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Why Barrick Gold Remains Interested in Pakistan’s Reko Diq Reserves

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Why Barrick Gold Remains Interested in Pakistan’s Reko Diq Reserves

Beneath the rugged terrain, sandy expanses, and arid deserts of Chagai lies one of the world’s largest undeveloped gold and copper reserves.

Why Barrick Gold Remains Interested in Pakistan’s Reko Diq Reserves

Pakistani Prime Minister Shehbaz Sharif at a meeting with a delegation from Barrick Gold Corporation, Islamabad, Pakistan March 22, 2024.

Credit: X/PMLN

During his meeting in March with a delegation from the Barrick Gold Corporation, Pakistani Prime Minister Shehbaz Sharif discussed the controversial Reko Diq project. In addition, he invited the Canadian mining giant to invest in other mineral projects in Pakistan’s Balochistan province.

In the last three months, Sharif has visited China, Saudi Arabia, and the United Arab Emirates to convince them to invest in the debt-strapped nation. The meeting with the Barrick delegation was part of that effort.

Over the last two years, Barrick Gold Corporation has been conducting feasibility studies for the Reko Diq project in Chagai district in Balochistan. Expected to be completed by the end of this year, the study will pave the way for mine construction scheduled for 2025. Mining operations are expected to begin in 2028.

Barrick is set to invest $7 billion in the Reko Diq project and will secure 50 percent of the shares. The remaining 50 percent is expected to be evenly split between the Pakistani and Balochistan governments.

The Pakistani government first entered into an agreement on the Reko Diq copper and gold reserve in 1993 with the Australian mining company BHP Minerals. In 2000, BHP handed over the project to Tethyan Copper Company (TCC), a joint venture of Antofagasta of Chile and the Barrick Gold Corporation.

In 2006, TCC invested $200-400 million to take over the project and convert the exploration permit into a mining license. However, in 2011, the Balochistan government rejected TCC’s application and in 2013, Pakistan’s Supreme Court ruled against the mining license.

Several factors influenced the Balochistan government’s decision not to issue the permit. Media reports revealed that the deal would be in effect for 56 years during which 75 percent of the mining wealth estimated at $60 billion in 2000 would be handed over to TCC.  There were allegations too that the company had undervalued the worth of the copper and gold reserves. Moreover, TCC delayed the completion of the feasibility report.

When the mining license was canceled, TCC filed for international arbitration at the International Centre for Settlement of Investment Disputes (ICSID), alleging breach of contract. Although the ICSID threw out the case, it accepted TCC’s claim that it had suffered losses and declared that the Pakistani government was liable to pay it $5.8 billion in damages. Amid this legal dispute, TCC signaled a willingness to negotiate an out-of-court settlement if the federal and Balochistan governments reconsidered the permit under revised terms. Around this time, Antofagasta exited the joint venture.

A new agreement was signed in 2022, under which Barrick agreed to a 50 percent stake, down from the previous 75 percent. Still, it is not a bad deal for Barrick. With Antofagasta’s exit, Barrick does not have to share stakes with any other mining company.

In a report published by Barrick at the end of 2023, the company disclosed that it has already paid $5 million to the Balochistan government as an advance on future royalties it will earn, once the project enters the production phase. Additionally, the report says, Barrick “invested another $3 million to improve the healthcare, education and the access to water in the region.”

A leading global mining company, Barrick operates in some of the world’s largest mineral reserves such as the Pueblo Viejo in the Dominican Republic, Carlin Gold Mine in the U.S., as well as in Argentina, Saudi Arabia, Chile, Japan and Egypt among several other countries.

When it has such an expansive global portfolio, why is Barrick interested in the Reko Diq reserves? Balochistan is an insurgency-wracked province. What underlies its continuing interest in the project for over two decades, fighting legal battles for years and giving in to out-of-court settlements?  What is the reason for its readiness, as its reports suggest, to invest in regional socio-economic development? What makes Reko Diq so crucial to Barrick?

Reqo Diq covers an area of 3.3 million acres in Chagai district, Pakistan’s largest district by area. Bordering Iran and Afghanistan, Chagai is mostly characterized by rugged terrain, with vast sandy expanses, and arid deserts. But, beneath this dusty surface lies one of the world’s largest undeveloped gold and copper reserves.

Located in the Tethyan Belt, Reko Diq sits within a renowned metallogenic zone that extends from Eastern Europe through Anatolia to Iran and then into the Balochistan region. The Tethyan Belt is recognized as one of the world’s most fertile areas for gold and base metals such as copper and zinc.

The success of several major gold-copper mines with similar geological positions to Reko Diq developed along this belt underscores its vast economic importance. An early study by Barrick confirmed Reko Diq’s copper-gold concentrate as clean and of high quality, worth billions, the actual figures are, however, yet to be disclosed. This explains the company’s persistent interest for over two decades in Reqo Diq.

Chagai is home not only to Reko Diq, whose mineral wealth is yet to be mined but also to Saindak, whose silver, gold and copper reserves have been extensively mined by the Chinese-run Metallurgical Group Corp (MGC) since 1987. The mining permit to MGC has been extended every 5 to 10 years, despite controversies. A recent agreement granted MCC access to new deposits around Saindak through 2037 when the reserves are expected to be depleted.

Over 30 years of mining, Saindak generated billions of dollars in profits. However, the region did not benefit. The Balochistan government receives just 5-6.5 percent of the revenue. But not even 1 percent of Saindak’s revenue appears to have been spent on the region for human development.

Chagai is not only one of the poorest areas of Pakistan but of South Asia. With one of the lowest literacy rates and the highest infant and maternal mortality rates, Chagai district ranks lowest in Pakistan on most social and human development indicators.

For local Balochs living close to one of the world’s largest gold reserves, daily life is one of struggle for survival. Their major sources of income are either sheep and goat rearing or the smuggling of people and Iranian petrol.

Barrick claims to have already spent on education, health and water, along with providing around 7,500 jobs to locals in the first phase and an additional 4,000 long-term jobs. Locals fear that Reko Diq will be another Saindak, where foreign companies make billions, and federal and provincial officials join hands to take their share. But people will yet again be left out and left behind.

The Saindak case and the protests against Barrick Gold Corporation in different parts of the world indicate that these fears are not baseless. Especially in countries like Argentina, Chile and Peru, Barrick has been taken to court for serious environmental violations.

Ideally, mining activity should be undertaken with community consent. It should be transparent and mindful of environmental and human rights norms. However, for mining giants like Barrick, and cash-strapped countries like Pakistan, it is one more ‘game changer’ that may ultimately make no difference for the people.