Canadian mining giant Barrick Gold Corporation and the governments of Pakistan and Balochistan have reached a deal to restart the Reko Diq mining project. Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper and 21 million ounces of gold. The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.
|Reko Diq Copper-Gold Mine|
New Reko Diq Deal:
The new agreement to start Reko Diq waives the ICISD award. In the reconstituted project, Barrick will have 50% ownership and Pakistan 50%, comprising a 10% free-carried, non-contributing share held by the government of Balochistan, an additional 15% held by a special purpose company owned by the government of Balochistan and 25% owned by other federal state-owned enterprises. The federal government’s shares of 25% will be divided equally amongst three state-owned entities (SOE): Oil & Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Government Holdings Pakistan Limited (GHPL). This is a huge improvement over the prior deal that gave the Balochistan government 25% stake in the project, with Tethyan holding the remaining 75%.
A separate agreement provides for Barrick’s partner Antofagasta PLC to be replaced in the project by the Pakistani parties, according to a statement released by Barrick Gold Corporation. Pakistan will buy out Antofagasta’s interest in the mine for $900 million, according to the two companies and the government.
Production Targets/Social Infrastructure Projects:
When the project goes into production in 5 or 6 years time of development, it will produce 200,000 tons of copper and 250,000 ounces of gold a year for more than half a century. At current prices, the annual copper output will be $2 billion and gold output $500 million.
The project’s development will bring in investment of approximately $10 billion in Balochistan, including $1 billion which would be invested in social uplift projects such as roads, schools, hospitals, and the creation of a technical training institute for mining. The investment is also said to result in the creation of over 8,000 jobs, according to a report in The Express Tribune newspaper.
Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.
“Reko Diq could also be the springboard for further exploration and other mineral discoveries along the highly prospective Tethyan Metallogenic Belt,” said Barrick Gold CEO Mark Bristow.
Foreign Direct Investment:
After reaching a peak of over $5 billion in 2007, foreign direct investment (FDI) in Pakistan has plummeted. It is at least in part attributable to bad decisions by the Pakistan Supreme Court headed by Chief Justice Iftikhar Chaudhry. Cancellation of the Pakistan Steel Mills privatization by the Chaudhry court in 2006. That decision alone has cost Pakistani taxpayers $100 million a year. Then came the Chaudhry court's decision cancelling the Reko Diq license and the $6.5 billion award against Pakistan. These decisions had a chilling effect on foreign investment in Pakistan. Let us hope the revival of the Reko Diq project helps restore confidence of foreign investors in the country. Let us also hope that this history of unwise court decisions serves as a reminder to the Pakistani judiciary to be more careful in deciding such cases in future.
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