Australian Mining Firm Looks to Dig in Karenni’s Tricky Territory

By Seamus Martov 28 April 2015

Australian mining firm Eumeralla Resources and its local partner Myanmar Energy Resources Group (MERG) received approval last year from state authorities to explore a 400km square area in Karenni State. The application, made through Eumeralla’s local Burmese subsidiary Mawsaki Mining Co. which is 70 percent owned by the parent company, still has to be approved by relevant central government authorities but has already raised concerns from local groups worried about the impact that the firm’s activities could have on the environment and the local community.

Local activists are also worried that the deal—which, when approved, will give the Australian firm and its little known partner permission to explore a huge area of a state racked by armed clashes between the government and rebel groups since the late 1940’s—could re-ignite conflict in Burma’s smallest state.

While a ceasefire was reached between the government and the Karenni National Progressive Party (KNPP) in 2012, it remains unclear whether this represents a pause or a complete end to fighting in the state. Much of the fighting that took place in Karenni State over the last five decades revolved around the struggle between the government and the KNPP and other armed groups for control over the Mawchi mine, which during the colonial era was one of the largest tin and tungsten mines in the world.

While Eumeralla has stated that the exploration lease, once fully approved, “would be one of the largest foreign held concessions in Myanmar,” the firm declined to answer questions from The Irrawaddy regarding exactly where in the state they have applied for exploration and if any of those areas included territory controlled or claimed by the KNPP or the several other non-state armed groups that continue to operate there.

Presumably, this is information that the Australian Securities Exchange (ASX) listed firm’s shareholders would be interested in knowing as well, but none of those details could be found in any of the firm’s filings. “All the information you need or we can disclose is in the public domain via the ASX website or on the Eumeralla website,” said Eumeralla CEO Michael Hynes in an emailed response to the Irrawaddy.

The fact that Eumeralla will not reveal what specific area the application covers is troubling, according to Ko Reh, a spokesperson for the Karenni Civil Society Network (KCSN), a group active in monitoring development in Burma’s smallest state. Ko Reh maintains that the Australian government should discourage firms like Eumeralla from operating in conflicted areas of Burma until permanent peace has been established.

“The situation is not stable,” warns Ko Reh, whose organization is concerned about the increased presence of army troops in contested parts of the state since the KNPP’s ceasefire was signed.Ko Reh also believes that the present Burmese government policy regarding natural resource extraction, and mining in particular, does not do enough to safeguard the rights of small-scale land holders whose farms would be impacted by both mineral exploration and mining. He’s not alone; a recent Investment Climate Assessment released by the World Bank earlier this year bluntly warns that with regards to mining, Burma does not have rules in place to protest the interests of local communities.

“When it comes to mining, Myanmar [Burma] currently lacks the necessary laws and enforcement mechanisms to protect its environment and vulnerable populations against the impacts of mining. Over the past two decades, this has led to conflict and severe environmental degradation in the wake of a rapid increase in large-scale mining,” the report concluded.

Calls that Australia discourage its firms from mining activities in ethnic areas will likely fall on deaf ears in Canberra, which over the last two years hasactively promoted Australian mining and oil firms to invest in the former pariah. Burma’s Minister of Mines reportedly visited Sydney in May 2013 as the head of a high-level delegation sponsored by the Australian government which is also supporting a rewrite of Burma’s mining laws which,, when finalized, are expected to make it much easier for foreign firm’s to operate in Burma.

Questions Remain About Firm’s Local Partners

Eumeralla’s website and various corporate fillings reveal little about the firm’s relatively unknown Burmese partner Myanmar Energy Resources Group (MERG) who, according to Eumeralla, owns the remaining 30 percent stake in Mawsaki. Eumeralla claimed in an Activities Report sent to shareholders in June 2013 that MERG is a “Myanmar conglomerate with operations across a diverse range of business sectors,” but didn’t disclose what any of those non-mining sectors were. Eumeralla identified MERG’s executive director as a Hpone Thaung, though little information could be found about him.

The MERG website, registered in Australia, does not include the name of Hpone Thaung or anyone else affiliated with the firm. Last year, text posted on the website claimed that MERG “became the first local business to bring world-class foreign mining companies to Kayah [Karenni] State.” The MERG site also claimed that the firm is “working closely with the Kayah State government” to develop a 3,500MW hydroelectric project in the state, likely a reference to the proposed Ywathit dam on the Salween River(also known as Thanlwin). The Ywathit dam is a deeply unpopular project that has environmentalists up in arms over its impact on local fish species and communities living in thevicinity of the site. Both of these claims, last viewed in March 2014, have since disappeared from the MERG website.

MERG’s registration with government authorities, a copy of which was obtained by The Irrawaddy, does not include anyone named Hpone Thaung, instead listing two individuals named Kyaw Tin Oo and Win Naing as directorsof the firm, which according to the document is headquartered in Rangoon’s Taung Kyar ward. Mawsaki, the firm held by Eumerralla and MERG, does not appear on the public list of firms registered with the Burmese government’s Directorate of Investment and Company Administration.

A four-page statement released by a Karenni activist group, the Molo Women Mining Watch Network (MWMWN), in October 2013, claimed that Mawsaki was owned by the chairman of the Karenni Nationalities People Liberation Front (KNPLF), Tun Kyaw, and a foreign firm which went unnamed but was identified as Australian.

Mawsaki is also the name of a village in Karenni state that has long been under the control of the KNPLF, a group that broke away from the KNPP in 1978 before reaching a ceasefire with the central government in 1994.

According to a former resident familiar with the area, Mawsaki village is next to a small mine that is also held by the KNPLF, which officially transformed into a border guard force in November 2009. Both Mawsaki village and the mine near it are controlled by Border Guard Force (BGF) 1004, a unit comprising men loyal to Tun Kyaw, who was recently awarded the rank of Lieutenant Colonel by military authorities for his service in the BGF.

Apart from the mine at Mawsaki, which like the nearby and much bigger Mawchi mine also yields tin and tungsten, the KNPLF are also known to be involved in gold mining in territory the group controls on the Salween River. Eumeralla did not respond to questions about Tun Kyaw’s alleged involvement with Mawsaki.

According to Eumeralla Mawsaki’s application for exploration was approved in November 2014 by the Karenni chief minister’s cabinet. The MWMWN statement, which preceded Eumerralla’s announcement of a deal in Karenni state by more than a year, noted that that there were reports at the time that “Kayin state government and Kayah state government have recommended an application by the Mawsaki mining company to survey for and mine tin and tungsten in an area of 100,000 acres (about 426 square kilometers) in the Mawsaki area.”

While Eumeralla pushes ahead with plans to explore Karenni State, another foreign firm appears to have opted to stay away because of security concerns. In January 2013, a delegation from Hong Kong-based Asia Pacific Mining Limited (APML) made what the firm described on its website as “a four-day due diligence visit to an operating tin/tungsten mine with a view of coming to an agreement with the underlying owner.” Though the firm, which was founded and led by an Australian businessman, didn’t mention the mine site by name, APML described it as “historically” being the “world’s biggest tin/tungsten producer,” which appears to be a reference to the Mawchi mine, the only one in the country that has ever been described as such.

According to APML, the firm opted not to pursue this project because the “security situation in the area dictated that this was not an opportunity we could contemplate at the current time.” APML is instead focused on exploring northern Shan State, hardly a model of tranquility. Just three days after the firm’s exploration permit was approved last October, fighting broke out in northern Shan State. In recent months fighting has continued between both the Ta’ang National Liberation Army and the recently resurrected Kokang-based Myanmar National Democratic Alliance Army across much of northern Shan State.