![Reko Diq gold mine in Balochistan province of Pakistan. — Twitter](https://www.geo.tv/assets/uploads/updates/2022-03-22/406637_6433333_updates.jpg)
KARACHI: The Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) will have 8.3% stake each in Reko Diq project and pay $187.5 million each as fees to be part of government shareholding.
Both companies through material information sent to the Pakistan Stock Exchange (PSX) stated that they, along with Government Holding (Private) Limited (GHPL), will represent a federal government stake of 25%, thus each company would be contributing an equal stake of 8.3% ie $833 million each.
In the new framework agreement, Barrick Gold of Canada would continue to own 50% stake in the project, while the remaining 25% would be owned by the government of Balochistan.
The total cost of the project was estimated to be around $10 billion, which was likely to be completed over a period of 5-6 years, once the process of legislation was approved.
Farhman Mahmood, Head of Research at Sherman Securities said that Pakistan might get major benefits through revised deal, unlike previous agreements on Reko Diq.
“It seems that the new framework will be passed through the parliament and Supreme Court since both provincial and federal government enjoy higher share in the project (combined stake of 50%) against earlier share of 25%. Previously, it was feared that the net dollar inflows via copper-gold exports may be marginal due to thin stake by government of Pakistan.”
He said that according to various sources, Pakistan has 5.9 billion tonnes of copper and 4.1 million ounces of gold reserves. However, inferred reserves (according to SMEC) would be around 12.3 million tonnes of copper and 20.9 million ounces of gold.
He said that final reserve studies will be carried out by Barrick Gold which is the main operator of the mining project.
Considering the track records of the mining companies, they usually operate at 10-20% production ratio against their inferred reserve size, he said.
Based on inferred size of copper-gold reserves and lower production ratio of 3%, it is estimated that $5 billion worth of copper-gold seems to be logical target for the project companies in initial phase (against total copper-gold reserve size of over $150 billion at current price) which would largely be exported and benefit Pakistan through dollar inflows.
The Government of Pakistan awarded the development contract of the Reko Diq project to the Canadian company, after the World Bank tribunal waived the $11 billion penalty imposed on Pakistan.
Barrick Gold was in dispute with Pakistan for several years, and the project was suspended in 2011 because of a dispute over the legality of its licensing process.
In 2021, the federal government started talks with Barrick Gold to settle the dispute on Reko Diq as its other partner, M/s Antofagasta of Chile, was seeking a financial settlement of their share in the award of $6 billion.
Following an out-of-court settlement, now Barrick, the Canadian mining company, ended its dispute with Islamabad.