ISLAMABAD, Sept 20: The Rs18 billion Saindak Copper-Gold Project in Chaghai district of Balochistan province is being run by a Chinese contractor on a 10-year lease without any independent monitoring for the last three years, raising questions if the production and sale of precious metals really yield prudent return to Pakistan.

The project, sources said, produced about $70 million worth of copper during the last financial year and contributed about $10 million to the government in export and revenue earnings.

The sources confirmed that an effort was made in 2004 to appoint a technical firm for monitoring and evaluating the production and export of copper, gold and silver but only a single non-responsive bid was received and the government had to cancel the bidding results.

Under the lease agreement, Metallurgical Construction Corporation (MCC) of China was to run the project on a 10-year lease starting October 2002 on an annual rent of $500,000 plus 50 per cent share of copper sales to the government.

The petroleum ministry claimed that a poor response for monitoring contract was because of lack of base metal analyzing technology in the country.

Engaging some international firm for the scheme was not considered due to high costs, the ministry said, adding that two non-executive directors of the Saindak board of directors had since been assigned the task of Saindak production activities.

However, the sources claimed that bids were invited from financial institutions to undertake technical and financial monitoring of the project which was practically not possible in view of the fact that financial institutions did not have the capacity to monitor a highly technical Saindak project for a long period of 10 years and hence technical firms failed to meet the bid criteria.

The sources said that both the non-executive directors of the board who had been made responsible for the monitoring activities had their offices in Islamabad making it practically impossible for them to monitor the project as they have to perform their normal official duties as well at the federal level.

Saindak Copper-Gold Project is situated about 1250 km away from Quetta.

According to official estimates, the sources said, the project had the capacity to annually produce 15,800 tons of blister copper containing 1.5 tons of gold and 2.8 tons of silver.

The reported production results, however, have generally remained on average more than 2,000 tons per month which means that more than 24,000 tons per year production was currently taking place from the project.

The actual production of blister copper at the site might be even higher resulting in reducing the life of the mine, said a market source who believed that 19-year estimated life of the mine may end in 10-year lease of the Chinese firm with excessive mining as it goes unchecked.

The mine is reported to have produced a total of about 50,000 tons since October 2003.

The historic Saindak Copper-Gold Project was one of the two gigantic (Pakistan Steel and Saindak) initiatives of late Bhutto that went into trial production in November 1995 at a cost of Rs17.5 but was closed down soon after. About Rs1.3 billion were injected into the project in the late 1990s to revive the project and was later leased out to the Chinese contractor for 10 years expiring October 2012.