Recodec Copper and Gold Mining; Issues & Recommendations

Background of the Issue:

“$260 billion gold mines going for a song, behind closed doors”[1]

Balochistan holds a large portion of Pakistan’s energy and mineral resources, accounting for 36 percent of its total gas production. It also constitutes large quantities of gold, copper, coal, silver, aluminum, platinum and above all uranium, it also holds a potential transit zone for a pipeline transporting natural gas from Iran and Turkmenistan to India. Two of Pakistan’s three naval bases Ormara and Gwadar are located on the Balochistan coast. Gwadar is anticipated to provide a port, industrial facilities and warehouses to more than twenty countries, including those on the Red Sea, in the Gulf, and in East Africa and Central Asia as well as India, Iran and China. Balochistan because of its strategic significance has evoked much interest among players of regional politics.Today, the big challenge before Islamabad is to convert the strategic assets in Balochistan into economic opportunities by starting different Mega and developmental projects. In this regard Rekodic proved the most blowing issue these days. RekoDiq which is one of the world’s largest reserves of gold and copper was discovered at in the Chaghi area of Pakistan’s southwest Balochistan province. According to development experts, some 12.3m tons of copper and 20.9m ounces of gold lie in the Rekodic area. The copper-gold deposits at RekoDiq are believed to be even bigger than those of Sarcheshmeh in Iran and Escondida in Chile.RekoDiq went under many foreign companies for the exploration purposes. The exploration license for the RekoDiq project was initially given to BHP of Australia in 1993, which included the Tethyan Copper Company (TCC) in association with another Australian company, Mincor Resources. TCC was later sold to its current owners, Barrick Gold Corporation of Canada and Antofagasta of Chile. It is significant to reveal that a Chinese company, China Mining and Metallurgical Corporation (CMMC), has been mining copper in the area (Saindak) for more than a decade. Industry sources in Islamabad say that the Chinese company has also silently lobbied to secure the mining license for RekoDiq, as the reserves of the RekoDiq are four times larger than Saindak.However Pakistan was getting a ridiculous share from this project. Balochistan was never happy by giving this project to a foreign company as they were not getting the justified royalty from the assets of its own land. For saving the country from “foreign exploiters”, the petitioner said that Pakistan should get an 80 per cent share and the mining company’s share should not exceed 20 per cent. This request was made in a petition filed in the Lahore registry of the Supreme Court by the Punjab president of the Watan Party, Hashim Shaukat Khan.

Later it came into news that the corporate bosses of two of the largest mining groups in the world have been setting meetings with Pakistan’s President, Prime Minister and the State Bank governor for pressing them to “quietly and quickly” hand over Balochistan’s vast mineral treasure “worth over $3 trillion”.

After realizing the stake involved in the project Balochistan Chief Minister AslamRaisani jumped in. Minister raised the voice that that the provincial government itself will run the multi-billion-dollar RikoDeq copper-gold project in Chaghidistrict.Recently the Government has handed over the control of the RekoDiq gold-copper project to Balochistan. By doing so, the Government has won the hearts of many Pakistanis who think that the contract with the TCC of Australia had damaged the rights of the local public. Equally admirable is the determination of the provincial government in setting up relevant mining infrastructure, while transferring the responsibility to a galaxy of renowned scientists/researchers headed by Dr Samar Mubarakmand in exploring their own mineral wealth.

Emergence of the issue

The Supreme Court was informed on Jan 12 that the country could earn $2 billion per year by developing the RekoDiq copper and gold project on its own — much higher than a paltry return of $160 million offered to the Balochistan government by a consortium of Chilean and Canadian companies. Dr Samar Mubark Mand, chairman of the board of governors of RekoDiq Copper Development project declared in a presentation to a three judges bench seized with petitions challenging a contract awarded to Tethyan Copper Company (TCC) for exploring gold and copper that “Pakistan is possessed with the expertise and technology to explore and refine the precious metals — an investment which will help the government earn $2 billion per annum,”.

The bench, comprising Chief Justice Iftikhar Mohammad Chaudhry, Justice Ghulam Rabbani and Justice Khalilur Rehman Ramday, heard identical petitions filed by Barrister Zafarullah and Advocate Tariq Asad. Barrister Zafarullah also moved a contempt petition against the TCC for carrying out advertisements in the print media, although the matter was before the court. Dr Mubarakmand pointed out that if Pakistan could develop nuclear technology by reducing defense budget, why it could not develop mining technology. It would also help boost foreign exchange reserves and establish the downstream industry. He pleaded that “This technology is similar to uranium mining. The digging process will also help excavate a number of precious minerals, including zirconium and cobalt,” he said, adding that about 400 square kilometers of land had been leased out to the foreign firm, but it had dug only six to seven sqkm over the past three years – only two to three per cent of the total area.

He said that mines in RekoDiq had 0.025 per cent reserves of precious metals. The country had the capability to process these metals and the foreign firm would fetch an estimated profit of $104 billion from the digging site. Right now the firm’s owners wanted to ship the extracted raw mineral outside the country for refining.

The scientist informed the court and lamented that the total copper requirement of the country was one ton a year, but whatever copper was excavated from the Saindak copper and gold project had been exported. Not a single kilogram went to the local industry;He rejected allegations that Balochistan was not sharing the project’s feasibility report with the federal government. He recalled that the Balochistan government had in 1993 entered into an agreement with Broken Hill, a foreign company, for exploration of mineral reserves, of which 25 per cent of shares as profit was to go to the province while the federal government reserved the right to levy cess.

On Sept 3, 2007, the then prime minister had constituted a five-member committee comprising federal secretaries to attract foreign companies, but it failed to reach any decision as the firms interested in the project were not ready to give more than two per cent share as royalty while the government’s demand was five per cent.

DrZubair Khan, an adviser to the TCC, claimed that a large quantity of precious deposits had been lying idle for years, but these were discovered only after exploration by the company.

“The TCC invested at a time when other investors were running away because of security concerns,” he said, adding that future of the country, especially Balochistan, would brighten only if those bringing investment were appreciated, encouraged and protected.

“The shareholding given to the Balochistan government from the project will be unprecedented. TheTCC has already invested $200 million and negotiations for a $1.3 billion loan have been finalized with banks. The total size of the project is $3.3 billion, of which only $1.5 billion is required to develop necessary infrastructure,” the TCC adviser said.

When the chief justice asked whether the foreign firm would also set up downstream industries in Pakistan, the adviser replied in the negative. “We are a mining and exploration company,” DrZubair said, but added that the company would transfer technology by training the people of Balochistan.DrZubair claimed that the Balochistan government had restrained the company from sharing the feasibility report conducted by a Canadian firm when the chief justice asked whether the TCC had shown the report to the federal as well as provincial governments and the apex court.The court also hinted at listening to TCC chief executive Gurhard Von Borris on Thursday.

Impact Analysis

According to the Planning Commission if the project is executed domestically then “The whole project proposed by the Planning Commission would cost a maximum of $1 billion. The mining and processing of ore and its downstream utilization would produce badly needed employment as well as give Balochistan control over its wealth. It is also declared that Balochistan government will be able to develop the copper reserves at RekoDiq at less than one-third the cost estimated by the feasibility study submitted by the TCC. This step by the government to hand over the RekoDiq Project to Balochistan is admirable because the Baloch people were having severe complains regarding the issues of autonomy and royalty on its own land assets, and these issues led periodic uprisings in Balochistan. And most of all there are two major unified obstructions in the way of enduring peace in Balochistan. First, the Federal Government believe that it has the sovereign right to hold the Baloch natural wealth and Second, the crisis of confidence between the Baloch and Islamabad as Baloch political parties are of the view, based on past experience, that Islamabad cannot be trusted any longer and the right of national self-determination is the only way out of the crisis.

As, the people of Balochistan have now got the constitutional autonomy over their resources that will raise the confidence level between Islamabad and Balochistan and will eliminate the reasons which cause periodic revolts in past. Government calculates approximately that exports of the processed metals from RekoDiq could bring at least $500bn, which can drastically shift the economic landscape of the Pakistan’s least developed province. With the province taking the necessary steps to start mining and refining the precious metals, the government should not waste any more time to make the multi-billion dollar project operational. This project should be taken as a challenge by the Balochistan Government and should show others that they were right in their words. More responsibilities and expectations now stand with provincial government. People of Balochistan have now acquired the opportunity to change their fate by handling this project in a more productive and conducive way which can bring progress, employment, wealth and prosperity for the province.



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