Foreign Mining Venture Seeks Investment Guarantees

ISLAMABAD: A joint venture of western mining giants has sought sovereign guarantees from Pakistan for protection of its estimated investment of over $5 billion in the resource-rich field of Reko Diq, having known deposits of around 4 billion tons of copper, it is learnt.
Tethyan Copper Company, a joint venture between Antofagasta of Chile and Barrick Gold Corporation of Canada, holds a 75 per cent interest in the exploration licence concerning Reko Diq field in the Chaghi hills of Balochistan while the remaining 25 per cent share is held by the Balochistan government.
Balochistan would earn billions of dollars in profits and royalty over the life of the mine, sources said, adding there was a need to set a good precedent so that the country could become an attractive place for investors in future.
"Negotiations are in progress among three parties including the federal government, the provincial government of Balochistan and Tethyan Company for reaching a mineral agreement to establish a framework for future investment," said a high-level official of the Ministry of Petroleum when asked for comments.
In case an agreement is finalised, Tethyan is expected to invest around $5 billion till 2013. The agreement is proposed to be for 13 years and each year an investment of around $1 billion will be made, taking total investment to $13 billion.
When Director General Mineral, Ministry of Petroleum, was contacted for comments, he confirmed to The News that negotiations were under way to finalise a framework for future investment, which was expected to be finalised in a few months.
Under the Mining Act 1948, provinces give concession grants to the parties concerned. Reko Diq field holds large copper and gold reserves on the Tethyan belt in the remote and sparsely populated province of Balochistan.
At the end of 2008, combined deposits of resources at Reko Diq were estimated at over four billion tonnes. A feasibility study for the project was initiated in December 2007 and is expected to be completed in the second half of 2009. An additional 146,000 meters were drilled in 2008, which mainly related to infill drilling to upgrade the existing resources.
Costs incurred by Tethyan in 2008 amounted to $100 million, including expenditures on feasibility study and acquisition of additional surface rights. When Tethyan was contacted at its office in the federal capital for comments, a written reply was sent which states: "In our negotiations with the government, the sovereign guarantees that we are seeking are already being provided to foreign investors in Pakistan, particularly in the oil and gas sector.
"According to the terms of the agreement for the exploration licence of which the government of Balochistan is 25pc partner, TCC has made 100pc investment for exploration and feasibility of Reko Diq project.
"At present, negotiations are in progress with the government of Balochistan and the federal government for a mineral exploration agreement to establish a framework for future investment. We hope to conclude this agreement soon and are keen to make this a win-win deal for all the parties involved."