Chinese firm to retain control of Saindak until 2022

Updated October 27, 2017

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A file photo of Saindak mines. The mineral deposit found in the project area comprised three ore bodies: east, north and south.
A file photo of Saindak mines. The mineral deposit found in the project area comprised three ore bodies: east, north and south.

ISLAMABAD: Metallurgical Corporation of China (MCC) and state-owned Saindak Metals Ltd (SML) signed on Thursday an agreement under which the Chinese firm will continue operating the Saindak copper-gold project for another five years on existing terms.

The two companies signed in 2002 a 10-year contract, which was extended for five years in 2012. The contract was to end on Oct 31. The government has always kept the terms of the contract confidential.

The deal is believed to provide the provincial government with about 25 per cent of the net profit along with royalties and duties. The terms of contract are often criticised by nationalist leaders for being unfavourable to Balochistan. The lease extension will remain effective until Oct 30, 2022.

Prime Minister Shahid Khaqan Abbasi witnessed the agreement-signing ceremony.

A delegation led by MCC President Zhang Mengxing held a meeting with the prime minister. Balochistan Chief Minister Nawab Sanaullah Khan Zehri, Charge de Affairs of Chinese Embassy Zhao Lijian and officials of the Petroleum Division and the Balochistan government attended the meeting.

An official statement quoted the prime minister as appreciating MCC. The project employs over 2,000 Pakistanis and is also providing free services to the local villages in Balochistan, he said. Mr Abbasi welcomed Chinese investment in the country, saying the government has formulated investor-friendly policies that provide foreign companies with suitable work environment.

In a recent meeting, the federal cabinet had approved five-year extension to the original contract. The cabinet was told that the project was producing blister copper from indigenous ore of the Saindak area.

In pursuance of the cabinet’s decision of May 9, 2001, the project operation was leased out to MCC — a state-owned entity of China — for 10 years with effect from Oct 2, 2012. The government’s Aghaz-e-Haqooq-e-Balochistan Package (AHBP) envisaged the transfer of the project ownership to the provincial government after the completion of its lease term.

The lease was extended up to October with the consent of the Balochistan government and approval of the cabinet through an addendum to the lease contract.

The government of Balochistan had also consented to the continuation of existing arrangements for the project beyond October and the extension of the lease contract between SML and MCC.

The cabinet was told that the mineral deposit found in the project area comprised three ore bodies: east, north and south. The ore deposit in the current mine, south ore body, was almost exhausted and other ore bodies needed development for future operations.

MCC, SML and the federal and provincial governments had reached an understanding on the development of north ore body (NOB). MCC originally claimed the NOB development was uneconomical due to depressed metal rates. Therefore, it demanded a reduction in the royalty and complete waiver of the project rent. But it agreed to continue working on the existing terms for five years when the provincial government decided to go for open bidding.

The Ministry of Finance also agreed to the extension of the lease period, subject to the condition that no financial obligation will be put on the federal government. A confirmation regarding the observance of the conditions proposed by the Finance Division had been obtained from SML and MCC and these conditions were incorporated in the addendum.

The Ministry of Industries and Production has also acquiesced to the extension of the export processing zone status of the project.

The government of Balochistan holds 35pc shares in the project while the centre owns 15pc.

The remaining 50pc stakes are held by MCC.

Published in Dawn, October 27th, 2017