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Need for a national mineral policy and activities of GSMB

26 Jan 2015 - {{hitsCtrl.values.hits}}

Acomprehensive national mineral policy for Sri Lanka was drafted by me recently in my capacity as Honorary Adviser to the Environment and Renewable Energy Ministry and with my experience as the senior most geoscientist with over 50 years of professional experience from 1965 at the Geological Survey Department (Present GSMB) and the Director from 1982 to 1985 and thereafter as a World Bank consultant to the Industries and Scientific Affairs Ministry under the restructuring of state industrial corporations. The minister at that time was the present Prime Minister Ranil Wickramasinghe.

Under this project, I was also involved in the conversion of the Geological Survey Department to Geological Survey and Mines Bureau (GSMB), which is t he statutory institution charged with implementation of the Mines and Minerals Act No. 33 of 1992. This act is in two parts namely Part I Establishment, Powers and Functions of the GSMB and Part II Ownership of Minerals and Issue of Licences.

It must be stated that under the new act, the GSMB was empowered to collect all fees for issue of licences and permits for transport and export of minerals. Earlier the Geological Survey Department as a government entity functioned on an annual grant from the treasury of Rs.6 million but the GSMB presently collects a revenue of over Rs.350 million annually, which should be credited to revenue but this was not done earlier as the monies were placed in fixed deposits under the GSMB.

The present building housing the GSMB is environmentally-friendly and was constructed for the Environment and Renewable Energy Ministry.
During my World Bank consultancy, I was offered a post of Economic Affairs Officer i n t he Mineral Resources Section of the Natural Resources Division of the United Nations ESCAP from March 1990. From 1990 until my retirement in 2003, I was involved in formulating the mineral policy, promoting foreign direct investments (FDIs), environmental management in mining and advising sovereign states in formulating mining and environmental legislation in over 40 ESCAP member countries including China, India, Indonesia and the Philippines, etc.

My last assignment in 2001 to 2002 was implementing an UNDP Project in Timor Leste when the United Nations was administering the country and worked in close coordination with the Special Representative of the UN Secretary General until my retirement.In addition to my duties in the mineral sector, I was assigned the functions of coastal zone management, urban geology and providing advice to member countries on their rights and obligations in ratifying the 1983 United Nations Convention on the Law of the Sea (UNCLOS).

Geological Survey and Mines Bureau
On my return to Sri Lanka in March 2003, I met the Chairman of the GSMB at the ceremony for the award of the Ananda Coomaraswamy Gold Medal by the Geological Society of Sri Lanka to me in recognition of my contribution to the geology and mineral resources development in Sri Lanka from 1965 to 1985.
At this meeting, the chairman persuaded me to accept the post of the CEO of the GSMB Technical Services Limited, a wholly-owned state-sector institution, where the shareholders were the GSMB, Gem and Jewellery Authority and Eppawela Phosphate Ltd. This company was dormant without any activity for over two years and during 2003, I was responsible for generating a net profit of Rs.2 million and resigned from this post with the change of government in 2004.
I was also the acting Director of the GSMB for a short period in 2004 when the then director was requested to resign by the then minister and this person later became the Chairman of the GSMB.

GSMB since 2004
I am aware with strong evidence that the GSMB was not properly managed since 2004 up to October 2014, where there were a lot of irregularities in issue of exploration licenses and mining permits, etc.

In order to facilitate and legalize such irregular activities, significant amendments were made to the original act as reflected in the Mines and Minerals (Amendment) Act, No. 66 of 2009. These amendments were drafted by a former working director of the GSMB and also an additional director, who was given numerous consultancies without calling for expressions of interest or public advertisements since 2004. The designation of the director of the GSMB was changed to director general, which is a complete misnomer as there are no directors but only deputy directors.

A major amendment was included to the original act with the repeal of the proviso in subsection (c) where it is stated that “an industrial mining licence or a licence to explore, for minerals may be transferred or given as security subject to such conditions as may be specified in such licence.”With the above amendment, local companies and i ndividuals who had valid exploration and/or mining licences sold their licences to foreign companies registered under the Board of Investment (BoI) Law where there is provision in its new law to buy local companies without any payment of taxes by signing a Section 17 Agreement with the BOI disregarding the original Mines Act and t he legislative authority administering the act.

Information is available in the public domain where agreements have been signed by these local companies with a number of foreign companies especially from Australia and Canada and most of these companies have paid millions of dollars to local companies and individuals for such transfers.

These companies are planning to exploit the graphite and mineral sands deposits for export without value addition as these minerals are of strategic importance due to the rapid advancement of green technology like lithium-ion batteries, etc.There is also a recent record of a company form the United Kingdom involved in buying gem mining permits for 17 recently auctioned gem lands from the local individuals for exploitation and trade of coloured gemstones such as sapphires and rubies following the mining companies for graphite and mineral sands promoted by the BoI.

Non-cooperation of Environment Ministry and GSMB officials
Although I decided to help the following institutions - Environment and Renewable Energy Ministry and GSMB - in an honorary capacity as an advisor at the request of the former minister, I had no cooperation whatsoever from the high officials of the ministry.I have to state that I decided to help the ministry and the GSMB purely due to my patriotism to the country but it was later realized that the ministry officials never wanted me to give any advice overriding the minister.

My letter of appointment was purposely delayed by over four months and after repeated reminders by the minister, it was finally signed with no date on it. After issuing the signed letter by the then secretary, I requested the policy planning director of the ministry to call a meeting of the relevant heads of the institutions listed in my TOR, as I wanted to get first-hand information on the status of their activities.

It is regretted that these ministry officials treated me as an untouchable and had no regard for my age, experience and ability to give them advice. The impression I got was that they were not happy at all in my intruding into their own domain which they were guarding very closely although the former minister genuinely wanted me to help him and the ministry. It is best to investigate as to how many foreign trips these officials have made during the past 10 years and in particular in the last three to four years and what benefits these trips accrued to the country.It was quite evident that the ministers under the former government had no powers to control their secretaries and other high officials including the politically appointed heads of state statutory institutions who were getting orders from elsewhere.

This was confirmed when the newly elected President of our country stated in his election campaign his personal experience that the former ministers had no powers to act independently and collectively and were ineffective in administering the relevant ministries - orders to their secretaries came from the top. I personally experienced this in my saga for providing advisory services in an honorary capacity to the Environment and Renewable Resources Ministry.

Development of mineral resources – The way ahead
With my long experience as a professional geologist for nearly 50 years, unlike others who are in the limelight today by staking claims on mineral discoveries that were made by me and also claiming experience as professionals by initially working as trainees or laboratory and field assistants at the time of the Geological Survey, I would like to make the following recommendations for the sustainable development of our mineral resources and put an end to unethical practices till recently perpetrated by the GSMB, the sole regulatory authority on management and systematic exploitation of our non-renewable mineral resources, for the benefit of the people of this country and our future generations.

Recommendations
Appoint an independent committee of inquiry into the activities of the GSMB since 2004 to investigate the following: The procedures followed on the issuance of licences for exploration and mining covering all types including artisanal and industrial mining licences, issuance of export and trading licences, etc. The names of all companies and individuals who were issued the above licences with the relevant dates and those issued on recommendations of ministry officials and politicians. Investigate companies and individuals who were issued with multiple licences where the total area was over 100 square kilometres without relinquishing the earlier exploration areas.

The appointment of mining engineers over the existing cadre and also the number of regional offices in various parts of the country and the number of officers serving in each regional office and whether selection to these offices were made by calling advertisements. A List of existing operative licences with the relevant minerals and those cancelled for sand mining including offshore and mining for rock aggregates under each district and recommendations for such issuance form politicians and other state officials.

Consultancies
It is known that the GSMB had issued a large number of consultancies since 2004 and during the period 1993 to 2002 to retired officials of the Geological Survey Department and the GSMB without calling for Expressions of Interests or public advertisements with the recommendations of the Chairman and Director and later the Director General of the GSMB with or without the approval of the ministry.

If the ministry had approved such consultancies a list of such officials should be submitted. These consultancies should be investigated with the total fees involved with justification why there were no public announcements for EOIs or TORs for the consultancies. A glaring example is the compilation, printing and publication of an expensive monograph titled ‘The Saga of the Geological Survey Department’ where a former chairman and two former directors of the old department were extolled for their contribution to mineral resources development and advancement of geology while not mentioning a word most of the real contributors from 1947 to 1992. This monograph was to be distributed at the Commonwealth Heads of Government Meeting (CHOGM).
GSMB Technical Services Ltd

is known that the GSMB had issued exploration licences to companies or individuals on condition that such exploration work should be given to this company thus, creating a glaring example conflict of interests. This had been imposed unofficially. Investigate all such contracts.
Investigate as to how many contracts for exploration had been signed by GSMB Technical Services Ltd with the total value of such contracts from 2004 up to date.

Inflow of FDI to local mineral industry
The Chairman of the BoI in Sri Lanka is also the Chairman of the Queensland Mining Corporation Australia, a junior mining company, which has got a number of tenements in Queensland for gold exploration. This official is a Russian-qualified graduate in mineral processing and raised risk capital where his company is quoted in theAustralian Stock Exchange (ACX).

The BoI Chairman had encouraged junior Australian mining companies to get involved in graphite and mineral sands exploration in Sri Lanka by signing Section 17 Agreements under the BoI Law. These companies too are quoted in ACX and TCX and share prices have increased considerably although the capitalization is very low.

The BoI Chairman was said to be advising the Sri Lanka government to purchase shares on an equity basis with a take or pay contracts for supply of coal by mining companies in Australia owned by Chinese companies to our coal power plant and the proposed plant in Sampur. This was on a basis of an agreement similar to hedging and I highlighted in the local print media sometime back the dangers of investing in these companies, which are at development stages.
If the new government is to encourage these junior mining companies to continue exploration activities in Sri Lanka, it is recommended that they sign Mineral Investment Agreements by negotiating with the secretary of the ministry under the new government that will administer the GSMB under the Mines and MineralsAct.

Conclusions
It is ironical to note that the senior officials of the Environment and Renewable Energy Ministry with all their shortcomings continue to serve the present government in similar capacities in more important ministries. If the President and Prime Minister of the present government of Sri Lanka are going to create a clean administration for the benefit of the people of Sri Lanka in terms of its election manifesto, every effort should be made to clean the government administrative machinery where decision- makers can act without any discrimination, creating a level playing field with the interests of the people of Sri Lanka and its future generations. To this end, I suggest that the clean-up and making the government service more effective and responsible to the law makers as stated by the new president at the swearing ceremony of his Cabinet of Ministers, should go ahead independently within the 100-day programme.As an initial step I would strongly recommend that the present government should study the draft mineral policy I formulated and available in the Environment and Renewable Energy Ministry and take necessary action to implement it to create a level playing field for private sector both local and foreign to invest in risk capital for exploration and mining and value addition to our mineral resources, which are non-renewable in accordance with the Mines Act and the new mineral policy that should be legislated without delay.

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Need for a national mineral policy and activities of GSMB

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