Miner now wants refund of non-existent loans

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Despite failing to complete Maddhapara hard rock mine project even 10 years behind schedule, North Korean company Namnam is now asking the government to repay instalments of loans that it arguably did not give, highly placed sources said.

Namnam is also trying to make the government accept the unfinished mine project as a completed one. And accordingly, it is trying to end the one-year guarantee period on May 24 without doing the project’s unfinished tasks that it had promised to complete last year.

While the company is claiming loan repayment instalments of $6.5 million, it actually owes Maddhapara Granite Mining Company Ltd (MGMCL) about Tk 104 crore as liquidated damage, various bills and interests. This sum includes bills for electricity, explosives, hard rock and services from Bapex and Geological Survey of Bangladesh.

Namnam is now operating the mine with 65 South Koreans under a one-year service contract due to expire on May 27. As it did not fully transfer the South Korean technology to the MGMCL, it will get yet another year’s service contract, the sources said.

“But the company has not even extended its bank guarantee of $ 4.2 million beyond June 2007 while it is supposed to extend it till June 24, 2008,” said a high official of Petrobangla that owns the MGMCL. As per the contract, this bank guarantee should be there till the mine project is completed.

If this guarantee was there, the MGMCL could have encashed it as penalty for Namnam’s failure to keep its promises.

Interestingly, the mine’s Polish consultant Kopex is absent in Bangladesh for more than a year. Sources said due to bureaucratic red tape in the country, Kopex could not send its representatives.

Because of Namnam’s questionable financing, very poor mining design and usually slow implementation, cost of the project that originally was Tk 650 crore shot up to Tk 1,275 crore.

The company was supposed to provide 90 percent of the project’s finance. But it never pumped in that money and inadequately mobilised mining equipment and South Korean mining manpower. The project started with Petrobangla’s 10 percent down payment (or $13 million).

Later, Namnam received five more instalments totalling $23.19 million as per the contract. “But it will get the remaining 21 loan repayment instalments only after the mine is completed as per the project consultant’s report, and an auditing is done,” said the Petrobangla official.

Yet, taking advantage of Petrobangla’s dilemma over the incomplete mine, Namnam in the past bagged an additional $16.83 million from the government through a supplementary contract.

“Now it is once again using pressure tactics on the government to get more money,” the official added.

In contrast with such cost escalation, the mine is now capable of producing only 1,100 tonnes of hard rock a day, instead of a targeted 5,500 tonnes. The target production level can be achieved only when Namnam completes the project.

Namnam’s mining design is so poor that most of the rocks produced at this mine are cut in a way that the market does not want. As a result, the mining company’s inventory has become over-saturated with huge rocks.

Considering diplomatic relations, Petrobangla in May 2007 took over the unfinished mine from Namnam by issuing conditional acceptance certificate. The condition says, “Namnam has undertaken to rectify, replace or repair any defects, defaults or complete outstanding works within the guarantee period as per contract…”

The certificate added, “The defects liabilities period (guarantee period) of twelve months for these outstanding works will be calculated from the date of issuance of the certificate. Nothing in this certificate will absolve Namnam from any of their responsibilities under this contract and aforesaid handover.”

But despite such condition, the company did not finish the promised tasks. Some of these tasks include stope preparation, installing spread concrete, constructing a skip replacing building, installing reversible exhaust fan, submitting a 12-year project development plan and a land subsidence plan.

Moreover, in violation of the contract, Namnam did not replace a generator and did not conduct non-destructive testing of selected equipment of the mine.

“They did not even submit a development plan so that we keep on depending on their assistance,” commented an official of the MGMCL.

With Dr Mosharraf Hossain as energy minister, the BNP government had signed the turn-key contract with Namanam on Mar 27, 1994 to develop the hard rock mine which will annually produce 1.65 million tonnes of rock when completed. The mine was supposed to be completed in 1998.

But Namnam lacked both fund and equipment to complete the project in time. After a series of delays on various pretexts, it was given supplementary contracts to finish the project. In 2005, the company was given another chance to finish the tasks through a two-year service contract. But it could not do the job forcing the government to sign yet another year’s service contract last year.

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