Riyadh offers 15% equity investment in Reko Diq
PHOTO: FILE
Saudi Arabia has made an offer to buy 15% stakes in the Reko Diq mining project and would also give a substantial grant to build infrastructure around the mining area in a development that will mark the first investment under the umbrella of the Special Investment Facilitation Council.
The total offer involves both cash for the purchase of 15% shares and grant to build infrastructure around the mining area.
In response to the Saudi offer, Pakistan has decided to constitute a negotiation committee that will review the Saudi offer and recommend the final negotiated price to the federal cabinet for approval, the government functionaries involved in the discussions told The Express Tribune.
Saudi Arabia's Public Investment Fund (PIF) has offered to acquire 15% shares through Manara Minerals. The federal government currently holds 25% shares in the Reko Diq Mining project and out of its share it would sell 15% stakes to Saudi Arabia, they added.
SIFC Division Secretary Jameel Qureshi was not available for comments despite repeated attempts.
A Petroleum Division official said that the Saudi offer will be discussed by a negotiation committee that will be set up for finalising the deal.
If the deal materialises, it would cement Pakistan-Saudi Arabia economic relations and create employment opportunities for the people of the region. Pakistan was also in the process of securing rollover of a $5 billion Saudi cash deposit and has also requested a $1.2 billion new oil financing facility.
In addition to acquiring 15% shares, Saudi Arabia has also offered to give grant for the construction of road infrastructure around the Reko Diq mining project. The government wants to construct the Mashkhel-Panjoor road for smooth movement around the mining area.
The Ministry of Economic Affairs has taken up a grant offer with the Saudi Fund for Development (SFD) for finalising the road scheme, an official of the ministry confirmed to The Express Tribune. Once the talks make some progress, both the sides would work on finalising the feasibility study for the road project.
A cabinet member said on condition of anonymity that the SIFC has endorsed the structure of the offer but left the final decision on the Cabinet Committee on Inter-Government Transactions (CCIGT). The cabinet committee would approve the negotiation committee that will review the price discovery mechanism and will engage with Manara Minerals for finalizing the deal.
The Reko Diq project is owned 50% by Barrick Gold, 25% by three federal government entities and the remaining 25% by Balochistan.
Barrick Gold is in the process of updating the project's feasibility studies. According to a briefing given to the SIFC, the feasibility study would be completed by December 2024 and the first production is expected by 2028.
The Reko Diq project is highly capital-intensive and once it begins commercial operations the government hopes to develop the adjacent blocks with the joint investment by Reko Diq, Saudi Arabia, the government of Balochistan and the federal government.
Pakistan is eying $5 billion investment by Saudi Arabia by June 2025 in mining and agriculture sectors.
Chief of the Army Staff General Asim Munir is taking personal interest to ensure that the Saudi investment timely materialises.
Pakistan has already addressed the concerns of Saudi Arabia about withholding the repatriation of profits due to external sector liquidity constraints. Pakistan assured that Saudi investors would get priority in repatriation of profits. Prime Minister Shehbaz Sharif has already given instructions to the State Bank of Pakistan (SBP) to give Saudi Arabian companies preference in repatriation of the profits.
The US Export-Import (Exim) Bank has also shown interest in giving a loan for the Reko-Diq project. However, the Exim Bank of the United States, the US government's sovereign export credit agency, was seeking preferential creditor status.
The Reko Diq project's estimated cost is between $6 billion and $6.5 billion. The project requires $3 billion to $3.5 billion in debt financing. The US Exim Bank wanted to lend $1.5 billion to $2 billion for the project, subject to getting the preferential creditor status.
The proposal to extend the loan is being considered for the procurement of earth-moving machinery from the US, according to sources.
Once both the sides finalise the price, the three federal government owned companies that hold shares in the Reko Diq on behalf of the federal government would start the process to divest their shareholding proportionately and get their boards' approvals.
Pakistan is also trying to maximise the offer price by convincing Saudi Arabia to make upfront payments to the Pakistani companies that have already made initial investment in the project in lieu of their 25% shareholding.