SMCL prepares to take over Chunaikhola dolomite mine

Rinzin Wangchuk

The State Mining Corporation Limited (SMCL) is working for seamless transition which includes strategies to employ the workers at the mines and others engaged with the company.

SMCL is yet to receive official directives from the government to take over the Chunaikhola dolomite mine in Phuntshopelri gewog, Samtse, according to SMCL chief executive officer (CEO) Kezang Jamtsho. “However, we are preparing to take up the uphill task after the government announced the cancellation of auctioning the dolomite mining rights in view of the Covid-19 pandemic.”

Prime Minister Dr Lotay Tshering on June 1 wrote to the economic affairs minister to discuss with SMCL to look into the operations of the mine to ensure minimum business activity to keep the service afloat in the interim period after the present lease expires.

Economic Affairs Minister Loknath Sharma said that he had asked the SMCL’s CEO to plan and prepare for the mining operations although the ministry is yet to write officially about the government’s decision to SMCL.

“We will discuss only the modality how do we seamlessly operate the mine and switch from current mining to SMCL,” Lyonpo Loknath Sharma said.

The challenges

CEO Kezang Jamtsho said that if SMCL has to operate the dolomite mining, one of the biggest challenges for state-owned enterprise (SOE) would be absorbing a large number of employees from  Jigme Mining Corporation Ltd (JMCL).

JMCL, which mined the deposits in Chunaikhola for a period of 15 years with a total bid value of Nu 390 million, has 181 Bhutanese employees on permanent roll and 65 day workers, including 43 non-Bhutanese.

“It would be difficult to absorb all employees as the demand or the volume of sale has fallen by 90 percent due to Covid-19 pandemic,” Kezang Jamtsho said.

JMCL’s joint managing director, Ugen Kezang, agreed that the sale had drastically plummeted. For instance, JMCL used to export almost 9,000 Metric Tonnes (MT) of dolomite every day involving about  300  tipper trucks prior to the pandemic.

“However, today it has gone down to 800 and 900MT a day as the traffic is regulated by the government,” Ugen Kezang said.

JMCL, which has been given an extension until the end of June after completing15 years of mining lease period on May 14, has about 500,000MT of dolomite in stock which may last about two years given the present market situation.

The main market for  Chunaikhola dolomite are premier steel sectors in India like Bokaro Steel Plant, Durgapur Steel Plant, Tata Steel Ltd and more than 100 units of Ferro Alloys and Sponge Iron Plant. Due to intensive marketing, JMCL used to export about 2.6 million MT in a year.

Dolomite reserve

To maintain business continuity and reap more benefits, the geological reassessment of the dolomite deposit in and around Chunaikhola was undertaken by the Department of Geology and Mines (DGM) for a period of three months from February to May 2019. It was found that the area has reserve of 592.692 million MT up to an elevation level of 420m. Considering 15 to 20 percent average increase in annual mine production from 2018 with mine production rate of around 3 million MT of dolomite, the deposit is expected to last 169 years based on the geological reserve.

JMCL has extracted more than 21.436 million MT of dolomites from 2005 to 2019.

There were three active dolomite mines before the auction in 2005. Chunaikhola dolomite mine was operated by Bhutan Dolomite Mine, Sunargaon dolomite mine by Jigme Mining Enterprise, and Khagrakhola dolomite mine by Chhundu Enterprise.

Total export potential of dolomite then was 250,000MT per annum.

Gypsum mines 

Meanwhile, SMCL is optimistic about taking the responsibility of mining like in the case of Khothakpa gypsum mine. “We will negotiate with the management of JMCL and we expect support from JMCL  during the transition,” CEO Kezang Jamtsho said.

He said that SMCL had performed extremely well in 2019 making a net profit after tax of Nu 336.35M due to support and co-operation from Druk Satair Corporation Ltd (DSCL) with 100 percent employees during the takeover.

One of the  DSCL promoters said that the SMCL’s success was attributed to the fact that the mining site was ready for operation with less investment. He also said that the gypsum price was also increased at the same time.

Another promoter, who wished to remain anonymous, said that DSCL spent 15 years to develop the market and procure new machines. “Therefore, investment was much more. SMCL just took over the old machines at a nominal cost.”

He said that the closure of DSCL helped introduce SMCL to all their agents and their markets. “We have to remember that 15 years ago when the government had to start from scratch, it failed and, therefore, the mines were auctioned, not on the insistence of the private sector. It is unfair to make it seems like SMCL had performed so well after all the handwork was done by the private sector.”

The government handed over the Khothakpa Gypsum Mines to SMCL for an interim period of two years from January 1, 2019, immediately upon the expiry of gypsum lease to DSCL.

DSCL mined gypsum with a bid value of Nu 413.50M for a period of 15 years from 2004 to 2018.

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