Pakistan: Global Backing For Reko Diq – OpEd

The signing of the long awaited $6.4 billion Reko Diq mining agreement is now expected to take place next month. This is regarded as one of the most important projects of Pakistan. Final multi-lateral financing arrangements are nearing completion, with arrangements now in place for financing via the UK and US Export Import (EXIM) Banks, the World Bank and Asian Development Bank (ADB), all of whom have commitments as part of the agreement between all the major international stakeholders.

One of the largest undeveloped copper and gold deposits in the world is Reko Diq, which lies in Pakistan’s mineral rich Balochistan province. Once operational, it should have an annual output of over 200,000 tons of copper and 250,000 ounces of gold for 40 years. The project is a joint venture between a Canadian headstone mining giant, Barrick Gold Corporation, and the Government of Pakistan in partnership with the Government of Balochistan. Canadian mining corporation Barrick Gold, which owns 50% of the project, has been clear that it will develop the mine under international environmental and operational standards. 

The deal’s formal signing will coincide with the completion of the documentation necessary to reach financial close, according to sources close to the negotiation process. International lenders have done extensive due diligence and are now working through preliminary term sheets into alignment with Pakistani legal and regulatory frameworks. These financing arrangements, as a key part of rolling out the project successfully, guarantee that funds are there and instil confidence on a global level in how the project is set up and is transparent. 

It comes after a 10-year legal saga that previously stopped the project in its tracks. The previous developers, Tethyan Copper Company (TCC), have been denied a mining lease by the Government of Balochistan in 2011, which led to international arbitration. The case led to a legal dispute with Pakistan ending with a $5.9 billion award by the International Centre for Settlement of Investment Disputes (ICSID) in 2019. After prolonged negotiations, the current agreement is a restructured and amicable resolution and it paves way for a mutually beneficial partnership.

In a recent statement, Barrick Gold CEO Mark Bristow was optimistic about the project, and said that the project had a chance to become a world class operation and an engine for economic development in Pakistan. He said: “We are committed to working with the local communities and government to deliver this project and bring about a long-term value and sustainable development.” In addition, Bristow indicated that the project would adopt state-of-the-art technology and be led by strong environmental, social, and governance (ESG) frameworks.

The Reko Diq project is not just a mining project for Pakistan. It presents a chance for it to draw foreign investment, to correct its trade balance through exports of its minerals, and to fuel job creation in one of its neediest provinces. The project is of strategic importance as it was stressed by the representatives of both the Ministry of Finance and the Ministry of Energy, who repeated the government’s readiness to help it sail through bank bureaucracy as fast as possible.

On the other hand, World Bank and ADB most likely will offer concessional and policy-based loans, mainly towards building the necessary infrastructure and regulatory frameworks to facilitate large scale mining. Along with these institutions, regional lenders and commercial banks are said to collaborate as well for co-financing arrangements.

In addition, a considerable local infrastructure investment in the form of roads, power supply, and water management systems is part of the project. This investment will not only help in mining, but it will also be beneficial to the local communities in the long run through basic service provision. Social responsibility initiatives of the project include capacity building programs and vocational training of the local workforce.

As the project moves forward, environmentalists and human rights organizations have urged greater transparency and a fuller community engagement. Barrick Gold and the Pakistani authorities have responded by promising to undertake ongoing environmental impact assessments and set up community liaison committees to ensure development and mechanisms for addressing grievances.

The signing of the final agreement is what will allow the mobilization of technical teams and the start of preliminary works at the Reko Diq site. Initial production should be in five to six years and full-scale construction is expected to start within the next 12 to 18 months. The signing of the $6.4 billion Reko Diq project, which is inching closer to its final agreement, is about to reshape Pakistan’s mining sector and set the benchmark for public private partnerships in the country. International financing is almost in the bag and the regulatory hurdles have been largely resolved, leaving the project on the brink of a transformative chapter in which it could unlock untapped mineral wealth, and make a measurable contribution to Pakistan’s economic growth in the decades to come.