Monday, May 4, 2015

Balochistan govt to hire experts to re-tender Reko Diq: CM


QUETTA: Balochistan Chief Minister Dr Abdul Malik Baloch discusses the Reko Diq project with members of the Balochistan Assembly in the committee room of the assembly on Monday.

QUETTA: Balochistan Chief Minister Dr Abdul Malik Baloch has said that his government would hire foreign experts to invite fresh tenders for field blocks of copper and gold deposits in Reko Diq after its legal team has advised the provincial authorities to initiate the sale process.

“This time we are working with a different approach and the best deal will be considered,” Dr Baloch told a briefing organised for parliamentarians and media here on Monday.

“We will soon issue new tenders after the TCC (Tethyan Copper Company) gave up its demand for the leasing rights on Reko Diq.”

The chief minister said that things were at an initial stage and nothing had been finalised so far.

He rejected allegations by some opposition leaders that the government had accepted millions of rupees in commission for giving the project to TCC.

“Whatever decision or deal will be reached will be presented before the Balochistan cabinet and assembly for approval.”

The TCC, a joint venture between Chile’s Antofagasta and Canada’s Barrack Gold, had initiated arbitration against governments of Pakistan and Balochistan in 2011 on mining licence dispute.

Dr Baloch said the legal team had recommended re-tendering of field blocks before an expected out-of-court settlement on damages claims.

He said Ahmer Bilal Soofi and Cherie Blair – legal experts pleading the case of Balochistan government – and judges of the International Centre for Settlement of Investment Dispute had advised that negotiations should be initiated for an out of court settlement.

He said the government was considering a proposal to break Reko Diq copper and gold deposits into three to four blocks and call tenders in phases.

“Initially, we can offer two major blocks to international investors and remaining 12 can be put on sale later,” he added.

The TCC was granted exploration licence in 2006. It owned a 75 per cent stake in the project and the Balochistan government 25pc.

Reko Diq holds an estimated 5.9 billion tons of mineral resources with an average copper grade of 0.41pc and gold 0.22 grams per ton.

The chief minister said the government and its legal team would press the TCC to agree on the out-of-court settlement for damages. He declined to spell out the compensation amount, saying both the parties have signed a non-disclosure agreement to avoid further “arbitration on the issue”.

“But we have an idea what they will ask for and we will challenge their figure.”

Ahmer Bilal Soofi, the head of government’s legal team, said the tender process should start soon.

He disclosed that after rejection of two applications of TCC and its withdrawal from the mining licence demand, the site was now unlocked for negotiation for leasing out with some other international companies.

He said the TCC had applied for mining licence – 14 holes and 99 square kilometres areas, while the company was allotted six square kilometres for exploration.

He said after rejection of its two applications, including asking for mining licence, the TCC had filed a case for payment of damages and the money it had spent for purchasing the ownership of the project from BHP.

He said the company had claimed that it had paid $240 million for getting all rights of the project from BHP.

Mr Soofi said the TCC had now shown willingness to discuss an out-of-court settlement or stop further arbitration.

“We have advised the government to sort out technical issues and re-tender the fields before damage claims become major point of contention.”

He said it was agreed in the agreement signed with the TCC that in case of any dispute the parties would approach the International Chamber of Commerce and the ICSID for settlement.

He said the ICC and ICSID had endorsed the Balochistan government’s stance and rejected application filed by the TCC for stay on lease of 14 deposits. “Now matter is pending with the court which will soon announce liability to be paid as damages,” he added.

Published in Dawn, May 5th, 2015

Analysis: Reko Diq’s billion-dollar mystery


THE dispute between Pakistan and Tethyan Copper Company (TCC) over the Reko Diq mines in Balochistan appears to be headed to an out-of-court settlement. Earlier, the Supreme Court, in an order passed in January 2013, had declared void the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) signed between the Balochistan government and Australian mining company BHP in 1993.

BHP later sold its stakes to a then unknown TCC, which ran the mine till the case started in 2008.

As the litigation continued, TCC also approached the International Centre for Settlement of Investment Disputes (ICSID), initially citing breach of contract. However, the ICSID also denied its contention of mine ownership. The company then argued for loss of investments amounting to $400 million, and appears to have presented a case for a favourable verdict. However, it also appears willing to reach a compromise if allowed to maintain a stake in the lucrative venture.

Inside sources say the case is largely handled by the Balochistan government, which is said to be under pressure from the Centre to reach an out-of-court settlement. Balochistan Chief Minister Dr Abdul Malik Baloch denied this, after allegations by opposition parliamentarians accusing the government of giving in to TCC, saying he would not “sell a stone of Reko Diq”.

So what exactly is Reko Diq, a dusty little town located in Chagai — of nuclear-test fame — district? The Reko Diq mines have been the centre of much controversy since their discovery by BHP. CHEJVA, signed in 1993 by Balochistan’s then caretaker chief minister Naseer Mengal, granted exploration rights to BHP for the entire Chagai area. This was the start of a series of executive decisions that appear to have injured Pakistan’s interests.

The agreement gave BHP a 75 per cent share in discoveries made in the next 56 years over the 3.3 million acre area. The Balochistan government got a 25pc share on a joint-investment basis, and a mere 2pc royalty.

Subsequently, between 1993 and 1997, exploration marked out 14 potential sites containing 48 pockets for excavation, collectively called the Reko Diq complex.

BHP obtained licences for mineral exploration here, and almost immediately at a site called EL-5, clear gold and copper deposits were discovered after a shallow dig.

‘Highway robbery’

“This is when the international mining community got an idea of the potential of Reko Diq and moved quickly and quietly to put their own interests first,” said Naeem Awan, a Karachi-based former Pakistan Muslim League-Nawaz legislator, whose petitions related to the matter first brought the case to the SC’s notice. “What they have done since is highway robbery, while those who should be guarding Pakistan’s interests continue to look the other way.”

Geological literature and interviews with experts reveal that Chagai district is part of a belt called the Tethyan Magmatic Arc, which extends thousands of kilometres from Europe into Mongolia. The arc is a known reservoir for rare metals, and Pakistan’s share lies underneath the region between Chagai and North Waziristan.

Recent estimates by various geological organisations, including the US Geological Survey, put the value of the entire block between one to three trillion dollars. Some geologists contend that this is a low-end estimate as it does not take into account ‘rare earth’ materials essential to new fields such as nanotechnology and semiconductors.

Many questions

In this situation, and given the nearby location of the Saindak mines, there was a very high possibility of finding gold in Chagai district. Why, then, was a 25/75pc deal signed, while the precedent was a 50/50pc deal with the much-maligned Chinese in Saindak? More importantly, why was such a deal — signed by the unelected, interim Moeen Qureshi caretaker set-up — allowed to continue unquestioned till 2008? Further, it must be asked why no independent assessment has been done of the deposits in Reko Diq.

It also appears that TCC itself has something to hide.

The TCC website says Reko Diq’s “economically mineable portion” is “2.2 billion tons, with an average copper grade of 0.53pc and gold grade of 0.3 g/ton.” This means that approximately 10 million tons of copper and 13 million ounces of gold are available to be mined.

But another study by TCC geologists — published by the Society of Geologists in 2008 — says that the copper-gold deposit at Reko Diq “is world class and contains 18 million tons of copper and 32 million ounces of gold”. This means TCC is understating the copper deposits by eight million tons and the gold by 19 million ounces. Even this estimate makes it the tenth largest mine in the world. Experts believe a proper evaluation would take it to at least the number five rank in the list.

Why is this being done?

The answer lies in how BHP’s stake was taken over by Mincor Resources NL (one of the largest mining companies in the world) which set up TCC as a front. The company was later acquired by the Canadian-Israeli owned Barrick Gold (said to be the real power behind TCC), which also brought the Chilean Antofagasta to share the risk.

Barrick Gold is the largest mining firm in the world, and along with Antofagasta, controlled 75pc of Reko Diq till the SC stepped in.

Current estimates, which are considered quite conservative, say Reko Diq’s revenues should be $240-$260bn over a 40-year period. Pakistan’s share of this would potentially add nearly $1.5bn to national GDP.

However, TCC’s offer was $54bn over a 30-year period, including a clause to take all the raw gold and copper out of Pakistan “for refining purposes”.

With this background, suspicions are naturally created as to why Pakistan’s leadership is in such a hurry to sell what could be a major factor in alleviating the country’s economic woes.

Published in Dawn, January 23rd, 2015

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