Tshophangma Coal Mine began
Tshophangma Coal Mine began

State Mining Corporation Limited faces MDP problems but will make a profit this year

Initially the State Mining Corporation Limited (SMCL) anticipated that with the launch of the Mineral Development Policy (MDP) 2017, it will provide a clearer view on the strategic planning and execution to lead mineral development programs in the country, but much to the dismay of the company and boards, they feel that the revised MDP contradicts with the main objective of the establishment of the company.

While the rationale for establishing SMCL was to ensure sustainable development of the mining sector and contribute to the Bhutanese economy through state participation in the mining sector, the (MDP) 2017 states that the lease of strategic minerals shall be the prerogative of the government and the lease of mineral reserve explored by the Department of Geology and Mines shall be allocated based on an allocation framework developed by the Ministry.

“Our stand is that all the mining activities should be given to SMCL because minerals resources belong to the people of the state and its benefits must be passed down equally. And like the hydro power sector, mining sector also has huge potential in boosting the economy of the country if exploited wisely. So our main motive is to work towards equal distribution of the profits earned from such resources unlike the few privileged individuals fishing all the profits,” said Dasho Karma Yezer Raydi, the Chief Executive Officer of Druk Holding and Investment (DHI).

The company board has held numerous dialogues with the Department of the Geology and Mines (DGM) under the Economic Ministry on the effective interpretation and implementation of the policies.

“Our interpretation of the clause from the MDP which states, ‘lease of strategic minerals shall be the prerogative of the government,’ is that it is being referred to SMCL, but the DGM is totally in contradiction to how we understand it. I think policies as a whole should not be based on an individual’s opinion, it should rather work in accordance with what the constitution of the country mandates, which clearly states that the policies should not lead to inequality in the society” said Dasho Karma Yezer.

Meanwhile, the officials from the Department of Geology and Mines firmly maintain that it is not stated in any of the policies or regulations that the mandates of the corporate sectors are to be considered or included in the Economic Development Policy and that instead it has been given that the corporate sectors are equally subjective to competitions with the public sectors. The Ministry is currently working on developing the allocation framework for the strategic minerals.

The CEO of the DHI also mentioned that the relevant authorities did not conduct any consultation meeting with SMCL and its board during the revision of the MDP.

Unlike the previous years, after its establishment in 2014, the company is expected to earn its first profit this year after running in losses worth Nu 11 million and Nu 3.89 m consecutively.  “By the first half of the year, our net profit after tax is Nu 48.85 m and the three months after that the company might have lost around Nu 10 m due to heavy monsoons, but we are working really hard to meet our target of Nu.90 million this year,” said Kezang Jamtsho, the Chief Executive Officer of SMCL.

The other two projects, Tshophangma Coal Mine began its extraction this year but the coals could not be transported to the destinations due to road blockage and is expected to be cleared shortly and the Dzongthung Stone Quarry is all set to supply aggregates to Kholongchhu Hydro Energy Limited once the works begin with the project. Kezang Jamtsho said that the current profit of Nu 48.85 m earned by the company for the first half of the year is solely generated from the Habrang Coal Mine, indicating even greater profit margins once the company starts earning from the other two projects.

Some of the prominent challenges faced by the company are getting clearances from the National Land Commission Secretariat, National Environmental Commission Secretariat, and sectoral clearances which almost take about a year. The other challenge faced by the company is in getting timely public clearances. “The villagers are becoming more politicized and their expectations are increasing. We do have Social Corporate Responsibility as a company but as a state corporation we cannot fulfill their every demand like constructing roads, bridges, schools etc,” said the CEO.

The company also faces the challenge of obtaining qualified technical and professional human resources in the geological and mining sectors.

Given the bulky and heavy nature of the mineral like coals, the transportation cost constitutes almost 30-40 percent of the total cost of the company. Although the carrying capacities of the trucks have been normally designed for 30 to 40 metric tons, the Road Safety and Transport Authority in the country restrict a truck from carrying more than 10 metric tons. “The economic viability aspect is really hindered by the road infrastructure in the country, so in order to address this issue, the Ministry of Information and Communication is reviewing the RSTA act at the moment,” said Kezang Jamtsho.

There are currently around 54 staff strength in the company, supported financially by the Habrang Coal Mine. The company started supplying coals to Dungsam Cement Corporation Limited last year and the latest clients are Lhaki Cement and Penden Cement Authority Limited. SMCL was incorporated as 100% DHI subsidiary company on 31st December 2014.

About Sonam Yangdon

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