Aussie company buys Lankan ilmenite deposit for a pittance
by Daily Mirror, Colombo, December 20,2022
The Sri Lanka Cement Corporation owned factories in Kankesanthurai, Puttalam and Galle. The factories in Puttalam and Galle were sold in 1993. The factory in Kankesanthurai didn’t operate due to the war. Although the Puttalam Cement Factory was sold the land where the raw materials were obtained from remained with the Cement Corporation. It is located in the Aruvakkalu area and spreads across 5352 acres. The land was transferred to the Cement Corporation by Extraordinary Gazette No. 283/2 dated Tuesday, 20th September 1977. This land has been provided by the government to procure raw materials for cement production.
A layer of red soil had been observed when excavating work was carried out to find limestone to make cement in this land; located in Aruvakkalu. The soil contains ilmenite. It has been discovered that the soil contains many other expensive minerals as well. This is a source that will help Sri Lanka earn US Dollars. But it turns out that plans are underway to sell those valuable mineral resources to an Australian company at a low cost. Former Chairman of the Cement Corporation Gamini Ekanayake, said that he had the Geological Survey and Mines Bureau inspect the red soil. According to the inspection, it has been revealed that the red soil contains ilmenite and other valuable and expensive mineral resources.
According to him the soil contains 8-10 percent ilmenite. Iluka Lanka Exploration (Pvt) Ltd, a Sri Lankan subsidiary of an Australian company, had already submitted an application for the technical evaluation of the mineral resources of Aruwakkalu land and obtained permission to carry out exploration work from 15-11-2013 to 31-12-2019. Ekanayake said that it was before he became Chairman. Iluka Lanka Exploration (Pvt) Ltd was allowed to carry out the exploration activities with the approval of the former chairmen and Board of Directors of the cement corporation. This was not proper conduct.
Puttalam Aruvakkalu land is a government-owned property. “If that is the case, a proper assessment should be done prior to transferring the land to someone to do exploration work. But carrying out exploration activities only with permission of the chairman and the Board of Directors will deprive the country of a huge income. Therefore, I opposed the request made by the concerned company to extend the period of the excavation work,” said Ekanayake. “I opposed it because I wanted the country to receive the income generated from ilmenite and other mineral resources in the land in Aruwakkalu. Therefore, plans were made to do this excavation with Lanka Mineral Sand Limited and not with the Australian company. It is a public company in Sri Lanka. We do not need to pay separately for this excavation work. All income generated through this activity goes to the Government of Sri Lanka. Lanka Mineral Sand Limited and Geological Survey and Mines Bureau have the capacity to carry out these excavation and exploration activities.
There are skilled officers as well as technology for that,” he added. After former Industry Minister Wimal Weerawansa was informed about this approval was granted to continue the operations with the government institutions of Sri Lanka. The approval was forwarded to the Board of Directors and a project report was also prepared by Lanka Mineral Sand Limited. Lanka Mineral Sand Limited agreed to bear the cost of this project on the basis that 60 percent of this project should go to the Mineral Sand Company and 40 percent to the Cement Corporation, according to Ekanayake. According to the project report, 230,000 metric tons of soil should be excavated per month.
The report states that the soil contains 8625 metric tons of ilmenite, 375 metric tons of rutile, 375 metric tons of zircon, 375 metric tons of leucoxene, and 36960 metric tons of natural clay,” he added. 1900 million rupees will be spent on this excavation activity. 9000 million rupees will be generated in five months after the commencement of these excavations. Ekanayake pointed out that after five months, the expenses will be covered and a big profit will be generated. “A licence is required to begin this project. It should be obtained from the Geological Survey and Mines Bureau (GSMB). There was a problem in obtaining that approval. The GSMB refused to grant the mining licence to either the Cement Corporation or Lanka Mineral Sand Limited.
At a discussion held among the institutions, the GSMB stated that the mining licence cannot be given to the Cement Corporation or Lanka Mineral Sand Limited and that Iluka Lanka Exploration(Pvt) Ltd had been granted permission to explore the Aruvakkalu land. GSMB officials maintained that there is special permission and that even though it is a land belonging to the Cement Corporation, obtaining the corporation’s consent wasn’t necessary,” said Ekanayake. The problem lies not in the fact that Iluka Lanka Exploration (Pvt) Ltd was allowed to carry out the exploration work, but in the payment made for the minerals in the Aruwakkalu land. No valuation has been conducted regarding this. The company has been allowed to take away the ilmenite. “The payment for one ton of excavated soil is US$ 300. The 7% royalty is the only income Sri Lanka receives. This amounts to 50 US$. The remainder goes to the exploring company.
These soils also contain rutile, zircon, and leucoxene. There is a good price for these minerals as well. The soil is taken from Sri Lanka as ilmenite. But it contains the above-mentioned mineral resources. Therefore, the Treasury or the Cement Corporation can obtain royalty by adding the value of those minerals as well. In that case one metric ton of this soil can be sold for about 2200 US$. That money should flow into the country. But with the current procedure, the country will lose 2200 US$. Instead Sri Lanka receives only 50 US$ per ton,” said Ekanayake. The mentioned company sometimes indicates that Sri Lanka will receive an income of 100 million US$. Sometimes it maintains that the income will be 200 million US$.
There is no uniformity. “I do not understand why the Ministry of Environment, the Ministry of Industry and Commerce, the President’s Secretariat and the Sri Lanka Board of Investment are more interested in engaging in this transaction,” Ekanayake added. Sri Lanka does not have the needed technology to purify the red soil that contains ilmenite and separate the other minerals. But for that, local or foreign companies with technical knowledge can be selected to hand over the work. The Cement Corporation and Lanka Mineral Sand Limited entered in to an agreement to carry out this excavation activity hoping to provide the country with the income generated. But Ekanayake pointed out that many people in the Ministry of Industry and Commerce and the Ministry of Environment were against taking such measures.
DISMISSED AS CHAIRMAN
Now they are trying to use a different strategy to hand over this project to the Australian company. “Plans are underway and I was dismissed as the chairman of the Cement Corporation because I was considered a threat,” Ekanayake added. According to Iluka Lanka Exploration (Pvt) Ltd, this land has Sulphur ilmenite. A video of NASA done on this area states otherwise. Accordingly the Aruvakkalu land in Puttalam has valuable mineral resources and the land is even suitable to launch a rocket. There is also a cabinet decision that states that a valuation should be done when allowing the Australian company to carry out mining activities in this area.
That was in 2012. But according to Ekanayake no such valuation has been obtained yet. “Now the said Australian company is trying to obtain legal permission for this exploration by obtaining an EIA report. The company has already proceeded with the preliminary steps. If they are allowed to obtain the report they can argue that an EIA was issued allowing them to carry out mining activities in the area. This will give them an opportunity to file a lawsuit in the future,” said Ekanayake. When the Daily Mirror contacted Krishantha Silva, the Sri Lankan representative of Iluka Lanka Exploration (Pvt) Ltd in this regard he had this to say. “The former chairman of the Cement Corporation did not want this project to be given to us. He should be contacted to obtain the reason. We are discussing this matter with the government.
I cannot reveal to the media the matters being discussed with the government. Various people are making accusations regarding this, but we do not accept them. We completed our exploration activities during the period 2013-2019. We received our reports from the Geological Survey and Mines Bureau. We received a letter signed by the Director General of Geology, Sajjana de Silva, on October 22, 2021, stating that our exploration activities were successful and they acknowledged them. We now have to do the environmental assessment. We have made a request from the Central Environmental Authority for that. We only pay the government royalty. The problem we have is how to pay US$2200 for a US$300 product. There is no zircon or rutile in the ilmenite. There is only 8-9 percent mineral sand in the red soil. Only minor amounts of zircon and rutile are present. If sold at the market price, we get US$300. But this deposit has Sulphur ilmenite.
It costs 280 US$. If the value is added and sold, it will also be added to the royalty. We said that we would pay a royalty for the ilmenite we sell. Now the market value of one ton of Sulphur ilmenite is 280 US$. We pay 14US$ to the government as royalty. There are no other mineral resources in the ilmenite. The seven percent is paid only after extracting them. The government only requested for royalty regarding all these minerals,” said Silva. This writer also contacted the Ceylon Mineral Sand Limited official who prepared the project report. A Spokesperson from the company said that if the Puttalam ilmenite contains Sulphur, it can be removed. “If relevant machines are given, we can extract these mineral resources in our country. We have to do the same procedure followed in Pulmude. All the reports we gave regarding the Puttalam ilmenite deposit are true.
We are not allowed to carry out these activities in our country. These people want to allow the Australian company to excavate the ilmenite deposit at a low cost,” the spokesperson added. Commenting on this Lanka Mineral Sand Limited General Manager H. M. J. M. Herath said that he did not know anything regarding the mining activities at the Puttalam ilmenite deposit. “The former General Manager had given approval, but now the process has been halted,” he added.
This newspaper contacted Minister of Plantation Industries and Minister of Industries Ramesh Pathirana. But the minister’s security division maintained that the minister could not be contacted.
The members of the minister’s security division obtained this writer’s contact details and promised a response from the Minister, but this newspaper still awaiting that response. Cement Corporation Chairman Jagath Dharmapriya said that a problem had arisen regarding the provision of this ilmenite deposit to an Australian company. “This is still under discussion. We are also looking to obtain the maximum profit from the ilmenite deposit to Sri Lanka and protect the ilmenite deposit. As it is being discussed, we cannot give more details to the media right now,” he added. This newspaper also contacted the Secretary to the Ministry of Industry, Thilaka Jayasundara, wto find out whether the said company had been allowed to explore and excavate the Puttalam ilmenite deposit. She said that no final decision has been taken on this regard as yet.
This writer also asked Geological Survey & Mines Bureau Director General Sajjana de Silva regarding this. When asked whether the Bureau issued a letter stating that the said Australian company conducted the exploration activities properly and whether the Bureau can issue licences rgearding government lands without the approval of the Cement Corporation he said “I do not remember about that. I cannot say anything without checking the files,” We also attempted to ask the Minister of Environment, Nasheed Ahmed, whether the said Australian company was given permission to obtain an EIA report, but the minister could not be contacted and his media division confirmed that there was no request for an EIA report. We also asked Land Commissioner General Bandula Jayasinghe about this issue.
He said that the GSMB does not own the land where the Puttalam Aruwakkalu ilmenite deposit is located. “The government owns the land. This land has been assigned to the Puttalam Cement Corporation through a gazette. The cement corporation has leased it to another company that manufactures cement with the approval of the Cabinet. We seek Attorney General’s help to resolve this issue. Also, the GSMB can issue licences for the extraction of mineral resources in the land. But the company that has obtained the license is not allowed to enter the land. We need to give that permission. We have not yet given such permission. What we need to do now is to give the two institutions permission to enter the land which would eventially bring income to the country,” he added.