On March 20, Barrick Gold and Antofagasta announced that they had reached a framework agreement with the governments of Pakistan and Baluchistan province to restart the Reko Diq (RD) project. The project, one of the world's largest undeveloped open-pit porphyry copper-gold deposits, was suspended in 2011 amid a dispute over the legality of the permit process.
The RD project, located in The Chaghi district of Baluchistan province, has about 12 million tons of Copper and 650 tons (20.9Moz) of gold resources, which was formerly owned by Tethyan Copper Company Pty Limited (TCC), a joint venture between Barrick and Antofagasta.
TCC's 1998 agreement with the Baluchistan government gave it the right to a mining lease, but only under the government's usual requirements. After TCC invested $220m in exploration, The project stalled after Pakistan refused to grant a mining permit in 2011, citing "opaque access methods". TCC subsequently initiated international arbitration with the World Bank's Center for International Settlement of Investment Disputes (ICSID) and won the case in July 2019 with a compensation award of us $5.97 billion (38 billion yuan). The figure is equivalent to 2% of Pakistan's GDP, and Pakistan continues to pursue legal action without paying.
The agreement stipulates that the restructured project will be 50 percent owned by Barrick and 50 percent owned by Pakistani stakeholders, including:
The Balochistan government holds a 10 per cent stake;
A special purpose company owned by the Balochistan government holds a 15% stake;
Other Pakistani state-owned companies hold 25 per cent.
Another agreement stipulates that Antofagasta will not participate in the restructured project because the RD project does not support the company's growth strategy, which focuses on copper and by-product production in the Americas, particularly Chile, Peru, the US and Canada. The two sides have agreed to work together this year to finalize and ratify the final agreement. Antofagasta will exit its equity interest in TCC if the agreement is executed and the following conditions are met:
The RD project will be restructured by TCC, and THE ICSID ruling of TCC will be resolved;
A consortium of Pakistani state-owned companies will acquire a stake in TCC's subsidiary, which will hold the project, for a consideration of about $900 million;
The proceeds will be distributed to Antofagasta.
Barrick will be the operator of the project, which will receive mining leases, exploration licences, surface rights and mineral agreements to stabilise the financial regime applicable to the project over a specified period. The process of finalizing and approving the final agreement, including stabilizing the financial regime under the mining agreement, will be fully transparent and involve the federal and provincial governments as well as the Supreme Court of Pakistan. If the definitive agreement is executed and conditions for completion are met, the project will be restructured, including the settlement of damages awarded by the ICSID. Mark Bristow, President and CHIEF Executive Officer of Barrick, hailed the agreement as an important step forward in the development and operation of the RD program and as a tribute to the decision of all parties to work in a spirit of cooperation to achieve mutually beneficial results;
"Barrick has successfully worked with host countries around the world and our philosophy of equitable sharing of the economic benefits generated by the mine with our core stakeholders is also evident in the ownership structure of the new RD. This is a unique opportunity for substantial foreign investment in Baluchistan that will bring enormous direct and indirect benefits not only to the region but also to Pakistan for decades to come. In addition to local employment and skills development, local procurement, infrastructure upgrades and improved health and education systems, RD can serve as a springboard for further exploration and other mineral discoveries along the highly promising Tethys metallogenic belt."
Upon completion of the transaction, Barrick will commence a comprehensive update of the project's feasibility study in 2010 and pre-feasibility study for expansion in 2011, which envisages the production of high-quality copper and gold concentrate using conventional truck and forklift open-pit mining operations with crushing and flotation processing facilities. If all goes according to plan, RD could be in production within five to six years, Mr Bristow said.
