In first signs of a setback, the government has failed to nominate an arbitrator in a case on multi-billion-dollar Reko Diq gold and copper mining project filed by Tethyan Copper Company – a Canadian and Chilean joint venture – in the International Centre for Settlement of Disputes in Washington DC, sources say.
TCC had filed a request for arbitration last year in a dispute over rights for the Reko Diq project, claiming damages after the provincial government of Balochistan refused to give the go-ahead to the company for mining copper and gold.
According to sources, after failing to nominate the arbitrator in the stipulated time, the Government of Pakistan sought an extension in the period for nominating the arbitrator but the dispute settlement centre rejected the request. “Now, the court may itself nominate the arbitrator,” a government official said.
Talking to The Express Tribune, Petroleum Secretary Ijaz Chaudhry admitted that the government had not yet named an arbitrator in the case.
“However, TCC had proposed three names for the arbitrator and one was accepted by the dispute settlement centre,” a senior official of the Ministry of Petroleum and Natural Resources said.
The central government has also refused to pay damages if TCC wins the case in the international court. It has asked the Balochistan government to consider re-negotiating the deal to reach an amicable settlement with the company.
According to sources, the law ministry has also suggested that the Balochistan government should pay damages if the international court rules in favour of TCC.
Keeping in view the opinion of the law ministry, Petroleum and Natural Resources Minister Dr Asim Hussain has sent a summary to the prime minister, seeking approval that the Balochistan government should bear the cost of damages.
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 the province to bear 25% of financial obligations according to its share in the project, which the province refused. Second, TCC was concerned about purported involvement of a Chinese company in the same project.
In a letter written to then petroleum minister Naveed Qamar in September 2009, Pakistan’s Ambassador to Chile Burhanul Islam expressed worry, saying it was not a good idea to entertain Chinese company MCC in the same mining site, which had been offered to TCC with all commitment, responsibility, investment and legal claims. He suggested that the Chinese, if aspiring for a project, could be offered a separate 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 2009.
The mine has estimated reserves of 11.65 million tons of copper and 21.18 million ounces of gold.
Published in The Express Tribune, May 25th, 2012.
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