The mineral development policy that languished between the Cabinet and the Department of Geology and Mines (DGM) for eight years is now approved for implementation.
The need for the policy was felt more when the mining sector was mired in issues of corruption, mismanagement and weak governance as pointed out in reports of the Anti-Corruption Commission and Royal Audit Authority.
Director General of DGM Phuntsho Tobgay said, that the policy helped in making institutional arrangements. For instance, the policy spells out the recommendations of the organisation development exercise, which mandates a clear delineation of policy and regulatory functions of DGM. The policy provides legal provision for establishment of mining regulatory authority as an independent agency to regulate the mines, levy and collect royalties, rent and fees.
Currently, the department carries out all activities including the mine feasibility, approval, monitoring and compliance under the same roof. This delineation is done to avoid conflict of interest between promotional and regulatory roles.
Although the Constitution offers property rights of all mineral resource to the state, it also mandates the state to promote open and progressive economy, and foster private sector development through fair market competition and prevent monopolies.
In keeping with this mandate and also the government directives, the policy has classified minerals into three categories – strategic, industrial and construction minerals. Strategic minerals are defined as those that have wider implication on the economy, scarce in nature, have high economic value and have security implications.
While it is a broad principle of the policy that all strategic minerals are prerogative of the state, the government has to adopt an allocation framework. This is why strategic minerals are not listed. Director general Phuntsho Tobgay said some strategic minerals of high value may have security implications, and it is the government’s responsibility to ensure that it does not fall in wrong hands.
However, the director general also said there are other minerals, which may be strategic but have the potential to generate employment, enhance country’s revenue and develop manufacturing capabilities. “Then it’s important to have a model to optimise resource utilisation and contribute to value chain,” This is why the allocation framework allows the government to update the list of strategic minerals periodically.
But there is also a Cabinet directive to allocate strategic minerals to the State Mining Corporation (SMC). The allocation framework would also accommodate the fact that mineral resources are preserved in different state. For instance, there are evidences of presence of lead zinc but lab test validates that these minerals are preserved in oxidized form. Geologists said it is easy to extract in raw form rather than oxidized form.
“We cannot have overnight strategy because specific studies have to be conducted for specific mineral,” A DGM official said. The policy however, put responsibility on the department with the industry promotion mandate including the perspective of foreign direct investments.
The policy also allows industries to own a captive mine to source its raw materials. For instance, quartz is the raw material for ferro silicon industry. The industry would be allocated quartz mine only to source its raw materials and not allow sale in any form.
To encourage prospecting and exploration of mines among the private sector responsibly, the policy has new provision on mineral exploration and prospecting. Prospecting involves surface collection, which is most confined to sample collection. There is little disturbances to environment in this process. Exploration, begin by prospecting and involves digging and trenching.
The policy spells that prospecting and exploration rights to private sector are not given outright but only if it is aligned with the environmental and government perspective. “So the DGM has the responsibility of overall resource management,” the director general said.
There is also a clause stating that if prospecting reveals some promise to go into exploration, miners would be given the right only to explore minerals that is permitted. If not, Phuntsho Tobgay said, that this could lead to exploitation of other minerals.
Incase exploration lead to disturbance in ecosystem, miners are mandated to restore the environment. This right is provided to the private sector because officials said that the government cannot carry out exploration in every mining zone due to lack of resources.
The policy has also accommodated the concern raised by the audit authority on minority shareholder. It was highlighted that some mining companies do not protect interest of the minority shareholders.
For instance, a subsidiary of a mining company like a machinery-hiring unit was established as a legal entity by few majority shareholders. In the process, the whole work involving machineries were outsourced to that hiring unit benefiting the majority shareholders at the cost of investment made by minority shareholders.
To address this issue, some arrangements have been made in the Companies Act and to compliment it, the mineral development policy also spells out the need to adopt a framework on broad-based ownership.
The policy triggers reforms through adoption of revision of the mines and mineral management Act, regulations, framework, socio-economic development and stringent environmental protection regime and regulations.