Pakistan gives Reko Diq project to Canadian firm

ISLAMABAD: In a significant development, the Government of Pakistan on Sunday awarded the development contract of the Reko Diq project to a Canadian company while its penalty of $11 billion, imposed on Pakistan by the the World Bank tribunal, has been waived. The company is expected to invest multi-billion dollars in one of the world’s largest gold and copper deposits holder mines in Balochistan province.

Barrick Gold was in dispute with Pakistan for several years; now, Barrick, the Canadian mining company, has ended its dispute after holding multiple meetings and negotiations with Islamabad. The project was suspended in 2011 because of a dispute over the legality of its licensing process.

In 2021, the federal government started talks with Barrick Gold to settle the dispute on Reko Diq as its other partner, M/s Antofagasta of Chile, was seeking a financial settlement of their share in the award of $6 billion.

On July 17, 2019, a World Bank’s tribunal of the International Centre for Settlement of Investment Disputes (1CSID) had declared that Islamabad had violated the Pakistan-Australia Bilateral Investment Treaty and awarded $6 billion, plus interest, against Pakistan to Tethyan Copper Company Limited (TCC). TCC is jointly owned by Barrick Gold PLC of Canada (Barrick) and Antofagasta PLC of Chile.

The tribunal said in its judgment that Pakistan unlawfully denied the TCC a lease to mine copper and gold deposits at the Reko Diq mine.

On Sunday, the federal government, the Balochistan government, and Barrick Gold Corporation of Canada signed the agreement after successfully resolving the longstanding dispute with the Tethyan Copper Company (TCC).

The agreement was reached after several rounds of negotiations over the last three years.

In August 2019, the prime minister set up a committee to steer the talks to aim for the early development of the mines. In this effort, the federal and provincial governments were assisted by international advisors. To ensure the deal is compliant with all the laws, the government shall submit the matter before the parliament and Supreme Court.

Barrick will be the operator of the project, which will be offered a mining lease, exploration license, surface rights, and a mineral deal, stabilizing the fiscal regime applicable to the project for a specified period.

Reko Diq is one of the largest undeveloped copper and gold deposits globally, capable of producing 200,000 tons of copper and 250,000 ounces of gold a year for more than half a century.

The World Bank arbitration court had slapped Pakistan with $11 billion penalty, and now, this penalty has been waived after the out-of-court deal.

“This is a unique opportunity for substantial foreign investment in the Balochistan province and will bring enormous direct and indirect benefits to this region and Pakistan for decades to come,” Barrick’s President and Chief Executive Officer Mark Bristow said in a statement. He said that the project could start production within five to six years. The Barrick-Antofagasta JV had discovered these vast mineral deposits more than a decade ago in Balochistan. It said it had invested more than $220 million.

In a separate statement, Antofagasta said it had agreed to exit the project as its growth strategy was now focused on producing copper and by-products in the Americas.

A new agreement was signed Sunday by representatives of the federal and Balochistan governments with a delegation of Barrick Gold, led by Chief Executive Dr. Mark Bristow. As per the terms of the new agreement, the Reko Diq project shall be revived and developed by Barrick Gold in partnership with Pakistani entities. The new project company shall be owned 50pc by Barrick Gold. The remaining 50pc shareholding shall be owned by Pakistan, divided equally between the federal government and the provincial government of Balochistan.

The federal government’s 25pc shareholding shall be divided equally amongst three state-owned-entities (SOEs) of the federal government, namely Oil & Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings Pakistan Limited (GHPL). Balochistan’s share shall be held by a company wholly owned and controlled by the Government of Balochistan.

As part of the prime minister’s vision for Balochistan, the Government of Balochistan’s share of capital and operating expenses for the project shall be borne by the federal government. In other words, the Government of Balochistan shall not incur any expenses in development of the mines and its share of expenses shall be borne by the federal government.

In developing the project, nearly USD 10 billion shall be invested in Balochistan, including USD 1 billion that shall be invested in social uplift projects such as roads, schools, hospitals and creation of technical training institute for mining. The investment shall create over 8,000 new jobs. This project shall make Balochistan the largest recipient of foreign direct investment in Pakistan and the Reko Diq project shall be one of the largest copper and gold mining projects in the world. To ensure optimal utilization of nation’s mineral wealth, the government is also considering setting up a smelter.

The agreement was reached after several rounds of negotiations over the last three years. In August 2019, the prime minister had set up a committee to steer the negotiations with an aim for early development of the mines. In this effort, the federal and provincial governments were assisted by international advisers.

Earlier, a delegation of Barrick Gold Corporation called on the Prime Minister. Canadian High Commissioner to Pakistan Ms Wendy Gilmour was also present. Prime Minister Imran Khan witnessed the signing and appreciated the negotiating team’s efforts for a transparent and favorable agreement for the people of Balochistan. He congratulated the nation and people of Balochistan on successful agreement with Barrick Gold for the development of Reko Diq (RD) mine after 10 years of legal battles. He said the approximately $11 billion penalty was offset while $10 billion will be invested in the province, creating 8,000 new jobs.

PM Imran took to his Twitter account to say, “RD will potentially be the largest gold and copper mine in the world. It will liberate us from crippling debt and usher in a new era of development and prosperity."

While speaking on the occasion, the prime minister stressed on the emphasis his government places on development of Balochistan and uplift of underdeveloped areas. He expressed the hope that the investment will mark the beginning of large scale investments in Balochistan that shall change the quality of lives of ordinary citizens in the province.

In the meantime, addressing a hurriedly-called press conference along with Energy Minister Hammad Azhar and Chief Minister Balochistan Mir Abdul Quddus Bizenjo in Islamabad, Minister for Finance and Revenue Shaukat Tarin said the government has reached an agreement to reconstitute the Reko Diq project, enabling the country to avoid the $11 billion penalties.

An agreement was signed in 2006 among a Canadian Company, Barrick Gold, a Chilean company Antofagasta PLC and the governments of Pakistan and Balochistan to extract gold and copper from the Reko Diq reserve. Under that agreement, the two foreign companies were given 37.5 percent share each, whereas 25 percent share was given to the provincial government.

In 2011, the agreement was suspended due to a dispute over the legality of its licensing process. As a result, the International Court of Arbitration leveled a $6.4 billion award on the Government of Pakistan. At the same time, the London Court of Arbitration also imposed another $4 billion fine on Pakistan.

Soon after taking charge, Prime Minister Imran Khan actively pursued the case and directed to draw a suitable solution as early as possible. Subsequently, Antofagasta decided not to participate in the reconstituted project and withdrew from its claim of $3.9 billion in place of $900 million. He informed that the three state-owned enterprises (SEOs) i.e. OGDCL, PPL, and GHPL would pay this $900 million, and in return, they would get a 25 percent share of the project.

"Had the PM not taken his interest in the case, Pakistan would have to pay the huge amount of $11 billion as a penalty.”

Tarin also said Pakistan and Balochistan would benefit from the project for more than 100 years, and the total worth is estimated to be over $100 billion.

Hammad Azhar termed the new agreement a landmark achievement said it was a historic day. According to Barrick Gold, Reko Diq was the only part with massive gold and copper reserves. There were also other reserves to develop a lucrative mining cluster in Pakistan.