Iron ore ‘discovery’

ON that bright sunny morning, the villagers must have been delighted at the unusual sight of a small propeller plane flying over their fields. It was the 1970s, and the OGDC’s aircraft was conducting an aeromagnetic survey over northern Punjab.

As it repeatedly flew over in a grid-like pattern, it was detecting a magnetic anomaly near Chiniot, pointing to the possible presence of iron ore beneath the surface. The aircraft returned to base, the data was logged and the matter rested.

It wasn’t until 1989 that the Geological Survey of Pakistan picked up the dusty file and carried out a geophysical survey, in which a small ore body was identified. Nevertheless, a geophysical survey is a limited study and does not confirm the resource with the degree of certitude that would motivate commercial interest. That would require more detailed investigations.

Yet another decade passed when in 1999, the Punjab Mineral Development Company commissioned an international geological firm to carry out the detailed investigations over a small area. After digging boreholes it confirmed the presence of a small deposit of iron ore.

While the size of the deposit was of little commercial value, more importantly, the investigations, using extrapolations and inferences from the collected data, pointed to the presence of much greater quantities of iron ore (in addition to other minerals) — over 500 million tons — in the wider area. However, to confirm that would require a larger, detailed investigation. At that the matter rested.

In 2009 I had accepted a position with the Punjab Board of Investment and Trade. It was apparent to me that Chief Minister Shahbaz Sharif understood the subject of iron and steel well. Perhaps for that reason I picked up this initiative as my pet project.

In November 2009 I commenced a series of strategic conversations across a range of stakeholders, businessmen and technical experts in the field who were conversant with the subject. What do we do with these bits and fragments of geological information? What would it take to have this classified as a proven reserve? And afterwards who would invest in this mega mining project?

What would be the terms of the transaction? What kind of mining methodology would be required? What kind of logistic and transport infrastructure would be needed to remove earth to the depth of a 30-storey building and then haul the millions of tons of excavated ore?

How would we depopulate the hundreds of acres of farmland and villages — underneath which the ore was located? What would we do with the iron ore? Could we convert some of it to steel? If so, where would the energy come from in an already energy-starved country? Could we also sell some of the raw iron ore?

By April 2010 our rigorous consultations had led to the development of a road map that staked out a path to commercially tap these resources. The first requirement was to carry out a full-blown geological investigation that would authenticate these deposits to an acceptable international standard. And even with the chief minister applying full force, it took a slothful Punjab bureaucracy nearly half a decade to get this done.

But finally it has happened. A Chinese company has authenticated the deposit to be qualified as “reserves”. And while they are sizeable they are not very large by global standards. The entire reserve quantity is little more than what Australian mining giant BHP-Billiton would typically produce in two years.

The hard work only now begins. The ore is lodged deep under the surface. The area is well drained by the Chenab river, which may pose hydraulic challenges during excavation. The resulting mining solution could be costly.

That would make the Punjab iron ore project marginal on a world scale. Any investor will look at a range of comparable mines in the world’s ore-producing regions and compare the extraction costs per ton. And in the presently oversupplied world market many marginal mines have become dormant and are available.

Then getting the land cleared would pose a challenge for the Punjab government. The land acquisition for the Mangla reservoir expansion took years.

Structuring a mining concession, especially against the backdrop of the Reko Diq fiasco, will pose another challenge.

If the project envisages steel production on site then the government will have to think about ways to provide energy — either coking coal or gas.

Finally, to move ore (and even steel) through overland transport to our steel mills and ports requires a modern, heavy haul rail system.

We will turn to ways of addressing these challenges at a later time.

2015 – Dawn Media Group


Playing with fire

TO diagnose Saudi Arabia’s fear instincts, one would have to travel back to 1979. That year saw the Iranian revolution, and Ayatollah Khomeini’s subsequent talk of ‘exporting’ the revolution which has left Saudi Arabia with an exaggerated fear of Shia expansionism.

That same year, hundreds of armed extremists seized the Grand Mosque at Makkah. Shortly afterwards, two brigades, roughly 10,000 Pakistani troops, were deployed to Saudi Arabia under a bilateral joint military agreement aimed at protecting the Saudi monarchy.

One part of Saudi Arabia’s anxiety stems from its perception of a growing Shia footprint which now includes the Bashar al Assad regime in Syria, the Hezbollah militia’s strength in Lebanon, the Maliki government in Iraq, and the three years of Shia led pro-democracy protests in Bahrain.

Saudi Arabia is also suspicious of its own Shia population in the Eastern Province, where it fears the radical Hezbollah al-Hejaz is active.

At the same time, it is nervous about any domestic unrest that may be inspired by the Arab Spring uprisings. This nervousness was apparent when it announced a generous financial support package for its own population in 2011.

It is particularly wary of the mobilising capacity of the Muslim Brotherhood, whose political Islamism and grassroots activism are anathema to the House of Saud, whose grip on power comes from keeping religion under its own tight control and patronage.

And even as Egypt’s military junta has ousted the Brotherhood’s government (and received billions of dollars in Saudi largesse), it has stoked much Islamist resentment in the Arab world.

In the clearest sign of this fear, Saudi Arabia has recently declared the Brotherhood as a terrorist organisation and passed new anti-terror laws that Amnesty International regards as a tool to crush peaceful expression.

Saudi Arabia also faces a radical Islamist threat from Al Qaeda in the Arabian Peninsula which is now lodged in Yemen. It is entirely plausible that AQAP has been making every effort to penetrate Saudi Arabia’s state institutions and security forces.

Saudi Arabia promoted the Syrian rebellion against Bashar al Assad. That proxy war has reached a stalemate. The rebellion has been hijacked by jihadist groups who have turned on each other.

The fighting is out of anybody’s control and now Riyadh fears the fire may spread. Many Saudi fighters who had joined the rebellion could become the link between underground Saudi Islamist groups and jihadist groups fighting in Syria. In a royal decree announced last month, Saudi Arabia has banned its citizens from participating in the Syrian civil war.

A prolonged conflict in Syria could also spill over into Egypt where an Islamist movement against the military junta is in early stages. That would further complicate the Kingdom’s threat matrix.

The recent quiet sidelining of Prince Bandar bin Sultan, head of Saudi intelligence (and the mastermind of the campaign to overthrow Assad), is the clearest sign of this reordering of threat priorities. He is no longer to be in charge of Saudi policy on Syria which will now be handled by Interior Minister Prince Mohamad bin Nayef. Nayef’s skill set? Counterterrorism work against Al Qaeda.

Saudi Arabia may yearn for an early end to the war and the establishment of a transitional government in Syria, but is this objective realistic? Would Assad’s ouster necessarily end this war? Are the Russians going to stand by and watch the demise of their only ally in the Arab world? How will they likely respond to anti-Assad rebels receiving shoulder-fired anti-tank and anti-aircraft (and possibly even heavier) weapons, that Pakistan has been showcasing at its IDEAS defence exhibitions?

How will Iran respond as these weapons arrive in Jordan for subsequent issuance to selected rebel groups? There may well be an end user agreement; but do we really intend to monitor and enforce it? Are our trainers and other mercenaries also expected to arrive in Syria? And as the situation further complicates, will our friends in the Gulf expect other quid pro quo?

Some reports indicate that the Saudis are considering a standby force ready to put down Islamist and Shia uprisings whenever and wherever they may appear in the Gulf.

Such questions need to be pondered by our policymakers before further entangling us in this crisis. The parliament is the forum for such debates and policy appraisals.

Our representatives may also want to revisit the reasons why recently the US had hesitated to arm the rebels. They may similarly want to evaluate other risks and repercussions of this engagement. It’s time to open the windows and let in that fresh air.

2014 – Dawn Media Group