KARACHI: Balochistan hides vast mineral reserves under its seemingly barren surface. It is hoped that when these mineral deposits are tapped, they will be a great windfall for the economy. However, Pakistan is moving at a very slow pace on this front and does not seem to have fully grasped its potential wealth.
Many countries blessed with rich natural resources, have pressed home the advantage through sound planning and made great economic progress. In Pakistan, copper and gold deposits were discovered in Reko Diq in Chaghai district, Balochistan in 1993, but the find remains untouched even now.
Under an agreement signed between the Balochistan government and TCC, the company involved with the project, the province will receive a 25 percent share in the profits, in addition to royalties and taxes accrued in the project.
Various figures have been quoted in the media referring to the value of the find; there is disagreement between the mine developers and the government on the actual size and value of the deposits.
It must be understood that whatever the value of the deposits, whether $100 billion or $250 billion, Pakistan would still reap a 25 percent profit plus royalties and taxes; the total benefit for the country could even exceed 50 percent.
It must be understood that the valuation of a mineral resource encompasses several factors, such as investment costs, financial costs, operating costs and the risk. For Reko Diq to become productive, the project will have to entail massive expenditure on infrastructure which does not exist at present.
According to available statistics, the mineral resource at Reko Diq is estimated at 5.9 billion tonnes, from which some 2.2 billion tonnes of economically extractable ore, with an average copper grade of 0.5 percent and an average gold grade of 0.3 percent gr/tonne, will be processed to produce 2.2 billion pounds of copper (10,000,000 tonnes) and 13 million ounces of gold in about 56 years of total productive life of the mine.
What needs to be taken into account is the investment risk in first identifying the mineral, entailing a large and costly exploration campaign, and extracting the resource in a technically and financially viable manner. TCC stresses that it has undertaken all these measures without calling on the Balochistan government to bear either cost or risk in this phase. The market value of the project is also indicated in the feasibility study, assigned by TCC to one of the world’s three top independent international engineering firms.
The feasibility study handed over to the Government of Balochistan (GoB) clearly shows that if copper and gold prices go up, the benefits will rise in proportion. The provincial government is a 25 percent interest shareholder, a stake which will grow as international prices escalate, and it will also receive royalties and taxes. This feasibility study is deemed reliable and will be used by the international banking community as guide for initial investment on this project.
The agreement between GoB and TCC is said to be exceptional by all international mining standards and practices as it provides for government shareholding without it incurring risk (in addition to taxes and royalties). Generally, only the investor has the right to earnings and governments receive only taxes and royalties. The feasibility study aptly illustrates that more than 50 percent of the project’s revenues (after investment and operating costs) will go to both the provincial and federal governments.
However due to a plethora of reasons, ranging from official ineptitude and political apathy to lack of finance and dearth of technical expertise, this mineral wealth lies agonisingly just out of reach, under the surface. The upshot of all this inaction is that Pakistan has failed to make its mark on the world map as a mining nation despite massive potential, while many other countries have forged ahead and have transformed their economies in just a few decades through solid planning and harnessing available domestic and foreign technical expertise and resources.
Pakistan must not lose this opportunity to exploit its rich mineral resources and must take pragmatic steps to ensure that this very important public-private joint venture, which is of paramount importance to Pakistan’s mining sector, is facilitated and brought back on track in the shortest possible time. It is an opportunity that must not be lost.
The writer represents an NGO operating in Balochistan.
All roads to prosperity lead to Reko Diq
