Is Barrick Being Passed Over in Pakistan in Favor of the Chinese?

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There are many stories doing the rounds as to why the exploration license for Tethyan Copper Co (TCC), a joint venture between Canada’s Barrick Gold and Chilean copper miner Antofagasta, is likely to be revoked by the Pakistani Baluchistan provincial government this month. TCC has a 75% interest in the Reko Diq project a potential US$3bn copper and gold mine in the sprawling and largely lawless southwest state of Pakistan. The Baluchistan local government has the remaining 25%. The deposit is said to hold more than 27bn pounds of copper and 20 million ounces of gold according to an article in The Star although with the feasibility study still underway the figures are open to debate.

Barrick and Antofagasta agreed to buy into TCC in 2006 when they paid BHP US$ 200m for the exploration rights and are said to have since spent a further $200m on drilling and environmental assessments.

Shaukat Tarin, the Finance Minister, explained the governments’ case to the FT when he said, “We can’t continue with this project in its present form. We have to protect our key national interests,” Mr Tarin said ore extracted from the exploration site at Reko Diq would earn between $40bn-$50bn in raw copper exports in the next 25-30 years. “This is a tenth of what we could earn for Pakistan if the investor was to put in a processing plant to refine the copper and export it as a primary metal. Why should the investors take our raw material for processing to a third country and then make huge profits?” A senior official in the provincial government of Baluchistan said the export earnings could jump to $1,000bn in the next 25 to 30 years including earnings from gold and other precious minerals if the product was exported in the refined state.

Canadian diplomats are needless to say all over this case, making representations at national and local government levels. They have apparently been worried for months that Barrick’s exploration lease is in danger of being scuttled by Pakistani officials under pressure from the Chinese lobby. China is among Pakistan’s largest foreign investors and is financing the construction of a new commercial port in Gwadar, a coastal city near Pakistan’s border with Iran. China also operates a small copper mine close to Reko Diq.

The local government blames local feelings being spurred on by separatist guerrillas who have been fighting a low level insurgency for decades to rest control of gas and mineral resources. To be fair to the local population, when gas was discovered pipelines were promptly laid in and the gas piped off to other parts of Pakistan with nothing in return for the local communities. Local corruption is probably also involved in these machinations, one spokesman close to Barrick who has invested $1.5m in local schools and facilities is quoted as saying if a Chinese or Middle Eastern company comes in and takes this over, you know that they won’t be building schools or doing socially responsible projects there.

The local press see the unrest in the area as the result of interference by variously America, Russia, India, Iran and China well that’s spread around nicely then isn’t it? The reality probably is, as with much of Pakistan, a combination of tribal autonomy and decades of corrupt exploitation have made peoples distrustful of any outsiders and easy to stoke into separatist fervor.

Barrick’s position looks tenuous at the moment but they are experienced in dealing with such situations. The likelihood is some kind of deal will be reached which leaves local interests with a bigger slice of the pie. In the meantime such problems do not encourage other miners to invest hard earned dollars when they see what’s going on. This area of southwest Pakistan is rich in copper, gold, iron ore, chromites and potentially gem stones. With outside expertise and finance it could be transformed into a prosperous state, whether it will though looks increasingly unlikely.

–Stuart Burns

Comments (4)

  1. Ali says:

    Good for Balochistan!
    I hope that province of Pakistan becomes the most prosperous and developed province. Pakistan’s future rests with Balochistan and the sooner we realize that a healthy and strong province makes for a healthy and strong Pakistan, the better.
    Give 100% of the resources of each province to themselves. This will only make Pakistan stronger.

  2. Aziz says:

    Canadian officals are right about the Chinese influence in the Balochistan mineral projects because the Pakistani government already has given a similar project to China in the same region called SANDAK sometime back .

    But the native Baloch people have not seen any benefit. Similarly, now from the present project REKO DIG in the same region in Balochistan because Pakistan has history of taking Baloch peoples’resources by barrel of gun and shamelessly stealing the Baloch national wealth. And also Pakistani forcefully occupiedBalochistan March of 1948.

    In 1953, Pakistan also discovered a natural gas in Balochistan but the irony is Baloch people are still walking miles where the gas has been discovered to collect wood for cooking and the rest of all Pakistan has been prospering with Balochistan’s natural gas.

    Baloch’s are fighting for their rich natural resources. Therefore, International comapanies should also look at the ground reality of Balochistan and they should not act like Chinese government who has no respect for oppressed peoples’ rights and the prime example is Tibet. Similarly Pakistani government regime has no respect for internaiona law and charter of human rights.

    If one considers a case of Albertans having no say and no rights to their resources in the face of Ottawa and rest of Canada, one can see a parallel situation with the Baloch. But for Baloch, this is a reality.

    Baloch people expect international community will not overlook Balochistan’s situation while making a deal with the non-democratic rulers and ruthless army of Pakistan, only to make profit in the expense of Baloch nation’s suppresion and oppresion in the hands of the Pakistani regime.

  3. Shah says:

    @Aziz
    Stop Spreading Lies Pakistan Never Occupied Balochistan Khan of Kalat Voluntarily Signed The Article of Accession

    and Right Now Reko Diq Is Fully Under Government of Balochistan Control They Are To Decide It’s Fate

  4. samir sardana says:

    The Solution to the Economic Ills of Pakistan- Exports

    The export strategy of Pakistan,should be based on export of water,labour,earth, defense and LDC benefits.Any other model will fail,as competitive nations,with deep pockets,will offer financial, fiscal and asset subsidies,to offset any advantage, that Pakistan,has w.r.t labour cost and geography (besides excellent logistics,and regulatory structures)dindooohindoo

    Setting up manufacturing capacities,to cater to the local Pakistani market and exporting the surplus,is not viable,as Pakistan does not have economies of scale (even to realise the geometric impact,of lower labour costs).Planning capacities on that model,leads to the DISASTER of the Indian NPAs,of 350-400 Billion USD,with exports dead,and the inability of Indians,to compete,with the PRC.

    Export of Water – is export of animal proteins, exotic fruits and vegetables and agri to the GCC,EU and other parts of the world.Water from the skies or the earth,by rarefaction or condensation or precipitation,in the form of hail,rain or snow,is purely a function of geography, in a time span of a few decades.Over a period of 3-4000 years,some disasters can occur, like the disappearance of Saraswati (in Pakistan) or the diversion of rivers etc.

    Thus,water captures the fertility and agro-ecoonomic opportunities and variety of Pakistani soil,and also,the geo-strategic location of Pakistan (w.r.t access to GCC,Ports,Cheapest Point of Purchase for UN/FAO/WHO procurements for Afghanistan etc.)

    In Pakistan,Water is a Perpetual Resource,UNLIKE in India.In addition,many nations in the EU allow a COO certificate linked to a Geography,in that exporting nation, to give ADDITIONAL DUTY/SUBSIDY AND QUOTA BENEFITS. These are agriculture and agri-derivatives,like wine.Pakistan is the prime candidate, for the same,for exotic fruits etc., which have valuable and critical,downstream applications,in the EU.

    Export of Earth – is export of minerals,which ALSO,includes industries like Cement (which is export of lime,limestone and coal).Once the Coal Fields of Pakistan,are tapped,then it would include sale of power,as the cheapest way to transport power,is at the speed of light,via a grid – especially,when the Grid is set up by other nations.

    Pakistani Mineral Resources are almost perpetual, and in areas with very low density of population and ample water.Thus the scope for TOLERATING pollution is higher – and so,like in Nuke Power – if some latitude is granted w.r.t pollution, wastes, effluents, safety and environment – mining costs can crash exponentially.For a Perpetual reserve,with an exchange rate of Rs 160/USD,it is akin to burying US Dollars, 1000 meters in the earth,and starving on top of the earth.For a nation,with finite reserves (in the short term),there is an opportunity cost,of exports – in terms of the fact that,in 2023 (say),prices of several ores might be 2-5 times, current rates – and so,they can raise USD,from bankers,liening the mining reserves.

    Export of Defense – In conjunction with the PRC and the PLA/PLN.PLAF,Pakistan can perfect the technique of customising and innovating Chinese Defense Technology,for their use,and exporting lower technologies or the excess capacities to Africa,Central Asia,LATAM,South America and the Middle East (excluding the quasi Nato nations). With Chines=se Financial Aid, extensive credits can be given.There are many nations in the world, which the PRC would NOT like to make defense exports to.

    Export of Labour – Pakistan needs to be practical,to use low cost manufacturing technologies ,which are labour intensive and require moderate power consumption ,and some pollutive impact.Low Capital Costs,will lower the Operating and Financial Risk,and the skilled but CHEAPER labour cost,can be exported OUT.There would be several such technologies,several products and several markets.

    LDC – Lastly,Pakistan has to maximise the LDC benefits,using Chinese Capital and SEZs – with an appropriate mix of Chinese Labour and Domestic Input Costs,in the SEZ units, so that the COO is Pakistan,and the LDC benefits are availed of.

    SEZs – The SEZ policy of Pakistan has to be synthesised with the LDC gains,to ensure that the costs to the SEZ,are the lowest among all LDCs in the world.However,the Costs are not to be evaluated, as the Nominal Costs.So the land lease and other charges,payable by the SEZ to the Pakistani State, might not be the lowest – but on a NET differential Mode,w.r.t the Reduction in Logistics costs,to the Pakistani SEZ,it should be the LOWEST in the world. Once that is done,then as a thumb rule, to keep the laws simple, FREE EXIM needs to allowed and all Inputs (including Power etc.) should be sourcable,w/o caveats.So a SEZ should be able to set up a IPP/CPP/RPP, anywhere in Pakistan,with any fuel,with nil duty and taxes and the lowest wheeling and banking charges.

    Corporate Tax holidays should start AT THE CHOICE of the Investor,FROM THE YEAR after which the Brought forward losses,of the SEZ are exhausted. And the Tax holiday should be co-terminus,with that of the longest holiday,by any LDC.The period of limitation,for the Choice of initiating the holiday period,should be upto 5 years,from commercial operations.

    Basically,even if Pakistan waives the Wheeling charges etc.,it does not matter,as the aim is to bring in the ANCHOR and other Investors in the SEZ.Thereafter,the principles of Self Preservation by the SEZs,and its units,will ensure that,the State will find ingenious ways to earn revenue – provided that,1st the ANCHOR comes in,and then, that the SEZ and the SEZ units,make money !

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