Pakistan signs new deal for Reko Diq project

PM says this billions of dollars investment will mark beginning of large scale investments in Balochistan

ISLAMABAD   -   Pakistan, after successfully resolving the dispute with Tethyan Copper Company (TCC) concerning the development of copper and gold mines in Chagai, popularly known as the Reko Diq dispute, signed a fresh agreement on Sunday in Islamabad.

Prime Minister Imran Khan witnessed the signing ceremony between the government of Pakistan, the government of Balochistan and Barrick Gold Corporation of Canada after successfully resolving the longstanding dispute. A new agreement was signed by representatives of the federal and Balochistan governments with a delegation of Barrick Gold, led by Chief Executive Dr. Mark Bristow.

As per the terms of the new agreement, the Reko Diq project shall be revived and developed by Barrick Gold in partnership with Pakistani entities. The new project company shall be owned 50% by Barrick Gold. The remaining 50% shareholding shall be owned by Pakistan, divided equally between the Federal Government and the provincial government of Balochistan.

The new project company shall be owned 50 percent by Barrick Gold. The remaining 50 percent shareholding shall be owned by Pakistan, divided equally between Federal Government and the provincial government of Balochistan. Federal Government’s 25 percent shareholding shall be divided equally amongst three state-owned-entities (SOEs) of the Federal Government, namely Oil and Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings Pakistan Limited (GHPL). Balochistan’s share shall be held by a company wholly owned and controlled by the Government of Balochistan.

As part of the Prime Minister’s vision for Balochistan, the Government of Balochistan’s share of capital and operating expenses for the project shall be borne by the Federal Government. In other words, the Government of Balochistan shall not incur any expenses in development of the mines and its share of expenses shall be borne by the Federal Government. In developing the project, nearly USD 10 billion shall be invested in Balochistan, including USD one billion that shall be invested in social uplift projects such as roads, schools, hospitals and creation of technical training institute for mining.

The investment shall create over 8000 new jobs. This project shall make Balochistan the largest recipient of foreign direct investment in Pakistan and the RekoDiq project shall be one of the largest copper and gold mining projects in the world. To ensure optimal utilization of nation’s mineral wealth the government was also considering setting up a smelter. The agreement was reached after several rounds of negotiations over the last three years. In August 2019, the Prime Minister had set up a committee to steer the negotiations with an aim for early development of the mines. In this effort, the Federal and Provincial Governments were assisted by international advisors.

To ensure the deal was compliant with all the laws, the Government shall submit the matter before the parliament and the Supreme Court. While speaking on the occasion, the Prime Minister stressed upon the emphasis his government placed on development of Balochistan and uplift of underdeveloped areas. He expressed hope that the investment would mark the beginning of large scale investments in Balochistan that should change the quality of lives of ordinary citizens in Balochistan. The Prime Minister appreciated the efforts of the negotiating team for a transparent and favourable agreement for the people of Balochistan.

Later, Minister for Finance and Revenue Shaukat Tarin at a joint press conference with Federal Minister for Power and Energy Hammad Azhar and Chief Minister Balochistan Mir Abdul Quddus Bizenjo said that the Governments of Pakistan and Balochistan, Antofagasta plc, and Barrick Gold Corporation had reached agreement in principle on a framework to reconstitute the Reko Diq project, and a pathway for Antofagasta to exit the project.Tarin said an agreement was signed in 2006 among a Canadian Company Barrick Gold, a Chilean company Antofagasta plc, and the governments of Balochistan to extract gold and copper from the Reko Diq minses reserve. The agreement was suspended in 2011 due to a dispute over the legality of its licensing process. As a result the International Court of Arbitration levelled $6.4 billion award on government of Pakistan while on the same time the London Court of Arbitration also imposed another US $ 4 billion fine on Pakistan. He said soon after taking over the charge, Prime Minister Imran Khan aggressively pursued the case and directed to draw a suitable solution as early as possible. As a result an agreement was settled today under which Antofagasta decided not to participate in the reconstituted project and withdrew from its claim of US $ 3.9 billion in place of US $ 900 million. He informed that the US $ 900 million would be paid by the three SOEs and in return they would get the 25 percent share of the project.

Had the PM not taken his personal interest in the case, Pakistan would have to pay the huge amount of US $ 11 billion as a penalty, he added.

Terming the new agreement as a land mark achievement for Pakitan, Hammad Azhar said it was a historic day as it had not only avoided US $ 11 billion worth of penalty but also created a new opportunity for Pakistan.

He said this was not for first time that the Pakistan Tehreek-e-Insaaf government had achieved the landmark success, but it had also avoided the country from moving to Financial Action Task Force black list by implementing 32 out of 35 conditions. The government also saved billions of dollars by renegotiating the costly Independent Power Producers agreements.

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