World-class mine could make poor province rich
Bronwyn Curran, Foreign Correspondent
ISLAMABAD // A potential multi-billion-dollar solution to some of the problems plaguing Pakistan’s poorest province, Baluchistan, lies under its distant south-west sands: one of the world’s largest copper and gold deposits. Two western mining giants will decide, on conclusion of a feasibility study at the end of this year, whether to mine the massive Reko Diq field, part of the Tethyan copper belt that stretches in an arc across Iran to Turkey.
A green light would thrust Pakistan’s underdeveloped mining sector, currently focused on coal, chromite, salt and marble, into world-class heights and bring billions of dollars plus more than 12,000 jobs to the desperately poor province of 6.5 million people.
But that green light is contingent on, among other factors, political stability in an increasingly unstable country torn up by ever-bolder militants opposed to the US presence in neighbouring Afghanistan, and local Baluch insurgents taking on the federal government over inequitable distribution of resource revenues.
“This mine, if it goes into production, is expected to run 40 years at least, and potentially much longer,” said Cassie Boggs, chief executive officer of Tethyan Copper Co. “It’s the first large-scale mine operation for Pakistan. It may also be the biggest private sector investment now planned for Pakistan.”
Tethyan Copper is a joint venture between Barrick Gold Corp of Canada and Antofagasta of Chile. Together they own 75 per cent of Reko Diq, with 25 per cent held by the cash-strapped Baluchistan provincial government.
The partners began their feasibility study in Dec 2007, a year after acquiring exploration rights from Australia’s BHP Billiton, which had held them since 1993 in partnership with the Baluch government.
The Canadian gold giant and its Chilean copper counterpart have moved fast to explore, scope, drill and assess Reko Diq’s viability as a world-class mine.
BHP Billiton, by contrast, had moved slowly during its 13-year ownership, partly because it had difficulty raising foreign financing. Tethyan Copper estimates the field’s combined deposits at more than four billion tons, placing it among the world’s largest.
“This is very big scale. We think it will transform the mining industry in Pakistan and result in a lot of technology transfer and a lot of training. It will encourage other foreign investment,” Ms Boggs said.
The Baluch government would earn billions of dollars over the life of the mine in profit shares and royalties, she said, and stood to win more foreign investment on the back of Tethyan’s success.
“We know many small companies who have mining leases around ours. If we succeed, then they will be able to bring in investment on the back of ours. It will encourage a mining sector in Pakistan, especially in Baluchistan, which has great potential but not much development.”
The field is tucked in a remote corner of mountainous desert near the confluence of Pakistan’s border with Iran and Afghanistan in the Chaghai district, where underground nuclear tests were conducted in May 1998.
The site is a long way south of fighting between insurgents of the Baluchistan Liberation Army and Pakistani troops. Insurgents have for years targeted oil and gas sites in anger at the lack of revenue seen by the province. But Ms Boggs said the fact that hard mineral revenues go directly to the provincial government, unlike oil and gas profits that go to the federal government, removes the Tethyan site from insurgents’ targets.
Nevertheless, there is plenty of ill-feeling among groups in Baluchistan. Many claim that the province should have at least a majority 51 per cent equity in the project and consider that the US$11 million (Dh40m) paid by Tethyan for surface rights is too low.
“Reko Diq is a lifeline for the Baluch people. Baluchistan has no facilities. We need highways, lots of hospitals, lots of educational institutions, dams. The madrasas of the mullahs are better equipped than our schools. Schools here are built from mud and have neither electricity nor toilets,” said Hasil Bizenjo, a senator from Baluchistan and vice president of the province’s opposition National Party.
Up to 10,000 construction workers will be needed to build infrastructure and 3,000 skilled workers will be needed to run the mine. Tethyan has committed to hire Baluchs over other Pakistanis or foreigners.
Ms Boggs said most of Tethyan’s current employees are Baluch. The company is already supporting health, education and water supplies in the nearest community of Hummai.
Tethyan estimates a $2.5 billion investment is needed to start production. Almost half of that is for infrastructure construction.
“Here we have to build everything. So we are having to look at how we are going to build it or get someone else to build,” Ms Boggs said.
“We’re looking at potentially some Islamic bank financing from the Middle East, especially in the Gulf. We’ve had preliminary discussions with a bank in Dubai.”
The company has already invested $200m in drilling and feasibility studies.