Reko Diq project — exploiting own treasures

Khalid A Khokhar
Amongst dozens of ongoing mega development projects in Balochistan, Reko-Diq gold and copper mining project is considered to be a big national strategic asset that would transform Balochistan as the richest province in the country. According to experts involved in mining and exploration, some 12.3 million tons of copper and 20.9 million ounces of gold lie in the Reko Diq area (EL-5) in the Chaghi area of Pakistan’s southwest Baluchistan province – bigger than those evaluated at Sarcheshmeh in Iran and Escondido in Chile. The discovery heralded attraction of all the 12 major companies involved in mining & exploration business with the mining magnets started “behind-the-scene lobbying” for getting the contract at Reko-Diq from Balochistan Development Authority (BDA). After due deliberations, a Canadian and Chilean company Tethyan Copper Company (TCC) was given the licence for exploring copper, gold and other base metals in EL-5 area, by the government of Balochistan. Under the agreement, 75 per cent shares were given to TCC and 25 per cent to the BDA. Reports emerging from various sources indicate that the US $52 billion of natural deposit will be sold for just US $08 billion to the TCC. The mind-boggling question is why 75% of reserves are being given to get 25% back after investing 25% in (EL-5) project? According to reliable estimate, only a small part of the Reko Diq gold and copper mines (EL-5) have deposits worth US $270 billion. Two licences (EL-6 & EL-8 other bigger deposits in the same belt) were given to the same company (TCC) on a 100 per cent ownership basis and without any share to the government of Pakistan.

The people of Balochistan feel dissatisfied by this unjust and controversial licence (EL-5) to Tethyan Copper Company Pakistan (TCCP) at throwaway economic returns. It is generally believed that the contract to TCCP has been grossly undervalued and the actual project estimate should be in the billions of dollars. Besides, serious embezzlements have been cited by the print media in awarding of licence to the Antofagasta and Barrick Gold Corporation. The treasure discovered at (EL-5) Reko Diq belongs to the people and the government of Balochistan and they have the right to award a mining licence for the project. The exploration friendly reserves are roughly priced at least $104 billion in international market; however, the entire exploration would require total capital expenditures of only $6 billion. The officials of the mining industry contend that if the concentrated ore is first smelt by setting up a smelter indigenously and refined by setting up a refinery, the refined copper and gold can be sold at much higher prices – possibly at $500 billion instead of peanuts. Pakistan wants to export the finished product of copper and gold and not raw ore concentrate. But the TCC was not ready to accept this demand and wanted to export copper concentrate. Additionally, the exploration of mines will create thousands of high paying jobs, giving a massive boost to the local economy. Consequently, the provincial government had decided to set up copper refinery and processing plant in the province by earmarking Rs8.5 billion in Budget 2011-12. The Balochistan government will invest over Rs20 billion in different sectors through an Investment Board to generate resources for setting up refinery at Reko-Diq Copper-Cum-Gold Project site. With functioning of the proposed refinery, the Balochistan government would be earning Rs58 billion in annual incomes.

The Reko-Diq Copper-Cum-Gold Project is fraught with so much confusion and mystery that it is difficult to interpret and understand the real deal. Almost all the international bidders are indulging in secret talks with BDA/Islamabad. An Australian mineral exploration firm originally started the exploration and invested some $30 million but in 2006 sold the company to a Canadian and Chilean joint venture for $230 million. The old company was an Australian public company Tethyan Copper Prosperity Limited (TCPL) and the new company was named Tethyan Copper Company of Pakistan (TCCP). Under the agreement with TCPL, Chagai Hill Exploration Joint Venture Agreement (CHEJVA) consisted of EL-5, EL-6 and EL-8 in Chaghi areas of Balochistan province. Reko Diq (EL-5) is an exploration licence issued in 2002 by DMMD (Department of Mines and Mineral Development) to TCC. However, EL-5 licence has expired in February 19, 2011. The licence was not renewed due to its unjust conditionalities in the contract. Some of these violations include: a) EL-6, EL-8 and RL-7 have been in possession of TCC and its owners Antofagasta on 100 per cent basis and that is a violation of CHEJVA and MRB 2002. b) Drilling of 275,000 meters is a violation of CHEJVA and BMR 2002. c) Drilling EL-24 by TCC is a violation of BMR 2002. d) Construction of an airport on EL-24 is a violation of CHEJVA and BMR 2002. e) Expenditure stated at $220 million by TCC without an itemization is a violation and to claim that these huge amounts were spent in Balochistan, are not correct.

Based on the dicey dealings of TCCP echelons, the government of Balochistan announced the cancellation of the Reko Diq agreement on Dec 25, 2009. The provincial cabinet unanimously backed this. It was decided in the cabinet that not to extend exploration licence of Reko Diq to the Canadian company and not to issue any mining licence for further work. Chief Minister Nawab Aslam Raisani said on the occasion: “Cancellation of the Reko Diq copper and gold project agreement is a step towards getting control over provincial resources in accordance with the wishes of the people.” The project was handed over to the Department of Mines and Mineral Development of Balochistan and the services of eminent nuclear scientist Dr Samar Mubarakmand were also sought, who was made head of its Board of Governors. The seasoned nuclear expert vehemently argues that Pakistanis are fully capable of completing the entire project themselves. There is no need to award the contract of mining to any foreign concerns. It was further argued that the national interest was not considered as a ‘priority’ while awarding Reko Diq contract to TCCP. In many countries, where agreements had already been signed giving a much bigger share to foreigners, these agreements were revised in the interest of the host country. Ireland, South Africa, Venezuela renegotiated their mining and oil exploration contracts to their benefit. A petition filed in the Supreme Court, which is currently hearing the case on the award of licence of EL-5 (Reko Diq) to the potential bidders. The 3-member bench headed by Chief Justice Iftikhar Mohammad Chaudhry in an interim judgment of May 25 says: “all decisions by GoB while issuing mining licence must be in accordance with Balochistan Mining Rules of 2002. Now, it is the Government of Balochistan to decide who will get the mining and processing licences, however, a long list of irregularities and illegal actions will be reviewed by the apex court, after the award of contract.

In nutshell, Pakistan now has to issue mining licences to extract gold and cooper, which is worth billions of dollars. Despite CM Raisani’s strong public reassurances that Reko Diq copper and gold project can be undertaken with Rs8.5 billion, following two points need to be looked into: a) the exploration at EL-5 demands revenues generation activity (international funding) to acquire infrastructure associated with the mining industry. b) It also necessitates the provision of local expertise to explore and develop deposits for export in finished form. Keeping in view of these two important impediments, a reliable and renowned foreign company be hired that should offer 70-80 per cent share from these unfathomable treasures. Notwithstanding the fact that Reko-Diq project offers trade activities with local people given various jobs in exploring and mining fields, will help significantly improve their living standard.

Courtesy: The News International