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Pakistan High Court declares TCC’s Reko Diq JV agreement invalid

Barrick and Antofagasta Minerals took a $345 million gamble to develop Reko Diq, the first world-class mining project in Pakistan, only to lose the battle in Pakistan’s Supreme Court.

The Tethyan Copper Company (TCC)—a consortium of Barrick (37.5%) and Antofagasta Minerals (37.5%) which held a 75% interest in the Reko Diq copper-gold JV—lost its appeal to Pakistan’s Supreme Court Monday after the high court declared the Reko Diq agreement in conflict with Pakistani laws, and, therefore void.

In a 16-page short order issued Monday, the high court ruled that TCC no longer had any rights in relation to the Reko Diq copper-gold deposit, declaring the consortium’s agreement void on the basis that the initial July 23, 1993, exploration agreement between the Balochistan government and mining company BHP conflicted with the laws of the country and was illegal.

The $3.3 billion Reko Diq project is the largest foreign direct investment mining project in Pakistan. It is estimated that the project would yield 600,000 tons of copper and 250,000 gold ounces annually or 22 billion pounds of copper and 13 million ounces of gold over a period of 50 to 60 years.

Dundee Capital Markets estimated that Barrick’s share of the project’s resources worked out to 9.5 million ounces of gold and 11.7 billion pounds of copper.

The Supreme Court also ruled that all amendments made to the original 1993 agreement after its original signing were unlawful and in contradiction with the original agreement. The exploration license granted by the original agreement expired in February 2011.

The federal government of Pakistan had already scored a minor victory last month when the International Center for Settlement of Investment Disputes (ICSID) ruled that the Balochistan government and nuclear scientist Dr. Samar Mubarakmand could still carry out a mining and smelting project in the Reko Diq area without the participation of TCC.

The province of Balochistan was the silent partner in the Reko Diq project with a 25% stake. A separatist movement in Balochistan has been fighting for decades for control of the province’s resources, which they say is being unfairly exploited by richer and more powerful provinces.

However, some analysts suggest that China, a close ally of Pakistan, is also interested in Reko Diq, which may have further exacerbated the dispute with TCC.

The TCC had sought arbitration against the federal government at the ICSID and also sought a $10 billion penalty on the Balochistan government for refusing to grant TCC the Reko Diq mining lease. The company estimated that it had spent more than $345 million on project acquisition, exploration and feasibility studies.

The consortium had tried to force the Balochistan government to stop work in an area spread over 99 square kilometers including the area where Mubarakmand was working. However, Pakistan’s federal government has recently introduced reforms aimed at giving the province more autonomy.

Local authorities in Balochistan had refused to meet with TCC before rejecting the consortium’s bid for Reko Diq, located near the Afghan-Pakistan border, in the Tethyan Copper Belt, believed to contain the fifth largest copper-gold deposits in the world.

 

 
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