The Supreme Court of Pakistan has sanctioned an agreement for Barrick Gold’s intent to recommence mining at the Reko Diq mining project. The Foreign Investment (Promotion and Protection) Bill 2022 was rapidly approved by the National Assembly and Senate, which will also protect foreign investment connected with the project. On 15 December 2022, Pakistan signed a conclusive deal with Barrick Gold and Antofagasta PLC in London to resolve an 11 billion USD dispute and allow the resumption of the Reko Diq project. Though an exact date for the recommencement of the project has not been made public, all the administrative and legal barriers have been resolved. Pakistan is no longer liable to any of the mining firms. The state aims to obtain proceeds from the mines’ development.
The land of Reko Diq is reportedly home to the fifth largest gold deposits in the world, apart from various other minerals. According to estimates, the area can produce around 200,000 tons of copper and 250,000 ounces of gold from 600,000 tons of concentrate yearly. Such mineral resources and the associated monetary benefits are the reason overseas firms are ready to invest in the region, notwithstanding the multifaceted security concerns and the unpredictable political scenario in the country.
Reko Diq was one of the two regions in Chaghi identified as naturally endowed in minerals. The global intrigue was evident even back in 1961 as soon as various geological surveys termed the area mineral-rich. The Balochistan Development Authority (BDA) inked an agreement with the Australian mining firm Broken Hill Proprietary Company (BHP) Minerals in 1963. Under which the Chaghi Hills Exploration Joint Venture was set up to explore the Reko Diq area for minerals. Per the Chaghi Hills Exploration Joint Venture Agreement (CHEJVA) 1993, Tethyan Copper Company (TCC) had inherited a concession agreement from the Australian mining company BHP to explore and mine gold and copper at Reko Diq. TCC is a joint venture firm of two international gold and copper mining leaders: the Canadian Barrick Gold and Chilean Antofagasta Minerals. In 2007, locals challenged CHEJVA for the first time in the Balochistan High Court on the grounds that the provincial government had illegally relaxed the relevant regulations and allowed mineral titles to BHP for Reko Diq. Upon dismissal, the petitioners took the matter to the Supreme Court on the grounds of lack of fairness, lack of transparency, laws violation, and risks to provincial and state interests.
The ownership arrangement of the Reko Diq project represents a seemingly beneficial partnership for all stakeholders, including Pakistan, the province of Balochistan and the international mining firm.
On the other hand, another legal battle ensued following the Balochistan government’s denial of a mining lease application by TCC in 2011. TCC maintained that denying them permission to mine would breach CHEJVA and, by extension, the Australia-Pakistan Bilateral Investment Treaty (BIT).
Pakistan’s highest court, led by Chief Justice Iftikhar Muhammad Chaudhry in 2012, considered the 1993 agreement in conflict with the laws of Pakistan. Therefore, TCC was stripped of any rights emanating from the Reko Diq agreement. However, the mining firms took the dispute to the World Bank tribunal. Titled “Tethyan Copper Company Pty Limited v. the Islamic Republic of Pakistan”, the case is also referred to as the Reko Diq case. The main stakeholders were the Tethyan Copper Company (TCC) and the Government of Pakistan (GOP). An international arbitration tribunal of the World Bank’s Centre for Settlement of Investment Disputes (ICSID) ruled against Pakistan in 2017, with the country expected to pay 11.5 billion USD in damages. Though Balochistan rejected the claim, ICSID eventually asked Pakistan to pay 5.84 billion USD to TCC. Facing such a financial question, Pakistan finally settled the matter out of court.
The required legislation has now been passed into law by the country’s highest court, allowing the Canadian mining firm to start work at Reko Diq. The Supreme Court, in its judgement on the Reko Diq case, pointed out that the bill will allow the Reko Diq project’s implementation along with encouraging the flow of foreign direct investment for other mining and capital-intensive projects. The project is asserted to have one of the greatest “undeveloped open-pit copper-gold porphyry deposits”. The long-stalled project has an estimated worth of seven billion USD. Half of the shares of Reko Diq are held by Barrick; 25 per cent of the project is owned by three federal state-owned companies, namely Oil and Gas Development Company, Pakistan Petroleum Limited and Government Holdings (Private) Limited; 15 per cent is fully funded by the province of Balochistan and 10 per cent by Balochistan on a “free carried basis”. Antofagasta PLC, which co-owned TCC, took an exit from the project while Barrick updated its groundwork for the mine. The rearrangement of TCC has allowed Pakistani state-owned firms to enter the equation. Antofagasta is expected to collect the proceeds of its sold shares by December 2023. The ownership arrangement of the Reko Diq project represents a seemingly beneficial partnership for all stakeholders, including Pakistan, the province of Balochistan and the international mining firm.
According to Barrick’s project report on Reko Diq, the project’s development is expected to catalyse the region’s economic development and furnish major benefits to Balochistan, such as diversified local investment avenues, augmented skill development, and greater employment opportunities. The project will facilitate the expansion of the region’s economy. Balochistan’s interest in the project is going to be fully funded. The province will receive the benefits of 25 per cent shares without any monetary contribution to construct and operate the mine.
With the resumption of the Reko Diq project, over 8,000 employment opportunities will be open, with the residents of Balochistan being the first to benefit from the openings. The project will also generate 4000 long-term jobs. Senator Samina Mumtaz Zehri of the Balochistan Awami Party maintains that the province is the choicest region in the eyes of foreign investors.
However, given the other ground realities, the project’s financial returns seem rather simplistic. Some segments in Balochistan continue to voice their reservations despite the approval of the bill. But that might be the least of the concerns following the legislation. In terms of feasibility, the project’s remote location is a question. The logistics required to make the project functional will essentially slash the profits generated. Moreover, a sustainable water source will be required during the length of the project. Nevertheless, Islamabad is striving to assuage the given situation. To avoid any probability of being taken in, states like Pakistan should best refrain from signing mineral extraction contracts without sufficient awareness.