THE FATE OF LARGE MINERAL PROJECT IN BALOUCHISTAN By AL KAZIM - PowerPoint PPT Presentation

THE FATE OF LARGE MINERAL PROJECT IN BALOUCHISTAN By AL KAZIM MANSOOR B.E (Civil) M.S (Geotech) USA, P.E Chief Executive M/s Soilmat Engineers

Reko Diq literally meaning the ‘Black Mountain’ in Balochi, contains the world’s fifth largest deposits of Copper and Gold. The reserves are estimated at 5.9 Billion tons of ore with approx 0.4% of copper and 0.22g/t of gold.

M/s Tethyan Copper Company Ltd., a joint venture of two of the worlds largest Mining companies, Barrick Gold (Canada) and Antofagasta Minerals of Chile, were the operator of this world class mine, However at the moment, TCC and Government of Pakistan, are in legal battle at International Centre of Investment disputes of World Bank.

50 KM to Afghanistan 70 KM to Iran 500 KM from Quetta 1100 KM from Karachi

The Reko Diq area is a Part of the Tethyan Magmatic Arc or belt, extending through Central & South East Europe (Hungary, Romania, Bulgaria & Greece) Turkey, Iran & Pakistan through Himalayan region into Myanmar, Malaysia, Indonasia and Papua New Guinea, It contains wealth of large copper-gold ore deposits of varying grades.

TETHYAN MAGMATIC BELT

BACKGROUND AND HISTORY OF DISCOVER OF COPPER & GOLD DEPOSITS IN THE AREA

The history of copper gold deposits discovery is given in chronological order as under. The earliest geological observance of deposits were made  by Mc Molen and Vandenberg in early part of the 20th century. In 1961, Geological Survey of Pakistan and US Geological  Survey first identified porphyry copper deposit near Saindak in the western chagai region. From 1971-74 a more comprehensive mineral exploration program including geological mapping and drilling was carried out at Saindok. Reconnaissance mineral exploration program over entire Chagai Hills region continued during 1974-75 using Landsat-1 Imaginary aerial survey. The United Nations Development Program UNDP also initiated exploration program in 1975-77 and identified cluster of copper deposit near Saindak and Reko Diq area.

Following is the development history of the mining prospect in chronological order. 1960 Hunting Survey Corporation (USA) conducted Reconnaissance Survey of the Chaghi Area under Colombo plan project. 1961-62 Geological Survey of Pakistan & US Geological Survey  first identified porphyry copper deposits in the area. 1971-74 A comprehensive study by GSP and USGS including  geological Mapping and Drilling was carried out in and around SAINDAK and reconnaissance survey over entire Chaghi Hill. 1974-75 Landsat-1 Imaginary aerial survey of the entire Chagai Hill  area sponsored by UNDP. 1978-79 Geological Survey of Pakistan during the regional survey  compiled 1:50,000 scale mapping program reported large scale porphyry copper deposits at Reko Diq. 1993-1998 Balouchistan Development Authority (BDA) signed an  agreement with mining giants BHP which conducted extensive satellites imagery works followed by ground work including Geological mapping 1:20,000 and these extensive percussion and diamond drilling resulting in discovery of atleast 10 sites including the giant Reko Diq deposits.

1997-1998 Several other smaller sites were also discovered by BHP  outside the Reko Diq area. 1999 Formation of Tethyan Copper Company (TCC) with a JV of  another mining company named Mincore Resources of South Africa, the company was registered in Australia. 2000-2006 Tethyan conducted extensive drilling and mapping  geochemical sampling etc. In 2006 TCC declared a 214 million Tons of reachable copper deposit. 2006 Antofagasta of Chile and Barrick Gold of Canada acquired  100% shares of TCC and 75% interest in Reko Diq Mines. 2006-2008 After take over TCC accelerated the explorations program  including drilling of more than 150,000 CM of coring and allied testing and declared a global resource of 5.9 Billion Tons averaging 0.41% of copper and 0.22 g/tons of Gold. 2008-2010 Preparation of bankable feasibility for a 4 Billions Dollar  investment for world class mine at Reko Diq.

2010-11 TCC submitted a mining lease application to Government of  Balouchistan alongwith on Environmental and Social Impact Assessment Report. Nov. 2011 Government of Balouchistan summarily rejected the  application of mining lease. TCC commenced International arbitration, with International Chamber of Commerce. 2012-2013 On petition of Government of Balouchistan, Supreme  Court of Pakistan declared the contract Null & Voil on Jan 07, 2013, Thus ending project effectively in Pakistan. 2017-2018 International arbitration ruled in favor of TCC and termed the  termination, unlawful which denied TCC the mining lease for Reko Diq Project in 2011.

A Brief Description of the Project at the Time of Closure Tethyan Copper Company (Pvt.) Ltd. established it’s base camp in Reko Diq, and started preliminary works for the project. Two concentrated deposits named H 14 and H 15 were identified by the company, a combined deposit of 5.9 Billion Tons of Copper and Gold Ores, out of which a mineable deposit of 2.2 Billion Tons of ores were to be extracted with an average 0.53% Copper and 0.3 g/t of Gold, this corresponds to 11.66 million Tons of Copper and 660 Tons of Gold.

Copper is priced at around 6000/= per Ton and Gold at approx US $ 50.0 Million / Ton. As per the application of TCC, they intended to continue mining for 55 years from Reko Diq, as per today’s price this would put the reservoir in excess of 100 Billion dollars at today’s price. There are several other deposits in the vicinity of Reko Diq which was outside the lease of TCC.

The agreement of TCC with Government of Balouchistan was administered by Balouchistan Development Authority which had a 25% share in the profit of the mining operation. On top of it Government of Balouchistan would get a 2% - 5% royalty on gross mineral production. The federal government would have collected a 25% - 30% corporate Tax on all projects of the Company.

Main Components of Projects The intended development in first phase of mining included  the following. A Processing Plant.  550 MW Coal Fired Power Plant  110 MW Oil Fired Power Plant  Wind & Solar Energy Plants  Housing Colonies for 5,000 permanent & 10,000 temporary  workers. Crushers and Other infra structure projects.  Construction of 700 KM long slurry pipe line for transporting  ore slurry to Gwadar, where it will be deposited in setting tanks and than exported.

At the time of closure, TCC had already spent close to 1.0 Billion dollars (as per TCC’s official’s statement). The project achieved it’s financial closure on the bankable feasibility submitted by TCC to a consortium of international banks and in first stage 4.0 Billion Dollars loans were approved for first phase of the project. The financial closure was achieved in August 2010, The Tethyan Copper Company (TCC) submitted a mining lease application in February 2011 and it would have been a formality in normal case, However in November 2011 the Government of Balouchistan summarily rejected the lease application and the entire project came to standstill.

LEGAL IMPLICATION OF THE PROJECT

TCC believes that under the Chaghi Hill joint venture agreement between TCC and Government of Balouchistan as well as under Balouchistan Mineral Rules 2002 TCCP was legally entitled to mining lease subject only to routine government requirement, and Government of Baloushistan head no legal right to reject the mining lease agreement.

In November 2011, TCC commenced International arbitration at two forums, one against Government of Pakistan at International Centre of Investment Disputes for breach of investment against between Govt. of Australian and Govt. of Pakistan and the other against Govt. of Balouchistan for breach of JV agreement at International Chamber of Commerce.

The Supreme Court took a suo moto notice and amalgamated various applications against TCC and Government of Balouchistan, in January 2013 the apex court declared the contract between Government of Balouchistan & TCC as null and void.

The subsequent international arbitration has ruled in March 2017 against the Government of Pakistan in relation to unlawful denial of the mining lease for the Reko Diq Project in 2011, it stated that Pakistan has violated several provisions of bilateral investment treaty with Australia where TCC is incorporated.

PRESENT CONDITION OF REKO DIQ PROJECT

After the Nawaz Sharif Government took offices in 2013, second attempts were made by the then government for reproachment with TCC, however sensing their impending victory in the international Tribunal TCC was not very much interested in renegotiations. Subsequently Pakistan offered the project to china and as per recent news Pakistan has also offered Saudia Arabia Stakes in Reko Diq mining project, however no concrete step has been taken so far.