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Thursday November 20, 2014
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A miner holds a lump of iron ore. The chairman and chief executive of Chinese-controlled CAA Resources Li Yang claims that the firm earned its right to reopen the once-famous mines at Bukit Besi in Terengganu through his ties with ruling party politicians. — Reuters picA miner holds a lump of iron ore. The chairman and chief executive of Chinese-controlled CAA Resources Li Yang claims that the firm earned its right to reopen the once-famous mines at Bukit Besi in Terengganu through his ties with ruling party politicians. — Reuters picKUALA LUMPUR, Nov 20 — The chairman of a China-owned iron ore company has claimed that it was through his ties with ruling party politicians and purchases of “Datuk” titles that the firm earned its right to reopen the once-famous mines at Bukit Besi in Terengganu earlier this year.

In an article on the New York Times (NYT), Li Yang, the chairman and chief executive of Chinese-controlled CAA Resources, was quoted claiming that with the support of national leaders and the royalty, “you can do anything you want” in Malaysia.

“If you’ve got these two to support you, then you can do anything you want, because the natural resources are all controlled by them,” he reportedly said in the article from yesterday.

The article went on to claim that Yang had paid for each of the “ruling party politicians” with indirect stakes in the mines to receive the “Datuk” titles. Each title cost him some US$100,000 (RM330,000).

The NYT observed that although such agreements are deemed as corruption by some groups here, Yang said he was just following what he believed was a common practice in Malaysia.

Adding to that, Yang’s company has also circumvented a requirement to prepare an environmental impact assessment (EIA) for its operations by erecting an eight-foot-high corrugated-steel fence across the middle of the site and calling it two mines, the NYT wrote.

The paper said that as the size of each of CAA’s “two” mines is below 500 acres, there was no need for an EIA approval from local environmental regulators.

To keep costs low and avoid potential labour problems, the Chinese firm has also imported workers from low-wage countries like China, Myanmar and Vietnam, who each reportedly work 12-hour shifts and up to seven days a week.

They are paid according to their productivity levels, and how much iron ore they produce during each shift, Yang told the paper.

“You can save a lot of money, there is nothing to do here,” NYT quoted Yang as saying in his pitch to the workers.

“I say, ‘Each of you will be a hero, you will take back 100 per cent of your savings, your wife will be happier, your children will be happier’.”

With license in hand, CAA Resources is now clearing Bukit Besi, famously known as “Iron Hill”, which was once the site of the world’s largest iron ore mine.

It was ore mined from this now-quiet Dungun township that had supplied the Japanese steel industry throughout the second World War. According to reports, the mining was handled by the Nippon Mining Company during the Japanese Occupation.

When the war was over, the British took over the mines between 1945 and 1947, after it was sold to the Eastern Mining and Metal Company (EMMCO).

By 1971, however, the mine was closed, reportedly due to depleting iron ore, bureaucracy and union troubles, and has remained somewhat idle for the next four decades.

But CAA Resources, having sidestepped local curbs, now sees potential in its “Iron Hill” investment, despite the plummeting global prices of iron ore.

NYT said the company’s production is now at an annual rate of 500,000 tonnes, which is expected to double by next year.

“China still needs a lot of steel for infrastructure, housing projects and rails,” Yang was quoted saying. “The only problem is the pricing.”

China manufactures half the world’s steel, which is made from iron ore and is needed as construction material for houses, cars and others.

Once in the double digits, China’s economy has now slowed considerably, however, to around 7 per cent. But because many commodity firms have ramped up production efforts to meet previous demands, prices of materials like iron ore have fallen drastically.

According to the NYT, prices dipped some 48 per cent since early his year to hit a five-year low of US$70 (RM230) per metric tonne.

But, the report said, with CAA’s low labour costs, coupled with a “home-field advantage” of being a Chinese firm, the company’s Bukit Besi foray is still expected to be a profitable one.

The company is operating Chinese equipment, which were brought in at less than half the cost of American and Japanese equipment, NYT wrote.

“We’re still positive by this time,” Yang was quoted saying.

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