the provincial assembly lawmakers on the gold and copper mines located in Chaghi district of the province.
Apparently, the purpose of the briefing was to inform the elected representatives about the options available to both Balochistan and federal governments in the wake of a decision of the International Center for Settlement of Investment Disputes (ICSID).
In its verdict on a plea of the Tethyan Copper Company (TCC) – a company that had been mining at Reko Diq – the ICSID imposed a $5.97 billion penalty on the Balochistan government for rejecting the company’s 2011 application for mining.
The actual penalty amount was around $12billion. However, the ICSID brought it down by 50% in view of an appeal. A fine of $700,000 per day has also been imposed on Pakistan since July 2021 for non-payment of the penalty.
Reko Diq – a word that means a heap or mound of sand in Balochi language – is located in a desert of Chaghi district close to Iran and Afghanistan. It is some 700km south-west of Quetta and 40km north-west of the Saindak Copper-Gold Project.
The assembly session went for seven hours as federal government officials including the attorney general for Pakistan (AGP) briefed the house. It also included long speeches by provincial assembly members.
According to sources privy to the session, the members were briefed about the ICSID verdict; its impacts on the country internationally and implications in case of non-payment of penalty as well as the available options for the government.
Almost all the members except Akbar Askani were unanimous in their view that the provincial government once again strike an agreement with the TCC that may benefit the province and its people instead of harming their interest.
Many members from opposition as well as from treasury benches expressed their doubt about the proposed new agreement between the TCC and government of Balochistan.
Representatives of the Balochistan National Party-Mengal (BNP-M) were present in the in-camera session.
However, BNP-M chief Akhtar Mengal and National Party (NP) leader Dr Abdul Malik and other parties later declared that any agreement over Reko Diq against the interests of Balochistan and its people would not be accepted; rather they would launch a protest movement.
These nationalists allege that Islamabad wants to control Balochistan’s resources and demand that Balochistan’s people be given authority over the provincial resources.
Balochistan incumbent chief minister, Abdul Qudus Bizenjo and his predecessor, Jam Kamal, have also been accusing each other of compromising over Balochistan’s resources.
Bizenjo accuses that Kamal was ready to accept only 10% for Balochistan in negotiations with the TCC. Kamal rejects Bizenjo’s statement while claiming that the present government is not taking the Reko Diq issue seriously.
“It is the responsibility of the government to protect the rights and resources of Balochistan but Bizenjo and his ministers are not fulfilling their prime responsibilities,” Kamal said.
The PTI’s parliamentary leader in the Balochistan Assembly Sardar Yar Mohammad Rind said from day one the Reko Diq issue has not been dealt with properly. He accused the previous governments of minting money through these projects.
He called for setting up an independent truth commission for bringing the facts about the Reko Diq fiasco before the people of Balochistan.
The military authorities also launched a probe into the lopsided deals with foreign companies and undue concessions granted to them through amendments in rules and regulations.
In the past, Balochistan revenue department had allotted 575 square kilometer land to the TCC at a throw away price of Rs800 million and had also granted it surface rights for developing infrastructure including airport.
Later as a number of senior bureaucrats of the revenue department, the Balochistan Development Authority and mines and mineral department were interrogated for months for granting this undue favor to the company.
All investigation reports along with confessional statements of the accused were also presented before the ICSID as evidence to prove that the TCC had obtained concessions and agreement by bribing the government officials.
However the ICSID refused to take this evidence into account while deciding the case. All these documents had been handed over to the National Accountability Bureau (NAB) which prepared a reference against the accused for their trial in an accountability court.
In its detailed survey during the 70s to 80s, the Geological Survey of Pakistan discovered huge copper-gold deposits at Reko Diq area, but no international company showed interest in mining at the site for 13 years.
In 1993, Broken Hill Proprietary (BHP), an Australian company was granted 10 exploration and prospecting licenses for mining over an area of 1.4 million acres.
Under the agreement – called the Chaghi Hills Exploration Joint Venture Agreement (Chejva) – the BHP held 75% interest in the project while the government held the remaining 25% share on a joint-investment basis with 2% royalty payment.
The BHP obtained concession in 2000 and sold all its shares to a less known Australian company Mincor Resources in 2004 which further sold them out to mining giants Barrick Gold Corporation of Canada and Chilean Public Limited Company Antofagasta.
After bringing amendments in the BDA-BHP agreement, both Barrick Gold and Antofagasta entered into a joint venture in 2006 by forming a new company—the Tethyan Copper Company (TCC).
The company was named after the Tethyan belt that stretches all the way from Turkey and Iran into Pakistan. The TCC did primary work within 482 square kilometer – applied for the lease of another 100 square kilometers – but never shared its report with the Balochistan government.
In January 2013, a Supreme Court bench led by former chief justice of Pakistan Iftikhar Chaudhry declared Chejva agreement void, observing that the Balochistan government had exceeded its powers by signing it and that it was contrary to public policy.
The court also declared that changes in the parties to the agreement from the BDA to the Balochistan government and from the BHP to the TCC were also illegal.
The TCC had already moved the World Bank Group’s ICSID in 2011 against the Balochistan government’s decision to turn down its mining lease application.
In the meanwhile, the Balochistan government on the advice of legal experts established its own mining company – the Balochistan Mines Exploration Company (BMEC) – and appointed renowned nuclear physicist Dr Samar Mubarakmand as its chairman. The government allocated Rs10 billion for the company. A special permission was granted by the ICSID for mining activities at H-4 in Tanjeel area of Reko Diq.
Approximately Rs2.5 billion were spent on purchase of machinery, heavy equipment and luxury vehicles as well as for renting buildings for offices/residences, traveling and salaries.
Some 100 to 120 officials from different mining companies were hired on handsome salaries with perks and privileges. After a couple of years, Dr Abdul Malik Baloch had to wind up activities of the company as it was a flop project.
Some officials allege that legal expert Ahmer Bilal Soofi and Dr Samar were engaged in the project due to their relationship with the wife of the then chief minister. Around Rs10 billion were spent on litigation.
In 1995, the federal government of Nawaz Sharif launched Saindak copper-gold mining project on trial bases but closed it down for want of resources as well as low prices of copper in the international market. The project was commissioned in 2001 when a Chinese company – the Metallurgical Corporation of China (MCC) – took over the mines under an agreement.
Balochistan was getting only two per cent royalty; the federal government was getting 48% profit whereas the MCC was receiving 50% profit.
Balochistan had received just Rs16 billion under the head of royalty till the 18 Amendment of the Constitution was enacted on April 15, 2010 during the rule of the Pakistan Peoples Party.
The 18th amendment allowed the federating units to have 50% profit. However the federal government granted 25% of its 50% shares to the Balochistan government and now the province owns 50% shares of the Saindak project.
The MCC was also keen to have the Reko Diq project and for that purpose, it also submitted a detailed feasibility report to the Balochistan government for its fast track development.
Experts with experience of dealing with international mining companies blame both politicians and bureaucrats for bringing destruction in the shape of the ICSID verdict for their personal gain.
One of them said the statement of Dr Mubarak Mand in the Supreme Court of Pakistan as the chief executive of the BMEC benefited the TCC during the proceedings at the ICSID.
Dr Samar had stated that the benefits of the TCC mining proposal was $240 billion instead of $100 billion as stated in the TCC in its feasibility study.
The ICSID determined the penalty inflicted upon Pakistan on the basis of this statement. The expert said: “Dr Samar’s statement drove the last nail in the coffin of the Reko Diq project which cannot be reversed at any cost.”
These experts are of the view that there is a usual tendency among the foreign companies of obtaining undertakings from government functionaries to keep all matters confidential.
As a result, these bureaucrats cannot consult neutral resources or genuine stakeholders. Similarly the Balochistan government was bound not to share the voluminous feasibility study of the TCC consisting of over 10,000 pages on Reko Diq.
The Balochistan government was, therefore, unable to consult any expert of the same field for gauging the feasibility study whether it is detrimental or beneficial for it.
They suggest that the stakeholders—the representatives of Balochistan whether elected or non-elected – must be informed about the terms of negotiations. Any settlement may have bearing on the future of Balochistan as well as Pakistan.
The stakeholders – elected representatives – do not know so far whether there is any negotiation being held with the TCC and as to who is representing Balochistan – whether it is a team of experts or bureaucrats who have caused the fiasco.
Negotiations with TCC
The informed officials in the Balochistan government told Bol News that Antofagasta Public Limited Company – which holds 50% shares of the TCC – is not interested any more in mining at Reko Diq and demands its share of a penalty of $3 billion that is also negotiable.
However, Barrick Gold is very much interested to resume its mining related activities and Balochistan’s company BMEC is ready to go with Barrick Gold in a joint venture.
Negotiations are also being held on the terms and conditions like shares between Balochistan government and Barrick Gold. The profit share of Balochistan government was suggested with a ratio of 25% while 6.5% royalty and 5% for Corporate Social Responsibility (CRS).
The Balochistan Mines and Mineral department officials said there are limited options available to the government as the negotiation is the only course to reach an agreement that may equally be beneficial for both the parties.
The National Resources Limited (NRL) – a joint venture of Pakistan’s six leading business giants – showed interest in paying the negotiated penalty which is estimated at around 1 billion US dollars. The NRL, according to its CEO Shamsuddin Shiekh, has been formed primarily to develop Reko Diq reserves and has financial resources with a combined asset base of Rs1.2 tr.
The NRL has estimated that Tanjeel, a H-4 block of Reko Diq has approximately 0.7 million tons of copper with a revenue potential of $5-6 billion for next 10-12 years.
Reko Diq is at-least 20-times of Tanjeel having 12 million tons of copper and 13 million ounces of gold with revenue potential of $150 billion over next 40-50 years. Once in full production, Reko Diq could be the world’s 5th largest copper mine by production, NRL assesses.
A widening gulf
Oil and gas fields were discovered in various parts of Balochistan – including Kohlu and Sui – in 1951 and the industries in Karachi and Hyderabad were already getting gas by 1955.
Gas from Sui was available to the industries in Lahore, Multan and Faisalabad by 1958 while households in Karachi started getting gas connection in last 60’s. Soon the residents of Lahore and Islamabad also started getting gas connections.
However, the residents of Quetta – the cold and hilly provincial capital of Balochistan – started getting compressed gas in the late 1970’s while Quetta city was connected with a pipeline in the 1980s.
Of the 35 districts of Balochistan, only 15 have been provided gas connections while people of the rest of 20 districts including Makran as well as that of the Pashtun belt are still deprived of the fuel.
A development cess had been introduced for development activities in the province, but the regime of military dictator General Ziaul Haq only paid a very small amount to the province.
Under its Balochistan package, the Pakistan Peoples Party (PPP) led federal government – that ruled from 2008 till 2013 – decided to pay Rs120 billion as development cess arrears.
Balochistan also produces oil but most parts of the province experience up to 10- and 12-hour power outages. This situation has been creating a great sense of deprivation among the people of the province where literacy, unemployment and poverty are increasing simultaneously.
This situation is also widening the gulf between the province and Islamabad.
