The mine is expected to supply 5,000 metric tonnes of coal a month to the cement industry for 10 years

Mining: The Habrang coal mine in Samdrupjongkhar was formally leased to the State Mining Corporation (SMC) by the Department of Geology and Mines (DGM), yesterday.

The event is being deemed a milestone as it marks the official entry of the government’s investment arm, Druk Holding and Investments (DHI), into the mining sector. SMC is a DHI owned company.

Actual mining of the Habrang coal mine is expected to commence by February 2016, according to a press release.

The mine has an area of 100.6 acres and an additional five acres for stockyard and other infrastructure development. It has a probable deposit of 600,000MT and will be supplying 5,000MT of coal a month for an operation period of 10 years. The project is estimated to cost Nu 175 million.

The project is expected to break even by its first year and contribute “substantial revenue” to the government by its second year of operations.

About 40 Bhutanese workers are expected to be initially engaged along with hiring of machinery and vehicles from private firms.

Coal mined at Habrang will not be exported and reserved solely for domestic industries.

DGM director general, Phuntsho Tobgay said this will allow local industry to develop as it will create value addition, such as employment generation and revenue optimization of the mineral, which for the mining sector is very important. He pointed out that if minerals are simply extracted and exported, the value addition chain is not being created.

Coal in Bhutan is regarded as a strategic mineral given its limited availability in the country. It is found only in Samdrupjongkhar and parts of Pemagatshel.

The mineral is the main source of fuel for the cement industry, accounting for about 40 percent of the total cost of production of cement and therefore needs to be exploited in a responsible and sustainable manner, the press release says.

The formal leasing of the mine also marks the first major activity of SMC.

The company is expected to play an important role in fulfilling a constitutional mandate of broad based ownership of mineral resources in Bhutan. SMC is mandated to ensure that national resources are explored and used for the socio-economic development of the country through responsible mineral development, employment generation, foreign currency earnings, and revenue generation for the state. A significant amount of the profit earned from the venture will be remitted to the national exchequer.

Phuntsho Tobgay said one of DGM’s major challenges includes monitoring and achieving compliance with the Mines Development Plan (MDP). He said there are many instances of private mines not being developed as per the MDP. “SMC will be in a better position to collaborate with the government,” he said.

It is hoped that SMC will serve as a role model in terms of good environmental practices. Phuntsho Tobgay said that some mines located away from human settlements have many issues. “The over burdens are not being taken care of, retaining walls are not being made, benches are not being developed,” he said. He added that some mines do not even deposit the Environmental Restoration Bond, that exists to restore the mine and environment back to its original state once the mine has been exhausted.

Another major impact SMC is expected to have is price stability. Phuntsho Tobgay said that mineral exports would be canalized or channeled through one firm. He provided an example of how quarry owners who export aggregates drive down the price of the mineral through competition. He added that optimization of the value of minerals is a requirement of the Mines and Mineral Management Act but was not happening as a result.

“We will not resort to cutting prices,” he said. By having exports channeled through one firm, the profitability of a mineral being exported would not be reduced. The director general explained that this was the same problem orange and apple exporters faced prior to a floor pricing mechanism being implemented.

The lease signing ceremony occurred in Thimphu.

Gyalsten K Dorji