After a long struggle a consensus has been drawn on the Reko Diq project. The result of the consensus has created a win-win situation for all the concerning parties. During 1993 – 2006, Australian Company BHP Minerals and Balochistan Development Authority BDA signed Chaghai Hills Joint Exploration Agreement (CHEJVA) for exploration of minerals in Riko Diq with share-holding ratio 75% with foreign firm and 25% with Government of Balochistan (GOB). The agreement also included that World Bank’s International Center for Settlement of Investment Disputes (ICSID) was to mediate in case of disputes.
In 2006, Tethyan Copper Company (TCC) which was a consortium between the Canadian based mining company Barrick Gold and Chile’s Antofagasta acquired the project namely (Barrick Gold and Antofagasta). In 2010-11, TCC completed feasibility on Western Porphyries (H13, H14, H15) and Tanjeel (H4), submitted same for mining lease which was rejected by GOB on pretext that CHEJVA was exploitative in nature.
The matter, resultantly went to litigation. Supreme Court of Pakistan in 2013 declared the project of CHEJVA null and void and denied mining lease to TCC. In response, TCC filed a petition in ICSID and International Criminal Court (ICC) under CHEJVA and Pakistan – Australia Bilateral investment treaty. The decision was given in favor of TCC and $6 Billion were awarded to TCC in 2019, while the hearing at ICC would have resulted in another award assessed to be $4-5 Billion, making a total of $11 Billion penalty. Since that time multiple rounds of negotiations were carried out and as a result in 2022 a board settlement was reached with respective partners of TCC.
Shareholding structure for the foreign firm has been reduced to 50% as compared to earlier 75%. The remaining 50% is to be shared between Government of Balochistan (25 %) and Three Pakistan State Owned Enterprises (25 %) i.e. OGDCL, PPL and GHPL. The new agreement does not only save Pakistan from the $11 billion penalty and a concurrent increase in interest on award ($255 Million per year) but also saves additional cost and time of holding fresh bidding, which would have necessitated an additional cost of $ 200- 300 Million in feasibility studies and time of 24 -30 months.
The earlier deal involved financial contribution of approximately $1 Billion by GOB for its 25% share whilst present deal is non-equity based, meaning that GOB does not have to contribute anything for its share of 25%. The share of economic benefits to GOP and GOB has increase to 63 % (financial effect approximately $64 Billion) as compared to only 41 % in the previous agreement. In the new agreement there is a substantial increase in royalty to GOB; (earlier 2% now increase to 5%). Shareholding of 50% domestic partnership will result in domestic capacity development in mining and exploration; facilitating subsequent feasibilities and development of huge un-tapped mineral deposits.
The new agreement also envisages shared operation control with the foreign firm with gradual shifting of control to domestic partner as against no operational control in earlier deal. The new deal capitalizes updated Balochistan Mineral Rules and National Mineral Policy; ensuring that no discriminatory incentives are accorded to Barrick Gold. All the aforementioned developments were the result of extensive efforts from all organizations either civilian or military. A joint consensus helped in shaping a deal that would be extremely beneficial for the people of Balochistan.
About Author: Humais Sheikh is a defense analyst. He has completed his Masters in Defense and Strategic Studies from Quaid-I-Azam University, Islamabad