The multi billion rupee copper gold and silver project is a classic example of government indecision

From Shamim Ahmed Rizvi, Islamabad
Dec 20 - 26, 1999

The Cabinet decision last week setting up a committee to examine the viability of restarting the Saindak gold and copper mines in Balochistan has rekindled the hope for revival of this highly potential project which has been victim of bureaucratic wrangling since long. The matter came under discussion in the cabinet after the government of Balochistan complained to the Chief Executive Gen. Pervez Musharraf during his last visit to the province that nothing had been done by successive federal governments during the last 10 years for the development of their province and cited the example of Saindak and Pak-Iran Oil refinery — two development projects of high potential which were conceived earlier but could not take off because of the casual attitude of the government and the bureaucratic rigmarole.

This multi billion rupee copper gold and silver project is a classic example of how government indecision, political expediency and bureaucratic wrangling can harm a reasonably promising public sector enterprise. This Rs. 17 billion project is currently standing idle for want of funds to meet its initial cost of operations. The project started its trial operations in 1995 and its monthly production was 1,700 tonnes of copper, 6,000 oz of gold, 12,000 oz. of silver for the four months that it was in operation. But after successful trial production the plant had to halt production because of the government's failure to meet the project's initial costs despite the fact that a commitment to this end had been given earlier.

It was on repeated representations and protests of Balochistan government that former Prime Minister Nawaz Sharif agreed to visit the site. It was in the last week of September 97 when the former prime minister, along with Finance Minister, governor and Balochistan Chief Minister, visited the multi billion rupee estate of Saindak lying dead due to sheer neglect, mismanagement and corruption of the bureaucratic set-up. During this visit, the then Managing Director of the project, Maj Gen (Rtd) Muhammad Yaqub Bezenjo, while briefing the prime minister about the project had said that a sum of only Rs. 1,500 million was required for running it on commercial basis. He had said that the blister copper contains, 88.5 per cent of copper, 105 gm per tonne of gold and 140 gm per tonne of silver. He told the prime minister that the project was viable and had the potential to recover the total cost of plant within four years, adding that it could produce 15,810 tonnes of copper annually, 1.47 tonnes gold and 2.76 tonnes silver.

The then prime minister expressed his displeasure over the massive mismanagement which turned a highly feasible project into a big liability leading to the closure of the project. The funds required would be made available to run the project on commercial lines, he promised. The prime minister directed the finance minister to examine the operation plan, prepared by Gen Bezenjo and, if feasible, arrange the necessary funds. The Ministry of Finance negotiated with Bank of America, and ABN Amro who agreed to provide a loan of Rs. 15,000 million as working capital against guarantees of government of Pakistan. In addition government provided about Rs. 600 million out of its own resources to complete the pending work, construction and provision of infrastructure to make it ready for commissioning. The two banks, however, backed out of their commitment because of the post blast economic sanctions on Pakistan throwing the project once again in doldrums.

No fresh initiative was taken from the provincial or the federal government in this respect till Gen. Musharraf visited Quetta in the first week of the current month.

Although, the project was initiated in 1997, work on it did not start until 1989. At that time, the project was estimated to cost Rs. 6 billion, but, with the passage of time and because of the non-helping attitude and delaying tactics of a certain section of the officialdom, the initial estimated cost rose to Rs. 14.34 billion. In spite of all this and allegations of irregularities, wrong decisions and lavish expenditure by the management, the project now stands completed. It is through the active collaboration of Chinese engineers and experts that the Saindak project underwent trial operations and extracted 1,500 tonnes of blister copper, all of which was exported for a price of about Rs. 180 million.

There were also other problems associated with the project. One of these was that there was no refinery on site for the blister copper which was extracted and this had to be taken to China or Iran for refining. This added to the cost of the finished project. There was also mismanagement within the Resource Development Corporation, the organization chared with developing and running Saindak. Later on, the RDC was changed into the Saindak Metals Limited, and efforts were made to sell off the company. However, investors response was poor only because of the various problems facing the project. After failing to sell the project and being reluctant to commit more funds to it, the government proposed earlier this year that funds be collected from the private sector to raise the required money but the idea failed to elicit the desired response from prospective investors.

Now that the federal government has already invested a huge amount of money in the completion of this project and the Chinese partners have offered to install refinery and also to take over its management, it is only logical for the government to invest some money to make it fully operational. The total copper reserves in this area have been estimated at 412 million tonnes. Once the project goes fully on stream, it will yield a large amount of copper, gold and silver for export. The mineral products of Saindak are already in great demand in China, Japan, Britain and other European countries. The infrastructure needed for such a project is all there, with smelter, concentrator, crusher power plant, water pipeline, housing colony, schools, hospitals, laboratories and guest houses in place.

There is, however a good news now for the project. The Chinese contractors who have been involved with the project since its inception have offered to take over the project's management. They have also offered to build a refinery on site so that the cost of the finished product comes down. As things stand, the Chinese proposals may inject new life into the log-neglected project. For its part, the government would do well to pull the Saindak project out of its neglected state and turn it into a working industry with the help of the Chinese, and make it yet another shining example of Pakistan-China friendship and cooperation.