Govt to pay $900m as part of Reko Diq settlement

Money to be received by Chile’s Antofagasta, a firm engaged in project

ISLAMABAD:

Pakistan has decided to pay $900 million to a firm, Antofagasta -- one of the companies engaged in the settlement of the Reko Diq dispute in which the country was penalised with fine of almost $6 billion by a global arbitration body in favour of the Tethyan Copper Company (TCC).

The TCC was a joint venture between Chile’s Antofagasta and Canada’s Barrick Gold.

After the Supreme Court had blocked the TCC in 2013 from developing Reko Diq -- one of the world’s biggest untapped deposits of copper and gold -- the International Centre for Settlement of Investment Disputes ordered the government to pay $5.8 billion in damages after the joint venture took it to court.

Under the terms of the settlement, the government would pay Antofagasta a sum of $900 million- - the amount in lieu of the latter's share of the award -- $3.25 billion.

The Economic Coordination Committee (ECC) of the cabinet had approved the deal in a recent meeting.

Petroleum Division Secretary Ali Raza Bhutta had briefed the cabinet body about the case and informed that the attorney general for Pakistan (AGP) had negotiated terms of the settlement with both Antofagasta and Barrick Gold.

The terms were presented to the apex committee, which approved them. Conveying the decision of the apex committee to the Petroleum Division, the AGP Office advised to process the draft agreements for the approval of the ECC and the cabinet.

The Petroleum Division secretary had shared the terms of a settlement reached with Antofagasta and approved by the apex committee.

Read US court denies relief to Pakistan in Reko Diq case

The government would give Antofagasta a standby letter of credit (SBLC) for the settlement amount by no later than March 31 2022; provided, however, the funds shall not be released to the firm until the completion of all legal requirements, including but not limited to approval by the federal and provincial cabinets and the necessary legislation.

It requested to allow the Finance Division to $337.5 million to Antofagasta on behalf of the government of Balochistan. In return, the province, through the Balochistan Mineral Expo Company (BMEC), would receive a 15% shareholding of the proposed project company in addition to 10% carried shareholding with the payment mechanism suggested by the Finance Division.

It also suggested issuing the SBLC of $ 397 million in accordance with the arrangements.

The apex committee might continue to oversee and guide the process of legislation and requisite legal proceedings to ensure that both are concluded by March 31, 2022 and in case the deadline is missed, positively by December 15, 2022.

While commenting further, the petroleum secretary had emphasised that the AGP Office had confirmed that failure to complete the necessary legislation and requisite legal proceedings by June 30, 2022 would result in a significant late payment surcharge. If the failure persisted beyond December 15 2022, the entire deal would collapse. All relevant stakeholders were requested to ensure to meet the stated timelines.

The State Bank of Pakistan (SBP) governor had observed that the settlement may affect the foreign exchange reserves, therefore the, payment mechanism should be deliberation with the central bank.

The Economic Coordination Committee (ECC) of the cabinet had considered the summary submitted by the Petroleum Division regarding "Settlement of the Reko Diq Dispute between Tethyan Copper Company Vs Islamic Republic of Pakistan" and approved the proposal.

The ECC had also directed the Finance Division to consult the SBP and Federal Board of Revenue.