Bong Mieu exit causes golden headache for local authorities

10:00 | 12/12/2019
The current standing of laws on environmental protection and minerals in Vietnam are being called into question after the collapse of Bong Mieu gold mine, with locals paying the price for the damage left behind. Insufficient restoration cover for such activities, along with the lack of responsibility placed on organisations to implement mining schemes in a proper manner, mean that lessons must be learned in order to efficiently procure high-quality foreign direct investment in the mining sector. Nguyen Thu reports.
bong mieu exit causes golden headache for local authorities
Authorities have decided to close Bong Mieu mine and restore the area, which will include planting trees and purifying water holes (Photo: Le Toan)

After Bong Mieu Gold Mining Co., Ltd. in the south-central province of Quang Nam saw its mining licence for Bong Mieu mine expire three years ago, one of the two largest gold mines in Southeast Asia went officially bankrupt in 2018. The consequences, however, are far from over as the surrounding area has been ploughed and left to deal with dangerous chemicals. This has led to the province being forced to utilise its local budget to close the mine entirely and take up all works of environmental renovation and restoration.

Such works must be the responsibility of the investor, but the deposit for environmental renovation and restoration has been found too low to cover such works. According to local authorities, the total cost of closing the mine can reach VND19 billion ($826,000), of which Quang Nam must contribute VND12.6 billion ($548,000) with the remainder coming from the mine’s restoration fund.

The Bong Mieu gold mine was the most modern gold facility in the country when it was opened in 2005, and was expected to contribute to the state budget and produce jobs for locals. But in November 2017, the company revealed that it had amassed VND1.26 trillion ($54.78 million) in debts and nearly VND1 trillion ($43.47 million) in accumulated losses, which exceeded its total equity by VND966 billion ($42 million).

This forced creditors to vote for the group to go bankrupt, but the lack of money to actually close the mine and restore its environs has been a headache for local authorities.

According to the company’s financial statement, as of November 2017, the Bong Mieu company, a subsidiary of Besra Gold Inc., amassed VND1.26 trillion ($54.78 million) in debts and VND1 trillion ($43.47 million) in accumulated losses, which exceeded its total equity by up to VND966 billion ($42 million).

As a partner in transport services with Besra Gold for nearly 10 years, Quang Nam based-Tan Nhat Minh Company was left in the lurch with Besra owing the company up to VND8 billion ($350,000). Bui Ngoc Luong, chairman of Tan Nhat Minh, blamed unfair treatment as the local tax agency offered more incentives to foreign-invested enterprises.

After more than two decades of operating and exploiting gold at the Bong Mieu mine, as well as exporting it overseas, Besra fled in 2016 without returning the site to its original state as required by the law, leaving behind unpaid debts of tens of millions of US dollars.

The situation is a typical example of failing to attract investment in the mining sector and managing that investment when the promises from investors and fulfilment in reality do not go hand-in-hand.

Nguyen The Vinh, Chairman of the People’s Committee of Tam Lanh commune where the mine is located, said, “The bankruptcy of Bong Mieu gold company has many consequences for this locality. The environment in the area has not been returned or restored yet. The situation is complicated, with considerations of security, order, and illegal exploitation of gold, while the human resources in the commune would find it difficult to manage the mines.”

Province left to fend for itself

During recent times, complaints have been made of illegal exploitation in the area, and gold dust poisoned rivers and streams, with more than 20 large and small mine gates in the area not being filled back up. Besides, hundreds of hectares of land remain hazardous, and gold bandits have built night camps on mountain slopes, causing environmental pollution, loss of mineral resources, and social disorder.

Explaining why businesses took away tonnes of gold from Bong Mieu mine with little left to the province to spend on cleaning up the ir mess, Le Tri Thanh, Chairman of Quang Nam People’s Committee, cited the current law stipulating that in the case of a company’s environmental rehabilitation and restoration deposit not large enough, the company is no longer responsible if bankruptcy is involved.

“The deposit was made according to the old law from 2010. It is too little but there is no mandatory obligation to pay more,” Thanh explained.

According to Thanh, continuing exploitation with other investors has not yet been discussed. The bankruptcy of Bong Mieu mine has brought to light many holes in the country’s law on mineral deposits and managing the mining process.

Commenting on having to use the local budget to close Bong Mieu gold mine, Tran Thanh Hai, chairman of the Vietnam Gold Investment and Trading Corporation said that it is “unfair.”

Currently, the Law on Minerals 2010 and the Law on Environmental Protection 2014 both stipulate that organisations and individuals extracting minerals are responsible for environmental restoration and deposits in mining. However, responsibilities are not clear when it comes to implementing mine closure process.

In May, the prime minister signed and issued Decree No.40/2019/ND-CP amending and supplementing a number of articles of decrees detailing and guiding the implementation of the Law on Environmental Protection that makes more detailed rules on deposits for environmental renovation of mineral extraction activities. Under Decree 40, the deposit must be equal to the funding for environmental restoration according to the contents approved by the competent authority. The calculation of deposit must apply the norm and unit price of localities at the time of preparation for the plan. In case the locality has no norm or unit price, it will follow the respective ministry or sector. In case that does not exist, the market price shall be applied.

However, the decree does not address the appraisal of mine designs and environmental impact assessments, which in most provinces are limited. The Law on Minerals provides no feasible mechanism for handling mining organisations and individuals that fail to implement mine closure plans.

Tweaking the applicable laws

The Vietnam Business Forum’s Mining Working Group said that the challenge the government has to address is to make Vietnam’s mining industry more efficient, productive, safe, and environmentally suitable. This can only be achieved by encouraging the introduction of modern technology, technological innovation, and international best practices that come to Vietnam through foreign direct investment and joint ventures between domestic and foreign companies. “As the Law on Minerals has been valid for seven years, it is respectfully requested that the prime minister considers supplementing and amending some of its provisions,” the group said.

Meanwhile Trinh Anh Hung, a lawyer from Quang Nam Bar Association, previously called for transparency in tax management as well as specific responsibilities for tax losses of the state from mining exploration.

He said even though Bong Mieu mine was forced into bankruptcy, the company representative must still be responsible for unsolved tax debts left behind.

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