US ready to back mining projects
INVESTMENT AVENUE: “The critical minerals issue is very important for us because it is about economic security, prosperity and national defence,” the official said. Pakistan joined the US Critical Minerals Initiative in Washington earlier this year. PHOTO:FILE
The Trump administration is ready to finance another project the size of Reko Diq, and American investors are willing to take security risks to invest in Pakistan's mineral sector, a US embassy official said on Wednesday.
In a background briefing, the official underscored that the US is very keen to invest in Pakistan's mineral sector, with American investors also exploring the possibility of buying small mines worth a few million dollars.
"The US is ready to finance another Reko Diq-sized project where the feasibility is showing potential," said the official.
However, security remains the biggest challenge, which has already delayed the much trumpeted $7.7 billion first phase of the Reko Diq project.
To a question, the official said Reko Diq is moving forward but at a slower pace than originally planned. Some project costs are being recalculated, and it will come back to financiers for the final package.
The Export-Import (Exim) Bank of the US has offered $1.25 billion to Reko Diq, but the final financing package is still being finalised.
In November last year, Petroleum Minister Ali Pervaiz Malik said Reko Diq was very close to achieving financial close and raising $3.5 billion in debt. The total project cost was estimated at $7.7 billion, including $3.5 billion in debt from 11 international banks and organisations.
But in March this year, Barrick Gold, which owns 50% stakes, announced a review of the project due to security and cost-related issues. Pakistan has twice revised the cost of the first phase upwards.
Once fully operational, Reko Diq will generate free cash flow of $2 billion per annum, with half a billion going to Balochistan and another half a billion to state-owned enterprises, the official added.
The mineral sector currently contributes 3% to Pakistan's economy. The official said Reko Diq alone could add another half a percentage point to GDP.
The Trump administration is making a significant push to develop critical minerals supply chains, with funding for these projects through the Exim Bank and the Development Finance Corporation, he added.
In 10 to 20 years, the mining sector will have a significant impact on Pakistan's economy, the official added.
American companies are also looking for opportunities to buy offtakes from small mines for processing and export to the US, according to the embassy official.
. Some US companies are seeking to buy and develop small mines, while others want to bring significant investment in copper projects.
Pakistan has a high concentration of antimony, and with global copper demand going through the roof in the next few years, Pakistan holds one of the world's major reserves.
"There are very viable reserves of copper, antimony and tungsten," the official said, noting that companies are already working on the ground to extract these minerals.
The US is looking for 60 types of minerals vital for modern technology, including those used in artificial intelligence, semiconductors, computing, energy and defence industries. Several of these are present in Pakistan.
The US government is encouraging American firms to form partnerships with Pakistani companies to navigate local operating conditions, including security challenges.
Local firms also understand the unique security risks of operating in areas like Balochistan and Khyber-Pakhtunkhwa, the embassy official said.
"US companies understand the security risks in Pakistan and are willing to take them," the official said. "We encourage the government of Pakistan to do everything it can to provide security and assistance."
The official said the security challenges in Balochistan are real and US companies keep them in mind when pursuing projects.
"Good opportunities exist in Balochistan and Khyber-Pakhtunkhwa, but these are also areas with security challenges," he added.
US companies are also looking for copper deposits in Khyber-Pakhtunkhwa and rare earth minerals in Gilgit, he added.
"The critical minerals issue is very important for us because it is about economic security, prosperity and national defence," the official said.
Pakistan joined the US Critical Minerals Initiative in Washington earlier this year.
The official said the US is continuously encouraging Pakistan to provide a transparent and level playing field for US investments.