Govt-Fortescue mining agreement sparks concerns

KABUL (Pajhwok): An agreement has been signed with an Australian company in violation of the mining law, some sources say and the Wolesi Jirga’s Environmental Protection Commission says the matter is being probed.

The Ministry of Mining and Petroleum (MoMP) in coordination with the Presidential Palace Investment Facilitation Unit signed Frame Work Deed of Agreement for the Development of Mining with Australian Fortescue Future Industries PTY LTD on September 27/2020.

The agreement has been signed by Attaullah Naseeb, the Presidential Palace Investment Facilitation Unit head, Mohammad Haroon Chakhansouri, Minister of Mining and Petroleum and President Ashraf Ghani as an eyewitness.

This comes at a time when a well-placed source on the condition of anonymity said the agreement did not go through any bidding procedure.

Article 40 of Afghanistan’s Mining Law says that mining contracts are awarded in line with bidding procedure in article 41. The law strictly forbiddens awarding mining contract through other government units.

Clause first of article 41 of the mining law says: “a- The Ministry may conduct bidding processes for the award of a Mining Concession in respect of land within a Large-scale Mining Area. B- bidding process for the award of a Mining Concession may be initiated by the publication of a notice on the Ministry's website, international websites, local and national newspapers, and if required international newspapers, which shall include the following information:.”

Mohammad Aziz Gharawal, spokesperson for MoMP, said the agreement signed with Fortescue Future Industries was related to the survey of mining sites and after the completion of the survey, the company would sign future contracts in line with rules and regulations.

He said framework agreements are signed with not only one but multiple departments. The agreement is very wide therefore it is not only signed with the ministry but at the government level.

Five-year framework agreement is against the law:

According to the agreement, Afghan government allowed mining sites exploration to Fortescue Future Industries in 17 provinces without mentioning exact name of the mining site. No other person or entity is permitted to undertake similar studies or in any way engage in activities to interfere with the activities of the project studies and development being undertaken by Fortescue Future Industries for five years.

The agreement says that Afghan government will procure and provide exclusive access and legal title for Fortescue Future Industries and its affiliates to use all required land for each project as requested.

In the event, Fortescue Future Industries is unable for any reason to access a project site, the duration of the exclusivity outlined in clause 8.

This happens while article 31 of the mining law says a mining exploration license is awarded for three years to a company and is renewable for another three years upon the completion of the survey.

Article 31 of the Mining Law says: “An Exploration License shall be granted for an initial term of 3 years and up to 2 additional terms of 3 years with the approval of the Ministry.”

But according to Gharwal, the article doesn’t refer to the exploration license, adding that it is a survey agreement and there is no mention of three years term for the license of a survey in any law.

But a source, wishing not to be named, said this agreement is as an Exploration license. The Mining Law defines just 3 types of mining licenses such as: Small scale mining license, Exploration license with with the right of priority of getting an exploitation license, and, Exploitation license. There is no survey license mentioned in the mining law.

The source said there is no mention of survey license in the mining law and mining surveys are conducted on the basis of exploration license.

Mining agreement without consulting relevant organs:

According to the source and an appendix of the framework agreement reads that Afghan government handed over copper and gold mines to the Australian Company in Helmand, Kandahar, Logar, Kabul, Herat, Badakhshan, Takhar and Sar-i-Pul provinces, iron mines in Bamyan, Panjsher, Herat, Badakhshan, Kandahar provinces and lithium  and rare metal mines in Daikundi, Herat, Nimroz, Ghazni and Helmand provinces.

The framework agreement also says that all other potential gold, iron ore, lithium and rare earth mineral deposits and mine sites across Afghanistan for a 5-year period form the date of this agreement.

This included rare minerals and article four, clause 72 of the mining law defines them as Restricted Minerals --- Radioactive Minerals, Rare Earth Elements, Beryllium (Be), Lithium (Li) and.

In addition, article 18 of the mining laws says: “Unless a Restricted Minerals Program has been approved by Cabinet with the prior endorsement of the High Economic Council following consultation with the National Security Council: 1. the Ministry may not undertake a bidding process for the award of a Mining Concession in respect of the Restricted Minerals under Article 41; 2. the Ministry may not grant a License in respect of the Restricted Mineral under Article 28 or Article 29; and 3. a License Holder may not undertake Mineral Activities in respect of the Restricted Minerals.”

When asked why the agreement is inked with the Australian Company without consulting the National Security Council (NSC) and the High Economic Council (HEC), Gharawal said the agreement is limited to the survey of mining sites and any mining contract including the one for restricted minerals would be signed after the approval of the NSC and HEC.

The source also said that Fortescue Future Industries is not registered with Afghan government and it has no representative office in Afghanistan as part of its formalities.

Article 17 of the mining law defines condition for an entity under which it could not hold mining license. It says: “under following circumstances entities not eligible for mining license, being liquidated or wound-up in insolvency; do not hold an Investment License; have been convicted of a contravention of this Law or had a License cancelled for noncompliance within the previous 3 years; or - have been convicted of an offence in relation to bribery or corruption within the previous 10 years.”

The MoMP spokesman said Fortescue Future Industries is not registered in Afghanistan but it will open its branch soon.

He said if mining sites are offered for bidding and Fortescue Future Industries showed interest in availing contract, the company will have to show compliance with all mining laws and get investment license as well.

Not presenting plans:

According to the framework agreement, Fortescue Future Industries agreed that it shall undertake studies in respect of each project with a view to local force development and training, industry development, capacity and competency building in Afghanistan, developing vocational training and employment plan that provides equal opportunities between women and men with an explicit equal employment target.

But article 28, clause fifth of the mining law says: “A Mining Concession Holder who has a right of priority for the grant of an Exploitation Licence and who seeks the grant of an Exploitation Licence in accordance with a Mining Concession must lodge with the Ministry: 1. a Feasibility Study; 2. a Mining Proposal; 3. a proposed Environmental Management Plan; 4. a proposed Local Content Plan; 5. a proposed Community Development Plan; and 6. a proposed Health and Safety Plan.”

Clause 6 of article 28 says: “Upon lodgment of the Mining Proposal under Article 28(5), the Ministry must consult with the local community in the manner prescribed in the Regulations and other relevant Ministries and Government bodies in relation to any conditions relating to the Mining Proposal and prepare a report summarising the consultation.

Clause 7 says: “The Mining Technical Committee is obliged to consider the consultation report prepared by the Ministry, evaluate the Feasibility Study and the Mining Proposal, assess commitments made in the documents referred to in Article 28(5) in respect of the Exploitation phase; and provide a Mine Development Report to the High Economic Council.”

Clause 9 says: “Upon approval of the Mining Proposal, the Ministry must, upon provision of any necessary Performance Bond, grant the Exploitation Licence subject to the conditions specified under the Mining Concession and the conditions relating to the Mining Proposal imposed by the High Economic Council.”

This comes at a time when according to article 28, the exploitation license holder is the first choice for the grant of exploitation license.

This makes the Fortescue Future Industries first choice for the grant license thus agreed mineral sites come under the monopoly of Fortescue Future Industries after the completion of survey.

 Why London Arbitration:

According to the framework agreement in the event the parties fail to resolve the dispute amicably, such dispute shall be referred to the arbitration in London.

The government laws for the arbitration shall be the laws of England and pursuant to the rules of arbitration of the chartered institute of arbitrators, London, England.

But according to the source, disputes in Afghanistan’s mining agreements and contracts are referred to the Afghanistan Business Arbitration and in case any side rejects the ruling, it is referred to the UNCETRAL.

But Gharawal said that specific mechanism is set for the dispute resolution of any framework agreement and both sides picked the London Arbitration in the agreement.

Unpaid Performance guarantee:

Second clause of Article 28 of Mining Law states: The Ministry issues exploratory license after obtaining a guarantee for fulfillment of commitments and ensuring that the preconditions in the mining contract are met.

A source from the ministry of mines and Petroleum said Fortescue Future Company has not provided the government with any guarantee of fulfilling its commitments and nothing as such has been mentioned in the agreement between the two.

The source added if we consider $600m budget for each project then budget for implementation of the whole project would reach tens of billions of dollars and according to article 95 of mining regulations 15 percent of the project budget during exploration must be given to the government as a guarantee; in this case the amount reaches billions of dollars.

Article 95 of mining regulations states: The amount of the guarantee for the fulfillment of the commitments stated in the proposal related to the exploration license is 15 per cent of the total expenses determined for the initial period of the exploration license.

Aziz Gharwal said Fortescue Company in the first round would complete its survey and it has not begun to explore so far.

He added government would take the guarantee money for the exploration license when exploration license is issued to the company.

Former Minister of Mines and Petroleum, WahidullahShahrani had signed an agreement with an Iranian cement company in western Herat province which was later closed because of not paying the performance guarantee money; and the minister was convicted to 13 months in prison and paying a fine of $1.5m to the government.

The Jury had said WahidullahShahrani is convicted to 13 months in prison and returning $1.5m to the government for exploiting his authorities and facing the Ministry of Mines and Petroleum with a loss of $1.5m.

First paragraph of Article 9 of the agreement with the Australian company states that the government of Afghanistan would provide all available data and studies to Fortescue Company to ensure that all projects are more optimized for both parties and this information would help Fortescue better identify mines in Afghanistan.

Spokesman of MoMP said some of Afghanistan’s mining maps would be shared with the company for better working.

Nabil calls the agreement “Selling Afghanistan”:

Former spymaster Rahmatullah Nabil on his Facebook page wrote, “Whole and selective sale of Afghanistan; Dr. Ashraf Ghani and his close circle have come together to surrender Afghanistan to the bankrupt Australian Fortescue Company, which is originally owned by the Chinese. If the agreement is signed consciously then it is a national treason and if it is negligence then it is a national crime.

He has also written that the Australian Company is not required to obtain a special permit for mining sites during the study of the related projects, and no other person or entity can obtain a mining project permit for a period of five years; this means modern colonization and the destruction of the Afghan national Mining Industry and National traders.

Nabil added, Ministry of Mines is the revenue treasury of its country especially in Afghanistan where the national income depends on the country’s mines; but for years, the Afghan ministry of mines instead of helping the national budget, has inflicted devastating losses and huge bureaucratic costs on the Afghan government.

Nabil said Ministry of Mines and Petroleum mostly plays the role of a consuming department in the government and is considered as the main place of corruption within the government due to the wrong policies of the government in the field of governance, unprofessional appointments and corruption.

He added Afghan Ministry of Mines has amended the mining law four times over the past five years and lack of stability and early change in the mining law worries every investor in the future and none of the investors would dare to invest in such conditions.

Ministry of Mines and Petroleum in response to Rahmatullah Nabil’s claims, wrote, “Such baseless and irrational statements of Rahmatullah Nabil show that not only he failed in his previous position but also he has not reached political maturity; with such remarks he is confusing public minds and also trampling on national interests and values.

Economist SaifullahSaihoon said he was unaware of the agreement with the Australian Company, adding the ministry did not have the right to handover Afghanistan’s reserves and mines to companies without bidding.

He added the National Assembly and other monitoring bodies should always monitor the agreements and contracts of the Ministry of Mines; because any ambiguity in the contracts and agreements endangers the interests of the country.

If true, it is a national treason:

SayedHayatullahAlemi, member of Natural resources and environment commission of the Wolesi Jirga, said mines are Afghanistan’s largest asset and the Ministry of Mines and Petroleum has not signed any successful contracts in the mining sector for the past 20 years.

Regarding the agreement with the Australian company, he said, “So far, the ministry has not formally shared the agreement with us but based on my information the Australian company in the agreement has not given any commitment to Afghanistan and no one else has the right to interfere in Afghanistan’s mines for the next five years; If this is true then it in fact is a national treason.

He said, Wolesi Jirga would pursue the matter.

Nh/Hr/ma