BLESSED with copper and gold deposits, district Chnagi in Balochistan is attracting interests of foreign investors. The Toronto-based Barrick Gold Corp has reportedly agreed to acquire 50 per cent of the Reko Diq copper project controlled by Australian Tethyan Copper Company (TCC) if the Chilean Antofagasta’s bid for TCC is successful. Barrick and Antofagasta have agreed to share equally in TCC’s 75 per cent interest in the Reko Diq project as well as all of its rights, licences and permits held in Pakistan.
Barrick will pay Antofagasta $100 million in cash for 50 per cent of all the acquisition costs, including claw-back rights with BHP Billiton. Antofagasta has already made a $140 million cash offer for Australian-listed Tethyan and it also struck a $60 million side deal with BHP over claw-back rights to some Tethyan mineral interests.
Antofagasta Minerals, a Chilean copper company recently signed $133 million joint venture agreement with the Australian TCC to explore and exploit Pakistan copper and gold properties.
The agreement involves the purchase of a 19.95 per cent stake in Australia’s TCC for $20.5 million as well as an outlay of $37.5 million for a 50 per cent equity stake in company’s Pakistan mineral properties. The agreement, announced out of London a few months ago, involves a commitment to invest up to $75 million in exploration and development. The Australian TCC controls the Reko Diq project.
Reko Diq is a giant copper and gold project in Chaghi, containing 12.3 million tons of copper and 20.9 million ounces of gold in inferred and indicated resources. The copper-gold deposits at Reko Diq are believed to be even bigger than Sarcheshmeh in Iran and Escondida in Chile.
The Reko Diq copper deposits which is in the neighbourhood of Saindak copper project, is four times larger in copper ore tonnage than Saindak. The most credible international surveys suggest that Reko Diq is one of the biggest undeveloped copper projects in the world with over 11 billion pounds of copper and nine million ounces of gold.
So far, three foreign companies have purchased stakes in the strategic copper and gold assets setting off a cycle of ‘change of foreign ownership’ of Reko Diq copper project. Pakistan has only 25 per cent stake in the Reko Diq copper project. The rest of the 75 per cent stakes had first been transferred to BHP Billiton, the Anglo-Australian mining giant and then BHP Billiton under a ‘deed of waiver and consent’ transferred it to the Australian TCC and now TCC has sold its 19.95 per cent stake to Antofagasta Minerals.
The chief executive of Antofagasta, Marcelo Awad reportedly said, ‘The agreement with TCC provides Antofagasta with a window into a very prospective mining region and represents a strategic investment opportunity for us”.
A London-based mining analyst viewed that Antofagasta is going to test market with buying a stake in TCC and taking a 50 per cent interest in its Pakistan minerals assets. He said, ‘It gives Antofagasta “potentially lots of growth but for a small upfront fee”. “The market will have concern that it’s an investment in Pakistan’, he added.
The provincial government had first signed the contract for Reko Diq exploration area with the BHP Minerals International Exploration Inc. in July 1993 and established a joint venture with the respective interests of the province– 25 per cent and BHP Billiton – 75 per cent by virtue of a Deed of Waiver and Consent June 23, 2000.
Under this deed, the GOP provided its consent to the grant of rights to TCC and to any transfers to TCC and agreed to waive all of its pre-emptive rights under the agreement in relation to such transfers.
BHPM had entered into an option agreement with Mincor Resources of Australia. Mincor set up TCC in Australia having 81 per cent share, while the rest was held by investors from Canada and Australians. Mincor had planned to list its 88 per cent-owned subsidiary TCC, which controlled the project in Balochistan in early November 2003. Private investors hold the other 12 per cent.
Australian BHP Billiton which discovered the lode and had retained the mining licences for the deposit but no equity, acquired a small shareholding in the newly listed company. The listing enabled Mincor to focus on its nickel mining operations in Australia. After the listing, the new company had a market capitalization of about A$40 million.
Presently, the Australian TCC has a joint venture with the provincial government. The Company planned to start the Reko-Diq copper project in 2003 with an investment of $130 million. It is giant porphyry copper and gold complex with over 4.8 million tones of contained copper metal and nine million ounces of contained gold.
A further 14 mineralized porphyry bodies are known to exist, with the potential to place the Reko Diq Project among the largest undeveloped copper resources on the globe. The TCC has estimated annual production 200 to 500 million copper tones from the project.
Tethyan’s principal assets are a 75 per cent interest in the exploration licence encompassing the highly prospective Chaghi Hills region known as Reko Diq in Balochistan, which includes the Tanjeel Mineral Resource and the Western Porphyries, and a 100 per cent interest in certain other licences in the region.
The region is part of an extended copper-gold belt. Tethyan has reported total, indicated and inferred mineral resource estimates at its properties of 1.2 billion tones with a copper grade of 0.58 per cent and a gold grade of 0.28 grams per tones. The resource estimates include probable reserves at the Tanjeel Mineral Resource of 128.8 million tones.
Under TCC’s Alliance Agreement with BHP Billiton, the TCC got the right to earn all BHP Billiton’s interest in any mineral resource on the licences, subject to BHP Billiton’s claw back right.
The claw back right does not apply to the H4 Starter Project at Reko Diq. Antofagasta, together with Tethyan, will also terminate BHP Billiton’s right to claw-back a material interest in certain of Tethyan’s mineral interests. They will pay Billiton $50 million in compensation. Had the claw-back right rested with Balochistan, this compensation would have come into the government’s treasury.
In 2001, Australian TCCL informed Ministry of Petroleum and Natural Resources about its plans to develop H-4 Reko Diq as a pilot project for producing 40,000 tones of copper annually.
TCC requested the central government for grant of EPZ status to Reko Diq as had been extended to Saindak copper-gold project. The EPZ status to Reko Diq was granted to expedite investment in the neglected mineral sector and development of backward area of the country.
Many political, business and industrial circles had criticized the change of foreign ownership of massive copper and gold reserves at Reko Diq. They raised the question, why the government did not refuse the transfer of the Reko Diq project from the internationally reputed BHP Billiton to the Tethyan Copper Company which after acquiring the Reko Diq project raised funds for the project by floating its shares in the Australian Stock Exchange.
The project, they contended, could be given on lease to Chinese. “Reko-Diq project under Australians would not bring such benefits for Pakistan, as the Chinese are committed to provide from Saindak”, they opined.