Reko Diq gold mine project: Pakistan may face $11.5-billion penalty

[Kabira]

ISLAMABAD:

An arbitration tribunal of the World Bank has ruled in favor of Tethyan Copper Company Pvt Ltd (TCC) in a case involving the Reko Diq gold mine project in Balochistan. As a result of the ruling, Pakistan may face a penalty of $11.5 billion for not awarding the project to TCC.


The World Bank’s International Center for Settlement of Investment Disputes (ICSID) had earlier rejected Pakistan government’s application to dismiss TCC’s claims on grounds of corruption and malpractices by the latter.

Both the federal and provincial governments submitted applications before the ICSID and the International Criminal Court (ICC) in The Hague during 2015-16, seeking admittance of new evidence showing TCC’s corrupt practices in Reko Diq affairs for illegal and undue gains.

The move was futile, however, as the court ruled against the government for unlawful denial of the mining lease for Reko Diq to TCC- a joint venture between Chile’s Antofagasta and Canada’s Barrick Gold Corporation.

The arbitration claim had been submitted in 2012 by the TCC. Five years later, in 2017, it filed for compensatory damages amounting to $9.1 billion based on fair market value of its investments in the project till November 15, 2011. In addition, it also filed a claim of $2.3 billion as pre-award compound interest.

The government has to submit its reply to TCC’s damages claims by July 21.

The previous government of Pakistan Peoples Party (PPP) had tried to settle the dispute with TCC but failed. It had also warned the Balochistan government that the federal government will not pay damages in case of an adverse ruling from international tribunals.

TCC held 75% shares in the project while Balochistan had a 25% stake. The company claims it has invested over $500 million in exploration, scoping and feasibility studies on the project. Total investment was projected to be $5 billion over a period of five years.

TCC and Balochistan reached a deadlock in 2009 because of two issues. First, TCC wanted Balochistan to bear 25% financial obligation according to its share in the project. But the province refused to take any financial responsibility.

Second was the purported involvement of a Chinese company in the project. A letter written by Pakistan’s Ambassador to Chile Burhanul Islam to then Petroleum Minister Naveed Qamar in September 2009 had advised against involving Metallurgical Corporation of China in the same mining site.

In a feasibility report submitted to the Balochistan government, TCC projected a turnover of over $60 billion for the gold and copper project over a span of 56 years. This projection was based on a price of $2.2 per pound of copper and $925 per ounce of gold, in the year 2009.

The mine has estimated reserves of 11.65 million tons of copper and 21.18 million ounces of gold.

Published in The Express Tribune, July 12th, 2017.
https://tribune.com.pk/story/145587...oject-pakistan-may-face-11-5-billion-penalty/

 

[khanmubashir]

May or may. Not maybe some other arrangements could b made.with TCC

 

[ashok321]

This damage will cost Pakistan arm & leg.

 

[protest]

What happens if Pakistan doesn't honor the ruling? Is there an enforceable mechanism attached to the judgment?

All i can think of is there could be some disinclination by other countries towards investing in Pakistan. Pakistan isn't getting that investment in any case.

IMO, Pakistan should just ignore the ruling.

 

[Thəorətic Muslim]

Is Pakistan paying the $1Million/day fine to the Iranians for the Iran-Pakistan pipeline delay since 2014?

 

[El Sidd]

Still worth it though.

11.5 billion is peanuts compared to the potential.

 

[Rollno21]

Still worth it though.

11.5 billion is peanuts compared to the potential.

It depends if Pakistan is going to work on the project on its own and if it gives the project to some outside company on these terms ,the money made will be paid to this company as penalty and in the end the ore goes to another country and they make money and Pakistan will be left with no ore and money at the end of the projectm

 

[El Sidd]

It depends if Pakistan is going to work on the project on its own and if it gives the project to some outside company on these terms ,the money made will be paid to this company as penalty and in the end the ore goes to another country and they make money and Pakistan will be left with no ore and money at the end of the projectm

That is for the people to decide.

My guess is they will and should do it on their own and Balochistan's population will get a much needed nationalised industry.

So peanuts again

 

[Kabira]

That is for the people to decide.

My guess is they will and should do it on their own and Balochistan's population will get a much needed nationalised industry.

So peanuts again

Even punjab with much larger budget will not invest with provincial budget on reko diq. Balochistan government already decide against idea of investing their own money on mines. It needs billions of $ of investment and decades to recover investment. Now only hope is some Chinese company. Which will help Balochistan government pay penalty.

 

[Thəorətic Muslim]

What happens if Pakistan doesn't honor the ruling? Is there an enforceable mechanism attached to the judgment?

Arbitration is binding. If Pakistan doesn't honor the ruling it'll lower investor confidence towards Pakistan. Which will diffuse across the Pakistan economy in the form of; loans, stock market, imports, and future deals with governments.

Investors want to know their money will make them money and their investments protected. This doesn't really help. Sure the potential $11.5 Billion will be spread out over years. But the company took a hit on their ability to market copper and gold they lost out on other opportunities by taking this mine.

11.5 billion is peanuts compared to the potential.

The entire reason TCC was involved was because the Balochistan Provincial Government didn't have money to invest neither expertise. You can't create a mining company out of thin air. And this will have a negative impact of international companies operating in Pakistan. Having one start exploration/feasibility then renegading to a Chinese company. $11.5 Billion isn't peanuts, it's stupidity. For a province that bit<hes about "Punjabi dominance"

Since we're on the topic of potential. $60Billion over 56 years. "This projection was based on a price of $2.2 per pound of copper and $925 per ounce of gold, in the year 2009."

As of today copper is $2.62 and gold at $1320. These commodities aren't bought a that price from mines they have to undergo purification.

If potential is what's required there's a dam that's in the works for a few decades.

 

[El Sidd]

Even punjab with much larger budget will not invest with provincial budget on reko diq. Balochistan government already decide against idea of investing their own money on mines. It needs billions of $ of investment and decades to recover investment. Now only hope is some Chinese company. Which will help Balochistan government pay penalty.

Business can be done on fair grounds.

With elections coming this is up for debate

Arbitration is binding. If Pakistan doesn't honor the ruling it'll lower investor confidence towards Pakistan. Which will diffuse across the Pakistan economy in the form of; loans, stock market, imports, and future deals with governments.

Investors want to know their money will make them money and their investments protected. This doesn't really help. Sure the potential $11.5 Billion will be spread out over years. But the company took a hit on their ability to market copper and gold they lost out on other opportunities by taking this mine.



The entire reason TCC was involved was because the Balochistan Provincial Government didn't have money to invest neither expertise. You can't create a mining company out of thin air. And this will have a negative impact of international companies operating in Pakistan. Having one start exploration/feasibility then renegading to a Chinese company. $11.5 Billion isn't peanuts, it's stupidity. For a province that bit<hes about "Punjabi dominance"

Since we're on the topic of potential. $60Billion over 56 years. "This projection was based on a price of $2.2 per pound of copper and $925 per ounce of gold, in the year 2009."

As of today copper is $2.62 and gold at $1320. These commodities aren't bought a that price from mines they have to undergo purification.

If potential is what's required there's a dam that's in the works for a few decades.

I am not a politician neither i have interest in politics.
This case is for me a federal issue.

 

[Kabira]

The previous government of Pakistan Peoples Party (PPP) had tried to settle the dispute with TCC but failed. It had also warned the Balochistan government that the federal government will not pay damages in case of an adverse ruling from international tribunals.

Who ever was in Balochistan government back then must be investigated.

I am not a politician neither i have interest in politics.
This case is for me a federal issue.

Wrong, its provincial government issue but it will indirectly effect whole Pakistan when it comes to investment.

 

[El Sidd]

Who ever was in Balochistan government back then must be investigated.



Wrong, its provincial government issue but it will indirectly effect whole Pakistan when it comes to investment.

I know i am wrong but since it effects whole of Pakistan. This should ideally be a federal issue.

Whatever happens fine no fine settlement or what.

No deal

 

[shahbaz baig]

it happens when illiterate, incompetent rule the country. now what's next? both Baluchistan Govt & federal Govt have to submit their reply by 21 July because Both the federal and provincial governments submitted applications.

what would be their reply ?

since day one the sensible gentry of Pakistan were saying that this deal is illegal but extravagant federal Govt pushed the illiterate Provincial govt to deal with TCC during PPP era..

btw enjoy to listen this man

or ab in ki jihalat ki waja sy pakistan bhokty ga... in sab ko firing squad k samny khara kr dena chahia..

Solution: submit a reply that we would be agree if TCC sincerely share the data and increase the percentage of sharing, and make new agreement because previous agreement was declared as illegal by our courts. if TCC sensibly tolerate with us we can have a deal.. Lets see what happen

Tell this moron now eat the stones or pay the penalty
I will not sell a stone of Balochistan

ya tuo deal krni hi nhi thi agar kr li bhi li thi tuo bardasht k sath jari rakhni thi.. or har 5 ya 10 saal k baad agreement renew hona chahia tha.

 

[niaz]

Still worth it though.

11.5 billion is peanuts compared to the potential.

Just think:

- New partner has to be found who has the technical expertise to extract & market the copper & gold.

- Funding has to be arranged and we have to wait say at least another 5 years (?) until the project is on line and we see the mine generating income .

- How long with it take just to pay off $11.5-billion before real profits are generated?

We must understand Potential is only “POTENTIAL”. Its value is “ZERO” until it is realized.

This is not Pakistan where the powerful can say “Get lost. We don’t pay” even if the court has decided against them. Once the World Court rules against you, Pakistan can face economic sanctions in case of default.

We have to thank the megalomaniac CJ Ch. Ifitkhar for judgements against privatization of steel mill & Rekodiq.