Reko Diq agreement signed with Barrick Gold as Pakistan avoids near $11 billion penalty

367
  • Federal and Balochistan government ink agreement with Barrick Gold Corporation in London.
  • $6.5 billion fine imposed on Pakistan reversed. Overall, near $11 billion fine avoided.
  • Barrick Gold lauds the Supreme Court’s opinion; reveals its plans.
  • Antofagasta exits the project.

Islamabad: The federal and provincial governments of Balochistan Thursday signed a final landmark agreement on Reko Diq with the Barrick Gold Corporation in London just days after the Supreme Court of Pakistan declared the project “legal”.

With the final signatures on the deal, a $6.5 billion fine imposed by an international court on Pakistan has become ineffective. Overall, Pakistan avoided paying a total penalty of nearly $11 billion as another fine by the International Court of Arbitration (ICC) was not yet announced.

According to details, the landmark agreement was signed between Barrick Gold Corporation representative and the federal and Balochistan government representatives.

In a statement on Thursday, the Barrick Gold Corporation said that it had completed the “reconstitution of the Reko Diq project”, having received a “favorable opinion from the Supreme Court of Pakistan” and the “required legislation” having been passed into law.

Supreme Court declares it “legal”

Last week, the Supreme Court of Pakistan declared the new Reko Diq agreement between Pakistan and two international firms — Antofagasta PLC and Barrick Gold Corporation — for the revival of the long-stalled Reko Diq mining project as “legal”.

Headed by Chief Justice of Pakistan Umar Ata Bandial, a five-member larger bench of the Supreme Court had announced its unanimous opinion on a presidential reference.

The SC, in its order, observed that the government had entered the agreement after consulting experts, as per court directives, and the Balochistan Assembly was taken into confidence regarding the agreement.

Barrick Gold’s statement

Based on the new agreement, the statement published on Barrick Gold Corporation’s website stated, the Reko Diq project will be owned 50% by Barrick, 25% by three federal state-owned enterprises, 15% by the Province of Balochistan on a fully funded basis and 10% by the Province of Balochistan on a free carried basis.

“The completion of the legal processes was a key step in progressing the development of Reko Diq into a world-class, long-life mine which would substantially expand the company’s strategically significant copper portfolio and benefit its Pakistani stakeholders for generations to come,” Barrick president and chief executive Mark Bristow said.

“We are currently updating the project’s 2010 feasibility and 2011 feasibility expansion studies. This should be completed by 2024, with 2028 targeted for first production,” Bristow said.

The statement stated that the Canadian mining company was making sure that Balochistan and its people would see these benefits quickly. 

“Starting early next year, Barrick will implement a range of social development programs prioritizing the improvement of healthcare, education, vocational training, food security and the provision of potable water.”

It further stated that its investment in these areas was expected to amount to around $70 million over the feasibility and construction period.

“In addition, Reko Diq will advance royalties to the government of Balochistan of up to $50 million until commercial production starts.”

Antofagasta exits Reko Diq

Meanwhile, Antofagasta Plc said on Thursday it had exited the Reko Diq project as Barrick Gold Corp updated its plans for the mine.

Antofagasta, a London-based mining company, said the project had been reconstituted under Tethyan Copper Co Pty Ltd, a joint venture registered in Australia held equally by Antofagasta and Barrick Gold.

It said a consortium of “various Pakistan state-owned enterprises” had acquired shares in the Tethyan Copper Co subsidiary, which holds the project.

The proceeds of the sale, which together equals $945 million, will be held by Tethyan Copper. Antofagasta expects to receive the proceeds by the end of 2023.

While Antofagasta retains its shareholding in Tethyan Copper until the proceeds are distributed, it “will cease to have any appointees on the board and will no longer be involved in the business of TCC”.