Why Barrick Gold remains interested in Pakistan’s Reko Diq reserves

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

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

Over the past two years, Barrick Gold Corporation has been conducting feasibility studies for the Reko Diq project in Chagai district of Balochistan. Expected to be completed by the end of this year, the research will pave the way for planned mining 2025. Mining operations are expected to commence in 2028.

Barrick plans 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 shared equally between the governments of Pakistan and Balochistan.

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

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

Several factors influenced the Balochistan government’s decision not to issue the permit. Media reports indicated that the deal would be in effect for 56 years, during which time 75 percent of the mining assets would be valued $60 billion would be transferred to TCC in 2000. There were also allegations that the company had undervalued the value of its copper and gold reserves. In addition, TCC has delayed the completion of the feasibility report.

When the mining permit was revoked, TCC filed a request for international arbitration with the International Center for Settlement of Investment Disputes (ICSID), claiming that breach of contract. Although the ICSID dismissed the case, it accepted TCC’s claim that it had suffered losses and stated that the Pakistani government was liable to pay them. $5.8 billion in case of damage. Amid this legal dispute, TCC expressed willingness to negotiate an out-of-court settlement if the Federal Government and Balochistan Government reconsidered the permit under revised conditions. Around this time, Antofagasta left the joint venture.

A new agreement was signed in 2022, with Barrick agreeing to a 50 percent stake, up from the previous 75 percent. Still, it’s not a bad deal for Barrick. Antofagasta’s departure means Barrick no longer has to share shares with any other mining company.

In a report Published by Barrick in late 2023, the company announced 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. In addition, the report said, Barrick has “invested an additional $3 million to improve healthcare, education and water access in the region.”

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

Why is Barrick interested in the Reko Diq reserves when the country has such an extensive global portfolio? Balochistan is an insurgency-ridden province. What underlies the continued interest in the project for more than two decades, including years of legal battles and succumbing to out-of-court settlements? What is the reason for her willingness, as her reports suggest, to invest in regional socio-economic development? What makes Reko Diq so crucial for Barrick?

Reqo Diq covers an area of 3.3 million hectares in Chagai district, the largest district in terms of area in Pakistan. Chagai borders Iran and Afghanistan and is mainly characterized by rugged terrain, with vast sand plains and arid deserts. But beneath this dusty surface lies one of the the world’s largest undeveloped gold and copper reserves.

Reko Diq is located in the Tethyan Belt, in a renowned area metallurgists zone stretching from Eastern Europe through Anatolia to Iran and then into the Balochistan region. The Tethyan Belt is recognized as one of the largest in the world fertile areas for gold and base metals such as copper and zinc.

The success of several large gold-copper mines with similar geological positions to Reko Diq, developed along this belt, underlines its enormous economic importance. A early study confirmed by Barrick that Reko Diq’s copper-gold concentrate is clean, high quality and worth billions; however, the actual figures have yet to be revealed. This explains the company’s continued interest in Reqo Diq for more than twenty years.

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

During thirty years of mining, Saindak generated billions of dollars in profits. However, the region did not benefit from it. The government of Balochistan receives fairly 5-6.5 percent of the income. But less than 1 percent of Saindak’s revenue appears to have been allocated to the region for human development.

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

For the local Balochs who live close to one of the largest gold reserves in the world, daily life is one of struggle for survival. Their main sources of income are sheep and goat farming or the smuggling of people and Iranian gasoline.

Barrick claims to have already spent on education, health care and water, as well as the facilities for these 7,500 jobs for the local population in the first phase and another 4,000 jobs for the long term. Locals fear Reko Diq will become another Saindak, where foreign companies make billions and federal and provincial officials join forces to claim their share. But once again people will be left out and left behind.

The Saindak case and the protests against Barrick Gold Corporation in various parts of the world indicate that these fears are not unfounded. Barrick has been taken to court for serious environmental violations, especially in countries such as Argentina, Chile and Peru.

Ideally, mining activities should be undertaken with community consent. It must be transparent and take the environment into account human rights standards. However, for mining giants like Barrick and cash-strapped countries like Pakistan, this is yet another game changer that will ultimately make no difference to the people.