Letpadaung Copper Mine Project
Letpadaung Copper Mine Project
Project Summary
The Letpadaung Copper Mine Project is a Sino-Burmese joint venture project between Myanmar Wanbao Mining Company Ltd. (MWMCL), military-owned Myanmar Economic Holdings Ltd. (MEHL) and a state-owned enterprise, Mining Enterprise No. 1 (ME-1) of the Ministry of Natural Resources and Environmental Conservation (MoNREC). It aims to fulfil domestic raw material for mineral resources and promote export of the same which will encourage the development of heavy industries leading to long-term national development. The project is located in Salingyi Township of Sagaing Region in Myanmar and is 28.1725 square km in size. The project budget is allocated to be USD 1.065 Billion (USD 2 million annually for CSR project)
Project Background
The Letpadaung Copper Mine Project originated in 1992 as a joint venture between a Canadian company and the Burmese state-owned Mining Enterprise No. 1, which established Myanmar Ivanhoe Copper Company Limited (MICCL). In 2010, MICCL sold its share in the project to a Chinese company, Wanbao Mining Ltd, a subsidiary of the state-owned China North Industries Corporation (NORINCO) conglomerate but the process was never publicly disclosed. The original contract between China and Myanmar was signed during Chinese Premier Wen Jiabao’s visit to Myanmar on 3rd, June 2010. The cost of the project is USD 1.065 Billion (USD 2 million annually for CSR project), funded by Wanbao Mining Company which runs the mineral business of NORINCO.
When the quasi-civilian government took power in 2011, local villagers who lost their land and livelihoods protested for several months and faced a brutal crackdown. Then, Special Investigation Commission led by Daw Aung San Suu Kyi was formed in December 2012 and the Commission prepared a report in 2013. In response to the findings of the Commission, Mining Enterprise No 1 (ME1) of the Ministry of Mines (under former U Thein Sein government) and MWMCL and Myanmar Economic Holdings Limited (MEHL) signed an amendment of the Production Sharing Contract in July 2013.
The Letpadaung Copper Mine started to produce the minerals in March 2016 and it is estimated that about 100,000 tons per annum of cathode copper will be produced as output. Myanmar government receives in-kind payment for royalty, production sharing ratios, commercial tax and income tax.
Project Structure
The initial project permit was granted for the period from 5th March 2010 to 5th March 2013. In the amended agreement, the permit period is for twenty-five years from 4th March 2013 to 4th March 2038. Under the amendments, the Government of Myanmar enjoys 51% of the benefit and MWMCL and MEHL will get 30% and 19% respectively.
ME-1 on behalf of the Myanmar Government and MEHL are responsible for community consultation and all elements associated with land acquisition, compensation and resettlement. MEHL also contributed the mining rights and the MWMCL as the operational entity is responsible for project investment, development and management. The MWMCL is also responsible for the design, operation and closure of the project as well as completion of the Environmental and Social Impacts Assessment (ESIA).
Issues
The main issues affecting the Letpadaung project are problems of transparency and project governance, most of which are representative of wider problems with the extractives sector. Nearly 80% of extractive sector revenue is collected by SOEs. 50% of that revenue is kept in separate Union Fund Accounts, not subject to the regular budget process, in order to retain a portion of the SOEs’ net profits. In November 2019, the Burmese government issued a directive mandating that the SOEs’ practice of using “other accounts” be halted and such accounts closed, in order that SOE revenue can be properly reflected in the national budget.
The Ministry of Planning Finance and Industry still lacks the authority and information necessary to properly analyze SOE financial data. At present, the ministry is still pushing the SOE regulatory body to provide necessary information such as beneficial ownership and oversight list etc. Free access through an online portal, for all stakeholders, including civil society and the general public, to any financial assistance, including guarantees, received from the state and commitments made on behalf of the SOEs involved in this project, including contractual commitments and liabilities arising from public-private partnerships are still impossible at the moment.
Usually, the management of SOEs is under the purview of appointed managing director who is a civil servant and minister of the relevant ministry play an oversight role. All the board members are appointed active military officers or ex-military and selection process not known. As they are government staff, it can be assumed that their remuneration is the same as other military and civil servants.
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| Project Information | Score | Response | Link to Information |
|---|---|---|---|
| Project owner | No. 1, Mining Enterprise, Ministry of Natural Resources and Environmental Conservation | https://en.wikipedia.org/wiki/Letpadaung_Copper_Mine | |
| Sector, subsector | Extractive Industry: Copper Mine | http://www.mining.gov.mm/DM_mm/1.DM_mm/Permits(July).pdf | |
| Project name | Letpadaung Copper Mine Project | ||
| Project Location | 28.1725 Sq Km wide Letpadaung Copper Mine, Salingyi Township of Sagaing Region | ||
| Purpose | 1) To fulfill domestic raw material for mineral resources and promote export of same. (2) To promote production of mineral raw materials which would initiate development of heavy industries leading to long term national development. (3) To emphasize exploration and production of important mineral resources. |
http://www.mining.gov.mm/Minister_Office/3.Minister_Office/Details.asp?submenuID=4&sid=133 | |
| Project description | In cooperation with the Union of Myanmar Economic Holdings Ltd (UMEHL), Wanbao Mining Copper Company Ltd., a subsidiary of China North Industries Group Corp. or Norinco, a large arms manufacturer, bought the project from Ivanhoe, a Canadian mining company in 2011. The final agreement with Wanbao, reached the Product Sharing Contract in 2012. Original Product Sharing Contract signed in July 2013 was amended by Mining Enterprise No. 1 under Ministry of Mines. Under new terms, the Government of Myanmar enjoys 51% of the benefit and Myanmar Wanbao Mining Copper Limited (MWMCL) and MEHL will retain 49%. | https://www.myanmarwanbao.com.mm/en/about-us/about-mwcml-mining.html | |
| Project Scope (main output) | Expected 100,000 tons of Copper per annum | ||
| Environmental impact | Environmental impacts: Groundwater supply & contamination, Change in land form and landscape character, soil contamination, lowering of ground water level, contamination of ground water resources, contamination of rivers and watercourses, exceedence of health screening guidelines from ground level concentration of dust, Social impacts: resettlement, loss of catchment yield, loss of traditional livelihood, social problems, impacts on living standards, cultural heritage, Mitigation measures – zero-discharge site, a series of monitoring stations around the site, 2% community development, public consultation, health monitoring, | ||
| Land and settlement impact | land compensations/subsidies to Project-affected villagers three times together with the first subsidy, which is three times the market price of the compensation for the crops (between 525,000 and 552,000 Kyats), as guided by the regional government, A total of 3,442.55 acres of land have been taken up by related villagers so far, which totals more than 3.56 billion kyats. Approximately 874 villagers had taken up the subsidies for 2,435.16 acres of land by March 13, 2014. | https://www.myanmarwanbao.com.mm/images/pdfs/final_esia_rev6_update.pdf | |
| Contact details | Myanmar Wanbao Mining Company Ltd., Yangon Office 70 (I) Bo Chein Street Pyay Road, Hlaing Township Yangon, Myanmar Tel (951) 654757, 507239 |
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| Funding sources | Wanbao Mining Company which runs the mineral business of NORINCO, China North Industries Corporation (Central Govt. SOE) | ||
| Project Budget | USD 1.065 Billion (USD 2 million annually for CSR project) | ||
| Project budget approval date | Project permit was given for the period (5/3/2010 to 5/3/2013) first and then 4/3/2013 to 4/3/2038 | ||
| Project status (current) | Production stage after amendment of Product Sharing Contract in July 2013 and ESIA done by Australian Consulting Firm | ||
| Completion cost (projected) | USD 1.065 Billion (USD 2 million annually for CSR project) | ||
| Completion date (projected) | The first permit period is from 2010 to 2013 and the second term mining permit is given for 25 years from 2013 to 2038. However, because of protests by residents, the project agreement was amended in 2013 and the copper could be produced in March 2016. | https://www.mmtimes.com/national-news/mandalay-upper-myanmar/24953-letpadaung-copper-project-to-bring-in-us-20m.html | |
| Scope at completion | Original agreement with Wanbao – Investment – 997 million USD (Capital Cost – 912 million) 4% Royalty, 8 % Commercial tax 8% and Income tax 15 % then, amended project gave a 30% share of the eventual profits, 19% going to UMEHL, a massive military-owned company and 51% to Myanmar’s government. A later agreement gave 2% of profits to local development. The project is reported to have cost approximately $1 billion to develop. | https://my.wikipedia.org/wiki/%E1%80%9C%E1%80%80%E1%80%BA%E1%80%95%E1%80%B6%E1%80%90%E1%80%B1%E1%80%AC%E1%80%84%E1%80%BA%E1%80%B8%E1%80%90%E1%80%B1%E1%80%AC%E1%80%84%E1%80%BA%E1%80%A1%E1%80%85%E1%80%AE%E1%80%9B%E1%80%84%E1%80%BA%E1%80%81%E1%80%B6%E1%80%85%E1%80%AC | |
| Reasons for project changes | After protests by the villagers and recommendations of investigation committee led by Daw Aung San Suu Kyi, Wanbao agreed to amend the agreement. | ||
| Reference to audit and evaluation reports | Only ESIA report and Letpadaung Taung Investigation Commission Report | https://www.business-humanrights.org/en/latest-news/letpadaung-copper-project-a-brief-on-the-draft-esia-report/ | |
| Procuring entity | No.(1) Mining Enterprise, Ministry of Natural Resources and Environmental Conservation, | ||
| Procuring entity contact details | Office Building No.(19), Nay Pyi Taw, meone@e-mining.gov.mm | ||
| Procurement process | Ivanhoe, Canadian Mining Company sold its share to Wanbao citing the impact of the negative stigma of working with the military government on its other business throughout the world in 2011 | ||
| Contract type | Design & Build, Construction | ||
| Contract status (current) | active | ||
| Number of firms tendering | One | ||
| Cost estimate | USD – 1 billion | ||
| Contract administration entity | Not available | ||
| Contract title | The Letpadaung Copper Mine Project | ||
| Contract firm(s) | Not available | ||
| Contract price | Not available | ||
| Contract scope of work | Royalties, production sharing ratios, Commercial tax, Income tax from the product | ||
| Contract start date and duration | 4/3/2013 to 4/3/2038 | ||
| Variation to contract price | Not available | ||
| Escalation of contract price | Not available | ||
| Variation to contract duration | Initial project period was given 3 years | ||
| Variation to contract scope | Ivanhoe did feasibility study & EIA/SIA in 1994/1996 and MWMCL bought the share. After protests by local villagers, investigation report recommended MWMCL to do ESIA. At present, MWMCL claims that they practice all the measures recommended in ESIA report and uses USD 2 million per year for CSR activities. | ||
| Reasons for price changes | Not available | ||
| Reasons for scope & duration changes | Not available |