KARACHI - Tethyan Copper Company (TCC), which is battling to keep
control of
the multi-billion dollar
Reko Diq copper and gold project in
Pakistan's
southwestern Balochistan province, says it is still in
talks with officials
after moves by the provincial government to cancel its
US$3.2 billion
development deal with the company.
The Balochistan government holds a 25% interest in the
project. It recently
decided to take over the Reko Diq project after
announcing in December that it
was scrapping its deal with TCC. The company holds the
remaining 75% interest
in Reko Diq and since the original exploration contract
was signed has become
co-owned by Canada's Barrick Gold and Chilean copper
miner Antofagasta.
"We are not going on a collision course: we are in
talks with Pakistani officials and we hope things will move forward in the right
direction," Samia Ali Shah, TCC's public relations
manager in Islamabad, told
Asia Times Online.
TCC said it has not yet received official notification
with regard to
cancellation of the contract for Reko Diq, which is in
the Chagai district of
Balochistan. It says that if it receives such
notification, it will then decide
its future strategy and consider all options. In the
meantime, it expects to
complete a feasibility study for the project by the end
of this month. It then
plans to apply for a mining license.
TCC had allegedly violated its agreement with the
provincial government by
transferring its share to other interests - Barrick
Gold and Antofagasta - at
the exploration stage and without the local
government's consent.
Denying any violation of the Reko Diq joint venture deal signed with the
government of Balochistan (GoB) in 2006, the TCC told
Asia Times Online that
all transactions
were fully compliant with existing laws and regulations and as
per the provisions of the Chagai Hills Exploration
Joint Venture Agreement
(CHEJVA).
The original contract for Reko Diq exploration was
signed in 1993 with BHP
Minerals, which established a joint venture with the
local government, leading
to a deed of waiver and consent signed in 2000. TCC,
then a subsidiary of
Australian Mincor Resources, had an alliance with BHP.
Antofagasta and Barrick
Gold took over 100% of TCC in 2006.
Samia said the legality of the transactions was
expressly confirmed by the
Balochistan High Court in a 2007 ruling. "On April 1,
2006, by means of a
Novation Agreement, with approval of the Government of
Balochistan (GoB), TCC
assumed all rights and obligations of BHP Minerals
under the CHEJVA executed
between GOB and BHP Billiton on July 29, 1993. Before
doing so, in accordance
with the terms of the CHEJVA, GoB was offered to
acquire BHP�s 75% share in the
joint venture, but the GOB declined. In 2006, Barrick
Gold and Antofagasta plc
acquired 100% shares of TCC."
The local government also argues that TCC has been
reluctant to establish a
refinery plant and establish a mining academy in the
province. Samia said TCC's
expertise "does not lie in smelting and refining
business" but it did not
oppose the provincial government if it "wishes to invest in a
smelting/refining
facility, directly or through third parties". TCC's two
owners are leaders in
upstream mining (exploration and production) and are
not involved in the
downstream smelting-refining business.
TCC has also offered to make arrangements to deliver copper concentrates
to
such a facility under mutually agreed commercial terms
and conditions and
subject to the limits allowed by the lenders of the
project financing for the
Reko Diq project and provided that such a facility
meets the stringent
environmental and sustainability standards.
Samia said, "In the copper value chain, the most value
addition is achieved at
the copper concentrate production stage - that's why
most mining businesses
usually only comprise a mine and a concentrator, and
smelter/refinery
businesses are non-integrated. Since 1992,
approximately 90% of the major mines
and [mine] expansions in the world have been developed
without a
smelting/refining capacity because [these are] capital
intensive with a high
environmental impact and at best can add less than 10%
to the finished copper
product value."
On the company's alleged unwillingness to invest in
establishing a mining
academy in the province, Samia said such initiatives
would be taken after
approval of the framework for investment of
over $3.2 billion in Reko Diq, as
the company believes that highly skilled human
resources are a fundamental
requirement not only for the success of this project
but for the overall future
of the mining industry in Balochistan.
"Since 2006, TCC has spent 130 million rupees [US$1.5
billion] on its several
community development initiatives in education, health,
skill development, and
so forth,'' Samia said. ''Already, TCC is supporting
several skill development
initiatives under its community investment program."
The Balochistan government has claimed that TCC was planning to lay
pipelines
from Reko-Diq to the southern Balochistan port of
Gwadar and send concentrate
through this pipeline for transport on to Chile and/or
Canada for final
refining.
Samia rejected the allegation. "The copper concentrate
produced by Reko Diq
will go neither to Chile nor to Canada but will be sold
on an open, transparent
and competitive basis to a number of smelters/refiners
around the world -
typically China, Japan, South Korea and Europe are the
bigger copper
concentrates consumers.
�GoB will have the right, and TCC will welcome [it], to
monitor the whole
process and ascertain the revenues based on the
valuable payable metals
contained in the concentrate," she said.
Local analysts fear that scrapping the deal with
international miners would
send a bad signal to prospective foreign investors
interested in
poverty-stricken but resource-rich Balochistan. Foreign
firms in the oil and
gas sector have already left the province due to
security concerns, as bomb
blasts, targeted killings and attacks on public
installations and security
personnel have become routine in the insurgency-hit
province.
Still, while Baloch nationalists have expressed
reservations over the Reko Diq
project, no attacks on workers or the site have been
reported since 2000. The
nationalists have argued that they are not against the
development of the
province, but are merely striving to protect its
legitimate interests.
Some analysts argue that scrapping the Reko Diq
contract will not help improve
the situation in the province, as the nationalists'
grievances are against the
federal government, not against foreign firms or
investors. An agreement with
any firm that guarantees the protection of the
province's legitimate interests,
would be acceptable to the local people.
The United States has urged Islamabad and the provincial government to
stand
behind their agreements with international companies,
pointing out that the
cancellation of the Reko Diq contract would cost the
country the planned $3.2
billion investment in one of its most backward and
least-developed regions.
|