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.