US interested in giving loan for Reko Diq mining project

Loan contingent upon granting preferred creditor status to the US Exim Bank

ISLAMABAD:

The United States has shown interest in providing debt funding for the multibillion-dollar Reko Diq gold and mines project, marking what could be Washington's first major investment in Pakistan in decades.

Government and diplomatic sources told The Express Tribune that the Export-Import (Exim) Bank of the United States, the US government's sovereign export credit agency, was keen on backing the Reko Diq project with financing.

Although the new feasibility study for the Reko Diq project has yet to be finalised, the estimated cost is projected to be between $6 billion and $6.5 billion.

Sources indicated that the project requires $3 billion to $3.5 billion in debt financing. However, it remains unclear how much of this will be provided by the US Exim Bank and how much will come from other creditors, including the International Finance Corporation (IFC).

The proposal to extend the loan is being considered for the procurement of earth-moving machinery from the US, according to sources. They added that the loan was contingent upon granting preferred creditor status to the Exim Bank.

The spokesman of the finance ministry, Qamar Abbasi, said that “a number of financial institutions are exploring the possibility of financing the Reko Diq project”.

“The project authorities are engaged with these financial institutions and the discussions are ongoing but the precise details about individual institutions are not available at this stage,” he added.

The matter has been discussed at the level of Finance Minister Muhammad Aurangzeb and the US Ambassador to Islamabad, Donald Blome, according to the sources.

When contacted, the US embassy neither denied nor confirmed the development.

To a question whether the US ambassador discussed the issue of giving a loan for the Reko Diq project with Pakistani authorities, a spokesperson for the US embassy said that the “embassy would not comment on the content of diplomatic conversations”.

To another question of whether the US was interested in giving the loan, the spokesperson stated that the United States was deeply committed to working with Pakistan to promote US-Pakistan trade, investment, and the overall economic relationship.

The spokesperson further said that the United States was Pakistan’s largest export market, a major source of high-quality investment and a strong partner for joint economic prosperity, the United States continues to support Pakistan’s economic reforms.

If all sides, including Barrick Gold, the majority shareholder also having management control, agree to a deal, it will be the first major US investment in Pakistan in decades.

The US-Pakistan economic relations had remained in cold storage for a longer period due to Pakistan-China relations.

The US Congress and the administration have been publicly opposing the China-Pakistan Economic Corridor (CPEC).

The Reko Diq project is owned 50% by Barrick Gold, 25% by three federal government entities and the remaining 25% by Balochistan. Pakistan has already offered the Kingdom of Saudi Arabia to acquire stakes being held by the federal government entities.

Barrick Gold is in the process of updating the project’s feasibility studies. According to a briefing given to the Special Investment Facilitation Council, the feasibility study would be completed by December 2024 and the first production is expected by 2028.

During one of the recent interactions with the Barrick Gold Company, Prime Minister Shehbaz Sharif had desired that the firm should use the Gwadar port for project activities purposes. However, the company is keen to use the Karachi port due to the lack of road infrastructure around Gwadar.

According to a briefing given to the Saudi Arabian investors, the Reko Diq project is expected to have a life of at least 40 years. The construction is expected in two phases with a combined process capacity of 80 million tonnes per annum.

Any US lending for the project would also help in securing loans from other creditors. But for that, Pakistan will have to grant the Exim Bank the status of the preferred creditor, which is available only to the multilateral lenders.

The sources said that Pakistan was internally discussing whether the preferred creditor status could be granted to a foreign sovereign bank.

In addition to the existing block, Pakistan is also exploring the options to give adjacent Tethyan Metallogenic Belt blocks on lease, said the sources.