MONDAY OCTOBER 31: Saindak project: lease likely to be extended for five years

ISLAMABAD: Metallurgical Corporation of China (MCC) is likely to get five-year extension in the lease of Saindak project, beyond October 2012, and it will set up copper refinery in Balochistan, sources told Business Recorder. The MCC is operating Saindak project in Balochistan through its fully owned Pakistani registered subsidiary under lease contract with Saindak Metals Limited, fully owed by the Government of Pakistan (GoP).
The lease contract is at present in force under execution and valid until October 2012. As per terms of the contract, MCC has proposed that the term of the contract may be extended for five years beyond October 2012 or till the economic reserves are exhausted, whichever occurs later.
As per 'Aghaze-Haqooq-e-Balochistan' package, agreed between the GoP and GoB, the ownership of the Saindak project would be transferred to GoB after the expiry of existing term of the lease contract ie October 2012.
The proposal of MCC for extension beyond October 2012 was agreed by SML and Ministry of Petroleum and Natural Resources and referred to GoB for their concurrence. GoB desired to have a meeting to negotiate with MCC for extension in the terms of the lease contract beyond 2012.
A meeting was accordingly held at Karachi on January 2011 between representatives of GoB, MRDL and SML. Discussions were held on all the issues raised by GoB in a very cordial atmosphere and the following terms were agreed to for the period of extension beyond October 2012.
1- MMC, in addition to the royalty @ 5 percent of the gross sale proceeds, shall pay through an official account of the Ministers Welfare Board GoB, an amount equal to 5 percent of the net profit (defined as "surplus" in lease contract) for lending financial support to the social uplift activities of GoB in the mining areas. Thereafter, the balance surplus would be shared between MCC and GoB through SML in the ratio of 50:50.
2- Saindak project would continue to enjoy status of Export Processing Zone during the extended period of the lease contract for which necessary approvals from the relevant authorities of the GoP shall be secured by SML.
3- MCC shall arrange adequate funds for the replacement of outlived machinery and equipment at Saindak project which shall be recovered along with interest from the sale proceeds of the project.
4- All terms of the existing lease contract shall continue to apply during the extended period except by those effected by the aforesaid terms.
5- MCC shall exploit East Ore Body in the Saindak area as a component of existing project operations, if it is determined to be feasible.
6- MCC, at its own cost shall carry out a pre-feasibility study for setting up a copper refinery of an optimal size and at an appropriate site within Balochistan and submit the case to GoB as early as possible. If the refinery option is economically feasible and the GoB decides to go ahead with this venture, MCC shall provide technical and financial support to GoB for its execution.
7- The GoB will convey their concurrence to the GoP about the extension of the lease contract between MCC and SML for five years beyond October 2012 or till the economic reserves are exhausted whichever occurs later.
During the term of lease contract, lessee shall make the contribution to the local population and the costs and expenses incurred shall be part of production cost. According to the document, lessee shall arrange financing for the maintenance, repair, rehabilitation and production of the project and shall to this end invest $8-10 million in accordance with the investment plan.