Debt-trap diplomacy: China secures Gold Ridge Mine in Solomon Islands

China Railways loans Honiara US$825 million to construct and lease gold mine facilities through 2034

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Previous facilities constructed at Gold Ridge Mine (Photo from Concrete Evidence)

Previous facilities constructed at Gold Ridge Mine (Photo from Concrete Evidence)

TAIPEI (Taiwan News) — Following the break of diplomatic ties between the Solomon Islands and Taiwan on Sept. 16, it has come to light that China Railway Group Ltd. has signed a US$825 million dollar deal with Honiara to build and lease a railway system and mining service station.

The deal was signed on Sept. 12, and the contract is set to last until March 2034, according to reports. In line with China’s usual strategy of dollar diplomacy, the money for the contract will come in the form of loans and will contribute significantly to the Solomon Islands’ national debt over the next 15 years.

The deal was inked with China Railway International Group, a wholly owned subsidiary of China Railway Group. According to CNA, China Railway International announced the deal on its website's notice board on the date it was signed, with parent company China Railway Group announcing it on Sept. 16., the day the Solomon Islands and Taiwan officially broke ties.

The proposed infrastructure project will be in the interior of Guadalcanal Island to serve the Gold Ridge Mine, which at the height of its production in 2012 accounted for 20 percent of the country’s entire gross domestic product. The mine has only been in operation since 1998, but over the past two decades, mining has been regularly stalled by social unrest, environmental disasters, and financial scandals involving former owners.

The mine, which is currently the property of a local landowning company, Gold Ridge Community Investment Limited, was considered a “disaster area” by Honiara after a damn collapsed in 2015. The contract and lease agreement between Honiara and Beijing reportedly only cost China Railways .78 percent of its total 2018 revenue.

According to CNA, the contract signed by Honiara and China Railways involves two major phases. The first phase includes an exterior mountain-stripping project followed by the installation of interior mining equipment and facilities. The second phase includes the construction of roads, bridges, and a nearby reservoir along with dock facilities and a hydropower station.