In a major step toward exploiting one of the world’s largest untapped copper and gold deposits, Pakistan has reached a settlement with Barrick Gold Corporation to revive the Reko Diq project in the southwestern Balochistan province.
The project was suspended in 2011 due to a dispute over the legality of its licensing process. Barrick Gold (NYSE: GOLD)(TSX: ABX) says the Reko Diq hills host massive undeveloped open pit copper-gold porphyry deposits.
Under the out-of-court deal, an $11 billion penalty imposed on Pakistan by a World Bank’s arbitration court and other liabilities will be waived and Barrick and its partners will invest $10 billion in the project, Pakistan Finance Minister Shaukat Tarin told a news conference in the capital, Islamabad.
Pakistan’s Prime Minister Imran Khan says the work on the project will create 8,000 jobs.
In a statement, the Toronto-based mining giant Barrick Gold said the reconstituted project will be held 50% by Barrick and 50% by Pakistan stakeholders, comprising a 10% free-carried, non-contributing share held by the government of Balochistan, an additional 15% held by a special purpose company owned by the government of Balochistan and 25% owned by other federal state-owned enterprises.
A separate agreement provides for Barrick’s partner Antofagasta PLC to be replaced in the project by the Pakistani parties.
Barrick’s president and chief executive officer Mark Bristow hailed the agreement as an important step towards the development and operation of Reko Diq and a tribute to the decisions of all parties to work towards a mutually beneficial outcome in a spirit of partnership.
“Barrick has successfully partnered with host countries worldwide and our philosophy of sharing the economic benefits our mines generate equitably with core stakeholders is also evident in the ownership structure of the new Reko Diq. This is a unique opportunity for substantial foreign investment in the Balochistan province and will bring enormous direct and indirect benefits not only to this region but also to Pakistan for decades to come. In addition to local employment and skills development, local procurement, infrastructure upgrades, and improved medical and education systems, Reko Diq could also be the springboard for further exploration and other mineral discoveries along the highly prospective Tethyan Metallogenic Belt,” he said.
Barrick will be the operator of the project which will be granted a mining lease, exploration license, surface rights, and a mineral agreement stabilizing the fiscal regime applicable to the project for a specified period.
The Reko Diq project in Chaghai district of Pakistan’s southwestern province of Balochistan is believed to be the world’s largest copper and gold deposit It is close to Pakistan’s border with Iran and Afghanistan. In Balochi language Reko Diq means the Sandy Mountains.
In 2011, Pakistan denied Barrick Gold and Chile’s Antofagasta (ANTO.L) a license to develop it in line with Pakistani court orders.
The Balochistan cabinet on March 19, approved the proposed agreement and settlement regarding the Reko Diq project. The approval was given during a special cabinet meeting chaired by Balochistan Chief Minister Abdul Quddus Bizenjo.
In July 2019, an international arbitration tribunal of the ICSID struck a penalty of $6 billion on Pakistan for its 2011 decision to deny the mining lease to the TCC — a 50-50 joint venture of Barrick Gold Corporation of Australia and Antofagasta PLC of Chile.
The tribunal, chaired by Germany’s Klaus Sachs and Bulgarian arbitrator Stanimir Alexandrov and UK’s Lord Hoffmann, had ordered Pakistan to pay over $4 billion in damages to TCC in addition to $1.7 billion in pre-award interest.
The tribunal had found that Pakistan had unlawfully denied the TCC a lease to mine copper and gold deposits at the Reko Diq mine.
