LONDON -
The troubled Balochistan's Chief Minister, Aslam Raisani, has told newspaper editors that the provincial government itself would run the big Reko Diq gold/copper project and says it has allocated what would seem to be a totally inadequate Rs7 billion (about US$ 74 million) to do this. The cost of the originally envisaged project was last estimated at about $3.3 billion (almost certainly more now) which emphasises the discrepancy between funds available and reality
Reko Diq has for some time been on Barrick Gold's list of primary gold development projects, but has been overshadowed by political opposition to the project's development and, most recently, has led to the provincial government refusing to issue a mining licence to the Tethyan Copper Company - the jv between Barrick and Antofagastaset up to manage the project.
The Reko Diq mineral deposit is a large copper-gold porphyry on the Tethyan belt - indeed thought to be one of the biggest such deposits in the world. The Pakistan government reckons the deposit at Reko Diq to comprise total mineral resources of 5.9 billion tons of ore with an average copper grade of 0.41% and gold grade of 0.22 g/ton. From this, the economically mineable portion of the deposit has been calculated at 2.2 billion tons, with an average copper grade of 0.53% and gold grade of 0.30 g/ton, with an annual production estimated at 200,000 tons of copper and 250,000 ounces of gold contained in 600,000 tons of concentrate. Mine life is put at 56 years.
Barrick holds a 37.5% interest through Tethyan Copper Company's 75% share of the project and its share of the measured/indicated and inferred gold resource is put at 9.5 million ounces and 6.4 million ounces respectively and its share of measured/indicated and inferred copper resources are 11.7 billion pounds and 8.4 billion pounds, respectively. Antofagasta also holds a 37.5% interest in Reko Diq through Tethyan Copper with the balance of the project owned by the Balochistan government.
Tethyan Copper is taking the mining licence refusal to international arbitration asserting, among other things, that its local operating subsidiary is legally entitled to the mining lease subject only to "routine" government requirements.
To an external observer it might appear that to develop a major mine of this type in the region, particularly by western companies, would be fraught with all kinds of political and security problems. Balochistan itself is in a certain amount of turmoil with a current insurgency, while Pakistan itself battles with serious internal security problems and a divided Muslim population some of which is favourably inclined toward Al Qaeda.. Balochistan borders Afghanistan and Iran which is unlikely to help stability and Reko Diq is located relatively close to both borders..
However, because Balochistan does not have the necessary funding to go ahead with the project on its own it will need outside help if it wishes to try and benefit from the deposit's potential. To do so it will either need to reach a compromise with the Barrick/Antofagasta jv, or bring in another party for funding and expertise - China, with its thirst for natural resources, is often mentioned in this context. But here again such a development may well be coloured by the international arbitration proceedings.
