Saindak project lease extended for 15 more years

ECC approves Rs8.2b MPs’ recommended projects

ISLAMABAD:

The government on Wednesday approved revised terms of the Saindak Gold and Copper Mine project -- a joint venture between Pakistan and China -- and extended the lease period for another 15 years to extract metals from the mine.

The share of the government of Pakistan has been increased by 3% to 53% while the Chinese company has also agreed to enhance rent, royalty and social uplift payments to the federal and Balochistan governments, according to the revised terms that the Economic Coordination Committee (ECC) of the cabinet approved on Wednesday.

Finance Minister Shaukat Tarin presided over the ECC meeting that also approved doling out another Rs8.2 billion under discretionary spending to parliamentarians to execute schemes in their constituencies ahead of the next general elections.

The total budget that the government in just seven months has given to the parliamentarians schemes under the garb of the Sustainable Development Goals has surged over Rs64 billion.

The Ministry of Energy, submitted a summary on 15 years’ extension of lease contract between the Saindak Metals Limited (SML) of Pakistan and the Metrological Construction Company of China (MCC) for the Saindak Copper Gold Project, according to a press statement issued by the Ministry of Finance.

“The ECC after detailed discussion allowed the extension of the lease contract and recommended to review financial aspect of the project annually by the professional experts,” said the Ministry of Finance. Currently the lease contract is valid till Oct 31, 2022, which would now expire in 2037.

The revised terms showed that the profit share of the SML has been increased from 50% to 53%. Similarly, the royalty to the Balochistan government has been increased from 5% to 6.5% of the sales revenues.

The social uplift support to the provincial government has also been increased from 5% to 6.5% of the net profit. The venture will also give Rs10 million for scholarships to the students of Chagai.

The MCC will pay $700,000 per annum as rent and another $500,000 annual for the LME copper price, according to the revised terms. The MCC will make $45.5 million additional investment on a need basis. 

This project had been developed for local ore exploration, mining and processing of blister copper. The federal government has invested more than Rs29.2 billion in the project and it has been declared as an Export Processing Zone (EPZ) up till October 31, 2022.

Read: Emerging copper market and opportunities

The operations of the Project were entrusted to a state-owned entity of the China, namely China Metallurgical Construction (Group) Corporation (MCC) under a lease contract.

The mineral deposit of the project comprises three orebodies -- south, north and east. The ECC was informed that the present project operations are based on south and north orebodies, which are near depletion and development of east orebody (EOB) needs to be undertaken for continuance of the project beyond 2022.

After conducting exploration under the existing contract, the MCC submitted a feasibility study report for the development of the EOB.

The feasibility study has been examined by the SML’s board of directors and a Technical Evaluation Committee (TEC) comprising representatives of the SML, the Geological Survey of Pakistan, the Government of Balochistan and the Petroleum Division and the external technical & financial experts.
As a result of the deliberations, development of the EOB has been worked out to be a viable venture with mine service life of 20 years, according to the Ministry of Energy summary. The MCC had requested for 15 years extension in the contract.

The government of Balochistan conveyed its concurrence to the extension and the Ministry of Law and Justice has confirmed that as per provision in the Lease Contract, its term can be extended on the terms and conditions as mutually agreed by the parties.

The ECC approved to issue sovereign guarantee or standby letter of credit worth of Rs6.9 billion against the Operational Viability Gap Funding (VGF) for the construction of Sialkot– Kharian Motorway project.

Discretionary spending

The ECC approved Rs8.2 billion supplementary budget to meet the financing needs of the parliamentarians’ recommended projects, bringing total approvals to Rs64.2 billion in the current fiscal year.

The spending under the parliamentarians schemes has picked up momentum in recent months. The PTI government has a five-year constitutional terms that is going to expire in August next year.

Against the earlier approved money, an amount of Rs29 billion has been given to Punjab, which is more half of the discretionary spending allocations.

In Khyber-Pakhtunkhwa, Rs183 billion or one-third of the budget is given while another Rs5.8 billion is allocated to projects in Sindh. The Balochistan province also received Rs1.5 billion and the share of Islamabad territory was Rs1.1 billion.

The ECC also approved Rs1 billion for the military to handle the spread of the Covid.

The ECC approved the Ministry of Energy summary on determination of the RLNG sale price for the Pakistan LNG Limited (PLL) for supply of 150mmcfd RLNG to K-Electric.

On another summary of the Ministry of Energy, the Petroleum Division, for revision of gas price of the Mazarani gas field held by the PPL and the GHPL, the ECC approved the proposal of revision of gas price from $1.75/MMBTU to $3.75MMBTU from September 1, 2021.