Saturday, August 19, 2017

National Prosperity Company under scrutiny on gold debt to gov’t

National Prosperity Company (NPC), which operates the national Moehti Moemi mine in Yamethin district, Mandalay, has yet to pay a sum in gold owed to the government, U Phone Myint, deputy director from No. 2 Mining Enterprise under the Ministry of Natural Resources and Environmental Conservation, told The Myanmar Times.

NPC, which was granted rights to mine for gold in Moehti Moemi by the government, has yet to pay what it owes 5 years into its contract. Photo - EPANPC, which was granted rights to mine for gold in Moehti Moemi by the government, has yet to pay what it owes 5 years into its contract. Photo - EPA

Negotiations are currently being carried out for NPC to make the payments. The company owes 5.5 tonnes of gold (over 3,400 viss) priced at a fixed rate to the government.

NPC has an 8-year contract with the government to mine for gold in the resource-rich Moehti Moemi area, which spans over 6,000 acres of land. The company was awarded the contract in 2011, during Union Solidarity and Development Party president U Thein Sein’s administration.

Back then, the initial contract period was 5 years, from Sept 2011 to Sept 2016. Under that agreement, NPC was to pay over 70 viss of gold per month to the government in exchange for the right to mine for gold in the area.

In 2013, NPC requested a 3-year extension of the contract, citing difficulties in producing enough gold to pay the government. The extension was approved by the President’s office. Under the new contract, NPC must pay the total sum of 5.5 tonnes in gold owed to the government by September 2019, when the contract expires.

Since then, NPC has produced around 4 tonnes of gold, but it is still in arrears with the government, said U Phone Myint. “The company is still unable to pay the gold which it is obliged to under the contract. They have spoken to us about the difficulties they face in paying the gold they owe. So we are currently still negotiating,” he said.

Lack of capital

One reason NPC is falling behind on payments is lack of capital. “There is gold being produced but NPC is re-investing [the] gold. [That is why] they are unable to pay [the] required amount of gold they owe. When NPC first started mining for gold, it did not have any initial capital. All its capital expenditure requirements were funded by the gold produced,” U Phone Myint said.

“How the agreement works is if 5 tonnes [of gold] should be given to the government, then more than 10 tonnes must be produced. When we agreed to give them 8 years instead of 5 years, we agreed on the amount that must be paid monthly. In the latest 8-year contract, the agreement was to pay up to 5.5 tonnes … If they cannot pay anything then the superiors will decide on what to do,” he said.

When contacted by The Myanmar Times, U Phyo Si Thu, officer-in-charge at NPC’s headquarters in Nay Pyi Taw declined to comment given that negotiations with the government are currently underway.

Under scrutiny

Meanwhile, NPC’s struggle to pay the government is drawing flak from the industry. “Production has to be done according to auction rules. The contract terms were to pay 5.5 tonnes of gold within 5 years. Out of the 30 companies who bid for the tender, NPC won the [lucrative] contract to mine for gold in Moehti Moemi in 2011,” one gold merchant said.

“If NPC is having difficulty paying the State, the contract can be given to other capable companies. The government suffers damages if it isn’t paid the gold it is owed,” he added.

The issue was raised by MP U Saw Moe Myint at Amyotha Hluttaw. Union Minister for Natural Resources and Environmental Conservation U Ohn Win will reply, according to an official from that ministry.

According to its website, NPC was established in 2006 and is currently a key player in top sectors in Myanmar, which includes gold mining. After paying the required 5.5 tonnes of gold to the government in the first 8 years, NPC will operate on a product sharing ratio model of 30 per cent (to the government) and the remaining 70 pc to the company for the next 17 years.

The company hopes to list on the Yangon Stock Exchange in the future. Currently, the price per ounce of 24 karat Myanmar gold is US$1,228.50, according to NPC’s website.

Translation by Zar Zar Soe, Kyaw Soe Htet and Zaw Nyunt