A state-owned enterprise in Yibin, Sichuan auctions off sand quarry and subcontracts it multiple times, contractors “over-extract” according to contract, 8 arrested

Sand Mining Under Contract Leads to Criminal Charges for “Illegal Mining” Due to Excess Quantity and Time; Eight Investors Face Investigation

A company contracted to provide labor services for a sand mining project led by the government and state-owned enterprises (SOEs) is now facing criminal charges for “illegal mining” due to exceeding the agreed quantity and timeframe. Han Bo, the actual person in charge of Yibin Huahui Commerce and Trade Co., Ltd. (hereinafter referred to as Huahui Company), has invested hundreds of millions of yuan in the project but has not yet recovered the costs. Eight investors have been accused of “illegal mining” and are under investigation.

Prosecutors allege that after the expiration of the “River Sand Mining License,” the company “exceeded the quantity and timeframe” and mined more than 5 million tons of sand and gravel from the Yangtze River. The destructive mining caused the riverbank to be eroded and destroyed by the river, resulting in irreversible damage to the ecosystem. They should be held criminally responsible for illegal mining.

Han Bo recently told The Paper (www.thepaper.cn) that as a labor contracting company, they operated in accordance with the contract requirements and were previously unaware of the “over-mining.” They had obtained a license and authorization from the SOE and were mining sand under the supervision of relevant law enforcement departments. However, they are now under investigation by the public security department and have been approved for arrest, while the upstream SOEs that contracted the work to them are “unscathed.”

An informed source from the Nanxi District Water Conservancy Bureau confirmed part of Han Bo’s statement. On August 14, 2024, the Nanxi District People’s Procuratorate initiated a public prosecution against the Nanxi District People’s Court for “illegal mining.”

On December 3, Han Bo told The Paper that the Nanxi District People’s Court decided to postpone the trial of the case on November 25. According to the “Decision on Postponement of Trial” issued by the Nanxi District People’s Court, “During the trial, the Nanxi District People’s Procuratorate of Yibin City suggested a postponement of the trial due to the need for supplementary investigation in this case.” The court made the above decision in accordance with relevant laws and regulations.

The sand and gravel project was subcontracted multiple times, and mining restrictions were gradually lifted.

In 2014, the mining rights for sand and gravel in the Yangtze River in Nanxi District were auctioned by the Yibin Water Conservancy Bureau, and the project was contracted to Yibin Nanxi Xingnan Resource Development Co., Ltd. (hereinafter referred to as “Xingnan Company”), a state-owned enterprise in Nanxi District. The company won the mining rights for sand and gravel at 5 mining areas and 9 mining points in the Yangtze River channel of Nanxi District, with a total approved mining volume of 930,000 tons and a total auction price of 4.5 million yuan, from May 25, 2014, to May 31, 2015.

After obtaining the mining rights, Xingnan Company did not directly carry out the mining but transferred the entire project to its holding company, Yibin Nanxi Jiangfeng Resource Development Co., Ltd. (hereinafter referred to as “Jiangfeng Company”), through a “Cooperation Agreement.” The term was from September 2, 2014, to May 31, 2015.

The agreement stipulated that Jiangfeng Company would organize the mining (production, processing), and sales of sand and gravel in the project area and bear the expenses incurred during the mining and sales process. Xingnan Company would receive a profit share of 3.5 yuan per ton, with the remaining profits going to Jiangfeng Company.

Jiangfeng Company then conducted an external tender for labor contracting, and Yibin Nanxi Zhongxin Equipment Leasing Co., Ltd. (hereinafter referred to as “Zhongxin Company”) won the bidding for the sand and gravel mining at the Tuonihao mining point in Sanshe and Sishe of Tiantang Village, Jiangnan Town. This was one of the mining points in the entire project.

On December 12, 2014, both parties signed the “Machinery Leasing and Labor Contracting Contract for Maliuwan.” The project mainly involved machinery leasing and labor contracting for the incoming material processing points in Sanshe and Sishe of Peishi Township. The contract required a monthly mining output of no less than 5,000 tons at the dry mining point and no less than 150,000 tons at the Tuonihao water mining point. The contract was renewed annually, meaning it had been signed until December 2015, far exceeding the approved mining period.

The supplementary contract explicitly stated that Zhongxin Company was responsible for coordinating and resolving issues related to the construction site and surrounding areas (including land leasing, compensation for crop damage, etc.) and would bear all related expenses.

Subsequently, on January 9, 2015, Huahui Company signed the “Labor Contracting Contract for Tuonihao Sand and Gravel Mining” with Zhongxin Company, contracting all labor services for sand and gravel mining and transportation in Sanshe of Tiantang Village. The contract term was “from the date of signing to May 31, 2015.”

The contract also required a monthly water mining output of no less than 300,000 tons, without specifying a maximum mining limit. The compensation for crop damage at the stockyard, originally the responsibility of Zhongxin Company, was transferred to Huahui Company.

On June 6, 2015, Zhongxin Company, Huahui Company, and a third party (Party C), Mr. He, signed another “Contract for Tuonihao Sand and Gravel Mining.” The contract stipulated that if the mining volume was less than 1 million tons, the resource fee would be 4.8 yuan per ton; if it exceeded 5 million tons, the fee would be 1 yuan per ton.

The contract did not specify the mining period or volume limit but explicitly stated that the larger the mining volume, the lower the resource fee per ton.

Unable to Receive Payment, Continued Cooperation Led to Expansion

According to the contract, Huahui Company intensified its sand mining efforts and mined millions of tons in just a few months.

During this period, on May 4, 2015, the Yibin Water Conservancy Bureau issued the “Notice on Strengthening River Sand Mining Management,” stipulating that sand mining would be comprehensively prohibited in the Yangtze River within Yibin City’s jurisdiction starting from July 1 of that year. However, on June 6, 2015, Zhongxin Company still signed the aforementioned “Contract for Tuonihao Sand and Gravel Mining” with Huahui Company and Mr. He.

Han Bo stated that at that time, Jiangfeng Company and Zhongxin Company were unable to pay the labor fees, while Huahui Company had invested a lot in manpower and equipment and had also advanced the land leasing and crop compensation fees for the villagers. Failing to receive the labor fees put the company at risk of losing all its investment.

An informed source from the Nanxi District Water Conservancy Bureau also confirmed that due to severe fund shortages at Jiangfeng Company, they could not pay the mining labor fees. “Instead, they paid a management fee of 7 yuan per ton to Jiangfeng Company, and Huahui Company was responsible for selling the mined sand and gravel themselves.”

By June 30, 2015, Huahui Company had mined 5.3 million tons of sand and gravel. After the comprehensive ban on sand mining in the Yangtze River on July 1, 2015, with the consent of Jiangfeng Company, Huahui Company sold 550,000 tons of sand and gravel to cover the management fees, resource fees, and compensation for villagers. Han Bo said that the third-party partner, Mr. He, found it unprofitable and chose to withdraw midway.

On September 13, 2018, the Nanxi District Water Conservancy Bureau verified that Xingnan Company and Jiangfeng Company had violated the law by not mining according to the provisions of the sand mining license and severely over-mined. The bureau issued an “Administrative Punishment Decision,” stating that during the approved mining period from November 2014 to May 31, 2015, the approved mining volume for the 5 mining areas and 9 mining points was 842,000 tons, but the existing over-mined inventory was 4.823 million tons. As a result, the bureau imposed administrative punishments, confiscating 3.981 million tons of over-mined inventory and fining 50,000 yuan.

Han Bo said that although the administrative punishment acknowledged the illegality of Xingnan Company and Jiangfeng Company, the confiscated and fined sand and gravel were those mined by Huahui Company, for which Xingnan and Jiangfeng companies had not yet paid the relevant fees, causing significant losses to Huahui Company. In response, Huahui Company filed an administrative reconsideration, but it was not accepted due to “not meeting the qualifications of an applicant for administrative reconsideration.”

Over-Mining Leads to Criminal Prosecution of Company Owner

With the upstream companies not settling the bills, the mined river sand was auctioned off, and the proceeds were turned over to the district finance. Huahui