File photo. Shah Marai—AFP
New deal with Barrick Gold helps country avoid $11bn penalty, with finance minister claiming it will create 8,000 new jobs for locals
Pakistan has reached an out-of-court settlement with the Barrick Gold Corporation, which has agreed to waive $11 billion in penalties and revive the Reko Diq mining project that has been stalled since 2011.
According to Finance Minister Shaukat Tarin, the governments of Pakistan and Balochistan, as well as Antofagasta plc and Barrick Gold have reached agreement “in principle” on a framework to reconstitute the Reko Diq project, as well as a pathway for Antofagasta to exit it.
Flanked by Energy Minister Hammad Azhar and Balochistan Chief Minister Abdul Quddus Bizenjo, he said that the deal allowed Pakistan to avoid the $11 billion penalty and also resume exploration of the “world’s largest gold and copper reserve.” He claimed that around $10 billion would be invested under this project, adding that it would create 8,000 new jobs for locals.
Under the new agreement, Barrick Gold would retain 50% share, while the Government of Balochistan would get 25% share, and the remaining 25% would be provided to the State Owned Enterprises Oil and Gas Development Company (OGDCL), Pakistan Petroleum Limited (PPL), and Government Holdings Pakistan (GHPL).
Summarizing the details of the agreement that was signed in 2006, Tarin said Canadian Company Barrick Gold, Chilean company Antofagasta plc, and the governments of Pakistan and Balochistan had entered into a deal to extract gold and copper from the Reko Diq mines. Under that agreement, the two foreign companies were granted 37.5 percent share each, while 25 percent share was given to the Government of Balochistan.
The agreement was suspended in 2011 due to a dispute over the legality of its licensing process, with the International Court of Arbitration levelling $6.4 billion award on the Government of Pakistan in penalties and the London Court of Arbitration imposing another $4 billion fine.
Crediting Prime Minister Imran Khan for the deal, the finance minister said his efforts had yielded the new agreement under which Antofagasta had decided against participating in the reconstituted project and withdrawn its claim of $3.9 billion for a payment of $900 million. This $900 million payment, said Tarin, would be paid by the three state-owned enterprises—OGDCL, PPPL, GHPL—for their 25% share.
According to the finance minister, the total worth of the project is estimated at over $100 billion.
During the press conference, energy minister Azhar said the new deal had helped Pakistan avoid $11 billion in penalties. He claimed that it would enable the development of a “lucrative” mining cluster in the country, as Barrick Gold believed Reko Diq only comprised a part of the total reserves in the area.
In a posting on Twitter, Prime Minister Imran Khan said the project would “potentially be the largest gold and copper mine in the world.” He claimed the mine would “liberate” Pakistan from “crippling debt and usher in a new era of development and prosperity.”