Reko Diq decision

ByHoor Asrar Rauf

A national swimming champion and recently Graduated from UCF-USA in Hospitality and Event Management


December 17, 2022

Reko Diq decision

Hoor Asrar throws light on an important national issue

Reko Diq decision has come back to prominence once again after the Supreme Court (SC) declared legal an agreement signed between the Pakistan government and two international firms — Antofagasta PLC and Barrick Gold Corporation — in March for the revival of the long-stalled Reko Diq mining project. The verdict was pronounced by a five-member SC bench on a presidential reference that sought the SC’s opinion on whether a 2013 judgment by the apex court prevented the federal and provincial governments from entering into the implementation agreement afresh. In its 13-page short order issued the SC observed that the government according to the court directives had entered the agreement after consulting experts and the Balochistan Assembly was taken into confidence regarding the agreement.
Continuing the order stated that the law did not allow agreements on national resources in violation of the Constitution and that provinces could amend laws pertaining to minerals. The court observed that the Balochistan Assembly was briefed on the matter and elected representatives did not raise any objections. Moreover, the order said, the agreement met environmental requirements and Barrick Gold Corporation assured that labour rights would be considered during the implementation of the project. The order elaborated that Barrick Gold Corporation assured that laws for wages would be abided by and most of the labour force would be recruited from Pakistan. The court was further told that the project would be used for investing in social initiatives and skill development schemes would also be launched under it. Therefore, the court concluded that there was nothing illegal in the new Reko Diq agreement adding that it was also not in violation of its 2013 judgment.

Reko Diq saga is now quite long drawn and has caught national attention as it is rated to be potentially very viable a financial resource that can substantially contribute to national earnings. The original agreement for the Reko Diq mining project was signed in 2006 and it set aside a share of 37.5 per cent to Canada’s Barrick Gold and Chile’s Antofagasta each while the Balochistan government received a 25 per cent stake. The two international firms were part of the consortium Tethyan Copper Company and had found vast gold and copper deposits at Reko Diq but the hugely lucrative open-pit mine project came to a standstill in 2011 after the local government refused to renew Tethyan Copper’s lease and in 2013 Supreme Court declared it invalid. In 2019, the World Bank’s arbitration tribunal committee imposed a penalty on Pakistan for unlawful denial of mining.

Keeping in view the change in circumstances, however, in March, the federal and Balochistan governments reached an agreement with two international firms — Antofagasta PLC and Barrick Gold Corporation — on a framework to reconstitute the Reko Diq project that allowed Antofagasta to make an exit. The reconstituted project, aimed at excavating gold and copper reserves in Balochistan saved Pakistan from an $11 billion penalty in the Reko Diq case. Under the new agreement, Barrick decided to become a 50 per cent partner with the governments of Pakistan and Balochistan and three state-owned entities in the project, while the Chilean firm exited the contract in exchange for $900 million by Pakistani shareholders.

Balochistan government holds a 25 per cent stake in the project under the new pact and the rest of the 25 per cent shareholding is controlled equally by the three state-owned enterprises. In this context, presidential reference sought court’s opinion on reconstitution of Reko Diq project and interpretation of whether its 2013 judgment prevented the federal and provincial governments from entering into the implementation agreement and the constitutionality of the proposed Foreign Investment (Protection and Promotion) Bill 2022.

Earlier the federal and Balochistan governments and international firms reached an agreement in principle on a framework to reconstitute the Reko Diq project and a pathway for Antofagasta to exit the project. This breakthrough entailed that Barrick Gold Corp had agreed to restart the suspended Reko Diq mine project following a settlement with Pakistan on the framework to reconstitute the agreement after 10 years of legal battles and negotiations. The reconstituted agreement allows the Canadian company’s Chilean partner, Antofagasta Plc, to exit the project by withdrawing from its claim of $3.9 billion in place of a payment of $900 million. The two companies have won an award of around $11 billion from an international arbitration court against Pakistan’s decision denying their joint venture a licence to develop Reko Diq.

The government claims that the agreement will help it avoid the penalty, besides bringing in an investment of $10 billion and creating 8,000 new jobs in the province. Under the new arrangement, Barrick gets half the project while Balochistan and federal state-owned firms will each hold 25 per cent of the remaining half. Barrick Gold will get a mining lease, an exploration licence and surface rights. The project, once it enters the production stage five to six years from now, is billed to be potentially the world’s largest gold and copper mine with deposits capable of producing 200,000 tons of copper and 250,000 ounces of gold a year for more than half a century. The government contends that Pakistan will benefit for over 100 years from this project and the total worth is estimated to be over $100 billion.

Indeed, the new agreement seems to be an improvement from the past when international investors held 75 per cent of the project but questions remain such as the details made public so far do not state if the investor plans to set up a refinery at Reko Diq for exporting precious metals or intends to take minerals out of the country in their raw form like the Chinese operator in Saindak. Moreover, in case Barrick Gold decides to export the metals in their raw form it is required to be determined whether Pakistan has the capacity for determining the quantity extracted and moved out of the country and also have the means to verify the exact revenue that may come out of the transactions. It is also required to be determined that how much quantity of the minerals is to be excavated annually. It also needs to be clarified whether Barrick Gold and Pakistan will share the anticipated investment equally according to their shareholding and if yes then where the estimated amount of $5 billion will come from for investment in the span of five to six years.

The short order of the Supreme Court is an assurance that justice would be done to Reko Diq project and due care will be accorded to international standards in dealing with labour rights and protection of environment at the exploration site. The opinions expressed by counsels in the court also suggested that profits to be distributed among the employees working on the exploration site to inculcate a feeling amongst them that they were also stakeholders in the project. The counsel representing Barrick Gold Corporation (BGC), reiterated the commitment on behalf of his client that the company would set up a community grievance mechanism that complies with the IFC Performance Standards and the United Nations Guiding Principles on Business and Human Rights, the requirements of which were much higher than the local contracts. TW


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