Gold and copper: Compromise in sight for Reko Diq mines

Chinese firm offers to build smelting and refining facility, leaving mining to Tethyan.

ISLAMABAD:

The standoff between the Tethyan Copper Company (TCC) and the Balochistan government may be headed towards a conclusion as a Chinese firm has offered to set up a smelting and refining facility in Pakistan, something that Quetta wanted and TCC had repeatedly said it was not able to do.

Chinese mining giant Jinchuan Group has been lobbying the government to secure a deal to set up a multi-billion dollar smelting and refining facility near the Reko Diq mines to allow for the raw ores to be refined within Pakistan. The Balochistan government had repeatedly expressed its discomfort with allowing TCC to export raw ores from the province.

TCC, for its part, said that setting up such facilities next to their plant would raise their investment costs too high. The deal became a political lightening rod after politicians in Quetta began to criticise TCC for offering what they said was a bad deal.

The offer by Jinchuan Group appears to offer a way out to both sides: TCC can keep its mining licence at Reko Diq –where it has already invested $220 million in exploration – and the Balochistan government is likely to get higher tax revenues from the refinery.

“The multi-billion dollar project may now be split in two: the mining part may go to TCC, if the Balochistan government decides in its favour, and Jinchuan may be hired for the smelting and refining part,” said one source familiar with the situation.

TCC sources said that the company had no objection if the government hired any other party for setting up smelting and refining facilities at Rekodiq.

TCC, an Islamabad-based company that is a joint venture between the Canadian mining giant Barrick Gold and the Chilean mining company Antofagasta, applied for a mining licence in February 2011 after having found a substantial amount of minerals at its exploration site.

Under the Balochistan Mining Rules, the company claims that is entitled to 100% ownership of the mining rights based on the fact that it made the investment to discover the mineral deposits. TCC has offered the Balochistan government a 25% share in the project. Quetta is mulling its decision on the matter after the Supreme Court refused to nullify TCC’s claims.

“The Supreme Court has given 120 days to the Balochistan government to decide the fate of project with TCC keeping in view rules and regulations,” sources said. “If Quetta fails to decide within that time, the case will reopen in the Supreme Court.”

Sources said that the Balochistan government recently held a meeting to discuss the Reko Diq project and specifically considered the offer by Jinchuan to set up the smelting and refining plant.

TCC may be asked to give its opinion on Jinchuan’s offer in writing.

“If Balochistan gets a positive response from TCC in writing, then it would start final negotiation with JNMC,” sources added.

According to TCC, Reko Diq will produce 22 billion pounds (10 million tons) of copper and 13.5 million ounces of gold over a 56 year period.





Published in The Express Tribune, August 5^th, 2011.