Clouds over Reko Diq

Published October 30, 2011

THE high-profile Reko Diq project of copper and gold faces an uncertain future following ‘a notice of dispute’ served on the Balochistan government on October 19 by the Tethyan Copper Company which having completed the exploration work now seeks the mining lease that is being denied.

If the dispute is not resolved in 120 days, the TCC will open two international arbitration proceedings, one in London against the Balochistan government and the other in Australia against the federal government for a potential breach of Pakistan’s bilateral investment treaty with Australia. Such cases usually take two to six years to conclude.

The main bone of contention is, who should run this project in its second phase – TCC or a local firm or the government itself? Tethyan is a joint venture equally owned by UK-listed Chilean copper miner Antofagasta and Canada-based miner Barrick Gold Corp. Both are leading mining giants.

The TCC says it has the right to mine at Reko Diq under Balochistan Mineral Rules, 2002, but the provincial government is unwilling to offer it the contract. The government had warned last year that it may have to cancel the project because of a “growing anger over outsiders exploiting the natural resources” of Balochistan. There has been a persistent demand by radical elements in the province that only local investors be given contracts of mineral projects.

However, a day after the notice of dispute was filed, the Federal Minister for Water and Power Naveed Qamar, while reacting strongly to such demands, told a seminar in Islamabad: “Either we should trust the foreign investors or wait for generations until we develop indigenous expertise and technology to exploit our natural resources”.

Referring to the stance of Balochistan’s political groups and certain interested parties, he said: “Historically we have not been at good terms with foreign investors. It is this mistrust that has also held back the process of development.” Since Pakistan, he said, was unable to exploit fully Balochistan’s mineral resources on its own, there was a need for foreign firms’ services and state of the art technology. “Rationally speaking, we should not shy away from inviting foreign investors and experts to develop our natural resources for us”, he asserted.

But Dr Samar Mubarakmand, the reputed nuclear scientist, argues: “If we can refine uranium locally, then why can’t we refine copper and gold?” He is one of the contenders for the mining or entire contract of the Reko Diq project and enjoys support in the Quetta secretariat. On October 22, he told the standing committee on inter-provincial coordination of the National Assembly that the Planning Commission of Pakistan, of which he is a member for science and technology, has prepared a project on Reko Diq, which has been cleared by CDWP and ECNEC and is now waiting for green signal from the Balochistan government. Reko Diq has large deposits of copper and gold but their quality is relatively of low grade..

According to the TCC, the mineral resource at Reko Diq is estimated at 5.9 billion tonnes. From this resource, an estimated 2.2 billion tonnes of economically mineable ore, with an average copper grade of 0.5 per cent and an average gold grade of 0.3 gms/tonne will be processed to produce 10 million tonnes of copper and 13 million ounces of gold in the form of payable metal in about 56 years of mine life.

On May 25, the Supreme Court, while hearing several petitions against the possibility of giving to a foreign company (TCC) a contract for mining copper and gold deposits in Reko Diq, had vacated its stay order which restrained the Balochistan government from issuing mining lease to any company.

Now it has asked the government to expeditiously decide the matter regarding renewal of the TCC’s lease for its licence had expired on February 19. The three-member bench is headed by Chief Justice Iftikhar Mohammad Chaudhry.

On February 3, the court had stopped the Balochistan government from awarding the lease till a final decision of the court.

The court will give its verdict only after the Balochistan government announces its decision about the mining contract.

The petitioners include 26 senators mostly from JUI-F, a former federal minister and Barrister Zafarullah Khan of Pakistan Watan Party. What they are seeking collectively is just refusal of mining lease to the TCC.

The TCC took over this project in 2006. It is interesting to note that the provincial government has 25 per cent stake in the project which is quite unusual. The company claims it has made an investment of over $220 millions and is committed to bring $3.3billion to make the mine operational. Under Balochistan Mineral Rules, 2002, once it is established that the project is feasible, the licence holder is entitled to mining contract.

According to Dow Jones Newswire, the TCC received a letter from the government of Baluchistan a month ago which contains ten observations and objections regarding the TCC’s application for the mining lease. The company says the observations were made within “the context of an intended refusal” to award a mining lease. The government gave 30 days to respond to the objections but refused to hold discussions.

The CE of the TCC, Tim Livesey, believes there was “a miscommunication going on” but he would still like to develop the project. He noted that the government’s observations and objections didn’t “seem to bear any connection” with Balochistan’s mining code.

The letter says that the company was “silent” on how to process the concentrate from the project and that Tethyan cannot apply for the mining lease on its own without gaining prior consent of the government of Balochistan because it was a partner in the project and possesses a 25 per cent stake. In reply, Livesey argues that neither an applicant is required under the mining code to propose a solution to processing concentrate, nor was there any mention to make a joint application.

Balochistan, Livesey says, has technically surrendered its equity stake in the project to TCC by failing to notify to it whether it wanted to become an active partner in the project. Under an agreement with the government, Tethyan now has the right to acquire the stake from the government at a negotiated price.



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