The Cabinet which is scheduled to meet on (Thursday) today with Prime Minister Raja Pervez Ashraf in the chair will give go ahead signal for five-year extension in the lease period of Saindak copper project. Saindak Metal Limited (SML), Balochistan is an entity of the Ministry of Petroleum and Natural Resources with 100 percent equity share.
In pursuance of the Cabinet decision of May 9, 2001 the project was leased out to Metallurgical Corporation of China (MCC) for a period of 10 years from October 02, 2002 to October 2012. MCC, China submitted a formal proposal seeking extension in lease period. To reach an agreement, MCC (lessee), SML (lessor) and Government of Balochistan (GoB) have renegotiated the agreement and agreed for extension in the lease period beyond October, 2012 with some modifications. Addendum to the lease agreement (signed during the visit of Prime Minister of Pakistan to China from 17-20 May, 2011) was agreed by GoB, SML and MCC and duly vetted by Ministry of Law and Justice.
According to official documents available with Business Recorder, Prime Minister while approving earlier summary for signing the addendum during his visit to China also desired that the addendum may subsequently be placed before the Cabinet for approval. Accordingly, a summary was submitted to the Cabinet, which was considered by the Cabinet on November 02, 2011. The Cabinet decided that the Minister for Finance and Minister for Petroleum and Natural Resources will discuss the matter further before it is considered by the Cabinet. In the light of Cabinet decision two Ministers met on January 11, 2012 to discuss and consider the details of proposed addendum to lease agreement and noted that Corporate Social Responsibilities (CSR) and financial terms are comparatively better than the lease Agreement signed in 2001. Therefore, the Cabinet Committee recommended that Addendum to the lease agreement to award 5 years extension in the lease period from October 02, 2012 may be approved.
According to the terms, lease contract will stand extended to October 31, 2017 after formal approval by the Cabinet. The documents further reveal that MCC, in addition to the royalty @ 5 percent of the gross sale proceeds, will pay through an official account of the miners welfare Board of GoB, an amount equal to 5 percent of the net profit [defined as “surplus” in the lease contract] for lending financial support to the social uplift activities of GoB in the mining areas. Thereafter, the balance surplus would be shared between the parties with the ratio of 50:50.
Saindak Project would continue to enjoy status of Export Processing Zone (EPZ) during the extended period of the lease contract, for which necessary approval from the relevant authorities of the GoP will be secured by SML. The MCC will arrange adequate funds for the replacement of outlived machinery and equipment at Saindak project, if any after third party evaluation, the actual cost, if any agreed by lessee and lessor, will be recovered along with interest from the sale proceeds of the project.
The MCC will exploit East Ore Body in the Saindak Area as a component of existing project operations, if it is determined to be feasible, MCC at its own cost will carry out a pre-feasibility study for setting up a copper refinery of an optimal size and at an appropriate site within Balochistan and submit the same to GoB as early as possible. If the refinery option is economically feasible and the GoB decides to go ahead with this venture, MCC will provide technical and financial support to GoB for its execution. All terms of the existing lease contract will continue to apply during the extended period except those affected by the aforesaid Articles, directly or consequently approved.