The federal and Baluchistan governments inked a deal on Reko Diq with the Canadian business Barrick Gold on 16 December, after the Supreme Court approved a settlement to begin mining at the site located in Chagai district. The Baluchistan administration described the arrangement as historic and the largest investment pact ever made by the nation. The statement said, “The $6.5 billion punishment levied by an international court has been ineffective after signing the Reko Diq accord. Senior authorities attended a ceremony where the deal was signed by representatives of the federal and Baluchistan governments as well as Barrick Gold Corporation.”
The essential legislation has been passed by the legislature and it has gotten a favorable ruling from Pakistan’s Supreme Court. Officially, Barrick owns 50 percent of Reko Diq, 25 percent is owned by three federal state-owned enterprises, 15 percent by the Province of Baluchistan on a fully funded basis and 10 percent by the Province of Baluchistan on a free carried basis.- Advertisement –
Reko Diq is one of the largest undeveloped copper-gold deposits in the world. On 29 July 1993, the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) was signed by BHP Minerals, the Baluchistan Development Authority (BDA), and others. Later, on November 23, 2006, the Tethyan Copper Company (TCC) paid $240 million for BHP’s shares in CHEJVA. Due to a novation deal between the BHP and the Balochistan government, it has joined the CHEJVA.
The Tethyan Copper Company (TCC) filed its mining lease application and feasibility study on 26 August 2011, and the licensing authorities rejected them on 15 November 2011. On 6 November 2011, a petition was submitted to the Supreme Court requesting that it issue a directive prohibiting the Baluchistan government from awarding mining licenses in an arbitrary and illegal way.
The Supreme Court declared CHEJVA to be invalid from the beginning on 6 January 2013. On 12 December 2011, the TCC filed a complaint with the International Centre for Settlement of Investment Disputes (ICSID) regarding alleged violations of the Australia-Pakistan Bilateral Investment Treaty (BIT) by Pakistan and with the International Chamber of Commerce (ICC) regarding alleged breaches of CHEJVA contracts by the Baluchistan government.
Initially, with respect to the ICSID procedures, the ICC tribunal suspended its own proceedings. The tribunal published a draught ruling on jurisdiction and responsibility on 12 February 2016, holding that it had jurisdiction over TCC’s claims and that TCC had invested in Pakistan. In this regard, Pakistan has violated its BIT commitments by expropriating TCC’s investment there.
Undeniably, the restructured arrangement is heavily skewed in the investor’s favor. Although, it’s true that a bird in the hand is worth two in the bush, it’s time to move on and utilize the agreement to its full potential. It is high time that the government adopt the policies to make sure that Balochistan and its people will see these benefits quickly. Policymakers must start working to develop institutional capabilities, though, so they can create international accords that serve the interests of the nation rather than those of the investors.
TCC was awarded damages against Pakistan by the ICSID tribunal on 12 July 2019, totaling $5.894 billion plus interest of $700,000 per day. The London Court of Arbitration also fined Pakistan $4 billion at the same time. Subsequently, the TCC started legal action to enforce the decision in a number of countries, including Australia, the USA, and the UK (British Virgin Islands). The ICC reopened its case against the Balochistan government and was anticipated to issue another award. Pakistan contested the ICSID Award at the time by starting legal action to have the award revoked.
The out-of-court agreement puts an end to the protracted battle over restarting the development of the Reko Diq mine in Baluchistan’s Chaghi area by waiving the $11 billion penalty imposed on Pakistan by a World Bank arbitration court in 2019 as well as the other obligations. The agreement, which takes effect on December 16, was reached just days after Pakistan’s Supreme Court ruled that the March 2022 out-of-court settlement between the Pakistani government and the foreign corporations Barrick Gold and Antofagasta was legitimate.- Advertisement –
However, later on, Antofagasta made the decision not to take part in the reconstituted project and withdrew its $3.9 billion claim in place of its $900 million claim. Both the TCC and Pakistan decided to irrevocably withdraw all pending legal actions and to work outside the court settlement. “The project’s 2010 and 2011 feasibility expansion studies are now being updated”. “By 2024, it should be finished, with the first production set for 2028.” “With its unique combination of large scale, low strip, and good grade, Reko Diq is expected to have a life of at least 40 years. We envisage a truck-and-shovel open pit operation with processing facilities producing a high-quality copper-gold concentrate.”
The project will be built out in two stages, with a total annual processing capacity of 80 million tons. The project is planned to begin production between 2027 and 2028, with an estimated initial capital cost of $7 billion. During peak construction, the project is planned to employ 7,500 people and once in production, it will produce roughly 4,000 long-term jobs.
Reko Diq is predicted to have a profound influence on Pakistan’s economy. In addition to the economic advantages it would provide, the project will significantly increase Baluchistan’s growth potential, by generating jobs, boosting the local economy, and expanding investments in healthcare, education, vocational training, food security, and the provision of clean water. Full funding of the province’s stake in the mine will allow Baluchistan to profit from its 25 percent ownership’s dividends, royalties, and other advantages without having to contribute financially to its development or operation.
Undeniably, the restructured arrangement is heavily skewed in the investor’s favor. Although, it’s true that a bird in the hand is worth two in the bush, it’s time to move on and utilize the agreement to its full potential. It is high time that the government adopt the policies to make sure that Balochistan and its people will see these benefits quickly. Policymakers must start working to develop institutional capabilities, though, so they can create international accords that serve the interests of the nation rather than those of the investors.
