With its 15 years mining lease ending on December 31 this year, the trading of Druk Satair Corporation Limited (DSCL) shares in the secondary market was suspended since January this year until further notice.
The company also completed buying back 25 percent of the total paid up capital from its shareholders at Nu 80 a share, against the market price of Nu 34, beginning this month.
Similarly the lease period of Jigme Mining Corporation Ltd has also ended and it has initiated a buy-back of its shares at Nu 200 a share against the market price of Nu 78. The company has also declared 500 percent dividend for 2018.
For now, the future of the mining companies remains uncertain.
DSCL’s chief executive officer, Letho said the company could not arrive at a decision on whether to close shop or not. A letter from the geology and mines department, he said, has stated that the mines would be on auction after two years. “We cannot take a decision immediately because we have 1,263 shareholders, mostly from the rural communities of six eastern dzongkhags,” he said adding that the company has fixed assets and reserves enough to pay the shareholders, if at all the company closes down.
The State Mining Corporation Limited (SMCL) has already taken over these mines beginning this year. The economic affairs minister, Loknath Sharma in an earlier interview said that the gypsum deposits at the leased site are exhausted and this is why the SMCL is asked to assess the status and explore the site.
If there is an indication that further exploitation could be taken up, he said private entities would be given an opportunity to bid.
Prime Minister Dr Lotay Tshering also said that the government would renew the lease, if the country’s mineral deposits were exploited efficiently. “But there will be a major change in dos and don’ts,” he said.
Lyonchhen also indicated that the GST would entail a major tax reform in the mining sector. “The government will study which agency or individual can manage the mines more efficiently,” he said. If a private entity proves to be more efficient, he said the government would render its full support to do better. “But they will also have to pay more tax,” he said. “Ultimately, the government will benefit.”
“As long as minerals are exploited sustainably, efficiently and responsibly, it doesn’t matter whether DHI operates the mines or a state owned enterprise or even a private entity,” he said.
Lyonchhen also said that the draft mines and mineral management Act, 2020, has been discussed in the cabinet and that the mineral development policy is also under review.
The National Council, during the second Parliament insisted that mineral resources be nationalised, the underlying reason being the contradiction between the Constitution and mines and mineral management Act, which has been in force since 1995.
The Constitution states that rights over natural and mineral resources shall vest in the state and are the properties of the state. Like hydropower, the national council said exploitation of minerals be undertaken solely by the state.
Among other justifications, was that only few big businesses benefitted from mining. For instance, some of the companies have divested only 30 percent of the shares to the public while couple of promoters held 70 percent of shares. To this effect, companies declared dividend as high as 500 percent, which obviously benefits the major shareholders.
In some cases, Kuensel learnt that a subsidiary company was created by the promoters to value add or render hiring services to the parent company.
However, Lyonchhen said the government has thought about nationlisation from a broader perspective. “I am neither for nationalisation nor against,” he said. “I am right in the middle.”
If state resources have gone out of the country and exploited only by foreigners, then nationalisation is relevant, he said. “Whether it is done by a private individual or a state owned entity, as long as the resources are managed efficiently and potentials are tapped, I’m okay with that.”
After implementing all the tax reforms, if the sole mandate to exploit the minerals is given to the state, Lyonchhen asked who would then pay the taxes.
But again, he said a line has to be drawn with the SMCL on board. He said the government has to discuss what the private sector cannot and should not do. He explained that the private sector does not have the financial capacity to operate a mine that requires huge technical expertise, heavy equipment and investment. There, he said the SMCL’s role would be defined.
On strategic minerals of high value and those with scarcer deposits, Lyonchhen said it becomes the responsibility of the government to ensure that future generations too have ownership over it. The SMCL would come in to ensure sustainability.
Otherwise, Lyonchhen said that the economy couldn’t prosper if the role of private sector is undermined. While few families may have the resource to invest and made a fortune, Lyonchhen said they couldn’t be blamed. “But often the access to policies and policy makers is leading to crony capitalism,” he said adding that in few cases policies are known to few businesses even before they are implemented. “I don’t want to encourage that,” he said.
The new Bill
The draft of the new mining Bill recommends establishment of an independent and autonomous Mining Regulatory Authority, represented by a board, chairperson and chief executive officer.
The department of geology and mines role is to formulate and review policies, laws and guidelines related to mineral and mining besides producing geological maps, environment monitoring, seismic risks and geohazards prevention and civil works planning.
The Bill also encourages value addition on the mineral before export wherever technically and economically viable.