Analysis: What is at stake in Reko Diq?

Published: January 16, 2011
The project has come to the limelight because the exploration contract awarded by the federal government back in 1993 will expire in February 2011.

The project has come to the limelight because the exploration contract awarded by the federal government back in 1993 will expire in February 2011.

KARACHI: As the Reko Diq case unfolds in the Supreme Court of Pakistan and the media, there is a tangible fear that the short-sightedness of powers that be will squander an opportunity that could spell an economic turnaround for the country.

The project has come to the limelight because the exploration contract awarded by the federal government back in 1993 will expire in February 2011. This  prompted questions about the prospects of mining mineral deposits in the region.

A Canadian and Chilean joint venture, the Tethyan Copper Company Pakistan (Pvt) Limited (TCC), that holds an exploration licence in the region has furnished public discourse with estimates of gold and copper deposits.

Based on their technical and feasibility studies, on which they claim to have spent over $220 million, they estimate the value of the deposits to be around $260 billion. This valuation is based on their long-term estimates of gold and copper prices in the international market.

At the same time, the company has expressed interest in mining and extracting the copper and gold deposits that they themselves have evaluated. To this end, they claim an investment of $3.3 billion will be required whereby unrefined gold and copper deposits will be siphoned from the mines to Gwadar through an underground pipeline and shipped to smelters around the world for refining.

Several questions have been raised in this regard for example the veracity of the company’s estimates of the gold and copper deposits, the sensibility in exporting unrefined gold and copper instead of value-added refined ores, and the opaqueness of the project characterised by the underground pipeline that would transfer unrefined liquid ores from the project site to Gwadar for export.  Of course, the government is under no legal obligation to award the mining contract to TCC once their exploration contract expires. However, it does seem to be in a rush to award the mining contract to whoever comes along first.

For starters, it makes rational sense to verify the feasibility studies and the estimates provided by TTC by an independent, international consultant, not least because the company that has provided the estimates wants to mine the deposits itself. Secondary or multiple verification of feasibility studies is a fairly standard process that ensures transparency in the project.

Secondly, the imperative for exporting unrefined ores for a period of 56 years must be questioned. While Pakistan may not be a highly developed country, there exist smelters elsewhere in the country, eg in Saindak, that are refining copper. Therefore, it is not unfathomable that the mining company be obliged, under contract, to refine the deposits in Pakistan before exporting.

Thirdly, the underground pipeline that will transport the unrefined liquid ores to Gwadar for export is not only superfluous but also raises questions about the transparency of the project. Is there a built-in mechanism to verify the contents that are eventually shipped from Gwadar? Do we know for sure that only copper or gold will be extracted from the deposits since that is what we will be paid for? What about the presence, albeit in limited quantities, of uranium and rare earth elements, that are found in unrefined deposits?

Nothing is lost at the moment because the mining contract has not yet been awarded. We have the opportunity to be thorough and make sure that foreign companies are not gaining a disproportionate advantage due to our underdevelopment. Invariably we will need foreign assistance to be able to mine our mineral wealth but transfer of mining and refining technologies must be a built-in mechanism of any deal that goes through. At the end, the benefits must proportionately accrue to Pakistan, not just foreign investors.

Published in The Express Tribune, January 16th, 2011.

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Reader Comments (9)

  • Karim Khan
    Jan 16, 2011 - 8:11PM

    Given the overwhelmingly high incidence of corruption in Pakistan, I think it’ll be better to allow foreign companies execute the project. I have experience working with so-called medal-winner resaerchers in Pakistan, and I know how competent they are. Giving them the project may imply zero percent progress. Recommend

  • Engineer Ilyas Khan
    Jan 16, 2011 - 11:48PM

    It is not a question of local corruption or incompetence, but one of being too clever by half.
    The TCC joint-venture has proposed a fantastic idea of an underground pipeline for LIQUID transportation of slurry over hundreds of kilometers!!
    Imagine how expensive that operation is going to be, with massive pumping stations, my rough estimate is about 100 JUMBO JET ENGINES will be required for PUMPING full time!
    Setting up a smelting plant is much more commonsense option, and probably more economical.
    Why dont the pakistani experts work out the cost comparison analysis for the supreme court????Recommend

  • Ahmed
    Jan 17, 2011 - 12:44AM

    Mining Engineers of PAEC are doing mining of Uranium in DG Khan, how can our media without any knowledge or thinking can claim that Pakistan has no expertise of extracting copper and gold? And we can raise 3.3 Billion US$ if Prime Minister addresses the nation and tells them complete picture and offers Pakistanis to invest in this project assuring his government transparency this time at least.Recommend

  • Anoop
    Jan 17, 2011 - 12:58AM

    More minerals means more money for Military to build up Arms against India.Recommend

  • Shah
    Jan 17, 2011 - 4:17AM

    It will be much feasible if we do it ourselves with our companies. Who knows wht dis govt. has made any shady deal with outside companies. Atleast the raw materials will stay wid us if local firms are involved. Recommend

  • RKM
    Jan 17, 2011 - 2:06PM

    this reminds me of a drama serial i saw on PTV when i was hardly 8 years old. back in 1995. where a farmer finds an expensive MOTI on his small field. he gets so excited and tells it to his friend, who almost night tried to steal it. kidnapped his children also to make sure he gives them. the farmer and his amily used to sit around that MOTI whole day night to ensure it is in front of themwhole day n night. annoyed by the things happening around he throws it back into the river. this is what our great poor nation is facing now. we just cant handle it. i am getting so annoyed by the rulers of this country. they just want money. tell zardari, when Shaheed BB died, he did not take a single penny with her. he cant take any wealth too. tell zardari, God asks questions too. there are powers other than USA and other “INTERNATIONAL POWERS”, sigh.Recommend

  • Ali Ahmed
    Jan 18, 2011 - 1:34PM

    @Anoop….gotta keep a eye on u guys….so yeah we dont mind giving more money to army!Recommend

  • U Bajwa
    Jan 19, 2011 - 2:29PM

    We are simple people living under corrupt rulers who will sell their country in an instant to whoever gives them the money – gives them the quickest and not the most!!!

    Also, I fail to understand all the fuss about the Reko Dik mines and Pakistan. We shall realize that the natural resources lie in Baluchistan where the Government of Pakistan’s writ is non-existant anyways.

    So let stop talking and let the leaders decide our future and let them sell ours and our children’s future. Lets all go down and deep and try to find the rock-botttom!!!Recommend

  • Adnan
    Jan 26, 2011 - 7:55PM

    I think TCC is getting away with a very very sweet deal. Firstly, why is Balochistan’s share in the project only 25% when most natural-resource rich countries like the Middle East insist upon having 51% control of all such ventures? Surely, it is not without precendence. I agree that foreign technology partners may be invited to invest, but only as long as the majority (at least 51%) goes to the province of Balochistan.
    Secondly, unrefined ore MUST not go out of Pakistan. There should be no questions about it. The government is in a great negotiating position here and we MUST ensure to exploit it to the most. Recommend

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