               (a)      from the     Government

                        (i)    that it would ensure that Gecamines has adequate      access to
                               sufficient    foreign exchange to complete the Project    and to
                               operate    the Company (para.  4.39);

                      (ii)     t.at   the financial     relations   between the Government and Gecamines
                               would be governed exclusively         by the existing  tax regime and by a
                               dividend   policy    acceptable    to the Bank (paras.   4.31 and 7.05); and

                     (iii)     that it will abide                   by the financial    covenants               to ensure
                               Gecamines'  viability                  and ability    to implement               the Project.
                                              -55-


      (b) from Gecamines

            (i) that it will prepare every year (a) 5-year financialprojections,
                including  its foreign exchange and local currency requirements,
                and (b) foreign exchange and local currency budgets on an annual
                basis;

           (ii) that, in any given year, it will not make capital investments,
                i.e., additionalto the slready approvedInvestmentProgram,
                exceeding in aggregate US$15 million without prior Bank approval;
                and

          (iii) that it will maintain a current ratio of at least 1.3 and a Latio
                of debt (excluding   short-term maturities thereof) to equity of
                not more than 40:60.

G.    Auditing    and Reporting     Requirements

7.10        All Gecamines companies would be requested            to submit to the Bank
annual reports     audited by independent      auditors   acceptable     to the Bank within 4
months of the end of the accountingyear. Gecamines has in the past been
audited by independentauditors acceptable to the Bank and no special
arrangementsfor selection of auditors have to be made. In addition to the
annual audit reports,       Gecamines will submit quarterly         financial    statements
within 45 days after the end of each quarter            and monthly project progress
reports   and procurement status      reports   within three weeks of the end of each
quarter.    Finally,    within 6 months after the closing date for the Project,
Gecamines will prepare and furnish         to the Bank a completion         report on the
Project   dealing with its Implementation,         and the costs and benefitsderived and
expected to be derived therefrom.          Gecamines record of the last 10 years on
reporting   to the Bank and alerting        the Bank on potential problemshas been
excellent   and no problem is expected to comply with the Bank's requirements.

H.    Financial    Rate of Return     and Sensitivity   Tests

7.11         The financial  rate of return    for the Project has been calculated           on an
incremental    basis in real terms.     For assessment    of the Project's     results    it was
assumed that without the Project,       output even from viable and competitive
operationswould decrease. The specific assumptionson productionand cost
development without Project      are subject   to a considerable   margin of uncertainty
depending on the adjustments       to low investment   levels by management, the
repercussions    on Gecamines finances,     and the impact on Zaire's      balance of
payments and creditworthiness. The main assumption made here is that,                  should
the Project not be implemented,       Gecamines' copper production would decrease at
1.5% p.a. from 465,000 tonnes in 1985 to about 437,000 tpy in 1990.

7.12      The cost and benefit      streams in real terms have been prepared on the
basis of the financial   projections     presented,    and are given in Annex 7-5.    Based
on these assumptions,  the incremental       financial   rate of return is 21% before
taxes and 16% after taxes.
                                     -56-


7.13       SensitivityTests. As could be expected from an incrementalanalysis,
the return is mostly sensitive to the assumptionsmade on the percentagedecline
in productionexpected should the Project not be implemented. If this
percentagevaries from 1.5% p.a. to 1% p.a. (447,000 tons in 1990), the return
decreases from 16% to 12%, demonstratingboth the financial risks of the Project
and the limited validity of an incremental analysis when applied to a Project of
this nature. The return is less sensitive to copper price variations,operating
costs or investmentcosts. Switching values have been calculatedto equal the
return to 12% after tax for the most sensitivevariables, and are presented
below in order of declining sensitivity. The most critical variable is the
productionlevel to be attained; with this clearly the main emphasis of the
Project and to a large extent under Gecamines'control, and on the basis of
Gecamines encouragingrecord of the last 3 years, the probabilityof the
switching values being reached is small in the 10-15% range. The Project's
return is also sensitive to metals prices over which Gecamines has little
(copper) or reasonablygood control (cobalt). Because of this favorable
copper-cobaltmix, and assuming a rationalapproach to cobalt sales the overall
downside risk on sales receipts is also small in the 15-20% range, a very
favorable and in fact rather unique situation for a copper producer.

                     Switching Values of Critical Variables

       Variable                                        SwitchingValue a/

       ProductionDecrease                                     -17
       Metals Prices                                          -22
       Production Costs                                       +29
       InvestmentCosts                                        +34

       a/ The percentagechange that reduces the financial rate of return after
          tax to 12%.

I.   Major Risks

7.14      The technicalrisks to the Project are small. The rehabilitation  and
                                                   in
replacement componentis relatively straightforward terms of teehnical design
and operation; it forms part of Gecamines' recurrent investmentneeds and has
taken adequatelyinto account on-going operating arrangements.

7.15      As discussed in Chapter IV, while Gecamines is not expected to
encounter difficultiesin marketing its copper production,it cannot be excluded
that copper prices decline more than has been assumed in the sensitivity
analysis in this Chapter and that cobalt prices and sales remain depressed.
Future copper price projections    are subject to considerable uncertainty,    and
while most experts expect some improvement,    there remains a non-negligeable
probability (in the 20-25% range) that prices remain below the low copper price
scenario presented in para. 7.08. The risk on cobalt sales is to a greater
extent controllableby Gecamines and a prudent marketing strategyshould
minimize this risk. However, given Gecamines'competitive cost structure and
                                 it
generally high profitability, is not considered to present a major problem
for Project implementation.    The Project is not expected to influence the general
level of copper prices, as Gecamines is expected to maintain its present share
of around 7% of the internationalcopper market.
                                              -57-


7.16        One of the main financial risks for Gecamines is the resumptionof
undue government interferences          in marketing,     introduction     of additional    tax
burdens,   and demands for transfer          of maximum amounts of net profits as dividends
without due regard to the Company's cash needs for operations                   and investment
financing. In order to minimize this risk, assuranceswould be sought from the
Government on clear financial          relations    with Gecamines governed by the existing
tax regime    and a suitable     dividend policy       (paras.4.3 and 7.05).         In order to
provide an adequate base for assessment             of its financial      needs, the Company
would revise its financial projectionsannually and submit them to the
Governmentand the Bank for review (para. 7.09 (b)(i)). The risk of
insufficientaccess to foreign exchange is low because of the right of Gecamines
to retain   45Z of its sales revenues net of marketing expenditures                  from metals in
foreign   currency    to service    its debt and cover its foreign exchange requirements
for operations     and investments       (para.  4.39).     Lastly,    the risk of inefficient
purchasingactivitieswould be minimized through the creation of SONATRAD
(para. 4.58).

7.17       Finally, there is also a managerial risk in this Project. The success
of the rehabilitation   program depends heavily on the managementwhose task is to
implement the Project successfullyand correct past practices that had led to a
deterioratingsituation. In order to assure effectivemanagement, assurances
would be sought on Bank consultation    before changes in the organization        are made
(para. 4.02).   Moreover, the training    program should improve technical       skills of
local employees and thus lay the basis for improvement,      and for the successful
introductionof cost effective production methods. Finally, the Project's
success depends heavily on the Government's and Gecamines' commitment to
transform  the agreed upon long-term   objectives  in a consistent     action program.
Gecamines has agreed to prepare during the Project      implementation     period and
submit by December 1989 a draft of its next 5-year investment        program for the
period 1991-1995,including the principal featuresof its program after 1995.


                               VIII. ECONOMIC ANALYSIS


8.01       The Project is an important element of the Government'sobjective to
improve Zaire's balance of payments through continuingexport and foreign
exchange earnings.     Gecamines' continued      ability    to generate      foreign exchange is
essential   to support the Government's     strategy      of diversification        of its
economic structure,    attract  foreign   capital,     and permit economic growth.
Gecamines is expected to generate       in current     terms a total of US$5.8 billion
gross foreign exchange over the next 5 years (or US$1.2 billion                  p.a. on the
average), which is expected to continue to represent over 55% of the country's
foreign exchange earnings. On a net basis, the net foreign inflow would amount
to US$3.2 billion over the next 5 years (or US$0.6 billion p.a. on the average),
after taking into account on the one hand foreign loan disbursements(US$0.3
billion), and, on the other, foreign exchange expendituresfor capital
investments (US$0.4 billion),operating costs (US$2.3 billion), and debt
servicing (US$0.2 billion).
                                                -58-


A.    EconomicRate of Return

8.02       The economic rate of return of the Project has been calculatedin real
terms, on an incrementalbasis based on the streams given in Annex 8-1. The
economic cost and benefit         streams are measured from the viewpoint of the economy
as a whole, and have been adjusted           to reflect    distortions       in the market prices
of the project     inputs and outputs.         They have been based on the same assumptions
used for the financial       return,    except for the exclusion           of all identifiable
taxes, as a standard conversionfactor of 1 was applied,                     which assumes that the
Government would continue         to apply exchange rate and tariff             policies   which would
eliminate  distortions      between international        and domestic price levels. As
expected for a project of this nature,            the economic rate of return            is high
amounting to 24%. As in the case of the financial                  return,     the economic return
is most sensitive      to the without-Project        production     levels.      Should the Project
prevent a drop in production          of only 1% p.a. during 1986-90, instead of 1.5Z
p.a., the return would still be acceptable              at 17%. As the financial           return, the
economic return is less sensitive to variations in revenues, operating costs,
and investmentcosts.

B.    Foreign ExchangeBenefits

8.03      The net foreign exchange benefits of the Project are high since
Gecamines generates 10OZ foreign exchange from export sales of copper, cobalt,
and zinc; and about 45% of its cost,  in addition to the service of foreign debt,
is in foreign exchange.

8.04         Incrementalforeign exchange benefits have been calculatedbased on
the streams for the incremental        financial    rate of return plus debt-service        on
foreign financing.       Metal revenues have been calculated         as 100% foreign
exchange, as practically      all incremental      production   will be exported.       The
foreign exchangeportion of operationsand capital costs include the direct and
indirect    foreign exchange costs.       The total    foreign exchange portion for
operating    and capital   costs are about 45% and 60%, respectively.           The resulting
incremental     net foreign exchange benefits       of the Project    are considerable,
averaging    about US$66 million    p.a. in current       terms over the next 5 years (Annex
8-2).

C.    Other   Benefits

8.05        Other macro-economic   benefits    are the financial  revenues which will
accrue to the Government (income and other taxes).          On the basis of the present
taxation  system, during the next 5 years, Gecamines is expected to pay about
US$0.9 billion    in direct  and indirect   taxes,   (or US$180 million p.a.), of which
US$0.4 billion    in export and corporate    taxes and US$0.5 billion in other taxes
including import duties. Substantial additionalbenefits could accrue to the
Governmentfrom dividend payments.

8.06        As a part of the institution building effort, trainingprograms
will be institutedfor Gecamines. The unquantifiable      economic benefits of
training add to the attractivenessof the Project. Finally, the Bank will be
working closely   with Gecamines to help prepare a sound investmentprogram for
its long-term   development.
                                                 -59-


                      IX.            REACHED
                            AGREEMENTS      ANDRECOMENDATIONS


9.01           The following   agreements     have been reached:

       (a)    With the Government     that:

               (i)   it would consult with the Bank prior to any decision affecting
                     the organizationof the Gecamines group (para. 4.02);

             (ii) it would consult with the Bank before making any changes      to the
                  tax regime governing Gecamines' finances (para. 4.31);

             (iii) it would continue to allow Gecamines to retain 45Z of its foreign
                   exchangeearnings (para. 4.39);

             (iv) financialrelations between the Government and Gecamines would be
                  governed exclusively  by the existing tax regulationsand the
                  dividend  policy to be agreed upon between the Company and the
                  Government, and that no sales without proper and prompt
                  compensationwould take place (para. 4.40);

               (v) along with Gecamines, it would be requested to discuss with the
                   Bank its expansion investment plans and the structure of the
                   partnershipenvisaged for such investment(para. 5.05);

             (vi) along with Gecamines, it would have a study carried out and
                  propose to the Bank, by December 31, 1986, an appropriatepolicy
                  of dividends distribution (para. 7.05); and

             (vii) it will abide by the financial covenants for Gecamines as
                   described in para. ,.09.

       (b) With Gecamines/Holdingthat:

               it would consult with the Bank prior to any decision affecting the
               organization of the Gecamines group (para. 4.02).

       (c) With Gecamines/Exploitation
                                     that:

               (i) it would establish, by September 30, 1986, an adequatelystaffed
                   corporate planning and strategy department reporting to the
                   Director General (para. 4.07);

              (ii)   it would prepare, by December 31, 1986, a plan to implement its
                     stated policy of gradually increasing wages over the next several
                     years and of reducing fringe benefits (para. 4.15);

             (iii) it would prepare, not later than December 31, 1986, a
                   comprehensivemanpower developmentand training program for its
                   supervisorystaff (para. 4.18);
                                  -60-


    (iv)   it would present by December 31, 1986 a plan to reorganize its
           mine planningat all mining divisions,and particularly  at the
           Kolwezi open-pits (para. 4.22)

     (v) it would submit for the Bank's review, by December 31, 1986, a
         program for cost accounting,cost control and cost reduction by
         productioncenter (para. 4.32);

    (vi) it would submit half-yearly external audited reports of its
         commercial operations(para. 4.42);

   (vii) it would submit quarterly external audited reports of its
         purchasing operations(para. 4.58);

  (viii) it would submit at regular intervals reports on pollution control
         and discuss corrective measures required (para. 5.18);

    (ix) it would finance cost overrun on the Project within     a maximum
         overall 50:50 debt to equity ratio (para. 6.05);

     (x) it would abide by the financial covenantsdescribed in para.
         7.09; and

    (xi)   it would prepare and submit   to the Bank not later than December
           1989 a draft of its 1991-95   investment program (para. 7.17).

(d) With Gecamines/Commerciale   that:

     (i) it would not amend its Marketing Agreement with
         Gecamines/Exploitation without Bank prior approval (para. 4.42);

    (ii)   it would have its operationsaudited half-yearly (para. 4.42);

   (iii) it would market its products on the basis of arm's length
         arrangements (para. 4.43); and

    (iv) it would prepare, not later than June 30, 1987, ,- plan defining
         its strategy for marketing wirebars (para. 4.4B) and cobalt
         (para. 4.49).

(e) With SONATRAD that:

     (i) it would not amend its PurchasingAgreement with Gecamines/
         Exploitationwithout Bank prior approval (para. 4.58);

    (ii) it would have its operationsaudited quarterly (para. 4.58);      arid
                                     -61-


        (iii) its thresholdwould be reviewedevery six months and could not be
              changedwithout prior Bank's approval.

9.02     A conditionof effectivenessof the proposedBank loan would be the
effectivenessof all other loans/creditsfor the Project (para. 6.05). An
additional conditionof effectivenesswould be signing of satisfactoryset-aside
arrangementsfor the Bank Loan (para. 6.07).

9.03      On the basis of the preceding commitmentsand agreements,the Project
is suitable for a Bank loan amounting to US$110 million for 15 years, including
3 years of grace.




Industry Department
March 1986
                                    -62-                                  ANNEX 2-1


                      ZAIRE - GECAMINES REHABILITATIONPROJECT
                            NON-COPPER MINING ACTIVITIES


Diamonds

1.            Zaire is the world's leading industrialdiamond producer, accounting
in 1984 for 29% in volume of world mine production. This industry has been an
important earner of foreign exchange, contributingbetween 4X (1981) and 13%
(1984) of Zaire's foreign exchange earnings over the past decade. Diamond
extractiot     is carried   out in two ways: industrial productionby the Societe
Niniare de Bakwanga (MIBA), a state-owned company managed by the Societe
d'Entrepriseet d'Investissements                                        1
                                          which also owns 20Z of MIBA. / Between 1978
and 1982, exports from MIRA deposits at Mbuji-Mayi in the Kasai Oriental
province representedapproximately881 of Zaire's total officiallyrecorded
diamond exports. Individual prospectorsaccount for the rest of Zaire's
diamonds production: artisanal diggers operate near Tshikapa in Kasai Oriental
and illicit mining on the MIBA concession also occupies some 15,000 people.
Officials of that company estimate that in the past up to 5 million carats of
industrial     diamonds have been smuggled out of its concessionarea annually and
sold illegally.       Total recorded   production   more than tripled  from 6 million
carats     in 1982 to 18.5 million    carats   in 1984, with MIBA's production  growing
from 5.7 to 7.0 million        carats during that period and the remainder being
produced by artisans.

2.          Although diamond mining is by far not as important overall   as copper,
its impact on the regional     economy in Kasai Oriental is substantial as it
provides   the base of living for at least 100,000 people. AlthoughMIBA's
activities declined until 1982, small-scalemining induced by illicit trade and
subsequentlythe Government's liberalizationof private diamond purchases may
well have couLterbalanced     this company's decreasing importanceand contributed
to maintaining   an economic boom in the area around Mbuji Mayi which is estimated
to be among Zaire's   fastest   growing cities.

Gold

3.           A state-owned   company, the Office des Mines d'Or de Kilo-Moto,is the
most important      gold producer in Zaire. Other producers include Societe Miniere
et Industrielle      de Kivu (SOMINKI) and Gecamines.  Kilo-Moto operates  several
mines in a remote area near the Uganda and Sudan borders in the Haut-Zaire
province,    and faces serious   logistical problems.  Its output has declined
steadily from about 4 tonnes in 1968 less than one tonne in 1980, mostly on
account of managementweaknesses, departure of expatriates,obsolete equipment,

1/     This public limited liability company registeredin Belgium, is
       controlledby Societe Generale de Belgique, which owns 53% of the
       share capital; De Beers ConsolidatedMines owns 19%.
                                                                            ANNEX 2-1
                                        -63-                                Page 2 of 2

and lack of imported raw materials and spare parts, but admittedlythe
production   may have been higher and exported    illegally.      The gold produced by
Kilo-Moto is refined     at Hoboken (Belgium) and sold by Its own office in
Brussels.    Kilo-Moto's   reserves are estimated at approximately90 tonnes, or 2.9
million troy ounces of gold. A reversal of the sharp decline in Kilo-Moto's
output calls    for the development of new reserves;      the replacement  of the
obsolete processingfacility;and changes to the marketing arrangements
presently in effect.

Manganese

4.        Since the closure in 1975 of the Benguela railways, its sole viable
export route, the state-ownedcompany, Soci&te Miniere de Kisenge (SMK) has
considerablyreduced manganese ore productionand stopped ore shipments, in
effect building up ore inventories. Since the technical reopeningof the
railways in July 1979, a few tonnes of manganese have been shipped: some 21,000
tonnes arrived at Lobito (Angola),between April 1979 and April, 1981. At the
beginning of July 1984, the company had a total stock of over 1 million tonnes
of manganese ore awaiting export. The 500 workers still on the payroll of the
company are subsidizedby the Government. The company is reportedlyconsidering
building a refinerywhich would convert the manganese carbonateinto electrolyte
manganese oxide for battery manufacture.

Tin

5.            Societe Miniare et Industrielledu Kivu (SOMINKI),a joint venture of
the Government of Zaire (28%) and Cogemin (72%), of the Belgo-French      Empain
group, is a company based in the Kivu provincewhich producesmainly
cassiterite,     but also some gold, wolframite,   columbo-tantalite and monazite.
The company is also acting on behalf of SOMIKIVU(90% owned by the U.S.-based
Metallurgy     Mining Group and 10% by the Empain group) in order to exploit
deposits     of niobium (used in nuclear reactors)    in Kivu.

6.            Societe ZAIRETAIN is a tin and tungsten producer in the Northern Shaba
province which is owned 50% by the Government and 50Z by Geomines Cie, of
Belgium.      ZAIRETAIN has encountered         increasing  difficulties    in recent years
because of lack of exploration            work, depletion   of secondary,     weathered ore and
technical     difficulties      in crushing and grinding     the underlying     primary ore, and
insufficient       availability    of foreign exchange for operational         equipment supplies
and spare parts,         and investments.      Additional  adverse factors     have been
increasing     restrictionsin expatriate employment,insufficienttraining of
Zairians     to take over their positions,          and low attractiveness     of the company's
location.




Industry Department
December 1985
                                                                          ANNEX 3-1
                                     -64-

                                   ZAIRE
                                REHABILITATIONPROJECT
                        GECAMINES

                                   THE ZINC MARKET


1.         World reserves of zinc are estimated at 162 million tonnes
(containedmetal), of which 61 million tonnes (38Z) are located in Australia,
Canada and the USA. The remaining reserves     are w:dely distributed   in many
countries.   In addition  163 million tonnes of resources  are known. Zinc is
commonly found in association   with other metals,  with 60X and 10% of mine
production  obtained from zinc-lead ores and zinc-copper   ores, respectively.

2.       The following table summarizes the recent developmentof zinc
production.

                                      Zinc
                       World Mine Production. 1960-83 a/
                                 ('000 tonnes)

                            1960       1965     1970      1975     1980      1983

Industrialized   Countries
   Canada                    369        746    1,139     1,230    1,059     1,070
   United States             396        554      496       468      348       302
   Australia                 322        355      484       501      495       695
   Japan                     157        221      280       254      238       234
   Other                     556        558      723       701    1,016       965
     Subtotal              1,800      2,434    3,122     3,154    3,156     3,266

DevelopingCountries
   Peru                      157        255      316       365      488       527
   Mexico                    271        225      266       221      243       252
   South Africa               25         30       54        67       82       108
   Zaire                      83         91       87        80       67        82
   Other                     258        280      343       588      510       545
     Subtotal                794        88i    1,066     1,321    1,390     1,514

     Total                 2,594      3,315    4,188     4,475    4,546     4,780

a/ Excludes CPEs.

Source: World Metal Statistics,World Bureau of Metal Statistics (WBMS).

               As shown in the above table, Canada, Australia,and the United
States    accounted for 43Z of world mine production      in 1983, and other
industrialized      countries  accounted for another   25%. Developing countries
accounted for 32%, with Peru contributing        the major share of 11%. Three
countries      -  Australia,  Canada, and Peru accounted for 55% of the zinc ore
export trade.       Secondary production   from old scrap is relatively   small
compared to other metals,       estimated at 5Z of refined   production.
                                                                    ANNEX 3-1
                                                                    Page 2 of 4


3.         World zinc productiongrew strongly in the 1960's but stagnated in
                                                        in
the 1970's. New capacity came on stream, particularly the Tara mine in
Ireland and the Rubilas in Spain, in the mid-seventies,resulting in lower
overall capacity utlllzation (80-85%)in the late seventies. However, mlne
productionwas limited by strikes in North America and Ireland from 1979 to
1981, preventing  a build-up in concentrate stocks. Zinc mining capacityis
largely controlledby eight companies holding directly and indirectlyover
fifty percent of mining capacity. During periods of low prices, mine
production is as a result more readily adjusted to demand than is the case
for other metals. Discoveries of large zinc deposits, in recent years should
assure an adequate supply, although some of these deposits require prices
which are considerablyhigher than recent levels,   to be viable.

4.        There has been a shift    in zinc refining to producing countries     away
from consuming countries, resulting    in a surplus of refining   capacity  and
closure of older facilities,particularlyin the USA. Host of the newer
plants are based on electrolyticprocesses,which now represent 75% of
refining capacity,as opposed to 25% for pyrometallurgical       plants.

                                      Zinc
                       World Slab Production, 1960-83 a/
                                 ('000 tonnes)

                            1960      1965      1970      1975     1980      1983
IndustrializedCountries
   Canada                    237       325       418       427      592       617
   United States             792       978       866       450      370       296
   Australia                 122       202       268       201      301       303
   Japan                     181       368       676       698      735       701
   Germany, FR               192       182       301       295      365       356
   Other                     729       820     1,073     1,086    1,365     1.404
     Subtotal              2,253     2,875     3,602     3,157    3,728     3,677

Developing Countries
   Peru                       33        61        69        63        64      155
   Mexico                     53        63        85       163       145      180
   South Africa               -         -         27        66        81       83
   Zaire                      53        57        64        61        44       62
   Other                      47        79       127       258       39b      459
     Subtotal                186       260       372       611       730      939

     Total                 2,439     3,135     3,974     3,768    4,458     4,616

a/ Excludes CPEs.

Source: World Metal Statistics,World Bureau of Metal Statistics(WBMS).
                                    -66-                             ANNEX3-1
                                                                     Page 3 of 4


5.            The major uses of zinc are in galvanizing (40% of consumption)aa a
protectivecoating for steel products; die castings (20%) for automotiveand
other hardware; and brass products (20%) In plumbing,electrical,and other
applications.      Use in galvanizing  has expanded but growth has been restrained
by developmentof new processes,such as electrogalvanizing            which permit more
efficient     use of zinc.   With downsizing of automobiles    during the seventies,
zinc lost market share to plastics, but developmentof thin wall diecastings
which are lighterand of higher quality than plastics arrested the
downtrend. Other uses of zinc include zinc oxides in rubber products, and in
other chemicals,     rolled zinc in dry cell batteries,     and recently  in coinage.

6.          Zinc consumption grew strongly    during the sixties,   but stagnated
from the mid-seventiesto the early eighties due to lower consumption in
automotiveuses, and more efficient use of zinc in many applications. Zinc
consumptionis concentratedin the transportation          and construction
industries,and their cyclical nature makes for volatile demand on a year to
year basis.     Growth in demand is projected    to average 2.3% during the
 1985-1995 period.

                                       Zinc
                        World Slab Consumption,  1960-83 a!
                                   (t000 tonnes)

                            1960      1965      1970      1975      1980      1983

Industrialized Countries
   United States           796       1,221     1,077       839       810       770
   Japan                   198         322       623       563       752       771
   Germany, FR             297         334       396       297       406       418
   France                  172         278       220       222       330       275
   Italy                    85         186       178       150       236       207
   Other                   736         685       953       845       918       903
     Subtotal            2,284       3,026     3,447     2,916     3,452     3,344

Developing Countries
   Brazil                     31        32        52        82       138       102
   Mexico                     23        33        48        63        88        89
   Korea, R.                 n.a       n.a       n.a        24        68       ill
   India                      60        70        97        82        95        82
   Other                      43       140       220       375       569       591
     Subtotal                157       275       406       626       958       975

   Total                   2,441     3,301     3,864     3,542     4,410     4,318


a/ Excludes CPEs.

7.         There are three principal price quotations for zinc -- the US
producer price, the producer price outside North America (commonly known as
the European producerprice), and the London Metal Exchange (LME) price.
Most trade in zinc concentratesand metal is based on the producer prices.
However, the LME price better   reflects    free market conditions. The evolution
in LME prices as well as projections     are given in the table below.
                                                        ANNEX 3-1
                                  -67-                  Page 4 of 4


                            LME Zinc Prices
                          Actual and Projected
                            (US$ per pound)


            Year          Current Terms          1983 $ Terms
Actual
            1965                0.14                0.41
            1966                0.13                0.36
            1967                0.12                0.34
            1968                0.12                0.31
            1969                0.13                0.32

             1970               0.13                0.32
             1971               0.14                0.31
             1972               0.17                0.37
             1973               0.39                0.79
             1974               0.56                1.05

            1975                0.34                0.58
            1976                0.32                0.53
            1977                0.27                0.41
            1978                0.27                0.38
            1979                0.34                0.44

             1980               0.34                0.42
             1981               0.38                0.42
             1982               0.34                0.35
             1983               0.35                0.35
             1984               0.42                0.43
             1985               0.38                0.36
Projected

             1986               0.36                0.34

             1990               0.56                 0.41

             1995               0.69                0.41


Source: Metals Week (Actual).
        Bank forecasts.




Industry Department
March 1986
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                                          -70-
                                                                                  ANNEX 4-3


                      ZAIRE - GECAMINES REHABILITATIONPROJECT

                                         MANPOWER AND TRAINING
                    GECAMINES/EXPLOITATION


                          I. Gecamines'Staffing Situation

1.           Number of staff. In May 1985 GCM had a staff of 36,787, made up
of 162 directors (directeuro),1,248 managerial staff (cadres),1,779
supervisory staff (agents de analtrise)     and 33,598 workers (agents
d'execution) (Table 1). Expatriate staff numbered 648, i.e. 1.8% of the
company's total staff. This number was made up of 81 directors compared to
81 Zairian, 368 managerial staff compared to 880 Zairian, and 199
supervisory staff compared to 1,580 Zairian. In 1984 expatriatesalaries
(before tax) and benefits accounted for 27.69% of total labor costs. This
created a serious problem at GCM, which came under heavy Government
pressure   to cut back rapidly    on the number of expatriates,    not to mention
the internal    complications  of having two quite different    salary systems for
the same level of responsibility.

2.            The GC4 Management plans to cut the number of expatriates                 by 5-6%
each year.      As most of them occupy key posts their replacement                with
Zairians    is proving extremely     difficult.     In order to carry this out with
as little     upheaval as possible,     steps should be taken to identify             Zairian
staff who show potential,      organize virtually        -tailor-made'      training    for
them, and conduct periodic evaluationsof their performance,which could
perhaps be done while the expatriates are away on leave. So far there has
been no sign of such a program. Most expatriatedepartures seem to have
been decided on in a hurry and in response            to political      pressure rather
than in accordance     with a pre-established       plan based on service
priorities.      There has therefore      been a feeling      of insecurity     and
bitterness among expatriates,        many of whom have helped to ensure the smooth
running of the Company for years.

3.           Salary structure. GCM staff are, in general, by far the best
paid comparedwith other public or private sectors in Zaire. Because of
the austeritymeasures imposed by the Government,however, basic salaries
have not kept pace with the rate of inflation in the past five years.
Following the example of other State corporations,            the GC4 Management has
therefore    had to increase    its contribution    in the form of allowances       and
benefits paid and provided. Total monetary pay accounts, on average, for
only 47.7% of total labor costs compared to 52.32 for benefitspaid and
provided by the Company. For workers, in particular,monetary pay
represented 30% of total pay for this category of staff in 1984, while
                                                    f
social benefits accounted for 70Z. Aware -- this siLuQ_inn, the Management
wanted to correct these distortions, the harmful consequencesof which have
already    begun to appear.     In several    cases there are reports      of a decline
in motivation,      an increase   in absenteeism,   a relaxation     in discipline   and
less respect     for the production    equipment.    A new pay system is under
study, which would be based on the responsibilities             of the post occupied,
production     performance and respect     for the equipment.      Because of political
                                                                 ANNEX 4-3
                                    -71-                         Page 2 of 9


constraints,however,GCH's room to maneuver in terms of wage policy will
remain extremely      limited:    motivation for better productivity cannot be
translated   into substantial      increases as long as the social benefits
received   constitute     the bulk of total pay.

4.        Training   level of workers. In July 1984 the operating personnel
(main-d'oeuvre   d'execution- MOE) or workers comprised 7,915 laborers
(241), 19,211 semi-skilledworkers (57Z), 5,137 skilled workers (15X) and
1,281 highly skilled workers (4Z), i.e. 33,544 workers in all; 11% of these
were trained at technical schools, 89% were trainedeither on the job or at
company trainingcenters (Table 2). Semi-skilledworkers therefore account
for the bulk of the operating personnel. To upgrade the skill level of
these workers the concept of in-house trainingwould have to be radically
revised, since it is not at present geared to technological   development or
to the labor structure of a company expected to compete wi-. other
internationalcompanies. Such a revision would have'to meet the following
criteria: (i) comply with long-term production goals; (ii) establish
cohesion among the different training courses within a trade or group of
trades; and (iii) encourage young staff with a certain level of training to
take part in advanced training courses through a realisticmotivation
policy, guaranteeing them career development opportunities.

5.        Age of staff. Most of the Zairian managerialstaff are in the
31-40 age bracket; there are 23,500 staff under 41, i.e. 651 of the total
staff (Table 3).   If retirementage were set at 59 there would be ?0
departures of African managerial staff, about 2,000 departures of workers
and 114 departures of expatriatemanagerial staff between now and .89.
The departures of Zairian staff will not cause much of a problem. n fact
the departure of those in the worker category is even desirable, since this
will enable GCM to replace poorly trained workers with low productivity
with young people who are better educated and more adaptable to
technologicalchange. According to labor legislationin Zaire, however,
employees who reach the age of 59 are entitled to retire but cannot be
forced to retire without their consent. GCH has approachedthe Department
of Labor and Social Welfare with a view to obtaining the right to terminate
staff whose work is no longer satisfactoryat age 59. There is little hope
of these steps proving successful,given the large package of social
benefits offered to active staff and the difficulties encountered by the
State-run Pension Fund (Caissede Pension) in meeting its commitments
vis-A-vis pensionedworkers.

                          II.   Personnel Management

6.         The PersonnelDirectorate,which was reorganized in 1982, is
divided into two departments:the Personnel     Management Department and the
Staff Training  Department. This new structure    is characterized  by: (i) the
addition of two new divisions,i.e. the Manpower Planning and Control
Division (Divisionde la Planificationet du Contr8ledes Effectifs) and
the Professi.2nal Qualificationand Promotion Division (Divisionde la
Qualificationet de la Promotion Professionnelles);     (ii)    the
                                      -72-                             ANNEX 4-3
                                                                       Page 3 of 9


decentralization decision-making
                 of                with regard to personnelmanagement at
the different levels of responsibility,in accordance with a set of
regulationsprepared for the purpose; and (iii) the incorporation of
training within personnel management through the establishmentof the Staff
Training Department.

7.            Manpower planning is now an integral part of the Company's
overall    planning and management.   Managers at the production   unit level are
required    to forecast  their manpower needs and to prepare their manpower
plans,   in terms of activity   and production programs,  in accordance   with the
policies    and rules governing the creationor eliminationof posts.        At the
central level the Manpower Planning and Control Division studies        and, if
necessary, revises the manpower plans proposed by the productionunits and
is in charge of monitoring and supervising their implementation.

8.        The ProfessionalQualificationand Promotion Division is
responsible for conducting qualitativestaff evaluations. It is
responsible for: (i)'updatingjob classifications,(ii) establishing
standards for professionalqualificationsfor each category of staff, (iii)
organizing evaluation tests for switching from one category to another, and
(iv) ensuring the best possible match between staff and jobs.

9.         Based on a comparisonof the internal supply of staff and the
Company's quantitativeand qualitativeneeds, the central personnel
departments are able to prepare recruitment,training,career development
and successionprograms.          Training  is therefore   no longer an isolated
activity;   instead,    it is incorporated     within production, plays a role in
improving productivity       and, at the same time, aims at giving every employee
the opportunity      to progress    in his career.

10.         The existence      of the new structure undoubtedly    makes it easier  to
control  the staffing     situation   and ensure a fairer    and more rational  use of
human resources.      Some major moves have also been made by the Management,
viz: (i) the establishmentof the Manpower Committee chaired by the
President/Managing     Director of the Company, whose mandate consists of
formulatinggeneral policy for training and retrainingand examining key
strategiesand policies for personnel administrationand management; (ii)
the adoption of new rules and proceduresand the assignmentand hiring of
staff to make management more clear-cut and less arbitrary;(iii) the
appointment of personnel management department          heads to all operating
centers and to the main functional departments.

11.          These efforts are indicativeof the desire of the Directorate to
give the Company a personnel       management system that is both coherent and
effective.     At the organizational      level the results    are visibly
significant.     It will take another two years at least,          however, before the
system which has been put in place can really            become operational.
Procedures    for the processing     of personnel   statistics    have not yet been
fully mastered,     since the data are not yet being presented in a usable
format, which could periodically         provide managers with an accurateand
complete set of performance       indicators.     The manpower plans have been
                                   -73-                          ANNEX 4-3
                                                                 Page 4 of 9


prepared   on the basis of the annual needs of each production    unit but the
quality   of this work varies    from one unit to the next and the 12-month time
frame does not give sufficient scope to prepare a long-term trainingplan
aimed at the supervisory    staff and the highly skilled   staff.  The personnel
department   heads do not all have the necessary training or the experience
and know-how needed to handle the role of manpower planner and training
coordinator. The job classificationprepared some twenty years ago is also
in the process of revision. The ProfessionalQualificationand Promotion
Division, led by a top-levelexpatriate expert, does not have sufficient
trained staff to accomplishthis important and tedious operationwhile at
the same time fully assuming the responsibilities      outlined in paragraph 8.
Technical assistancewould be needed to remedy this situation. The main
purpose of such assistancewould be to help to prepare the methodologyused
to classifiedGCM jobs and to train the nationalanalysts responsiblefor
continuing this work.

                         III. Training at Gecamines

12.         Vocational training at GCM comprises: Ci)classroom instruction,
(ii) technicel in-house training, (iii) trainingfor managerial and
supervisory personnel,(iv) traineeships(stages)abroad. All this
training is administeredat the central level by the Staff Training
Department.    This department   also manages the Centre de Formation des
Cadres et des Agents de la MaItrise - CFC (TrainingCenter for Managerial
and SupervisoryPersonnel), the Institut Technique de Mutoshi - UMT
(MutoshiTechnical Institute),and the Technical Training Division.
Proposals have been made at appraisal,which would make the organizationof
training more efficientand coherent. They consist in: (i) merging the
,-utoshi Technical Institute with the Technical Training Division, which
already supervisesthe vocational institutesand in-house training; (ii)
establishingtwo new units, one of which would be in charge of technical
training for managerial    personnel,  the other being responsible  for training
planning at GCM.

13.       Classroom instruction. Classroom instruction is provided by a
network of establishmentscomprising:

     (i) The Mutoshi Technical Institute,which trains A2 level
         technicians (five years after orientationcycle) in electronics
         and general mechanicalengineering and A3 level skilled workers
         (three years after orientation cycle) in mining, maintenance
         engineeringand metallurgy. There are a total of 800 students
         for the two levels and, on average, it produces 50 A2 and 50 A3
         graduates each year. The curricula are those establishedby the
         State but the quality of the teaching is far superior to that in
         the public schools. The success rate in the State examinations
         is by far the highest in the Shaba Region and even in the
         country.  This success is attributable to several factors:   (i)
         the teachers (instructors) are better trained and better paid --
         generally 10-15 times better paid than State teachers; (ii)
         enrollmentis based on the establishment'scapacityand entry is
                                                                                   ANNEX 4-3
                                                                                   Page 5 of 9


             more carefully screened; (iii) the operatingallocations to GCK
             schools are based on their needs, unlike the situatlon in the
             public schools.    However, although  80-90% of the A3 graduates     are
             hired by GCM, more than 70Z of the A2 graduates     set their  sights
             on higher education.    In the long term, GCM, with its competitive
             salary structure,should be able to recover these students after
             they liave completed their university training. The short-term
             goal fo. the A2 cycle cannot, however, be said to have been
             achieved, since it has not proved very profitablein economic
             terms.

     (il) The seven vocational institutes (three in Kolwezi, one each in
          Kambove, Lubumbashi,Likasi and Kipushi). Enrollment in these
          schools is about 1,600, with approximately300 graduating each
          year.      These graduates     must take entrance    tests before being
          hired by the Company, which accepts          80X on average;     this figure
          still     does not meet the Company's needs for workers. The
          standard     of teaching    is good but there is still      room for
          improvement.       While the general courses have oeen taught by
          teachers     with a university     degree,  two-thirds    of the teachers   of
          technical     subjects   are from the worker category.         GCM should take
          steps to hire qualified teachers who have graduated              from the
          Instituts     Superieurs    Pedagogiques   Techniques,    one of which is
          located in Likasi and was financed by the Third Education Project
          sponsored by the World Bank.

14.         Technical in-house training. The in-house trainingis designed
for the workers. It is given at the centers attached, on a hierarchical
and operational basis, to each major production unit. There are 14 centers
in all, which provide advanced training to some 3,000 staff each year. In
1984, 3,300 staff were invited to take advanced trainingand the average
length of training         for each trainee       was 170 hours.     This technical        training
was primarily a requirementfor the promotion of workers to supervisory
posts (500 promotionsin 10 years) and for the promotion of workers to the
highly skilled category (495 promotions in 10 years). Since 1982 there has
been a unit (the In-HouseTraining Monitoring Unit) within the Technical
Training Division to keep track of in-house trainingactivities by
productionunit and to help standardize the format for technical                         training
courses.     There still       remains much to be done to improve this program.                    The
training    methods and programs vary from one center to another.                      The
instructors      are not hired on the basis of uniform criteria.                   There is a
lack of modern teaching           equipment in some centers       and existing        equipment Is
outdated.      The personnel       department      heads are, in theory,      responsible       for
monitoring     the effectiveness        of the training      by obtaining     as much data as
possible    from the production         units.      But they do not yet have the
experienceneeded to perform this role effectively.                     Finally,     there is
still    no in-house     training     policy geared to long-term production             and career
development goals.          The training       programs are not prepared        from a global
standpointbased on an in-depth               study of trades or occupationsand their
development.        At the technical       level the programs are not divided into
units which would enable the most capable personnel                   to gradually      improve
themselves.
                                                                      ANNEX 4-3
                                                                      Page 6 of 9


15.         Trainingof managerialand supervisorypersonnel. This training
is given at the Centre de Formationdes Cadres et des Agents de MaItrise -
CFC (TrainingCenter for Managerialand SupervisoryPersonnel).
Established in 1981, this center has received special attention from
Management. The reasons for this are: (i) the rapid increase in the
percentage of African staff, which is expected to go from 76% to 85% by the
end of 1989; and (il) the inclusionof 930 Zairians at the supervisory
level in the past five years,     500 of whom require     retraining.     The training
given at CFC comprises:    (i) courses up to the first       and second supervisory
level;  (ii) training  for young university    graduates     in preparation for
their role as department    heads; (iii)   the retraining      of department  heads;
and (iv) seminars for directors. A complete trainingcycle comprises
theoreticalcourses interspersed      with periods of practical training on the
job.   The length of the cycle depends on the level of the training;
generally the duration varies from two to six months. The young university
students also are the subject of special monitoringby an integration
unit. The trainingprograms preparedespeciallyfor them comprise three
phases: (i) the initiationphase, organized in the third and fourth
university year during vacations;(ii) the integrationphase, which begins
with the hiring, for a probationary      period of two years, of university
graduates; and (iii) the temporary assignmentphase, organized for those
hired permanentlyby the Company on completionof the integrationperiod.

16.       The Center has trained 473 staff members since it opened, 290 of
them supervisory staff, 86 departmentheads and 97 directors. The
last-mentioned have attended two short seminarsled by a consultant
provided under the technical assistancescheme financed by the World Bank.
The Center's results seem very encouraging,despite certain weaknesses,
which are discussed later on. An overall evaluationshould be made of this
program, however, with a view to making it even better suited to the
Company's needs before launchingthe second phase of its development.

17.          Several points need to be kept in mind to impruve the trainingof
managerialpersonnel: i) the management traininggiven by the CFC should
be supplementedby technical trainingadapted to each field of
specialization,this being urgently needed because of rapid technological
developmentand the deteriorationin the quality of the training given in
the Facultes Polytechniques;(ii) a study of the training needs of
managerial and supervisorystaff should not be limited to the opinions
"xpressed by the productionunit heads; it should be based on staff
,erformanceevaluations,on the one hand, and on an in-depth study of the
manpower situation,on the other, from the point of view of age and skill
distributionand reductionsin expatriatemanpower and the replacementof
retirees; (iii) the teaching staff at CFC needs to be strengthenedand
retrained;although this staff has an average service of eight years with
GCM and eight to ten years'       teaching experience, their management know-how
is limited    to theoretical    knowledge and to the technical assistance support
received   by the Center;    (iv) finally,  one cf the main weaknesses lies in
the coordination     of the practical training (stages)in the production
units,   which is handled by a team made up of five people,     three of whom
have no experience     in operations. Apart from these flaws, CFC's activities
                                                                ANNEX 4-3
                                   -76-                         Page 7 of 9


are generally successfuland its competencewas recently confirmed by the
adoption of new personnel management procedures,whereby one of the
prerequisitesfor the promotion of managerial and supervisorystaff will be
the successfulcompletion of training at CFC.

                      IV. Program of Action for 1986-90

18.       At the present time GCM has the data and human resourcesonly for
the preparation of annual manpower programs. The quality of the
preparation also varies from one productionunit to another. In the
absence of any medium-term plan for manpower development and training,a
program of action has been prepared by GCM along the following lines:

      (i) The level of expertise of the managerial personnel should be
          improved or maintained during the period in qniestion;     there are
          also plans to increase the number of managerial/supervisory
          personnel at the works level, while cutting back the number of
          managerial personnel in the departmentsand in the Company's
          social programs. The total number of manr -erial/supervisory
          personnel will go from 3,000 to 3,700 by the end of 1990, mainly
          through internal promotion.

    (ii)   During this same period the number of expatriatepersonnelwill
           drop from 648 to 460.

   (ii)    The total number of workers will fall by 2X per annum, while the
           Company plans to upgrade the skill level of the semi-skilledand
           skilled category by developing in-house training.

19.       With regard to personnel management, G04 should for an initial
period (two years) take steps to accomplish the following: (i) establish
job descriptionsfor supervisory posts in terms of the programsand
activities planned, together with the professionalrequirementsfor these
posts; (ii) complete a detailed inventory of managerial and supervisory
personnel; (iii) complete the formulationof mechanisms, proceduresand
rules for personnel management and introduce these at the productionunit
level; (iv) train personnel management staff and initiate them in the
manpower planning process; (v) strengthen personnel departmentsat the
central level (productionunits) through the hiring of training
specialists. Special attention should also be paid to revising the
classifications, since these are no longer consistentwith changes that
have occurred in the trades and professions,and to formulatingthe
methodology used for personnel evaluation.

20.       It is expected that by the end of this initial phase the
personnal management structureswill be capable of functioningnormally,
effectively implementingthe decentralizationpolicy, furnishingprecise
data on the manpower situation of each unit, and forecasting its
medium-term development. It should be possible to prepare a preliminary
medium-termmanpower development plan in 1987 on the basis of these data
and to identifymanpower needs according to productionand activity
                                                                    ANNEX 4-3
                                                                    Page 8 of 9


programs. This plan would have to be adjusted periodically,however, as
and when the ProfessionalQualificationand Promotion Division, with the
help of technicalassistance, prepares the methodology to be used for job
classification and personnel evaluation.

21.      With regard to training, the following measures should be
adopted:

     -    Strengthening the organizationalstructure at the central
                            of
          level. Two new units should be established: the Training
          PlanningUnit, which would be responsible for (i) collectingand
          processingall data on trainingneeds, and (ii) investigatingthe
          need to boost and assign manpower, equipment and financial
          resourcesin order to accomplish the Company's established goals;
          the ManagerialLevel Technical Training Unit, which would be
          responsible    for studying  and proposing  a policy and plan for the
          technical   training   of managerial  level personnel and for
          coordinatingall managerial level training activitiesboth abroad
          and in Zaire. The Inspection Department should also be
          strengthenedand would be responsible,among other things, for
          arranging for the retrainingof instructors in conjunctionwith
          CFC, investigatingthe use of new teaching equipment,
          periodicallyrevising, with the assistance of professional
          committees,the content of curricula (study programs) and
          monitoring the implementationof new teachingmethods.

     -    Improvingthe training of managerial personnel: this activity
          would be considered a top priority. An evaluationof CFC's
          performancewould be made to identify its weaknesses from an
          organizational,   technical and manpower standpoint,new strategies
          would be proposed and recommendations         would be prepared for a
          program of action for the Center for the next five years.              This
          evaluation   could be conducted by the same consultantwho helped
          with the start-up of CFC. It would be advisable           for this
          exerciseto be carried out with the assistance of CENACOF (Centre
          Nationalde la Coordinationde la Formation au Developpement),
          given I's expertise in training techniques,with a view to (i)
          utilizingthe manpower resourcesavailable in Zaire, and (ii)
          obtaininga more impartial view of the results achieved by CFC.
          Arrangementsshould be made for CFC personnel to attend training
          courses (stages)abroad in business management and organization;
          combined with their professional       experience,   this training    would
          enable them to enrich their teaching skills and might help them
          to play the role of training     and management advisors.        Finally,
          the team responsible     for monitoring    the practical training
          courses (stages)    in the production    centers would be strengthened
          by the addition    of personnel with experience      in operations     and
          with prior training    in communication      skills.

22.           With regard to technical training   for managerial  and personnel,
emphasis would be placed on special      training   seminars for each field of
specialization.      These 2-4 four-week seminars would be organizedwithin GCM
                                       -78-                                ANNEX94-3 9
                                                                           Page   of


and would be led either by highly qualified company engineers or with the
assistanceof specialists provided in part through World Bank financing.
It would be important here to call upon sectoral evaluationand training
committees'/to work with CFC and the Managerial Level Technical Training
Unit in prewparing   training programs and establishingrequirementsfor
lecturers. The second component would consist of organizingpractical
training courses (stages)abroad designed either for fields of
specialization    for which it would be difficult to organize seminars in
Zaire, or for top-levelmanagerial staff whose knowledge needs to be
updated periodicallyin order to keep up with developmentsin the Company's
operationsand organization. During this period a study will be conducted
into the feasibility    of establishing a technical training    center for
managerial and supervisory personnel and to establish      other financial,
technicaland human aspects of the project.

     -    In-house training for workers: this trainingshould be stepped
          up and reorganized. The training activitieswill no longer be
          "isolated." The programs should be studied in their entirety,
          with common-corecourses for all the sub-groupsor trade groups
          and with an identificationof the various skill or qualification
          levels to permit transition from one level to the next. The
          planning work could be assigned to evaluationand training
          committeesorganized by sector, which would map out the general
          outlines before the actual work of program formulation is
          assigned to professionaltrade committees,under the leadership
          of the Technical Training Division. Implementation                 would, in
          accordance with the principle of decentralization, monitored      be
          by the Personnel Department at the level of each plant, but would
          also be closely        supervised     by the Technical   Training   Division    in
          order to guarantee the quality            and uniform standard of the
          training.      Finally,     the financing for this project would be used
          to renew the teaching          materials    and equipment and to make it
          compatible     with the requirements         of modern technology,
          particularly      in the case of hydraulic         and pneumatic equipment and
          electric     controls.      It is essential     for in-house training      centers
          to have more say in organizing seminars in communicationsand
          training methods for technicians skilled in productionwith a
          view to strengtheningthe trainingcorps and ensuring the more
          effective monitoring of trainees (stagiaires)              in their place of
          work. In view of these new responsibilities,                the Division for
          the Monitoring of In-House Training should hire new experienced
          specialists to closely monitor the activitiesof each center.


1/ Sectoral committeesfor the following sectors: mining, metallurgy,
   maintenance and workshops, functional services, and operations.




Industrial Department
December 1985
                                                               FDRECAST
                                              FIVE-YEAR HANPOWER



       CATICO0RIES             1985            1986        1987            1988       1989          199U

Dir. MOCA                        81             86           91              96        101           106
ProfessLonals MOCA              880            902          935             942        953           970
Supervisory Staff MUCA        1.580          1.662        1.785           1.922      2.072         2.218
Total MOCA                    2.541          2.650        2.811           2.960      3.126         3.294

Dir. MOCE                        81              76          71              66         61            56
Professionals MOCE              368             346         326             310        294           272
Supervisory Staff MOCE          199             183         167             159        144           131
Total MOCE                      648             605         564             535        499           459

Total MOC                     3.189          3.255        3.375         3.495        3.625         3.753
H1ORC.L.4                     2.431          2.451        2.471         2.491        2.511         2.531
MOE C.L.5-8                  31.167         31.026       30.880        30.729       30.578        30.432
Total MOE                    33.598         33.477       33.351        33.220       33.089        32.963
Total MOC + MOE              36.787         36.732       3b.726        36.715       36.714        36.716

Note: This forecast begins at the   end of May 1985.


Abbreviations: Dir. HOCA = Director of "Main d'Oeuvre des Cadres Africain6" (Manpower of African Professionals);
                  K
               MOCE   "Main d'Oeuvre des Cadres Europeens" (Manpower of European Professionals);
               MOE = "Main d'Oeuvre d'Exfcution" (Operating Personnel).




                                                                                                              nI"
                               LEVEL OF STUDIES   -   HOE



                               STUDIES                      TOTAL FOR      COTES
             0        GP     CO     A4      A3         A2   EACH GROUP   IR.23 85


  HQ       360     118       540      78    93         92      1.281       1.456
  Q      1.328     530     1.476     489   771        563      5.137       5.311
  SQ     8.075   4.302     5.263   1.196   209        146     19.211      19.716
  MS     1.629   3.027     1.971      62     9          4      6.702       5.789
  _         57     778       368       5     2          3
                                                        3      1.213         848


Abbreviations: GP -   6 years of primary school;
               CO -   "cycle d'orientation" years of post-primary);
                                            (2
               A4 -   graduates from the Professional Institutes;
               A3 -   graduates from the TechnicalInstitutes(shortenedcourne);
               A2 =   graduates from the Technical Institutes(long course);
               IIQ-   highly specialized;
               Q -    skilled worker;
               SQ -   semi-skilled worker;
               MS -   speciali:edmanpower;
                      manpower.
                                                                    ANNEX 4-3
                                                                    Table 3
                                       -81-



                                        (as of June 30,
                TABLE OF PERSSONEL Y AGCE                   1985)



   AL-E                 HOCA            MOCE          MOE                TOTAL

17 - 20 rears              _                  -        181                  181
20 - 30 years            170                  1     9.134                9.305
31 - 40 years          1.381             118       12.576               14.075
41 - 50 years            657             296        6.258                7.211
Over 50 years            236             241        4.953                5.430

TOTAL                  2.444             656       33.102               36.202
                                               TABLE OF RETIREENT AND SEPARATIONSAT HOE



                                19_2                                       1983                                198.4

GROUPs        SEPARATIONS                RET11 IENT       SEPARATIONS             RETIREMENT        SEPARATIONS        RETIREMENT

            CL. 4   CL. 5-8            CL. 4   CL. 5-8   CL. 4   CL. 5-8      CL. 4    CL. 5-8   CL. 4   CL. 5-8   CL. 4    CL. 5-8

SOUTH           1           2              1        98       4         9           3        94       2         4       6         130
CENTER          1           1              9       182       2         4           8       173       2         3       2       ;184
WEST            2           4              3       159       5        18           2       142       3         3       3         169
KINSIHASA                           .     _                  _                                                                      2

TOTAL           4           7             13       439      Ii        31          13       409       7        10       11485




                                                                                                                                 Iw
                                                     ANNE 4-3
                                                     Table 5
                      -83-




             56 yrs      57 yrs    58 yrs   59 yrs

MOCE             33           26       14       41
MOCA             18           11       18       43
TOTALMOC         51           37       32       84
TOTALMUE        544          563      448      403
GRANDTOTAL      595          600      480      487
                                                                                      ANNFX4 _R
                                             -84-                                      ab1e 6



                      STAFF TRAINED AT THE -CPC- DURING THE LAST 3 YEARS
                                           (1982-84)



                             SUPERVISORY                            PROFESSIONAL

                              LEVEL          TOTAL SU-                   LEVEL           TOTAL
SECTORS    YEAR         I      II      III   PERVISORY    YEAR     IV         V          PROF.


              82        11      9       8           28
MINE          83        15      -       -           15     82       12         -             12
              84        -      12      24           36

              82        -       -       -

MET           83        27      9       -           36     83       13        62             75
              84        -      30      16           46

              82        34              _           34
DEM/ATL       83        22             12           34     84       26         -             26
              84        13             14           27

              82                                     -     82        -            -
SUPPORT       83                       10           10     83       10-       35             45
              84                             -       _     84       25            -          25

              82
SEC/DIR       83
              84                                    24

TOTAL/LEVEL            122     60      84        290     TOT/LEV    86        97            183


Total no. of personnel during the 3 years: 473

Note: This table includes only chose who completed their training during the
      years indicated above.

Abbeviations:      DEM - Electro/Mechanical; MET - Metallurgy;
                   SEC - Secretariat/administration
                                                                         4-
                                                                    ANM1ZE -,
                                  -85-



                     COST OF TECHNICAL TRAINING
                            (in Zaires)




1)   Investment over a 5 year period

     Vehicles, office machines, furniture, teaching materials,
     reproduction.

                                               20,429,000 Z for 5 yrs,
                                          or    4,086,000 Z/yr

2)   Running Costs

     .   Training - Enterprises

         Mines and Quarry                      40,000,000 Z/yr
         3Metallurgyand Concentration          10,000,000 Z/yr
         Studios                                  33,000,000Z/yr
         Various                                  10,000,000 Z/yr
                                               93,000,000 ZIyr

     .   Professional Institute                   24,000,000 Z/yr

     .   Technical Institute of Muroshi        67,000,000 Z/yr


                                               184,000,000 Z/yr

                        Yearly Total           188,000,000Z
                                           -86-
                                                                                               4-4
                                                                                           AUNEX

                                          -
                                ZAIE - GnAMuDtES     r             w
                                GECAMD - ACIIM ShfSf=,          1975-84


                                   1975      1976      1978     1980      1982      1983      1984
     Freuereya/
     Uiderg3&mnd                  230.3     131.0     52.7      33.0      34.7      32.7      21.1
     Surface                       85.0      54.7     54.4      30.3      32.3      32.7      21.4

     Awerage                      103.8      65.5     54.2      30.7      32.5      32.7      21.3

Severiq b/
   UdePrgiOnnd                     16.8       9.9      4.1        3.4      4.0       4.3       2.3
   Surfac                           5.9       3.7      4.2        2.3      2.6       2.7       2.0

     Average                        7.3       4.5      4.2        2.4      2.7       2.9       2.1

Total. Fatalities                  19        10        14        10       10         6        10


ay                Nmiber of accidents with over four (4) days lost time per 300,000 man-days of wok.
         Frequency:
bI Severity:     Numberof days lost per thousand (1,000) u.n-days of vork.

Source: Geckunes Amml RepDrts.




Irulty  Deparmen
Mardh 1986
                                                                                                                  ANRM4-5
                                                   -87-
                                   ZA-;-           M             RBAJ
                                   CADS        -   P             =    SiATXSt;,     1974-84

                                      1974              1978            1979        1981       1982      1983        1984

Openrpit
 - Volume excmvated ('000     )      30,697         21,995            23,465       26,507     22,430    27,411    28.708
   of wbich SKM a/                   26,462         19,229            19,729       24,845     21,387    25,190    26,369
 - Ore ('000 t) -                    10,351          8,468             7,430        9,708      8,506    10,205     9,91
   of which SKM a/                    9,611          7,262             6,622        8,480      7,924     9,095     9,437

 -Ore ('000 t)                        4,237             5 729          6,019        5,215      5,755     6,036      6,121
Total Ore ('000 t)                   14,588            14,197         13,449       14,923     14,261    16,241     16,052
Average Grade (X Cu)                     4.5              4.9             4.4         4.4        4.2       4.0        4.1

Ccxicentrators
Ore Feed ('000 t)                    14,22             14,056          14,048      15,868     16,014    17,482     17,536
Concentrates ('000 t)                 1,803             1,641           1,570       1,766      1,576     1,701      1,818
Average Grade (2 Qi)                   28.6              28.0            25.5        29.4       30.6      29.4       29.0

,1Mt      aical Plan
1uhmiashi Sud ter
  - Blister Ccpper ('000 t)           130.5             135.3           142.0       156.9      153.9     160.3      156.8
  - Blak Copper ('0O0 t)               22.0              10.6             0.0         7.7        3.7       0.0        0.0
Shituru Hydrcuttallurgical Plant
  - Copper Deposited ('000 t)         135.6               97.4              95.8    130.9      132.7     137.5      136.4
I udlu                     Plant
  - Copper Deposited ('000 t)         179.8             147.0           135.4       171.0      169.7     166.6      172.7
Shituru Refinery
  - Electro Copper ('0o0 t)           254.6             103.0           103.2       151.5      175.1     227.2     224.5
     Lr
Kolwezi                       Pl t
 - Zinc Deposited ('000 t)             73.4              49.7            49.9        65.4       72.6      70.5      74.8
 - Cacdmix Deposited (t)              301.0             305.0           232.0       255.8      304.8     338.5     355.0

Productio
Copper ('000 t)
  Wirebat                             254.6             102.9           103.1       151.3      175.0     226.9     225.2
  Electrrwn Cathodes                   69.6             142.8           125.1       152.5      132.9      80.5      82.6
  Blister                             130.0             135.1           141.5       156.7      153.4     158.4     157.7
  Otbers                               16.9              10.5             0.1
                                      471.1             391.3           369.8       468.2      466.2     465.8     465.5
Cobalt (t)
 Chips                                9,074             6,578           7,509       6,960      5,087     3,363      5,266
 Granules                             3,586             5,245           4,897       3,247         -      1,897      2,827
 Others                               4,885             1,272           1,623         917        486        90        982
                                     17,545            13,095          142029      11f124      5,573     5,350      9,075

Zinc (t)                             68,700            43,500          43,700      57,600     64,425    62,500     66,100
Cadnmm (t)                               272               186             212        230         281       308        318

  Siiege YKlei    Mines (MO:           Kolezi openit                 nes.

Source: GecandnesMu-'l Reports.

Iedwtry Department
Mardh 1986
                                                                                                            4-6
                                                                                                        ANNEX
                                               -88-

                                  Z   -      raGfl                           nrr
                                      -SS -      AnEM DIM              SYAEns
                                                     CZaudifimo

                                      1978           1979    1980         1981         1982    1983         19E4


     copper                           r.a          959      2,473        3,612     4,592       7,791      22,021
  Cobalt                              n.a        1,313      1,206        2,231       864       1,312       8,384
  Otber Metals                        n.a          165         159         441       550         953       1,713
  Otbur Sales                         n.a          147        275          351       237         591         456
    Total ReveM                       977        2,584      4,113        6,636     6,243      10,646      34,058
c-t
  0peretr   Gc3Ots                    780        1j958      3,211        4,657      7 707a/ 11J155        29,077
  Opergtizg Prafit (Lass)             lW7             626     9(2        1,979     (     Y    i5O9)        4581
  Net FIIanclA1 Chouzi                150             125     210         436          369       477         635

     Profit (lOBB) before Tsem         47             501     692        1,543     (1,833)      (986)      4,364
     Corporate IzEchim Tnm b/         (98)            289       1            1          1        443       2,8

     Net ProEfit (Lem.) after   Moem 145             212     691         1,542     (1,834)    (1,429)      1,I58


     0permtin Profit X of Revewes      2D             24          22       30          (23)       (5)         15
     Net Profit X of Reaenu            15              8          17       23          (30)      (13)          4

a/ In 1982, s eindn lwTed reyt1atal       I
                                          1mW of Z 1,778 million fold wing
   Iuplrmtatkn    of tie wnrkei     _reutirgwt SZAM a¶ the
    Noazuer of mest and 1iabditim.
b/ Until L982, thebulk of tur paid mm irdtrect tam included in
   (ofnnowes' pjrodtik casts. In L978, (wmfne received an exceptinai
   izens tut zu 1      m of Z 121 uilIoa.
                     z zu




March 1986
                                                  -89-
                                                                                                     AlNEX4-7

                                   ZAIRE GECAMESi
                                        -                        IU   Dm

                                          MAM      - AUD         W    SEW
                                                    (Z mnilion
                                           1978      1979     1980      1981      1982 a     1983        1984

Cirrent Aseets:
  Stores and Stodcs                         284        832   1,666    2,085      4,192      7,053     11,651
  Recuivables                               468     1,866    4,105    6, _-'.    1,68D      8,707     10,702
  Cash                                       99        272      407      560       557      1,309      3,126
     Total QCrnent Asset                    851     2,970    6,178    8,901      6,429     17,069     25,479

Tud Assets:
  GrossFixedAsets                           843     1,842    2,314    2,685     23,506     98,102     118,288
  Minu: Dp redatim                          363       902      996    1,136     12,620     60,788      74,582
  Net Fixd Assets                           480       940    1,318    1,551     10,886     37,314      43,706
   Oter Assets                                2        16       30       31         11        679         899
    Total Fbwd Asse                         481       956    1,349    1,581     10,897     37,993      44,605

    Total Assets                          1,333     3,926    7,526    10,482    17,326     55,062      70,085


  Cirent LUaaUAities                        352     2,033    4,389    5,360      3,294      9,143      10,837
  Prcwisioi                                  97        160      196      249        564     2,539       3,846
  lavg- andtKwurMm           DEk            205        361     751    1,113      1,064      4,072       5,134
     Matal Liahlities                       654     2,554    5,336    6,722      4,922     15,754      19,817


   hare Catal                               260        260     259       260        260        260     8,787
  Reserves                                  419     1,112    1.931    3,500     12,144     39,048     41,480
    Total Equity                            679     1,372    2,190    3,760     12,404     39,30B     50,257

    Total Liabilities      and Equity     1,333     3,926    7,526    10,482    17,326     55,062      70,085

RAT[    NDNEI WM=           CAML
Nept Wozkig Capital                         499       937    1,789    3,541      3,135      7,926      14,642
Crrent Ratio                                2.4       3.5      1.4       1.7       2.0         1.9         2.4
Qilcd Ratio                                 1.6       1.1      1.8       1.6       0.7         1.1         1.3
I"g- 'em Debtl:Equity                     23:77     21:79    26:74    23:77       8:92       9:91        9:91
Total Liabilities:Equity                  49:51     65:35    71:29    64:36      28:72      29:71       28:72

al In 1982, Gezunss'         fixedaeets    were revalued.



Mbrdhy D19r8
Mardi 1986
                                                    -90-

                                                                                                     ANNeX4-8


                           GNS   -GRUMINES   REHUBILITA2ION PROJECT
                          GECANINES COPPERtAND COBALT SAL     FS
                                                             1961-64

          Table   1:      Gecamines   - COPPER SALES BY REGION. 1982-84
                                           (000 tonnes)
                                                                                              1984

                                         1981              1982       1983         1984        (Z)

           Belgium                       66.9          130.4          84.0         40.2           9
           France                       102.2           57.6          65.8         54.4         13
           Germany                       48.5           61.8          75.7        106.3         24
           Holland                         -            15.9          12.3         48.4         11
           Italy                         35.3           36.0          26.4         32.5           7
           Yugoslavia                      -              -             -          23.0           5
           Other Europe                 110.2          115.4         140.6         54.4         12
           United States                 18.2           21.8          33.1         29.2           7
           Other Americas                 8.1            7.0           8.0         21.0           5
           Japan                          3.7            1.8           1.8          5.5           1
           Taiwan                         3.1            9.3           8.0          7.5           2
           Other Aria                     9.8           10.1           8.0          6.4           2
           CPEs                           2.4            4.2          20.0         10.3           2
           Others                         3.0            0.0           3.0          1.0         -

             Total                      411.4          471.3         486.7        440.0        100



           Sources:        Gecamines/Commerciale, SOZAC0K Annual Reports.


          Table   2:      Gecamines   - COBALT SALES BY REGION, 1982-84
                                                (tonnes)
                                                                                               1984
                                         1981              19B2           1983      1984         %

           North America                3,165              2,371          2,994     3,001        31
           Europe                       1,717              2,254          3,187     3,086        32
           Japan                        (                    902          1,462     1,683        17
           CPEs                         ( 916                401          1,141     1,508        16
           Others                                            430          1,190       388         4

                  Total                 5.798              6,358          9,935     9,665       100
                                                            -         _




           Sources:        Gecamines/Cosmerciale,               SOZACM4 Annual     Reports.



Industry Department
March 1986
                                      -91-

                                                                         ANNEX 4-9


                      ZAIRE - GECAMINS REHAILITATIO   IKTECT
                         SOZACOM- AUDrTED INCOME STATERIK=TS
                                     (Z 1ilin)


                                     1980     1981    1982 &/   1983        1984 bl
Revenues

Diamonds Sales                         -       60.3   518.8     726.0       971.5
Sales Concessions                     59.3     66.5    71.8     141.4       54i5.
Other Revenues                        14.7     23.1    54.9      61.6        69.8
  Total                               74.0    1W'i9 IRE:5       9Z9.0     1,587.1

Costs

Costs of Diamonds & Other Metals       -       42.2   452.8     666.6       894.3
Other Costs                           47.0     94.2   138.0     259.6       526.4
Net Financial Charges                  0.8      2.1     2.2      13.1        31.0

  Gross Profit                        26.2     11.4    52.5     (10.3)      135.4

Depreciationand Amortization           7.3      4.5    14.2       9.1         8.5
Exchange Losses (Net)                  2.7     27.2    (4.5)    133.0       (10.1)
Other Charges                          6.1     14.2     5.6       6.8         3.2

Net Profit (Loss) after Taxes          10.1   (34.5) 37.2       (159.2)     133.8

Exchange Rate (Z/US$)                  2.8      4.4     5.8      12.9        36.1

a/ Since August 6, 1982, the relationshipbetween SOZACOK     *nd Gecamines have
   been regulated  by a new Marketing Agreement, giving Gecamines full ownership
   of its mineral production,   and appointing          as
                                                 SOZACOK its sole agent.
b/ Provisional.   SOZACOM  was abolished  on July 2, 1984, and its accounts closed
   on December 31, 1984.




Industry Department
March 1986
                                             -92-

                                                                                    ANNEX 4-10



                              ZAIRE - GECAMINES REHABILITATION PROJECT
                                  SOZACOM- AUDITED BALANCE SHEETS
                                            (Z million)


                                    1980            1981     1982 a/     1983       1984 b/

Assets
Current   Assets:
    Stocks                         3,179.5      4,362.2       53.5      118.1         14.4
    Receivables                      429.9        645.4       93.5      181.5        953.4
    Cash                              86.7        439.9      185.5      602.8        755.9
       Total Current Assets        3,696.1      5,447.5      332.4      902.4      1,723.7

Net Fixed Assets                      30.3            34.3    47.0        47.7         51.3
Other Assets                           6.2             5.9     4.5        11.0         11.8
Loans & Participation                 98.8           112.5    93.3        87.9         73.1

       Total Assets                3,831.4      5,600.2      477.2     1,035.0     1,859.9


Liabilities
Current Liabilities:
   Payables                        2,125.4      2,898.0      207.3       470.0       980.1
   Prefinancing                    1,480.8      2,374.2        -         109.6         -
   Others                             51.5        183.7      143.5       420.8       758.7
Total Current Liabilities          3,657.7      5,455.9      350.8     1,000.4     1,738.8

Long & Medium Term Debts              97.2        102.3       53.3       120.8        73.4
Total Liabilities                  3,754.9      5,558.3      404.0     1,121.2     1,812.2

Equity
Share Capital                         31.3         31.3       31.3        31.3        31.3
Reserves                              45.2         10.7       41.8      (117.5)       16.4
Total Equity                          76.5         42.0       73.1       (86.2)       47.7
Total Liabilities & Equity         3,831.4      5,600.2      477.2     1,035.0     1,859.9


Exchange Rate (Z/US$)                  2.8             4.4     5.8        12.9         36.1


a/   Since August 6, 1982, the relationship between SOZACOM and Gecamines have been
     regulated by a new Marketing Agreement, giving Gecamines full ownership of its
     mineral      production,   and appointing SOZACOM as its sole agent.
b/   Provisional.          SOZACOMwas abolished on July 2, 1985, and its accounts closed on
     December 31, 1984.



Industry Department
March 1986
                                                                                                                                    -93                                                                                                 ANNM 5-1


                                                                                                         ZOWRE
                                                                                                       REHAILITATNPROECT
                                                                                               GECAMINES
                                                                                                               Plogn
                                                                                   Impsmsntatlo Schedule RFsYeor
                                                                                                       of

                                              Yew          I                 ~                 ...                             "                 s I~                                            *WoI                          P   T1
                                   Cl                  2
                                                       1           2                       2    3        4 1               1
                                                                                                                           2        3        *                  2       3       *            2       3           4    *    2   3   4      *        2    3




   0_
  Cbs TX                          b~~~~~~~~~~-                         II                            .                     -   ,        .
                                                                                                                                                 ELX   .                                -.       .




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                                                   E                   I       u
                                                                                      .I       L-          t           i
                                                                                                                                _                      _
                                                                                                                                                                                                                 -   -;   -I
                                                                                                                                                                                                                                                 I'**




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                                                                                             GECANINES             P1OJECI/GIC*INE1S
                                                                                                      RNHA6hllltlONI                PROJil 01 1lHA1t181MAtlON
                                                                                                                                       table1. IOUtH/1011PI
                                                                                                                                                          5UD
                                                                                                                                                 Cost
                                                                                                                                         Detailed table
                                                                                                                                          (US - 00ttA* NilIoni

                                                                                                                                                                                                              Breakdown totals Incl
                                                                                                                                                                                                                       of                                          Cont
                                                                                                                                                                                                                     IUSS Nitionl

                                                                                      late Cosls                                               Iiscls Including ContInq inclas                                                   tocal
                                                                        ........... .............               ................................................                                                 lap.             lel.             DutiesA
                                                                      log6 tie?        oss        1g96          1990 lotal                 1166 19t7 199t 1919 1990 total                                        Etch.           taxes)             tel s  total


 1. INvESIlIUI                                     CO0IS
        .......                    .............

     A. MIIUSiI NINE
                    ............

                  MINING EOUIPEINI INCR./IENGINS
                                               ACCR.     0.56                      0.10 0.1 0                      1.56                       0.62         0.58 0.62                 *               1.84            1.28                    *          0.55      1.84
                  NINE PEIPAUAtION/tE*VAUI PREPAIAtOlRES 3.00                      3.00 4.00            4.00 2.50 16.80                       2.42         3.65 5.23              1.62         4.24 22. 16          1. 11               II. 13          3.31     22. is
                  OERINAOE/EIHIURE                       2.62                      2.84 2.30            2.00       9. i6                      2.t8         3. 45 2.01             2.81            *1. 26            2.82                  7.1sO          1.14    12. 26
                  IUUNSIRUCIUIE                          0.13                      0. 04 0.13           0. 11   * 0.41                        0.15         0.05 0.15              0.16               0.52           0.26                 0.11           0.06      0.12
                  N    EINtINANCE/Ni*lEhI1N              0..                       0.005 0.01                   - 0. Is                       0. 06         .06 0.01                   -             0. 18            . 10               0. 06          0. 03     0. to

     Ss- total RIPUSiI NINE                                             6. 3       6.4        .95
                                                                                             54        6.11        2.80 28.69                  1.23         1.10 9.09             8i.19 4.24 36.15                  1.59             25.54              S.6 236.91
     6. tIPUSlI CONCENtRPItO
                  ....................

                  CASCADE I.SCCDE-R01GE                                                                     .              .          .             .                   .  .                                                                                                                                I
                  NAINIEN*NCI/mAN11IE111                                0. 17      0.08     0. 12           -              .      0.31        0. 13 0.10                0.15           *               0.38         0.23                0. 10           0.06       0.38

        Sth-lttol                            NItPUSHI CONCENISAICO      0.17       0.08     0. 12           -              -      0.31        0. 13 0. 0 0. 15                         -               0.J6         0.23                0. 10           0.05       0.38
                                                                     .....      .....     . .....   .....       ......         .....       ......       .....        ......    .....       ......   .....     ........        .......           .....   ......   .....               ....       .... ..
                                                                                                                                                                                                                                                                          . ............ ........ .......

 total            INVSINENI COSTS                                        6.50      6l.50 1.01          6. 11 2.60 2t.01                        7.37         1.30        9.24      8.51         4.74 31.33           5.87             25.54              5.66 31.33
total                                                                    6.0       55          .1      61                .02.1                 13               .0     12;4 6.1 s"4.2 13                                 .2          2.4                16          13


March 19                      IIttl                 IS: 36




                                                                                                                                                                                                                                                                                                                IT
                                                          GfECAINIS          PROJICTt/OCAMNItS of NEHAISIIIAIIOW
                                                                 REHABIIIIAIION             PRuJtit
                                                                        table CENtER/04011PE
                                                                             2.            CENTRE
                                                                                   Cost
                                                                            Detailed table
                                                                           (US- 0OILK NIllianI
                                                                                                                                                                     Sreakdomn Total%
                                                                                                                                                                             at          Canti
                                                                                                                                                                                     Intl.
                                                                                                                                                                           lull NillionI
                                                               BaleCosls                               Totals
                                                                                                            IncludingContlngencies        toeal
                                                                        ......................................................      for.  lustl.     8
                                                                                                                                                GuIles
                                                   lii1381loll          1283                    ttal loge lilt logo tHlS 1920 ltotalfIch. Ilaest ol taeTotal
                                                                                                fa3

             COStS
  I.INVEStMEtNt
    A. RIMBOVI
             NINE
        MINING  EUIPNENT/EuaI1IS
                             Et SOUS-ENSEUOLES             -        .         -           .            .             -           -      .      .       .        .
        MNINPNEPARATIOW/tIAVAUR
                              PREPARAYIOINS      0.0                                             01            0.11                                                    .2     00 Oa      02
                                                                                                                                                                                      0. 0.11
        uaiitINANCtnailticuf                     0.120 0. 20 0.20 0. 20 0.20                     1.00          0.123 0.24 0. 26 0. 28 0. 30                  1.32     0.176   0. 36   0. 20 1.32
   5*t-total RAMOVE
                  MINE                           0.30   0. 20 0.20 0. 20 0.20                    I. 10         0.34 0.24 0.26               0. 28 0.30       1.43     0.178   0. 43   0. 21   1.43
   S. NRBNDAN-RANIUNONA
                    OPEN1PIi/CARRnERS
        MININGE9IIPHINt/ENGINS
                            (It SOUS-ENSIMSLIS   0.53-                                           0.53          0.58     -  -                                 0.58s    0.40       -    0.it 0.58
        NINEPUEPIRAtINII11AVLUI
                             PRIPAPAIQIRES       3. 14    --                                     3. 14         2.5?      -                                   3.57     I. 13    1.25   0.54 3.57I
                     /MAIMIIN-INI*StN.0.
                  MINI.-NFRASt.                    64 0. 44 0.01              -                  1.08          0. 72 0.53 0.01                         -1.     21     0.63    0. 44   0. IS 1.2?M
   5*A-Ttota NANANDA-KANFUN0144
                         OPENPIT/CARRIERES       4. 31 0.44      0.01         -           -4.        75        4.8? 0.53             0.01                    5 42     2.863   I. T0   0.90 5. 42
   C. RARANO*-ANIOVE
                   CONCENWAORS

        MIINTINANCE-OPII/NAINI
                          IIN-ERPL               1.06   1.55 0.52             -                  3. 13          1.20        1. !     0.68      -3.18                  2.21    0.34    0.5S? 3.168
    3*i-totall RANANDA-RAN8OVI
                          CONCENIRAIOIS          1.06   1.55 0.52             -           -3.        13         1.20 1.852 0.68                -3.             18     2.2?    0 94    0. 5? 3.178
 lintel INVISIIIENI
                COSIS                            5. 56 2. II0.     73 0.20 0. 20 8.9!                          5.42 2.6? 0.95 0. 28 0.30 10.63                        5.87y   3.07    1.68 10.5
Tolel                                            5.66    .15     0.13 0.2           0.20         LIs           1         2 tI        0.96 0.28s 0.30 t0. 131          5.8?    3.07l   1.68 10.63


March II. 1386 IS: 36
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                                                                                   ISIIDIIAIIl"I 31                                    I          06l £3613361 836330666636ili6
                                                                                                                                                                        S3610065
                                                                                                                                                                            3l"31£
                                                                                                                                                                Dv1w1
                                                                        11H86111181103
                                                                GECANIN(S                        PROJUI UEtAIIRtlltItN
                                                                                   PROJICI/0C11911S   Ofi
                                                                        1.IANPN-CKP-IM/ISPU-ltt-uuS
                                                                    lable
                                                                                         Coat
                                                                                  Saeallad table

                                                                                                                                                 beoak*w, letals Isti.
                                                                                                                                                         of          cmlt
                                                                                                                                                        (USSNhlIflOfi

                                                                   Base Coats                         legals I'ieludlng CefItilleficlaw                     Local
                                                  ious fool lostan              1110 toa            IMs   ion   III11 loss   1110 Ttal*          for. Each. foals      Tome    ftotl

  I.INvtItENt      Costs
    A. hNAMIPOfT
           uaumisnausfEHEE[S                      1.20 1.120 20
                                                              1.                             2.00 1.30 9.40 1.10O                        4.20          2.14 0.29         9.01 4.20
        PAILCASNI1M0m   TtUNICS                   1.00 S." 5.00                             11.00 S.42 S. 61 1.24                       17.46         12.24    -         S1.21I.4161
        VtNitiCtIflNI WItS                        I. 0  .0 7.0100 6.1
                                                                    as                      20.61 0. 78 6. 14 S. 123 II1                31.84         14.13 a.Is                64
                                                                                                                                                                         A.1 Iis3.
    Sib-Total tUAWSIPW                            11.20 12.120
                                                             13.20 5.1
                                                                     AS                     48,45 16.11 1I. 3 1I. 45 0. 1I              57.51         30.01 2.35        11.16 97.11
    S. N06151W/IfTEl US
        MACGUlS                                   2.00 1.60 2.00 2.10                 -       .20 2 1i 2.0 3. 2.5 3.35                  11,24         6.00     1.46       .6so to.124
        FOtINOIWtAlIIlOfhI8          ICOtNhIE     0.21s 0.60 1.00 1.30                -      3. 31 0. 21 0 13 1.215 1.174          -     4.19s        2.73     0684      0.513 4. I0
        SUS-SSItWLlIE/SOUS-FUS1MLE5               7.00 8.00 3.419                           22.4 17. 6 90.20 10.14     -                17.41         11.21    1.01            27.
                                                                                                                                                                         6.231 41
        OINEEN*,tE11ILIIUiRIEIS
                              981l11IlE1,S        1.00 0.115 2.21 2. 40               -      5.20 1.00f 0.64 2.51I 3.22            -     1.11         1.43     I. Is     1. Is 7.715
    Sub-tetal *UNSIIOPSAitEtIUS                   10.21 It. II 14.0605. 20                                    16.
                                                                                            42.20 ff. 14 12.097 21 8. 31           -      0.63        31.46 1.38         3.101 10.53
    C. atwRim IVCII(NINSIAUIRUSINVUSISIIGCWNEIS
        DII PUOCE1SIN/tEIIlMit            gal
                                0 iNIghPIINI             .20 7. 30 7.00 5.42 26.03          6.16f 0.10 1.30 0.20 33.01                                22.1 19. 02     11
                                                                                                                                                                   10. 33.5
        TittCaMIiCAiii                            6.0 2.00 0.8   as      -      8.895 6.152 1.22 1.06          -       3.091                           6.14 0061 P i26 2.01
        HutCht tOUIPMNlIAtAltUhtL
                                REICIAL           0.64 0.54 0.644               1.1910.51 0.174 0.11      -    -       2.23                             III0 0.is   0.II 2. 23
        SOCIAL                 SOCIAUK
               SIRWICES/SERWICEI                  1.953 1.@*i 1. 44    -              I 66
                                                                                 .05 1 B       e 15 197 -              4.61                              36 1.12
                                                                                                                                                        1.          0.50 4.651
        UUNCIIOEIIWL                              1.154 1.48 1.1       -   -    4.31 1.5?7 1.12 I.561          -       S1.0                            2.10 1.1is   0.15s 1.01
        HIICUUMUOUS/3l VIS                        1.238 4. 70 1. 00 4.90   -is.    17 5.81 5.17 5. 31 1.04      -23.81                                 11.021 8.34  2. 17 23.61f
                               IUVISIISSINIWS
    Si-totalGIRlSINVtSIKtMS/IUIICS                  00
                                                  11. 11.21 Is.5i                                 so10.71 15.43 0.10s 70.51I
                                                                        11.50o5.43 64.83 l6. 40 17.1                                                  47.04 14.81g      17.13 71.11
 Total tIVESiKNti COSTS                                      44.41 14.11 1.43 111.
                                                  40.54 36.156                                11.31 32.11 0.20 1lUll
                                                                                 46 44.01 46.00                                                         41   3
                                                                                                                                                     122. 12.5          42.64117.
                                                                                                                                                                                67
                                                      3,3*331     133   33S      33;333*33;;33t3t          23    lt    33     3l       1:1:                   143       4f33   333333
Total                                             4.421644.42.5 4440            6.3114                    6001.33211205.7                            1241      253       2545.7


Ntech It.   fo66      36
                    11:
                                                                                                                                GECANINESHl*I lf*1tTIOW               PRO31tOt *EHiUILITBTIOI
                                                                                                                                                      PNOdECIt/GCAKIWIS
                                                                                                                                                           tRulhhO/tIUOES FORltifNi4
                                                                                                                                        Table6. SIUDIES 410D             El
                                                                                                                                                     DetallodCost fable
                                                                                                                                                     f-
                                                                                                                                                     fUS 00LAN NillIoII
                                                                                                                                                                                                                                                                                                                    Ireabdoen of Toalal Intl.                                       Cant
                                                                                                                                                                                                                                                                                                                                 mllion)
                                                                                                                                                                                                                                                                                                                             fulsl

                                                                                                                              Base Costs                                                                                                          letals lrmludtlg Continagntes                                                       loeal
                                                                                                         ...................................                                                                                                   ......................-.                                               For,
                                                                                                                                                                                                                                                                                                                     --                  -.---............. a
                                                                                                                                                                                                                                                                                                                                       lEel.       Duties
                                                                                                         1986 Iog? 1968 1969 1990 Totl                                                                                                         1986 Its7             1966 1999 1990 fotal                             Eich.           Ia.esl           lans   lotal
                                                                                                         seatl                  lfll   33322       tilt                                I                                        511...2X....
                                                                                                                                                                                                                                  ,             lass    itftl    sf12 a        ls
                                                                                                                                                                                                                                                                            .....          3S        1f             :S                 33Xff           I2:f32                    tials



                     COSS
        1. IKWISIIIENI
                              ................

                              A. Stuol aScaEOlaT,/ClUoES-caolaou
                                         ...............................

                                         SURVEY EOUIPHINI/EQUIPIENII  SON04AES                             0.1i 0. is 0.26                                                     0 64                                                             0.20     0.23     0.312          - 071                                   0.3                 0 11               0. 11             0.15
                                         OPUAlltoNSI SIUDItS/EtlUtS flPI.                                  3.64 4. 43 4.25                                         1. 00      13.53                                                             4. Id    S. 15    5.30 1.34        15.97                                 it. 8               0.80               1 40             iS.9?
                                         PROJCtCSIUOIES/IlUOES 01 PROJEI                                   0. 40 0.40 0.40                                         0. 40 0.40 1.00                                                              0. 43    0. 47    0.50 0. 54 0.58 2.51                                   2.01                O. 13              0.38              2. 51
                                                        OF
                                         RECONS0IIUIION OEPOSII/NECONSIITUI1IN GISSENENE                   6.64 4. 13 4.13                                                  . 14.69                                                             7.21     4.60     S. 14          - 17. 16                                 7.04                .155              2.57             17 16

                            Set-fatal   SIUOIES.CIOIOOGYEIUDES-GEO1,0l1                                  11.O7 9. 16 9.04 1.40                                                                                 0.40 31.06                      12.02 lO.SS 11.27               1.86 0.56 36.40                           22.31               8.59               5 46 36.40
                            S. t3hIlN1I     1ORN£RION                                                     1. 10 1. 10 1. 10 1.10                                                                               1. 10 5.50                       1.20 1.28 1.37                 1.4  19    6.91                            3.46               2.42                1.04 6.91

        Total                             INWVtlNWt COStS                                                12. It 10.26 10. 14 2.10 1.10 36.55                                                                                                   13.22 1.92        12. 5.1 3.36                2. 1? 43.31                 25.51           11.01                    6.50 43.31
                                                                                                         i...                   il.    ,,t                     321.1                                     tiltS                  flit           th       itlta    Stills     lisZt          *11       12122............ 12::          122332          *::::ustiut,t               ............... |
                                                                                                                                                                                                                                                                                                                                                                                  :2122

total                                                                                                    12.1? 10.26 10.14                                           2.10                                        1.10 36.16                    I3.22 till2       flu4         3.36          2.1? 43.31                   11.61               It                   6.50 43.31
                                                                                                         .,,,,                 13322   2:122                   Notes                                     ilsIS                  13855          itiU     2,312    lease22.           .225         .   2       3             tt.....
                                                                                                                                                                                                                                                                                                                     . *.iiittt      thitf            tSl
                                                                                                                                                                                                                                                                                                                                                    *22531ese               ll


.....................................                                      ..............   ..........       ...............                   ..............................................................................                                                                                                                                   .........



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                                                         Z_E~~~FA
                                                 DISE!              SOEW            IL
                                                                             PFR MBAC

                               W.sbizu.ut Profiles Czu,itive           Z
 TlD      Fisma1                   MUn1t          Eist    Africa                           Dlsbuset     Otmlative
Yewn & Qurtw                      Bwk-Wide                                        Z      Dlrbwsu.te



   1987

               I
             II                       1                   1
           III                                                                    7               8.2          82
              IV                      7                   4                      16               9.4        17.6

       19B8

               I                                                                 24               9.4        27.0
              II                     16                  10                      33               9.4        36.4
           m                                                                     41               8.4        44.8
              IV                     25                  17                      48               8.4        53.2


   1989

                   I                                                             56               &4         61.6
              TT                     37                  27                      64               8.4        70.0
           III                                                                   72               9.1        79.1
             LV                      48                  37                      8D               9.1        88.2

   1990

                   I                                                             86               6.2         94.4
             II                      59                  48                      90               4.3        98.7
           III                                                                   93               3.3       102.0
             LV                      69                  59                      95               2.8       104.8

       1991

                   T                                                             96               1.4       106.2
              II                      77                 68                      98               1.4       107.6
           LTI                                                                   99               1.4       109.0
               LV                     84                 76                      100              1.0       110.0




 nimtry            Dep   Ent
Mw&d~1986
                                          -102-                             ANNEX7-1
                                                                            Page 1 of 3


                                        REHABILITATIONPROJECT
                        ZAIRE - GECAMINES

                                   FOR FINANCIAL PROJECTIONS
                         ASSUMPTIONS


A.    Inflation

1.         Since the financial     projections       have been carried out in current US
dollar terms, orojected   international        inflation   rates have been applied as
follows:

                                      Inflation   Rates
                                            (Z p.a.)

             1986         1987       1988         1989          1990     1991-92
              7.0          7.0        7.5          7.7           7.6        4.5

B.   Sales

2.    Sales volumes during the period 1985-88 have been forecast     to fluctuate
around 470,000 tpy of copper in accordance   with Gecaminest own estimates.
Thereafter  sales are assumed to stabilize  at 470,000 tpy.    Cobalt sales have
been assumed to amount to 10,000 tpy until    1988 to increase  to 11,000 tpy in
1989, 12,000 tpy in 1990 and to remain at that level thereafter.       Zinc sales
have been assumed to fluctuate around 64,000 tpy until 1988, based on
Gecamines' own estimates,and to remain constant     at that level thereafter.

C.    Investments

3.         Gecamines'investment program is expected to cover all investment
needs of the Company until 1989. Thereafter reinvestmentlevels have been
assumed of about 10X of Gecamines' annual revenues.        Depreciation assumptions
are based on Gecamines' practice    of linear depreciation    which is applied   for
major investment categories   as follows:

                    Buildings                                        30 years
                    Mining Equipment                                4-8 years
                    Vehicles                                       5-10 years
                    Railway infrastructure      and equipment     10-30 years
                    Other materials     and equipment             10-20 years
                    Mine development                                   5 years
                    Studies and prospection                            1 year

D.    Costs

4.        All elements of production costs have been estimated at their
predicted 1985 values. The following assumptions have been made for the
different cost items:
                                      -103-                               ANNEX7-1
                                                                          Page 2 of 3


(a)    Labor:   (i) decrease    o' the number of expatriates     from about 660 in
       1985 to about 380 in 1992; real salary increase        of 1.8% p.a.;
       (ii) increase    oZ the number of the Zairian    supervisory   staff from
       about 2,500 in 1985 to about 3,600 in 1992; real salary increase          of
       2.2% p.a.; (iii)    decrease of the labor force from about 32,250 in
       1985 to 30,000 in 1988 and stabilization      at that level;    real wage
       increase  of 4% p.a. but reduction     of fringe benefitswhich would
       bring the increase     of total remuneration  to about 2.5% p.a.

(b) C=sumables and spare parts: increase of 2.5Z p.a. in real terms
    until 1990 because of opening up of new mines and mining in greater
    depth.

(c) Electricity: cost increase of about 1% p.a. due to expected tariff
    increases for electricity supplied through Inga-Shabaline.

(d) Services: decrease by 1.5% p.a. in real terms principallybecause
    of reduction of fringe benefits for Gecamines' personnel.

(e) Taxes: indirect taxes not included in cost items have been assumed
    to remain unchanged in real teL    D.   The royalty (part of corporaLe
    income tax) has been calculatedat 7% of metal revenues and
    additional  corporate   tax payments were added when in years during
    which the royalty    amounts to less than Gecamines' corporate  tax
    dues (50% of gross income).

(f) Marketing Costs

       (i)   Transport   costs       in Zaire:   costs   were assumed   to remain
             unchanged   in   real     terms;

      (ii)   Land Transport      in Africa:      costs   were assumed   to increase   by
             4% p.a.;

      (iii) Maritime Transport: costs were assumed to remain unchanged in
            real terms;

      (iv) RefiningCosts: were assumed to decreaseby 14% p.a. over
           five years and to stabilize thereafter,to reflect more
           favorablerefining terms aCnieved through diversificationof
             refiners.

        (v) Commissions: were assumed to decrease from 1.4% of copper
            sales revenues in 1985 to 1.2% in 1986; for cobalt from 8.4%
            in 1984 to 4.5% in 1985 and 3.5% in 1986; for zinc from 2.Z%
            in 1984 to 1.4% in 1985 and 1.2% in 1986.
                                             -104-                            ANNEX 7-1
                                                                              Page 3   of 3


     (g) Financial Cges

            (i) Interest: interest on existing loans was predicted on the
                basis of Gecaminea' forecasts and intereston new loans was
                calculatedat an average 10% of the outstandingloan balance,
                and a comitment fee of 1% of the average undisbursed balance
                was added;

           (ii)     Ewxort fees:      1.3% of part of sales     revenues   (55%) retroceded
                    to Gecamines    in Zaire currency.

E.   Balance      Sheet,   Working Capital     and Funds Flow

     (a)    Current assets:    operating    cash has been estimated     at about 3.5
            months of wage and salary payments and has been assumed to remain
            at that level throughout     the period.    Receivables   for sales have
            been assumed to decrease     from about 1.5 months to about one month
            of sales revenues,   to reflect     improved sales receipts    management.
            Other receivables   have been assumed to remain at approximately         the
            current  level.

     (b)    Current liabilitles:        accounts    payable have been assumed to
            decrease   from about four months to about three months of
            consumables consumption.         Short-term     debt is expected  to decrease
            to about one third df the current           level by 1990 principally    because
            of reduction     of prefinancing     of metal sales and also because of
            Improvements in cash management.

     (c) Outstanding long-term debt has been calculated  for existing and new
         debt along with the current portion which was included in current
         liabilities.

     (d) Other fixed assets, existing provisions, subscribedcapital and
         existing  reserves have been assumed to remain unchanged in current
         terms.   Retained earnings have been calculated as accumulated net
         income.




Industry Department
March 1986
                                                                      -105-                                                          AUNfl 7-2
                                                                                                               1111
                                                                                                                  SECT
                                                   ManE IMEM
                                                      -                   rNSUTAnI           Pam               ewe      PS:          Om -K

                                                 DEMMSL.              - PamniO Damrw




                                                                ^s11          19"      Il7          I'm       M9         IM          1"1          I"m
     hl
San5vvi                         tu                               _                                  iw000                             _

  Coppr                                                    4a.0M413.071 469e.Y 470.40 46.304                                 eu,om e.m
  CuWLt                                                      9,WT ao*mn toGM 10ion n.m0 sans                                  sien  1m
  liw                                                      61.73          64.745 U440            6a20       64.75      64.760 6470 I4.740
   Tuou Taump                                              50.741         3i, 11 544,5.3            605440
                                                                                                         545.7         545.70 546.70 541.70


Slas      k            lust uilliI
                   _nues

  Capp                                                      673.7          701.6      754.4        791.7    374.0        944       161.1        1112.2
  Cubit                                                     160.9          155.2      13.7       196.4                    .9
                                                                                                                         MS.4       UL           117.6
  Zinc                                                          54.           57.6     41.5         64.5     73.6        7e.6        U.S              7.
  °Osr        kitll                          l.2                              19.7     24.0        2.1       24.5        21.2        3.6          10.0

        kh"SSUREu                                           9              97.
                                                                            WA.1     13.6        1507S.7 13t9          1.0         14.01        1347.1
              5lir
            SI"                                                 3B.9        40.3       6.1         41.2    49.7          i3t         iss.         59.3

        TOa       AiN.                                      94.5           974.4     106.6       1121.9     151.       1411.5      1516.3       H06.4

tuutliq           Can.     ISuuumg)

  Lar                                                        ME.           135.5     14.5        130.9        71.9      19.1         M.5         214.3
  C-meshi.               I S         ft"s                   267.3          33.1      316.5       841.0      33.3        414.1       44.6         41.0
  Ectriatv                                                   26.0           17.0      29.1        11.3       38.9 s        1.7       19.1         41.6
  Services                                                  116.,          I12.9     119.0       125.7      115.2       14.2        147.4        151.7
  Towns                                                       7.0            7.2       7.1R           i        6.9        9.4        10.2         10.7
  Pusliun           fur 01 kuum             wd Other          0.6            0.0       1.1       -2.4        -0.7        -1.0        4.3           2.2
  Deprecatios                                               116.2          125.6      1.5          129.6    145.2       11.7        155.3        162.9

Tut       tratu            Ctaus                            s6.a           469.9      76.3       779.5      63.1        9.5         99e.5 1.3.9

TH*       rhitut           Cosn                             169.4          170.7      171.9        131.2    3A.1        2e.5        33.4         3A.4

Tuu Pruducia but                     (Tot. turnmng
 Cat + 1st HPMuIt                     Vt) '1.0                        e       60.6    912.2      95.1       106.       1149.0       29.1        1.7



      0P%         Iscomm


  T't.      times          - Tot. Praductiso        Cast    S2.S           11.8       1.A.4        156.3    L97.4        2.4        27.T         319.7



Ml F          csd        Dsp.                                   i.8           21.4     23.0        26.1      29.8        31.9        39.S         Sl.9

M& I.ncom A                Ta                                   36.1          27.0     33.9        54.9      73.8       10N.9       127.1        143.4



Dhwidmb                                                               6          6           o
                                                                                             0                     0           0            6              0

taluS        IZmu                                            31.1          27.e       a.8         54.9       73.3       104.3       127.1        14.4
  1       "ive tlmnd            Incame                       5.1           63.1      101.5       136.4      233.2       35.0        4e.1         6as.s

blis:          Ise mf Tazsflon  ki                              16.5          9.5      16.4        UA.       12.1        14.9        16.3         17.9
                lla   Afar TuulTt ka                             3.8          2.6       9.T         4.9       5.9         7.4         3.4          9.9
               Rtal    IITut   kAU                               3.1          2.3       3.7         4.9       5.9         7.4         3.4          9.9

                                Imstri       l    _pant
                                             19Hur-01
                                                    -106-                                            ANNEX7-3

                                                            ZAI     -             0      IUTAT!NPW:Jr
                                                                                          TUfES

                                                              CECMWM             - PDWE      R*UOS



                                              1995          19 19        1997    1999      1999    19 19    1991    1992

Saran of Fuds

  Iht Income                                 36.1           27.0         39.3    54.9      73.8   104.8    127.1   143.4
       Dpr    niatlu                         116.2     12a.8            122.5   129.6     140.2   152.7    155.9   162.9

Intemal Cah            nmaln                 12.2      156.9            160.8   1914.6    214.0   57.s     2e2.9   36.3

Iltwet       on LT DbT                        14.4          14.7         15.9    19.4      20.7    23.2     23.1    21.9

Lug-Tsr. Loou.
 Euisting                                     17.6          2.7          0.0     0.0        0.0    0.0       0.0     0.0
 NM                                            0.0          9.0         57.0    63.0       69.0   74.0      13.6     0.0

Total 9.rrmulq                               17.6       11.7            57.0    63.0       69.0   74.0      13.6     0.0

Toutl Sore                                   184.2      117.3           239.7   265.9     309.7   354.7    319.6   329.1

Applicstions of Fndo


I:assunts                                    151.0      150.0           160.0   180.0     170.0   109.0    160.0   172.0

DEbt Smice
 Imtiur    on LT Dobt                        14.4       14.7            15.9    18.4      20.7     23.2      3.1    21.9
 Principal kpqm t                            20.6       22.6            26.6    29.7      35.4     11.9     19.6    24.5

  Total Dobt Survics                         35.0       37.3            40.5     47.1      56.1   35.0      40.7    46.3

Dividend Paid                                  0.0           0.0          0.0     0.0       0.0    0.0       0.0     0.0

Chop in Varking Capital                      -Z7.5      -33.9            -9.5    19.4      34.8    39.3     32.1    26.7

Totl     application                         158.5      159.4           198.0   246.5     i60.9   176.3    234.8   245.0

Cuh SurplusI(D.Iieitl                        25.7       23.9            40.7     19.4      42.9   178.3     94.9    09.1
AaccumAvad SIrplusI(eficit)
        Cib                                  25.7       49.6            90.2    109.7     152.5   930.8    415.7   499.o

R&Uo

M *tSmivie Coverage                            4.4          4.0           3.9     3.9       3.9    7.4       6.6     6.6


                         ImbdusttDepartmnt
                                 19-IIg
                                 _sr-
                                                 -107-                                        ANNEX 7-4
                                                          7AUE- CEUIMB         inWrITAT       PEEr

                                                          GEr84NEXPL. - PNAEC            Lr




                                               19         1996      1917     190      199        99M0 199         199



Carwe AxmU
 Cob md Rmvinhlus                             255.3      213.9    191.5     199.4   218.5      241.4   259.5    272.5
 In     _umin                                 274.6      271.3    277.4       .6    295.5      309.a   37.4     96.5

Toual CEarrut       tusI                      529.9      4*J.0    468.9    499.0    514.1      54.4    5.9      616.0

AuIatud      CauhSurplus                       25.        49.6     90.2     109.7    1U2.5     330.8   415.7     49.9

Find Musts
  Gross                                       1359.2     1509.2   1669.2   1349.2   2019.2    2127.2   2W-2     249.3
  Las: AccumulatedDupretiaon                  116.2      240.0     962.5   492.1     632.3     79.9     940.9   1103.7

Not Find Asss                                 12.1       1269.2   1306.7   1357.1   116.9     134a.3   1346.4   135.5

Other Fixed Assts                              19.6       19.6     19.6      19.6     19.6      19.6     19.6     19.6

TOtWlAsets                                    1319.3     1023.4   1395.5   1969.4 2073.1      224.1    Z367.6   2490.0

Liabilitis      d Eit

Shri TermLiabilitin

  -_rrnt Liabilities                           146.9     135.9     129.2    123.9    120.2     12.2     126.6    130.1
  Current Portion LTD                          22.6       26.6     23.7      35.4     11.9      19.6     24.5     24.4

  Toutl ghwrt Twr LiiLitla                    169.5      162.5    157.9    159.3    132.0      141.8   151.1     154.5

Lo- Twr Dit Onstamding
  Existing                                    132.5      109.6     79.9     49.1     46.5       43.9    41.4     39.0
 mm                                            0.0        9.0      66.0    124.4    184.2      241.2   233.0    21O.9

  Total                                       132.5      117.6    145.9     173.5   230.7      235.1   274.2    249.9

Prcvisioms                                     76.1       76.1     76.1      76.1    76.1       76.1    76.1     76.1

Equity

  Capital                                      25.6       2Z5.6    2
                                                                   225.6    35. 6
                                                                            26        M.6      2es.6   225.6     225.6
  RAsreVs                                      109.3      109.3    109.3    109.3    109.3     109.3   109.3     109.9
  Capi',al Cain and Past Provisions           1069.2     1069.2   1069.2   1069.2   1069.2    1069.2   1069.2   1069.2
  Rlamed Income                                 36.1       63.1    101.5    156.4   230.2      3S.0    462.1     610.5

  Total Equitg                                143.2      1467.2   1515.6   1560.5   1464.3    1739.1 1966.2     2009.6

Tota LiabilU      and Equitg                  1819.3     1929.4   1995.5   1969.4   2073.1    2242.1   367.6     90.0

Ratios

Qulic ktio                                     1.51       1.32     1.21     1.25     1.66       1.70    1.71     1.76
Current btio                                   3.13       2.91     2.97     3.03     3.89       3.0     3.08     3.99
ODetEqdtlg atio                                0.03       0.07     0.09     0.10     0.12       0.14    0.13     0.11


                        IndustrIg Dmprut
                                   19 -9 6L
                                                       -108-


                                zAkIE GECNIIES
                                     -                    PROJECT
                                              KmrBILITATION                                            7-5
                                                                                                   ANNEX

                                CASH-FLOSS        SSTE
                                         FOR FDMWCIL              OF OTM


                                           (U59 million)




1. Bae CaMFlows                                                            Productianand Sale Level Omn 1.51 p.a.
                     SteudyProductionand SalesLevels                                  during 1985-9

             Sales       low    Op.Couts Hk.Camts          Taxs        5ales     I,.     Op.Cass Nk.Costs    Taxsa

     1995     946.5     151.0      689.7     168.6          63.5       946.5     94.6      659.7     168.3    63.4
     1986     941.4     144.9      664.7     164.9          63.2       999.4     81.1      664.7     161.9    61.9
     1997     942.7     144.5      665.6     155.3          63.2       919.3     90.9      670.1     151.6    61.9
     1999     944.4     151.5      652.1     156.7          63.4       915.6     94.9      "61.0     14.3     60.1
     1999     980.9     138.0      669.4     159.9          66.0       912.1     74.5      693.1     150.5    62.6
     1990    1025.9      79.5      692.0     161.7          79.0       955.4     92.6      701.0     153.1    65.6
     1991    1099.6     109.7      673.8     163.5          99.7       969.5    109.7      697.4     154.9    71.5
     1992    1053.4     112.9      673.8     165.5          96.3       992.3    112.8      702.1     156.8    77.6
     1993    1067.7     115.5      669.7     167.6         105.3       995.T    115.5      702.5     159.9    96.4
     1994    1000.2     118.3      666.3     169.8         113.0      1007.3    118.3      703.7     160.9    94.0
     1995    1092.8     121.3      666.5     172.1         118.T      1019.1    121.3      709.6     163.1    99.7
     1996    1105.6     120.3      666.5     174.5         124.7      1031.0    120.0      713.2     165.4   104.7


2.   Inoremental CashFlaws                                         3. Nut Cash Flaws
                                                                      After     Befor
             Sale        Inv    Op.Costs Nk.Csts           Taxs       Taxe      Taxns

     1985      00        66.4        0.0       0.3          0.1        -66.8    -66.7
     1996      2.0       63.8        0.0       3.0          1.3        -66.1    -64.9
     1997     23.4       63.6       -4.5       3.7          1.4        -40.8    -39.4
     1988     2.8        66.7       -9.9       8.4          3.3        -40.7    -37.4
     1999     68.8       58.5      -13.7       8.4          9.4         12.2      15.6
     19i      70.4      -14.1      -19.0       8.6         13.4         91.5      94.9
     1991     70.1        0.0      -23.6       8.6         18.2         66.9      85.1
     1992     71.1        0.0      -29.3       9.7         18.7         72.0      90.7
     1993     72.0        0.0      -32.8       8.8         19.9         77.1      96.0
     1994     72.9        0.0      -37.4       8.9         19.0         92.4    101.4
     1995     73.7        0.0      -4.1        9.0         19.0         87.8    106.9
     1996     74.6        0.3      -46.7       9.1         20.0         91.9     111.9


                                      Fiancial Rate of Return:         16.141   20.461
                                                             -109-




                                 7ZARE CEC4NIES
                                      -       RMNITAT!               PFJEC                       ANNEX 8-1

                                         FOR
                                 CASG-FLW EINUC RAE OF EJIN

                                             (US. millis.)




1. B,    Csh Flom                                                                                    1.51 p.a.
                                                                           Proouetimn no Salu Los Dome
                      St2sdl Production and Sales Lavas                               durin1985-B9

              Sa1.q       Inv Op.Cust       Kk.Costs                    sales     Inv Op.Costs Nh.CostS

     1995     946.5      120.8     606.0       168.6                    945.0     67.6       606.0   149.3
     1996     941.4      115.9     611.5       164.9                    924.2     64.9       U1.5    161.9
     1987     942.7      115.6     612.3       155.3                    921.6     64.7       616.5   151.6
     ilBm     944.4      l21.2     599.9       156.7                    997.2     67.9       606.1   14B.3
     1999     980.9      106.4     615.9       159.9                    932.9     59.6       623.4   150.5
     1990    1025.8       62.8     627.4       161.7                    976.4     74.0       644.9   l15.1
     1991    1039.6       87.8     U9.9        163.5                    994.3     97.8       641.6   154.9
     1992    1053.4       90.2     619.9       15.5                    1002.2     90.2       &4M.9   156.9
     1993    1067.7       92.4     616.1       167.6                   1015.6     92.4       646.3   159.8
     1994    1090.2       94.6     613.0       169.8                   1027.2     94.6       647.4   160.9
     1995    1092.8       97.0     613.2       172.1                   1039.0     97.0       651.9   163.1
     1996    1105.6       96.2     615.2       174.5                   1050.9     95.9       656.1   165.4


2.   Iuwrw.ental Cash Flos                                                3. Net Cuuh Flow
              Salm        Inv Op.Costs Nk.Costs

     1985      1.5        53.2        0.0        0.3                             -52.0
     1996     17.2        51.0        0.0        3.0                             -36.8
     1987     21.1        50.9       -4.2        3.7                             -29.3
     1998     47.2        53.3     -14.2         9.4                              -0.3
     1999     48.0        46.8     -12.6         9.4                                5.4
     1990     49.4       -11.2      -17.5        8.6                              69.5
     1991     S5.3         0.0     -21.7         8.6                              68.4
     1992     51.2         0.0     -26.0         8.7                              68.5
     1993     52.1         0.0     -30.2         8.8                              78.5
     1994     53.0         0.0      -34.4        8.9                              79.5
     1995     53.9         0.0     -38.7         9.0                              83.5
     1996     54.7         0.3     -42.9         9.1                               03.2


                                       EconomicRkt of Return:                    24.ZY
                                          -110-
                                                                                      ANEX8-2


                              ZAIU-H A        NPF3
                                        FZE       E    7H       E

                                              (15$ LulIc.)


                                              ProL    Cap.   TAM     tamn                It
                               Reaim          Cbut    Em.    Diab.          nterest    3flw
1. Stey    Produtio   level

          L986                    984          372     90       9    23       15        443
          1987                  1,001          388     96      57    27       16        531
          1988                  1,076          410    108      63    29       I1        574
          1989                  1,204          435    102      69    35       21        680
          1990                  1,358          48D     65      74    12       23        852

2.   Pmduction levels Dmtn1.5Z p.s. untdl 1990

          1986                    902          372    53      23     23       13         464
          1987                    963          388    57       2O    27       14         497
          L988                  1,014          410    66       20    29       14         517
          1989                  1,121          441    61       20    35       14         590
          1990                  1,259          487    88       20    11       13         680

3. Ixcreital     Farelp Edwge FJm

          1986                    32             -     37     (14)     -       2         (21)
          1987                    38             -     39      37      -       2          34
          1988                    62             -     44      43      -       4          57
          1989                    83            (6)    41      49      -       7          90
           990                    99            (7)   (23)     54      1       1         172




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