ISLAMABAD: The government is likely to extend lease contract period of Saindak copper-gold project between Saindak Metals Limited (SML) and China Metallurgical Construction Corporation (MCC) for 15 years from November 1, 2022 to October 31, 2037, well-informed sources in Petroleum Division told Business Recorder.
M/s SML is a public sector company wholly-owned by the Government of Pakistan (GoP) and is engaged in managing affairs of Saindak copper-gold project in District Chagai, Balochistan. The project was developed for local ore exploration, mining and processing to blister copper. The Federal Government has invested more than Rs 29.234 billion in the project and it has been declared an Export Processing Zone (EPZ) up till October 31, 2022.
The operations of the project were entrusted to a state-owned entity of China, namely China Metallurgical Construction Corporation (MCC) under a lease contract with SML on November 30, 2001, awarded through international bidding process. Subsequent to the approval of the Federal Cabinet, the contract was initially for a period of ten years starting October 2, 2002 along with a provision for extension on the mutually agreed terms. Thereafter with the approval of Federal Cabinet, the contract period was twice extended in 2011 & 2017 for five years each time. Currently the contract is valid till October 31, 2022.
The mineral deposit of the project comprises three orebodies-south, north and east. The present project operations are based on south & north orebodies (SOB &NOB), which are near depletion and development of east orebody (EOB) needs to be undertaken for continuance of the project beyond 2021/2022.
After conducting exploration under the existing contract, MCC submitted a feasibility study report for the development of EOB which has been examined by the SML’s Board of Directors and a Technical Evaluation Committee (TEC) comprising technical representatives of SML, Geological Survey of Pakistan, Government of Balochistan Evaluation Committee (TEC) (GoB) & Petroleum Division and the external technical & financial experts. As a result of comprising these deliberations, the development of EOB has been worked out to be a viable venture with mine service life of 20 years.
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M/s MCC has requested for fifteen years extension in the contract term beyond October, 2022 for development of EOB.
The Government of Balochistan conveyed its concurrence to the extension. Ministry of Law &Justice has confirmed that as per provision in the Lease Contract (clause-4), its term can be extended on the terms & conditions as mutually agreed by the parties.
The Petroleum Division constituted a committee having representation of the Finance Division, FBR, Ministry of Law & Justice, GoB, Petroleum Division, SML and ISI to determine and negotiate the terms & conditions of the contract extension with MCC for development of EOB. As a result of deliberations in various meetings between the two sides a draft of the terms & conditions agreed for the term extension of existing SML-MCC lease contract for further 15 years beyond 2022 has been prepared as an Addendum No.4 to the lease contract.
The Addendum has been endorsed by the Board of Directors of SML. The terms negotiated for the proposed contract extension are as follows: (i) annual rent(paid to SML)- current value $0.500 million/year - net value & 0.700 million/year, $ 0.500 million/year for LME copper price of $ 6,500/per ton; (ii) SML: MCC profit ratio, current value 50;50, net value, 53: 47; (iii) royalty to Government of Balochistan at current value 5 per cent and at net value 6.5 per cent of sales revenue;(iv) social uplift support to GoB, 5 per cent of net profit at current value and 6.5 per cent of net profit on the basis of net value; (v) funding to GoB for education has been agreed at Rs 10.000 million for scholarships to students of Chagai; and (vi) additional investment by MCC will be up to $ 25 million (paid off by SML) at current value whereas it would be $ 45.472 million on need basis at net value.
The draft summary along with annexures was circulated for circulated for views/comments of concerned Ministries/Divisions and GoB. The Ministry of Law & Justice has vetted the proposed Addendum No.4 to the Lease Contract with slight modifications, which have been incorporated in the Addendum being submitted herewith. The Addendum No.4 has been endorsed by GoB. Ministry of Industries & Production, Finance Division and FBR have also conveyed their concurrence.
The Petroleum Division has requested the ECC to consider the proposed 15 years’ extension in the lease contract period of Saindak Copper Gold Project between SML and MCC, China, wef, November 1, 2022 to October 31, 2037.
Copyright Business Recorder, 2022
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