ISLAMABAD: President Dr Arif Alvi has asked the Supreme Court whether a new deal on the Reko Diq gold and copper mining project in Balochistan was legally safe under the Constitution of Pakistan and international arbitration.
In a voluminous reference submitted to the court on Tuesday, the president also asked the apex court whether the proposed Foreign Investment (Protection and Promotion) Bill 2022, whenever enacted, would be a valid law under the Constitution.
The presidential reference comes a month after the federal cabinet approved its filing. Dr Alvi has filed it under Article 186 of the Constitution, which is related to the Supreme Court’s advisory jurisdiction and says the president may refer a question of law to the apex court if they think it holds public importance and the court’s opinion is needed.
Canadian company Barrick Gold, which ended a long-running dispute with Pakistan in March to develop the mining project under a new agreement, earlier asked the government to get the deal stamped by parliament and the Supreme Court to make company’s investment in the project sustainable in the long term.
Canada’s Barrick Gold, which owns half of gold and copper mining project, earlier asked govt to get deal stamped by parliament and Supreme Court
Under the out-of-court deal, an $11 billion penalty slapped against Pakistan by a World Bank arbitration court and other liabilities would be waived and Barrick and its partners would invest $10 billion in the project.
The consortium Tethyan Copper Company — of which Barrick and Chile’s Antofagasta controlled 37.5 per cent each — found vast gold and copper deposits at Reko Diq in Balochistan. However, the hugely lucrative open-pit mine project came to a standstill in 2011 after the local government refused to renew Tethyan Copper’s lease, and in 2013 the Supreme Court declared it invalid.
In 2019, the World Bank’s arbitration tribunal committee imposed a penalty on Pakistan for unlawful denial of mining. After a decade-long legal battle, Pakistan announced the out-of-court settlement with Barrick Gold in March. Antofagasta agreed to exit the project.
Once the apex court gives its decision in the present reference, the Reko Diq parties are expected to execute the agreement, which includes passing of the resolutions by the Balochistan and Sindh assemblies and potentially other provinces delegating certain authorities to the federal government, which in turn will enact a draft Foreign Investment (Promotion and Protection) Act of 2022.
Likewise, the Tethyan Copper Company, to be renamed Reko Diq Mining Company (RDMC), will be provided certain legislatively entrenched taxation benefits to protect them from arbitrary withdrawal by executive action.
The new project company will be owned half by Barrick Gold. The remaining half shareholding will be owned by Pakistan, divided equally between the federal government and Balochistan.
The RDMC will also be granted two mining leases for an aggregate 164 square kilometres for 30 years, which can be renewed for equal periods. It will also be issued an exploration license for around 312 sq km and a surface lease for 643 sq km.
The development is expected to be developed in two phases. In the first phase, likely to take five years, $4.2bn will be invested to set up a processing capacity in the range of 40 million tonnes a year. In the second phase, expected to take four years, $3.3bn will be invested to double the processing capacity.
The need to extract and exploit Reko Diq’s resources for the benefit of the people of Balochistan and Pakistan had never been more acute, the reference emphasised, adding that the country was still recovering from the economic shocks caused by Covid-19 pandemic for which Pakistan has taken a significant foreign debt to finance basic government services.
Recent catastrophic flooding had also created unprecedented pressure on the government and its people continued to face particularly dire problems, with high unemployment, extensive poverty and very little business activity, it said.
Therefore, it said, the proposed reconstituted Reko Diq project represents a unique opportunity to improve Balochistan’s economic fortunes and help the province reduce poverty and deprivation.
The project will also provide lasting employment benefits to Balochistan by offering training and upskilling programmes and creating around 7,500 jobs during peak construction for the project and an estimated 4,000 long-term jobs once in production, with preference being given to Balochistan’s residents.
Before the construction starts, the province will get advance royalty payments of up to $5 million in the first year, up to $7.5 million in the second year and up to $10 million per year thereafter until commercial production starts, subject to a cumulative $50 million maximum of advance royalty payments.
Published in Dawn, October 19th, 2022
