Tuesday, 28 January 2014

Pakistan and the Reko Diq conundrum

Reko Diq is the largest copper-gold deposit in the world. Unfortunately, it is located in Pakistan. Had it been a few kilometres north under the territory of Iran, it might have been the World's biggest producer of Gold. But as with Lakhra coal in Sindh, Pakistan's authorities are not interested in mining Reko Diq.

First, an agreement was reached with BHP in 1993. The rights changed hands, and the latest owner was Tethyan Copper Company, a joint venture of Barick (Canada) and Angofagasta (Chile). The Government of Balochistan was unhappy with the terms of agreement reached in 1993, and challenged the agreement in the Supreme Court, and did not renew the company's license. The Supreme Court ordered in 2013 that the agreement was a farce and that the GoBalochistan could now enter a new agreement.
The TCC says it had spent $220 million during the past five years on exploring the deposits in the ochre sand desert, and was planning to invest a total of $3.3 billion when the provincial government abruptly refused to grant it a mining licence. 
 The previous government also provided rights of Reko Diq to a Chinese company which had angered TCC. TCC went to the International Centre for Settlement of Investment Disputes (ICSID) to challenge the granting of license to the Chinese company. Due to serendipity and a good show by Dr. Samar Mubarakmand, the case was dismissed in favour of the Balochistan Government. Consequently, TCC decided to give up its right to mine Reko Diq and will be seeking damages from the Government.
But now, there is no indication by the Federal Government or the GoBalochistan with regards to the mining of Reko Diq. Dr. Samar Mubarakmand is leading exploration in a niche, but obviously Government Authorities do not have the resources for large scale mining. Mr. Mubarakmand was also critical of the last Government for allocating only Rs. 1400 million for the project whereas the cost for laying a water-sewer system is Rs, 1980 million.
This is not new from Mr. Mubarakmand. He has dealt with the Lakhra Coal Gasification project in the past. The success or failure of that project has always been debated but Mr. Mubarakmand continued his critique of the Government for non-allocation of funds. 
Moreover, the Government has not made a case against the TCC. Barick of Canada (parent of TCC) has been implicated in a separate case for harming the environment and has agreed to pay a record fine of $16.4 million. This should be ground enough for the Government to refuse to pay/or reduce the  payment of damages to Barick, which is said to be under a state of freeze since the verdict.
It is time that the Government carries out an independent and transparent auction of Reko Diq's mining rights. Previous unauctioned takeovers by China at Gwadar and Saindak have not resulted in propitious results for the people of Balochistan. With the new pro-people Government in place in Balochistan, I hope a decision will be reached soon.