As the govt and the mining company refuses to reach a consensus
Mining: Economic affairs minister Norbu Wangchuk said the government is ready for a face off after the disgruntled owners of a mining company threatened to take the government to court for under compensating them for cancelling their quarry license.
Chief Executive Officer of Wakleytar Taksha Mining Private Ltd (WTMPL), Rinzin Ongdra Wangchuk, as a last resort wrote to the minister on July 6 asking for fair compensation and describing their situation as being ‘punished like in a communist regime.’
Rinzin Ongdra Wangchuk said that the sudden shutting down of the quarry was a ‘draconian step by the geology and mines department and the ministry.’
“There’re very few correspondences between the ministry and us,” he said. He said that the company was not informed about the actual compensation amount recommended by the task force even days after it surrendered the quarry to the ministry on June 20.
On May 12, the department of geology and mines (DGM) wrote to the CEO saying they would receive a compensation of Nu 75.9M from Jaypee Associates Limited, the contractor who would operate the quarry for PHPA II dam construction.
“We surrendered the quarry wilfully in the interest of the nation hoping that the government would compensate us fairly,” the CEO said. “Their compensation was unacceptable to us and we did not know what the taskforce actually recommended.”
He said on repeated requests and two written applications, the DGM officials verbally told him that the recommended compensation amount was about Nu 150M.
In the letter to the company cancelling its lease on May 4, the officiating DGM director general wrote that the company would be compensated for the cancellation of the lease as per the recommendations made by the taskforce and the decision of the Cabinet subcommittee.
In his latest letter to the minister, the CEO asked for the justification of the drastic reduction in the compensation package and when the company would actually receive it.
“We’ve loans about Nu 135M in the banks and the government should pay their interests from the closure of the mines until now,” Rinzin Ongdra Wangchuk said.
Of its two quarries, the company is claiming compensation for one.
“We bear the loss for the other one because there is not much to do for the machineries without the Takshasili quarry,” he said.
Lyonpo Norbu Wangchuk yesterday said there is no need to respond to the July 6 letter. Lyonpo has also instructed DGM to expedite the handing over of the quarry to the PHPA II for immediate extraction.
“Everything was done lawfully and in the interest of the country,” he said. “It was not done recklessly.”
He said in this kind of a case, it is difficult to make both the parties happy.
“I understand how they feel but if they were in my place they’d have taken the same decision,” lyonpo said.
He said the government had an obligation to allot a quarry to the project and the Article 29 (iii) of the Mines and Minerals Management Act 1995 allowed it to obtain a private quarry.
The Cabinet subcommittee had struck off some elements in the cost structures such as market liabilities, outstanding and opportunity costs, among others from the compensation package the taskforce recommended.
“It’s like, a driver kills a chicken in an accident and the owner charges him not for the chicken alone but for all the chickens that could possibly hatch from the eggs it could have laid,” he said.
Citing this example, Lyonpo said that these costs were futuristic and not reasonable to pay.
The committee approved a compensation package considering mainly the quarry development costs.
“We’ve to now force the contractor, Jaypee Associates Limited, in to accepting the subcommittee’s approved compensation package,” the minister said.
The WTMPL CEO had proposed to allow the company extract from one part of the Takshasili quarry until the difference between the compensation offered and that recommended by the taskforce is recovered.
“But that would be practically not possible,” DGM’s Ugyen Wangda said.
The Taskforce report
The PHPA II applied to the DGM for a stone quarry in the Taksha area in Wangdue. The DGM denied clearance for the application saying there were already enough mines in the area.
However, the government was bound by contractual obligation to allot a quarry to PHPA II who would give it to the contractor to extract the required materials.
A cabinet subcommittee (CSC) was then formed to explore alternative quarries for the project.
In March, a task force comprising the finance joint secretary Nim Dorji, PHPA II powerhouse chief engineer Thinley, hydropower and power systems chief engineer Karma P Dorji, and DGM’s officiating director general Ugyen Wangda.
The task force studied three options to recommend the best one to the CSC. The options were for the project to continue buying from the quarries in Taksha area; the government buy out a quarry in the area and allocate to the project; or the government identify a quarry outside Taksha area.
According to the Mines and Minerals Management Regulations 2010’s Clause II, annexure I-E, the government could terminate the lease of a quarry, “if it is in the interest of the Royal Government to withdraw the lease.”
WTMPL had two quarries, one at Takshasili and another at Wakleytar. For the two, it submitted a final compensation package of Nu 172.732M to the Task Force, which included outstanding liabilities as of December 2014, market liability, accumulated losses, loss of profit for a year and less expected sales proceeds from plants and machinery and vehicles.
Based on the 6.362 million metric tonnes of mineable reserves of the Takshasili quarry, the taskforce recommended a compensation package of Nu 150.779M.
The DGM based on the approved Final Mine Feasibility Study report 2010 assessed the compensation package to Nu 62.512M. It included Nu 26.822M equipment cost, Nu 31.326M opportunity cost, and Nu 4.364M as mine development cost.
Why Takshasili mine?
“There were already too many in the area, so identifying a quarry for the project was impossible,” DGM’s officiating director general Ugyen Wangda said.
There are six quarries operating in the area but only three could supply the boulders the contractor needed.
Laboratory test results of samples from Dolliwa and Takshasili Stone Quarries, the two most suitable quarries for the supply of boulders for the project, showed the later as more suitable.
“We never thought the government would take us on a ride,” Rinzin Ongdra Wangchuk said.
The CEO said that there is no reason to deprive them of compensation amount that has been recommended in a report that has been researched, studied, and analysed independently by high-level officials.
The CEO, also a former PDP treasurer, claimed that just as there were rumours of the previous government taking bribes from a hydropower contractor for allotting the company a quarry for PHPA I, the current government could also have received bribes.
Lyonpo brushed off the accusations as rubbish.
The opposition party, meanwhile said that it is shocked to read Rinzin Ongdra Wangchuk’s statement on the former government being bribed.
“We leave it up to the intelligence and imagination of the people since the words came from the mouth of the former party treasurer and a prominent member of the executive committee of the PDP,” the party’s press release stated.
It stated that, it’s surprising that an appropriate quarry has still not been allotted to the contractor, even though the project is said to be 60 percent completed.
The opposition party said that the government should have allotted a quarry from state land and not acquired a private mine involving huge compensation to be paid.
“One also wonders whether the criteria used in acquiring this particular mine satisfied the procurement rules of the government,” it stated.
“We hope the Government will not buckle under pressure of the party heavy weights who own the mine.”
By Tshering Palden