Money Matters

The pipe dream

By Hussain Ahmad Siddiqui
Mon, 05, 18

Ten years on, the trumpeted first steel mill project based on indigenous iron ore still remains a pipedream, while future of the only integrated steel mills, Pakistan Steel Mills (PSM), which ceased production in June 2015, is put on the backburner.


Ten years on, the trumpeted first steel mill project based on indigenous iron ore still remains a pipedream, while future of the only integrated steel mills, Pakistan Steel Mills (PSM), which ceased production in June 2015, is put on the backburner.

Iron ore is the raw material used for making pig iron, which is the primary raw material to produce steel. Iron ore deposits near Chiniot were discovered in 1989, whereas detailed exploration work was carried out during 1996-1999. It is a good quality iron ore (magnetite Fe3O4 and hematite Fe2O3), with the characteristics of high ferrous content, in the range of 41-77 percent Fe2O3, according to the measured reserves study. Subsequently, the exploration studies assessed about 110 million tons (mt) of proven deposits. Grade-wise, these deposits are classified as smelting grade 12mt, high grade 8mt, medium grade 33mt and low grade 57mt, approximately. A pre-feasibility study done later also declared these reserves to be feasible for use in the steel mills.

Later, iron ore reserves were also indicated in Rajoa, three kilometres south of Chiniot, having potential of 500mt of acceptable grade. A techno-economic study was to be prepared to see if establishing a mini steel mill based on Chiniot and Rajoa iron ore would be feasible, which is proposed to be located at mine-mouth using suitable technology. The then government of Punjab had signed the mining lease agreement with a private sector company in 2007 for exploration, estimation and exploitation of iron ore and other associated metallic mineral resources in the area.

World Bank loan was available for the commercial exploitation of these deposits being developed under the public-private partnership. However, as the government changed, Chief Minister Shahbaz Sharif revoked this agreement in 2008, and initiated legal proceedings against the “fraudulent and illegal” lease award, which finally was referred to the National Accountability Bureau (NAB).

Meanwhile, there was no further progress on developing the iron ore deposits in Chiniot District. Roadmap for iron ore development on modern geo-scientific lines was worked out by the provincial government in 2010 when the Chinese consultants were engaged for iron ore exploration and resource estimation in Chiniot and Rajoa towns. China Metallurgical Corporation (CMC) carried out the detailed geological studies in April 2014, to demonstrate quantity, quality and grade of iron ore deposits in the area.

It was only then that CM Shahbaz Sharif claimed the “discovery” of these huge mineral deposits of iron ore, of the level of “two billion tons” having “60 percent to 90 percent purity” that made the headlines. It was declared that it would pave the way for setting up the first steel mill in the country utilising indigenous iron ore, which, on completion, would be “one of the biggest steel mills of the world”. The Chinese were to carry out full-scale investigations within a period of 10-18 months, devising an economic extraction metallurgical process.

On February 11, 2015, then prime minister Nawaz Sharif announced the discovery of iron ore deposits in Chiniot District, along vast copper, silver and gold deposits in the area, which, he committed, would be fully exploited on priority. It was announced that several international mineral exploration companies had already shown interest in developing the mines. Therefore, grant of large-scale mining leases was to be done by the provincial government on a fast-track basis. In the first phase, a pilot demonstration steel plant of 25,000 ton per year was to be constructed at a cost of about $16 million, and after its successful trials the main project was to be undertaken.

According to the revised plan, an integrated steel mill of one million ton per year capacity would be set up at an estimated cost of over $662 million, projected to use three million tons of Chiniot iron ore annually. As per project schedule, the structuring and documentation of mining for iron ore and associated minerals, and that of integrated steel mill was to be finalised by March 2016. Partnership with domestic and international investors was scheduled in June 2016. Sadly, all targets have been missed, and now that the provincial government has almost completed its tenure, there is no sign of take-off, as the project is still at the feasibility stage.

Only phase-one of iron ore exploration and assessment was completed during 2014-2016 at a cost of $25 million. About 150 million tons of iron resource at an average grade of over 30 percent has been confirmed. Currently, phase-two is being implemented at $40 million, for which an agreement was signed with a Turkish company in October 2017. The contractor, having mobilised at site in January, will commence drilling activities shortly. The project to set up a greenfield steel mill at mine-mouth, using Chiniot iron resources is nowhere in sight, but the complex cost has already gone up to $1,176 million.

Apparently, in a bid to cover up its improper planning, poor management and gross inefficiencies, which have resulted in inordinate delays in achieving significant progress, Punjab government recently asked NAB, through advertisement in the newspapers, to interfere in the project, which is termed as an unusual move at such a belated stage. Subsequently, on April 12, NAB chairman ordered to conduct an inquiry in “allegedly illegal award of mining lease to allegedly a fake company” by the then government in 2007.

What would be the fate of this vital national project is anybody’s guess. Surprisingly, no one is talking any more about the deposits of copper, silver and gold in Chiniot District. Or, is it identical to the case of Saindak-Copper-Gold project that has recently been leased again for five years, for the third time, to CMC, which is involved in Chiniot project too?

The writer is former chairman of the State Engineering Corporation