Reko Diq gold mine project: Pakistan may face $11.5-billion penalty

Published: July 12, 2017
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Empty trailers for housing workers at the site of the gold and copper mine exploration project of Tethyan Copper Company (TCC) are seen in this undated photo in Reko Diq, in Balochistan, Pakistan. PHOTO: REUTERS

Empty trailers for housing workers at the site of the gold and copper mine exploration project of Tethyan Copper Company (TCC) are seen in this undated photo in Reko Diq, in Balochistan, Pakistan. PHOTO: REUTERS

ISLAMABAD: An arbitration tribunal of the World Bank has ruled in favor of Tethyan Copper Company Pvt Ltd (TCC) in a case involving the Reko Diq gold mine project in Balochistan. As a result of the ruling, Pakistan may face a penalty of $11.5 billion for not awarding the project to TCC.

The World Bank’s International Center for Settlement of Investment Disputes (ICSID) had earlier rejected Pakistan government’s application to dismiss TCC’s claims on grounds of corruption and malpractices by the latter.

Balochistan wants Chinese helping hand for its mining industry

Both the federal and provincial governments submitted applications before the ICSID and the International Criminal Court (ICC) in The Hague during 2015-16, seeking admittance of new evidence showing TCC’s corrupt practices in Reko Diq affairs for illegal and undue gains.

The move was futile, however, as the court ruled against the government for unlawful denial of the mining lease for Reko Diq to TCC- a joint venture between Chile’s Antofagasta and Canada’s Barrick Gold Corporation.

The arbitration claim had been submitted in 2012 by the TCC. Five years later, in 2017, it filed for compensatory damages amounting to $9.1 billion based on fair market value of its investments in the project till November 15, 2011. In addition, it also filed a claim of $2.3 billion as pre-award compound interest.

The government has to submit its reply to TCC’s damages claims by July 21.

The previous government of Pakistan Peoples Party (PPP) had tried to settle the dispute with TCC but failed. It had also warned the Balochistan government that the federal government will not pay damages in case of an adverse ruling from international tribunals.

TCC held 75% shares in the project while Balochistan had a 25% stake. The company claims it has invested over $500 million in exploration, scoping and feasibility studies on the project. Total investment was 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 had advised against involving Metallurgical Corporation of China in the same mining site.

Not a dime spent on environmental protection

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 a price of $2.2 per pound of copper and $925 per ounce of gold, in the year 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, July 12th, 2017.

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Reader Comments (16)

  • Haseeb Khan
    Jul 12, 2017 - 9:56AM

    What is going on please?. It seems nobody is there in Pakistan to protect the interest of the nation.Every mega project has its own story of mess,incompetence and off course corruption.Recommend

  • Saleem
    Jul 12, 2017 - 10:24AM

    Why Pakistan always lose a case at international forums? Is it incompetence or something else?Recommend

  • AD
    Jul 12, 2017 - 10:40AM

    Sell the site to Chinese company,and pay the money or take loan from them and just pay the interest and let China company mine it. Easy.Recommend

  • Azam Ali
    Jul 12, 2017 - 10:53AM

    It’s Totally Rubbish… These international criminal court or courts of justice do nothing..They can only ban something or give penalties but they don’t see what’s happening in Syria,Kashmir and such other Countries … Or these not against LAW??Recommend

  • Mango man
    Jul 12, 2017 - 11:48AM

    CPEC will help Pak get out of thisand make Pak an economic super powerRecommend

  • Bimal William
    Jul 12, 2017 - 12:06PM

    I hope Pakistan have enough foreign exchange left after paying such a huge amount to this company. Recommend

  • Pakistani
    Jul 12, 2017 - 1:59PM

    CORRUPTION + NEPOTISM + INCOMPETENCE = PAK GOVT.Recommend

  • We are Doomed
    Jul 12, 2017 - 2:08PM

    If Pakistan keeps inserting China into every mega project I don’t see how we Pakistanis will ever flourish, this is ridiculous! we can’t even make friends with Canada which happens to be one of the most sober countries in the world. Corruption, malpractices, discrepencies everywhere. its a miracle that we have survived this long. Recommend

  • TN
    Jul 12, 2017 - 2:21PM

    Failure to comply with legal obligations!!!
    Punish those responsible for this mess.Recommend

  • Parvez
    Jul 12, 2017 - 3:43PM

    The people responsible from the Balochistan government are most probably sitting abroad wit fat bank balances and vast properties…..while the country suffered and still suffers.Recommend

  • powayman
    Jul 13, 2017 - 2:47AM

    Corruption, greed and incompetence is a lethal combination. Independent review of this debacle is warranted – that review should include the role of Balochistan & Federal officials as well as Chief Justice Chaundry who’s ruled in favor of Balochistan without even consulting experts familiar with joint venture mining. The whole debacle smacks of corruption/greed. Recommend

  • gp65
    Jul 13, 2017 - 3:42AM

    @Parvez:
    @TN:
    @Pakistani:
    @Azam Ali:
    @Saleem:
    @Haseeb Khan:

    Please note that the problem was not some corrupt civilian government. The problem was that suo motu notice by justice Iftakhar Chaudhry unfairly voided Reko Diq contract after the contract had been in existence for 20 years and company had spent half a billion dollars prospecting to find the copper and gold reserves.

    Please read what your own Pakistani lawyer Feisal Naqvi said 4 years back in this very newspaper when everyone was cheering on Justice Chaudhry and his patently illegal voiding of a perfectly legal contract. https://tribune.com.pk/story/496988/killing-another-golden-goose/Recommend

  • Lu Ping
    Jul 13, 2017 - 2:06PM

    China will pay the peanuts $11.5 billion.Recommend

  • Hate people who say Reko Diq was a ripoff
    Jul 14, 2017 - 1:37AM

    Next time, honour our agreements.

    We let a company in to explore the land for minerals.

    Once they were found, we kicked the company out, claiming it was exploiting us. Nevermind that we had no expertise, funds or plans of our own to explore these deposits.

    Then they rightfully took us to court for our childish behaviour concocted by simple-minded nationalists and swallowed up by the “multinational conspiracy” loving populace.

    I hate that this country is going to suffer from paying this penalty… but god, I can’t say that we don’t deserve it.

    If as muslims, we can’t be honest to our agreements, then at least we can pay the due penalty. We are not the innocent party in this case. Recommend

  • Momin Khan
    Jul 14, 2017 - 5:59AM

    FIirst I think that Ifthikhar Muhammad Ch., former chief justice of Pakistan, might have the solution on the basis of grounds he had taken the suo motu.
    Secondly, it may be the prejudice of the World Bank that it can make such beautiful decisions against the interests of Pakistan but fails to forbid India from constructing the illegal dams inspite of the arbitration of world bank in the form of Indus Water Treaty.Recommend

  • Mango man
    Jul 14, 2017 - 10:21AM

    @Lu Ping – Right, out of Chinese Tax payers money! Will be interesting to see how Xi convinces his govt to foot Pak incompetence! Recommend

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