Need for national policy on minerals value addition

11 March 2014 05:30 am - 0     - {{hitsCtrl.values.hits}}


There is presently a great interest on value addition to mineral resources that could be commercially exploited in Sri Lanka. However this interest was vigorously promoted by the Geological Survey Department (present GSMB) from the early 1960s and what is new is that three minerals namely graphite and mineral sands and pure silica quartz have now been identified as  strategic minerals with the advancement of cutting edge and green technology in the recent past.

It is now opportune to educate the public about the attempts that were made by the dedicated geologists from the Geological Survey Department whose untiring efforts were entirely responsible in setting up the advanced ceramic industry which has survived with even privatization in 1990 up to present day with manufacture of world class quality ceramic products. The other industries such as steel, mineral sands, fertilizer, hardware etc which were also privatized   did not use local minerals for value addition and depended on either imports of finished products or imported raw materials.

A glaring example was the liquidation of the State Fertilizer Manufacturing Corporation (SFMC) in early 1990 which operated the Urea Plant at Sapugaskanda by utilizing naphtha, a bi product from the refinery to produce urea and also had elaborate plans for use of the rock phosphate deposit at Eppawela discovered by the GSD in 1972 for manufacture of water soluble phosphate fertilizer such as SSP, TSP, MAP, DAP with maximum benefits to Sri Lanka. It is no secret that the Urea Plant was scrapped due to the interests of commercial entities hell bent in importing urea as NPK for reasons known to them.

The Phosphate Project which was initiated later by the State Mining and Mineral Development Corporation in early 1980s after the SFMC was to close down also did not see the light of day although the initial proposal from Agrico Chemical Company a subsidiary of Williams Companies discovered how the phosphate rock could be processed to eliminate chloride and fluoride that will be corrosive and eat up the acid reactor. The initial proposal was on an equity split of 51 to 49 to GOSL and Agrico and the GOSL equity was in the form of royalty paid up front with a debt equity ratio of 4 to 1. The working capital of US $ 25 million was to be brought by Agrico after the sale of a fertilizer plant at Namhae South Korea.  GOSL at that time refused to give the foreign loan guarantee and preferred to give such a guarantee to purchase of planes for Air Lanka.

It must be stressed that if this project was implemented at that time after carrying out a detailed EIA, it was going to earn foreign exchange more than export of tea! The subsequent attempt by the GOSL to go into a JV with Freeport Mc Moran with 70 per cent and Tomen Corporation of Japan 20 per cent equity was a complete failure as Sri Lanka was to get only 10 per cent free equity and was not economically attractive. Subsequently, the order by the Supreme Court under a Fundamental Rights case in 2000 to desist the GOSL from entering into any JV agreement until the total reserves of phosphate rock in Sri Lanka are proved by the GSMB and the CEA carries a detailed EIA.

Another project which was promoted by the GOSL was processing ilmenite to produce titanium pigment. The  surveys carried out by the GSD in early 1980’s under my direction on the stretch of coastline from Nilaweli to Mullaitivu discovered  four promising mineral sands deposits at Pudduawakkaddu , Niyaru, Kokkilai and Tavikallu  with a total reserve of over 6 million tonnes of heavy sands as proved by Intersite BV and Fugro in 1985. The irony of this is that the best deposit was given to a company which has now established a processing plant at Dambulla and has a long term agreement to process the tailings from  Lanka Mineral Sands Ltd without a guaranteed gate price at international market prices.

The GSMB refused to give a mining license to this same company to exploit the heavy sands at Podduawakkaddu and the company has appealed to the Supreme Court to gain redress. It is strange that the person at GSMB who was responsible for this decision is now heading a recent  committee to add value to minerals

Value addition to minerals
In the interests of the general public, it must be stated that there are four Ministries dealing with value addition to minerals. However, the lead Ministry  legislated to look into all aspects of mineral resource development with the implementation of the Mines and Minerals Act No 33 of 1992 and Mines and Minerals (Amendment) Act No 66 of  2009 and related regulations is the Ministry   of Environment and  Renewable Resources (MOERE).

The MOERE has taken meaningful steps in appointing a Committee for study and review the current policy on value addition and export of minerals  with representatives from the relevant ministries and the lead agency the GSMB as well as legal officers from MOERE and GSMB.  This committee is presently sitting and the final report will be submitted soon.

In the meantime  Committee on Science Technology and Innovation (COSTI) has also appointed a sub committee to look into value addition to graphite mineral sands , clays etc. COSTI conducted a Round Table Discussion on value addition to graphite on 9 January 2014 which was addressed by Hon  Prof Tissa Vitharana  Senior Minister for Science and Technology (MOST) and decisions were taken on follow up to value addition to graphite in the light of new findings as graphene research, photo voltaic cells, Lithium ion batteries, etc.

It is also learnt  that the Ministry of Science and Technology  has  convened another meeting by a self-appointed committee headed by a former Director and Chairman and a  former working Director of GSMB to look into value addition to minerals and the private sector which attended the two meetings convened by the MOST and COSTI were confused and baffled why there are duplication of efforts even within the same ministry.

In addition to these committees, there are now four ministries involved in mineral resource development namely MOERE, Ministry of Industry and Commerce ((MOIAC), Ministry of State Resources and Enterprise Development (MSRED) and Ministry of Science and Technology to explain further apart from the legislative responsibility  for mineral resource development of MOERE. The MOIAC is responsible  for the  Sri Lanka Kahatagaha Graphite Ltd (SLKGL) and the  Lanka  Phosphate Ltd (LPL) and Sri Lanka Mineral Sands Ltd (SLMSL) come under the MSRED. All these three entities are wholly owned Government companies registered under the Registrar of Companies.

To add to  the present  confusion  on  policy directives and development plans  from various entities, the Ministry of Science and Technology has also appointed ac committee to look into the same subject thus duplicating efforts of even COSTI under  its own ministry and ignoring the MOERE which  has the legislative and regulatory  powers for mineral resource development.

Conclusions and recommendations
It is not possible to evolve a national policy for value addition to minerals with such ad hoc committees under various ministries, and the private sector trying to promote FDIs in the form of JVs is confusing as to what is expected from them in getting maximum benefits to the country by value addition to minerals and for them to earn a fair share of profits.

 It must be stressed that Sri Lanka is still to attract Foreign Direct Investment (FDI),  if we are to embark on green technology and high-tech innovations. Most of our decision makers do not realize that taking laboratory innovation to commercial levels need transfer of  innovative and proven  technology,  foreign capital , secure markets for finished products as well as a stable investment and a regulatory regime. Sri Lanka  still has to embark on  industries utilizing such products for the steel industry ,refractories , lubricants etc. as well as high end products like fuel cells for conversion of hydrogen to electricity , lithium ion batteries , white titanium pigment , titanium metal etc  and an attractive investment regime is of paramount importance if we are to advance industrially and achieve the aspirations of the President  Mainda Rajapakse under his  “Maninda Chintanaya Idiri Dakhma”  Integrated National Policy Directive.

A US –EU Workshop on Mineral Raw Materials Flow and  Data held in Brussels on 12 September 2012  selected for study 41 materials for critical assessment and discuss how the supply chain for such materials  could  be guaranteed. Out of these materials Sri Lanka has so far discovered   crystalline lump Graphite , Titanium , Rare Earths ,  High Grade Silica (Quartz) and High Grade Limestone. The report focused on information gaps and available solutions. Future dedicated exploration programmes by GSMB in collaboration with the Universities and the private sector will be able to detect any other minerals  under this list in Sri Lanka.

In conclusion, I strongly suggest that the various state entities now involved in identification of policy directives for value addition to minerals study the National Mineral Policy that I drafted for the MOERE and also work in coordination with the MOERE and recognize  it as a lead agency for such an endeavor. Ad hoc committees appointed by various agencies without any inputs from the MOERE and mineral economists with international experience will lead to confusion and disarray and utter wastage of public funds.

(The writer is a Retired Economic Affairs Officer of United Nations ESCAP and a former Director of the Geological Survey Department –present GSMB and can be reached at )
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