ISLAMABAD:
In first signs of a setback, the government has failed to nominate an arbitrator in a case on multi-billion-dollar Reko Diq gold and copper mining project filed by Tethyan Copper Company – a Canadian and Chilean joint venture – in the International Centre for Settlement of Disputes in Washington DC, sources say.
TCC had filed a request for arbitration last year in a dispute over rights for the Reko Diq project, claiming damages after the provincial government of Balochistan refused to give the go-ahead to the company for mining copper and gold.
According to sources, after failing to nominate the arbitrator in the stipulated time, the Government of Pakistan sought an extension in the period for nominating the arbitrator but the dispute settlement centre rejected the request. “Now, the court may itself nominate the arbitrator,” a government official said.
Talking to The Express Tribune, Petroleum Secretary Ijaz Chaudhry admitted that the government had not yet named an arbitrator in the case.
“However, TCC had proposed three names for the arbitrator and one was accepted by the dispute settlement centre,” a senior official of the Ministry of Petroleum and Natural Resources said.
The central government has also refused to pay damages if TCC wins the case in the international court. It has asked the Balochistan government to consider re-negotiating the deal to reach an amicable settlement with the company.
According to sources, the law ministry has also suggested that the Balochistan government should pay damages if the international court rules in favour of TCC.
Keeping in view the opinion of the law ministry, Petroleum and Natural Resources Minister Dr Asim Hussain has sent a summary to the prime minister, seeking approval that the Balochistan government should bear the cost of damages.
TCC, which is represented by Antofagasta of Chile and Barrick Gold of Canada, holds 75% shares in the project while Balochistan has a 25% stake.
TCC claims it has invested over $500 million in exploration, scoping and feasibility studies on the project. Total investment is projected to be $5 billion over a period of five years.
TCC and Balochistan reached a deadlock in 2009 because of two issues. First, TCC wanted the province to bear 25% of financial obligations according to its share in the project, which the province refused. Second, TCC was concerned about purported involvement of a Chinese company in the same project.
In a letter written to then petroleum minister Naveed Qamar in September 2009, Pakistan’s Ambassador to Chile Burhanul Islam expressed worry, saying it was not a good idea to entertain Chinese company MCC in the same mining site, which had been offered to TCC with all commitment, responsibility, investment and legal claims. He suggested that the Chinese, if aspiring for a project, could be offered a separate mining site.
In a feasibility report submitted to the Balochistan government, TCC projected a turnover of over $60 billion for the gold and copper project over a span of 56 years. This projection was based on the price of $2.2 per pound of copper and $925 per ounce of gold in 2009.
The mine has estimated reserves of 11.65 million tons of copper and 21.18 million ounces of gold.
Published in The Express Tribune, May 25th, 2012.
COMMENTS (9)
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@pakistani: "here will be another deal with TCC………..with good payoffs to someone we all know quite well".
The original Reko Diq agreement was signed by Musharraf not Zardari, so implying that this deal is linked with Zardari's corruption makes no sense.
@Ameer Hamza : "TCC would be stupid not to negotiate with the Govt. of Balochistan for some solution"
TCC is likely to win the arbitration. Why then should it negotiate? if government of Pakistan fails to honour the decision of the arbitration court, why would TCC sink in additional funds or management time in a country where contracts have no sanctity?
A broader issues is if Pakistan continues to dishonor its commitments with foreign/private investors - whether in Telecom or mining or power sector as seems to be the case, it will directly impact the FDI coming in to Pakistan.
The government of balochistan should try to fetch atleast 50% stake in the mine. This can be easily achieved by issuing certificates or bonds for a period ranging from 10 to 25 years. the bond should be issued nationwide. a special company owned by GoB should issue these bonds and the company shuold be listed on the stock exchange. as government managed companies often suffer from politics. the bonds should be in nature of Defense saving certificates which require no interest payments on yearly basis. infact lump sum is payable on the maturity or yearly maturity which ever is preferred by the holder. Government of Balochsitan doesn't have the financial ability to govern the project so it should be accept what ever tcc is offering them. On the other hand the federation was very in the case when there were chances that Pakistan will get over this issue by as soon as the case weakened the federation moved out of the case and even refused to pay the fine money in case of ruling against Pakistan. isn't it just wow. after 50 years of taking gas from Balochistan for peanuts you are not willing to fight for that land????? i think there should be no part of Federation in the money from Reqo diq!
Musharraf govt., always the Baloch-hater that he was, sold this 2nd largest gold mine in the world for peanuts. I am not sure why Balochistan govt. should share any costs. It's their land and they have every right to get the profits. TCC would be stupid not to negotiate with the Govt. of Balochistan for some solution.
You guys must be real experts on international mining contracts to have determined not only what the global standards are but also what was in this particular contract. Personally, I still haven't seen any info to suggest that this deal was not fair.
The corruption in Mining Department is mind blowing. The loss should be recovered from the Secretary, DG and Minister of Mining. They are running the department as a fiefdom and extort money from every company and investor.
@ Not me........good question with a simple answer....................how much is my share?
when one uses less time for governance and concentrate more efforts and time on political chess board, the obvious things happen. the 80 odd fed. cabinet members, and all the MPAs cum ministers of Balocuchistan, the prime minister and president..............no body has the time to attend to matters of national importance.
I m sure now balochistan will put blame back on fed. govt. and the game will move on..............and at the end of the day................there will be another deal with TCC...........with good payoffs to someone we all know quite well.
Seriously who where the jokers who drafted the initial agreement which evidently was sloppy. Why does Pakistan keep on repeating the same mistakes over and over again.Look at the mess in respect of Gwadar port Go for open international tender which should be well advertised and evaluated by independent international firm who has expertise in the area
It's becoming increasingly obvious that Pakistan knows it's going to lose in arbitration -- seems like the only thing left in doubt is who's going to pay the damages. One might argue that once again Pakistan tried to muscle/extort an international partner and it's coming back to haunt them.