Firm opens Reko Diq deal to scrutiny

Miner says any reservations on the deal should have been addressed beforehand.

QUETTA: The international copper mining company, whose agreement with the Balochistan government for Reko Diq project has been at the centre of controversy, has offered to open the deal to a third-party or court scrutiny to allay concerns of detractors.

Tethyan Copper Company Pakistan’s Chief Executive Officer (CEO) Gerhard von Borries made the offer on Friday during a media briefing, while insisting that the agreement had been concluded in accordance with the Balochistan mineral rules.

He said it was an exceptional case in that the company offered 50 per cent share to the government “even though around the world, state does not enter into partnership”.

He told a questioner that mineral development “is a provincial subject, so we, the company, have no issue” with the central government. “TCC as a partner is sensitive to government of Balochistan’s concerns and, within the viability parameters of the project, committed to addressing them.”

Asked if the government of Balochistan was seeking to tear up the agreement, the company CEO said that a deal is sealed with the government in accordance with the law. Had there been any reservations, they must have been addressed beforehand, he added.

He said the Balochistan Mineral Rules (BMR) encourage private investment. It was in light of this investor-friendly legal framework that the two mining giants of the world – Antofagasta and Barrick Gold – decided to invest in the project in 2006.

Gerhard Von Borries pointed out that under the BMR other companies hold exploration licences with 100 per cent ownership in Balochistan and if these projects progress into mining stage, the government will receive royalties and taxes as is the case in most developed mining countries.

“While in the case of Reko Diq project, by virtue of its longstanding agreement (1993) which gives the government of Balochistan 25 per cent share in the project, the government will earn profits, in addition to royalty and taxes. This makes Reko Diq deal an exceptionally good one for Balochistan,” he said.

He said that overall more than 50 per cent of the project’s revenues (after investment and operating costs) will go both to the provincial and federal governments in the form of royalty, profits and taxes. Reko Diq project is being developed by TCC in a transparent manner, he emphasised.

The agreement to work on Reko Diq project was signed between the government of Balochistan and BHP in 1993, called Chagai Hills Exploration Joint Venture Agreement (CHEJVA). Under this deal the government had 25 per cent interest in the exploration licence while BHP held the remaining 75 per cent. In 2006, TCC shares were bought by world’s two leading companies, Antofagsata plc (Chile) and Barrick Gold (Canada). All transactions were fully compliant with existing laws and regulations.

The legality of the transactions was confirmed by the Balochistan High Court in its 2007 ruling.

Since 2006, profile of the project has improved significantly with investment of around $220 million to-date; in an extensive exploration and drilling programme and a world class bankable feasibility study.

The extensive drilling programme (more than 280,000m) has established a much larger combined resource estimate (5.9 billion tons) than declared by previous owners; and also in terms of employment currently 400 (permanent as well as contract) people are working for the project as compared to 50 prior to the takeover, he pointed out.

Published in The Express Tribune, November 13^th, 2010.