The Reko Diq scandal

Historically gold prospects always attracts adventurers, the sites are usually fought over, not only by individual prospectors and/or mining companies but by nations.
Possibly the biggest copper and gold deposit in the world, why should Reko Diq be an exception? On Nov 11 the Supreme Court (SC) issued notices to the Federal Govt and the Govt of Balochistan (GOB) on a petition accusing them of selling Pakistan’s assets, and that too without greater transparency, to a foreign company at a throwaway price.
The petitioner has requested that the govt be stopped from selling copper and gold reserves worth over US $ 224 billion in profits alone to Tethyan Copper Company, an Australian Joint Venture (JV) that is now partnered between Chile’s Antofagasta Minerals, Canada’s Barrick Gold Corporation and GOB.
Requesting for the entire record of the deal or lease agreement signed to be placed on record, the court was requested to restrain the two govts from changing the prospecting licence to a mining licence in an arbitrary and unlawful manner without a debate in Parliament.
While the SC has fixed Nov 24 for a hearing, the Balochistan Provincial Assembly had already passed a Resolution asking for the contract to be cancelled.
Chief Minster Nawab Raisani has claimed GOB has the resources to do the project by themselves. While GOB should certainly take control of their assets, expertise will have to come from abroad.
To quote Mohammad Ali Talpur from his article “Requiem for Reko Diq”, “Reko Diq, an ancient volcano in Chaghi, literally means sandy peak. This is something of a misnomer. It should be called Tangav Dik, or gold peak, below the sands lie 12.3 million tons of Copper and 20.9 million ounce of gold”.
In March this year the CEO of Tethyan Copper Company said a feasibility study into the site has confirmed 22 billion pounds of Copper and 13 million ounce of gold over the 50-60 year life of the Project. Taking the Tethyan estimate and given that the international price of copper today is US$ 8,600 per ton and that of gold US$ 1350 per ounce, with the cost of production estimated at US$ 1,500 per ton for copper and that of gold at US$ 350 per ounce, that works to a cool profit, at today’s international rates, of approximately US$ 80 billion for copper and US$ 156 billion for gold in the 56 years life cycle of the project, a total of US $ 236 billion, or roughly US $ 4.2 billion per year in profit alone.
The original agreement was signed between GOB in 1993 and BHP Billiton, the Anglo-Australian mining grant. Under a “deed of waiver and consent”, BHP Billiton sold 75% of its stake, 37.5% to Chile’s Antofagasta and 37.5% to Canadian Barrick Gold Corporation. Reports indicate that for establishing the Tethyan Copper Company and then selling it to the Chileans and the Canadians, BHP Billiton stands to make over US$ 75 billion over the life of the project.
That is a colossal profit on the meagre investment made! If that is true, BHP Billiton makes a cool US$ 1.125 billion per year for the next 56 years! Why has the royalty been unilaterally reduced from 4% to 2 % and why was GOB not party to the agreement? And what was their original investment? If Tethyan has spent about US$ 300 million as the CEO Tethyan Gerhard von Barriers claims, it would be appropriate to take up his offer to appoint international auditors to verify this.
An investment of US $ 3.3 billion will be made over the four-year construction period, however most of it will be in loans, guaranteed by the gold and copper deposit. Why is the 25% share of the Balochistan Govt contingent on the sharing 25% expenses? What is the GOB share in the initial investment, including that of providing support services, security roads, communications, etc? Does it mean the gold and copper mine-to-be was given to investors for free?
Tethyan Copper Company is asking for its exploration licence, which expires in February 2011, to be converted into a mining licence. The company’s CEO maintains that all apprehensions being expressed is because “of a lack of information and the fear of the unknown”.
The CEO Tethyan claims that the smelting and refining operation is based on a doubtful perception of benefits, and the economics thereof are very poor. If so, why are the Chileans and Canadians risking life and limb as well as their investment in such a dangerous area, almost in the heart of “Al Qaeda territory”? For profits off course, and if they can make profits, than we should be able to do so too, after all mining is not nuclear science. Coincidentally the man who is the father of our first nuclear explosion Samar Mubarakmand is the Pakistani Head of Tethyan.
Some information about the investors, Chile’s Luksic family owns the Antofagasta Holdings and the Canadian Munk family owns Barrick Gold Corporation.
The original Chilean company, Antofagasta and Bolivia Railway Company was incorporated by investors in the London Stock Exchange in 1888 to finance the railway from La Paz in Bolivia to Antofagasta, a Chilean port. Canadian Barrick Gold Corporation is the largest gold mining conglomerate in the world. Two interesting snippets about the founders of the two firms, both of whom are immigrants from Europe.
The patriarch of the Luksic family, Andr