Balochistan pledges to run Reko Diq
By Syed Fazl-e-Haider
KARACHI - The local government of the southwestern Pakistani province of Balochistan has said it will take full control of the Reko Diq copper mine, a
US$3.5 billion venture co-owned with Canada's Barrick Gold and Chilean copper miner Antofagasta, from its present operator, Tethyan Copper
Company (TCC).
TCC's role in the project, if any, will reportedly be decided by a recently constituted board of governors headed by Pakistani nuclear scientist Samar
Mubarakmand, which is to oversee the Reko Diq project.
The provincial government in December announced the cancelation of the present arrangement for Reko Diq, alleging TCC had violated the existing
agreement. The Balochistan government's decision comes as efforts were being made to renegotiate the mining deal with the government and TCC
was set to apply for a mining license after completion of a feasibility study this month.
Last week, Barrick Gold's chief operating officer, Peter Kinver, said the companies were having a constructive dialogue with government authorities on
the Reko Diq project. Barrick and Antofagasta each has 37.5% of the project, with the remaining 25% belonging to the provincial government. Kinver
said the project's feasibility study is being finalized and reviewed, Reuters reported.
Balochistan chief minister Nawab Muhammad Aslam Khan Raisani has secured support from cabinet colleagues and issued directives for legislation
to be drawn up "to secure the province's financial resources by making investments in major oil, gas and mineral exploration companies operating in
the province", Dawn newspaper reported this week, citing unnamed official sources.
The provincial government has also decided to take control of the Saindak copper project once an agreement with Metallurgical Construction Company
of China (MCC) expires in October next year. With an estimated life span of more than 50 years, Reko Diq mine is four times larger in copper ore
tonnage than Saindak.
The Balochistan government is making the moves with the intention of making "best use of its financial resources", in particular arrears it is to receive
from the country's Gas Development Surcharge and allocations from the federal government under the National Finance Commission Award scheme,
Dawn reported.
After earmarking necessary funds for development and non-development expenditures, efforts would also be made to apportion a sizeable amount of
money to buy major shares in Pakistan Petroleum Ltd, OGDCL - the country's national oil and gas company - and Gwadar Port and Gwadar Free Trade
Zone, projects being developed in the province's coastal city of Gwadar, Dawn said.
The first meeting of the newly constituted board of governors will discuss the role, if any, of TCC in Reko Diq and the source of funding for the project.
The Reko Diq mine reportedly could make annual profit of 15.4 billion rupees (US$181 million).
The Dawn report identified at least three reasons for scrapping the Reko Diq deal, saying TCC allegedly violated a provision of the joint venture
agreement by transferring its share to other companies at the exploration stage and without the consent of the second party, the Balochistan
government. Secondly, the company was required to establish a mining academy to produce skilled workers, but it was not willing to make that
investment. Thirdly, the company was reluctant to set up a refinery plant in Balochistan, but instead planned another arrangement outside Pakistan,
which was not acceptable to the government.
The report said, "TCC was planning to lay pipelines from Reko-Diq to Gwadar and dispatch concentrate through this pipeline to Gwadar and then
transport to Chile/Canada for final refining purposes."
The federal government conditioned renegotiations with TCC on the formation of a joint venture with a smelting firm, as it believed that processed metal
rather raw copper would be exported.
TCC in March said the government's proposal to set up a smelting and refining operation was based on a doubtful perception of benefits. "We have
pointed out that the economics of smelting and refining are very poor," TCC chief executive Peter Jezek was reported by Reuters as saying.
"Mining and concentrating actually captures over 90% of the copper chain value, smelting less than 10%. There is a combination of a lack of information
and fear of the unknown. The problem to a very large extent is not having the basics of understanding in place."
Despite the absence of the proposed mining academy, Balochistan's Mines and Mineral Development Department has sufficient technical staff to run
the Reko Diq project, Dawn reported, citing unnamed sources.
Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic
Development of Balochistan (2004). He can be contacted at .
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
http://atimes.com/atimes/South_Asia/LE27Df01.html
By Syed Fazl-e-Haider
KARACHI - The local government of the southwestern Pakistani province of Balochistan has said it will take full control of the Reko Diq copper mine, a
US$3.5 billion venture co-owned with Canada's Barrick Gold and Chilean copper miner Antofagasta, from its present operator, Tethyan Copper
Company (TCC).
TCC's role in the project, if any, will reportedly be decided by a recently constituted board of governors headed by Pakistani nuclear scientist Samar
Mubarakmand, which is to oversee the Reko Diq project.
The provincial government in December announced the cancelation of the present arrangement for Reko Diq, alleging TCC had violated the existing
agreement. The Balochistan government's decision comes as efforts were being made to renegotiate the mining deal with the government and TCC
was set to apply for a mining license after completion of a feasibility study this month.
Last week, Barrick Gold's chief operating officer, Peter Kinver, said the companies were having a constructive dialogue with government authorities on
the Reko Diq project. Barrick and Antofagasta each has 37.5% of the project, with the remaining 25% belonging to the provincial government. Kinver
said the project's feasibility study is being finalized and reviewed, Reuters reported.
Balochistan chief minister Nawab Muhammad Aslam Khan Raisani has secured support from cabinet colleagues and issued directives for legislation
to be drawn up "to secure the province's financial resources by making investments in major oil, gas and mineral exploration companies operating in
the province", Dawn newspaper reported this week, citing unnamed official sources.
The provincial government has also decided to take control of the Saindak copper project once an agreement with Metallurgical Construction Company
of China (MCC) expires in October next year. With an estimated life span of more than 50 years, Reko Diq mine is four times larger in copper ore
tonnage than Saindak.
The Balochistan government is making the moves with the intention of making "best use of its financial resources", in particular arrears it is to receive
from the country's Gas Development Surcharge and allocations from the federal government under the National Finance Commission Award scheme,
Dawn reported.
After earmarking necessary funds for development and non-development expenditures, efforts would also be made to apportion a sizeable amount of
money to buy major shares in Pakistan Petroleum Ltd, OGDCL - the country's national oil and gas company - and Gwadar Port and Gwadar Free Trade
Zone, projects being developed in the province's coastal city of Gwadar, Dawn said.
The first meeting of the newly constituted board of governors will discuss the role, if any, of TCC in Reko Diq and the source of funding for the project.
The Reko Diq mine reportedly could make annual profit of 15.4 billion rupees (US$181 million).
The Dawn report identified at least three reasons for scrapping the Reko Diq deal, saying TCC allegedly violated a provision of the joint venture
agreement by transferring its share to other companies at the exploration stage and without the consent of the second party, the Balochistan
government. Secondly, the company was required to establish a mining academy to produce skilled workers, but it was not willing to make that
investment. Thirdly, the company was reluctant to set up a refinery plant in Balochistan, but instead planned another arrangement outside Pakistan,
which was not acceptable to the government.
The report said, "TCC was planning to lay pipelines from Reko-Diq to Gwadar and dispatch concentrate through this pipeline to Gwadar and then
transport to Chile/Canada for final refining purposes."
The federal government conditioned renegotiations with TCC on the formation of a joint venture with a smelting firm, as it believed that processed metal
rather raw copper would be exported.
TCC in March said the government's proposal to set up a smelting and refining operation was based on a doubtful perception of benefits. "We have
pointed out that the economics of smelting and refining are very poor," TCC chief executive Peter Jezek was reported by Reuters as saying.
"Mining and concentrating actually captures over 90% of the copper chain value, smelting less than 10%. There is a combination of a lack of information
and fear of the unknown. The problem to a very large extent is not having the basics of understanding in place."
Despite the absence of the proposed mining academy, Balochistan's Mines and Mineral Development Department has sufficient technical staff to run
the Reko Diq project, Dawn reported, citing unnamed sources.
Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic
Development of Balochistan (2004). He can be contacted at .
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
http://atimes.com/atimes/South_Asia/LE27Df01.html
