Burma Mining UpdatePublished by MAC on 2006-08-20
Burma Mining Update
20th August 2006
Mining news from Burma has been rather scarce lately. Many of the smaller mines shut down during the monsoon season from June to the end of October, and some of the better sources like the Myanmar Times have not published mining items lately.
Ivanhoe Mines issued its quarterly report, to the end of June, last week. Not surprisingly production of copper cathode was down about 44% on the same quarter last year although it did recover somewhat from a disastrous first quarter of 2006, when the Monywa S & K mine was shut down for almost a month. However, with world copper prices more than double what they were a year ago, revenue from sales was actually up rather than down.
The company attributed the decline in production to a shortage of equipment, tires and the chemical reagents needed for operations. "Mine operations during the quarter continued to be affected by a shortage of trucking capacity, caused by delays in obtaining the necessary import permits," the report said. This problem seems to have been resolved for the time being. Early in July, the mine was finally able to obtain the necessary import permits for previously ordered equipment which arrived at the minesite at the beginning of August. It is expected that mining and cathode production will increase, after a delay for assembly.
What has most affected the bottom line at the joint venture has been a claim by the military government that commercial taxes on exports, stretching back to 2004, were owing as well as another claim for full payment of corporate income tax, at the rate of 30%. As a result, the joint venture company had to dig into the $84.3 million cash it had on hand at the end of the quarter, and set aside over US$ 30 million more for payment of back taxes. Ivanhoe said the joint venture, MICCL, is appealing both claims. The crackdown on the collection of taxes is being felt across the board in Burma, as the military government tries to pay bills for setting up its expensive new capital and cover the costs of increasing the salaries of state employees, including the 450,000 strong military, by as much as a thousand per cent.
Also of interest in the Ivanhoe report was a reference to the sale of "an interest" in Ivanhoe's share in the S & K joint venture to a consortium of three Korean companies which includes Daewoo International. This is now being referred to as a "possible sale". Are the partners beginning to get cold feet, what with the end of the tax holiday and continuing bureaucratic hassle over import permits?
In the gems and jade department, Myanmar Economic Holdings, (UMEHL), co-owned by the Defence Ministry and military officer shareholders, will be sponsoring its 21st Gems & Jade Auction at the end of August. Like the special sale organized by the MGE in June, the UMEHL auction will take place at Myanmar Convention Centre, north Mayangon township, rather than at the more centrally located MGE sales centre where the annual and semi-annual emporiums are held.
The new venue offers more space to display the vast array of jadeite offered at the auctions. Pictures of the event showed prospective purchasers picking over jadeite rocks and boulders in a very large outdoor lot. Over 2,300 buyers and dealers, including 1,450 from outside the country, showed up for the sale. Dollar sales figures were not announced, but the New Light of Myanmar reported that about 2300 lots of jade (72% of the total) had been taken up. Plans for the mid-year emporium in October are already underway.
A news item in the state-press on August 20th noted that Mines Minister Ohn Myint had held a meeting with gem entrepreneurs in the new capital, Naypyidaw, the day before. Mint , and his boss, Vice-Sr General Maung Aye, are apparently not too happy with entrepreneurs who do not show up to vend their wares at public gem sales at home and abroad. Mint added that in accordance with instructions, gems companies must cooperate with the Ministry of Mines in doing their gem business. In addition, companies failing to sell their products at the gems emporiums will stand less chance in seeking permission to explore gem blocks." He warned "those companies, co-operative societies, and individuals, that have been granted permits to engage in gems mining . . . not to illegally hand over their plots to others."
Ohn Myint also had a word or two to say about mine operations and the environment.
"Environmental conservation is to be considered as a crucial concern in engaging in gems mining. Gems mining needs to be in line with the prescribed rules and regulations to avoid de-forestation and the silting up of rivers and creeks." Jawboning is useful, but whether the Mines Ministry, or the Myanmar Environmental Commission, can do much more than talk about the environment has yet to be seen.
The on-again, off-again trips to the ruby mines area at Mogok offered by junta-friendly travel agencies are apparently off-again. Four-day tours from Mandalay, with participants closely vetted by the Tourism and Hotel Ministry were possible for several years on a limited basis, but, even though they are still advertised on websites, Mogok visits are currently not being allowed.
[An excellent book on Mogok, filled with maps, pictures old and new, and a text that offers a real glimpse into the life of the varied peoples who live in "rubyland" is 'Mogok: Valley of Rubies & Sapphires', by Ted Themelis, published by A & T Publishing, Los Angeles, in 2000. Themelis' website offers a second book focusing more specifically on the the mines in the Mogok area. It was supposed to come out in mid-2005, but publication seems to be delayed.]