The central government has distanced itself from the multi-billion-dollar Reko Diq gold and copper mining project and wants Balochistan to pay damages relating to the project if the international court of arbitration decides case in favour of Canadian and Chilean joint venture Tethyan Copper Company (TCC).
Sources told The Express Tribune that the Ministry of Petroleum and Natural Resources had sent a summary containing two proposals to the prime minister for approval.
According to the summary, the central government will not pay any damages if the international court rules in favour of TCC and Balochistan should pay the compensation, an official of the petroleum ministry said.
The other proposal is that Balochistan should re-negotiate with TCC, which filed the case last year, for finding an amicable settlement to the dispute. The Supreme Court of Pakistan is also hearing a case pertaining to the project.
TCC, which is represented by Antofagasta of Chile and Barrick Gold of Canada, holds 75% shares in the project while Balochistan has a 25% stake.
TCC claims it has invested over $500 million in exploration, scoping and feasibility studies on the project. Total investment is projected to be $5 billion over a period of five years.
TCC and Balochistan reached a deadlock in 2009 because of two issues. First, TCC wanted Balochistan to bear 25% financial obligation according to its share in the project. But the province refused to take any financial responsibility.
Second was the purported involvement of a Chinese company in the project. A letter written by Pakistan’s Ambassador to Chile Burhanul Islam to then Petroleum Minister Naveed Qamar in September 2009 says, “I do not think that it is a good idea to entertain Chinese company MCC for the same mining site which has been offered to TCC with all commitment, responsibility, investment and legal claims. The Chinese, if aspiring for a project, could be offered a new mining site.”
In a feasibility report submitted to the Balochistan government, TCC projected a turnover of over $60 billion for the gold and copper project over a span of 56 years. This projection was based on the price of $2.2 per pound of copper and $925 per ounce of gold in the year 2009.
However, Balochistan rejected the report. The price of copper has now gone up to $4 per pound while gold stands at $1,600 per ounce.
“An international expert estimated the price on a long-term basis for the financing model of the project,” a TCC official said, adding the forecast was not based on spot prices of copper and gold.
TCC sources said gold and copper were to be sold at prevailing market rates and now the projected turnover swelled to $125 billion based on current prices of gold and copper.
They said Pakistan could have benefited from the current prices of the metals, had production started on the scheduled time of 2014.
The mine has estimated reserves of 11.65 million tons of copper and 21.18 million ounces of gold.
Published in The Express Tribune, April 8th, 2012.
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Reko Dik could become a test case for foreign investment in Pakistan. Problem is we fail to negotiate at the contracting stage to our advantage due to cooruption in the system.
What a pity that a project that could transform the lives of the people in Baluchistan -- with forward and backwards linkages that would benefit the entire country -- looks to be all but dead in the water.
Obviously, any long-term price projections are just that, namely a projection, and actual prices will vary. both ways. Gold was $2,300 per ounce; it has come down sharply in recent days. But the project is still highly profitable.
I think that basically the sardar's don't want development. They prefer to enslave their people in poverty so that they can control them. Keep them down and they will remain subservient.
yup spot on.. baloch feudal lords and the famous highly educated current baloch chief minister are to blame...
just multiply 21.18 million with 1400 and this is the gigantic worth of only a single site in baluchistan... $40,100 million!!!@!!!! :D
I have to agree with Federal government on this one. Balochistan wants all control over the mineral wealth in province, a key demand by Balochi leaders, and yet when it screws up, as in this case, it expects the Federal government to bail it out.
How typical of Balochistan government to enter into a binding contract and then not make the necessary investment ! If they were not happy with terms of contract, well, then they should have done there due diligence earlier. If someone earned big commissions and signed a lop sided contract against Balochistan's interest, lets have their names out in open and have them arrested.
If Balochistan doesn't use foreign expertise to extract the mineral wealth, it won't help the people at all. Perhaps that's the goal of the sardars anyway, as they can continue to blame the federal government for all their problems. Start earning money through such projects and Balochs will soon start asking questions as to what is happening with all the money same as Akbar Bugti getting crores from Sui gas but the Baloch's never seeing a penny. If you don't believe me, sub peona Sui Gas records, you will get all the details from there, how much money, how many Toyota Hilux double cabins etc.