Investment in Reko Diq sought

OGDC, PPL decide to hire advisers to engage with sovereign foreign investors

KARACHI:

Pakistan has started taking steps to attract billions of dollars in foreign investment from friendly nations including Saudi Arabia in copper and gold mining in Reko Diq as two state-owned companies holding stakes in the project announced that they would hire advisers to engage with foreign investors.

In their separate notifications to the Pakistan Stock Exchange (PSX) on Thursday, Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) said that their board of directors decided to evaluate a potential engagement with sovereign foreign investors with respect to the Reko Diq project and decided to appoint advisers through Pakistan Minerals (Private) Limited to assist in this regard.

The brief notifications did not mention the names of potential investors and also did not go into further details.

Ismail Iqbal Securities Head of Research Fahad Rauf recalled that Saudi Arabia had shown keen interest in taking a stake in the Reko Diq project. “It is expected to acquire shareholding from the government of Pakistan.”

Three state-owned companies – OGDC, PPL and Government Holdings (Private) Limited (GHPL), representing the federal government, were collectively holding a 25% stake in the Reko Diq project, he said.

Read OGDC earns record profit of Rs224.6b

Among others, Canada’s Barrick Gold holds a 50% stake in the project located in Balochistan while the remaining 25% shareholding rests with the Balochistan government.

The two companies are likely to sell their full or partial stakes to the foreign investors in an attempt to boost the country’s foreign exchange reserves. Each holds 8.3% stake in the copper and gold mining project.

The analyst said the three companies had paid $187.5 million each to settle payments to Antofagasta of Chile, which wanted to quit the project back in March 2022.

So, Pakistan could immediately attract around $600 million on the sale of 25% stake to Saudi Arabia, he estimated.

“The advisers will assist the state-owned companies in the actual valuation of their stakes. The valuation also depends on inflation and the rupee-dollar exchange rate.”

The rupee was valued at 180-190/$ when the three companies took stakes in the project. “It is now hovering at 290/$,” he said, adding that the exchange rate would play a critical role in determining the initial investment.

Read more Nine Baloch students selected for Reko Diq ‘International Graduate Programme’

“It’s a 40 to 50-year-long project and may attract billions of dollars over its lifespan.”

Another analyst said the other day the Reko Diq project could easily generate $8-10 billion a year in terms of investment and net earnings from producing copper and gold.

The government of Pakistan awarded the development contract for the project to the Canadian company, after a World Bank tribunal waived the $11 billion penalty imposed on Pakistan.

Published in The Express Tribune, September 29^th, 2023.

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