TCC files for int’l arbitration over Reko Diq project

The Tethyan Copper Company (TCC), which owns the exploration lisence for Reko Diq copper gold project in Balochistan has said it has begun international arbitration proceedings to protect its rights after the provincial government rejected its mining lease application.

Legal proceedings
A statement issued by TCC on Tuesday said, “Following the summary formal refusal of the mining lease application (MLA) originally submitted in February 2011, TCC has today filed for international arbitration in order to protect its legal rights”. However, it did not provide any details on the arbitration proceedings. Earlier this month, Balochistan rejected MLA application that TCC submitted in February this year. The company had filed a notice of dispute on October 19, 2011, after provincial government refused to meet its executives, or extend a deadline for a response to objections raised over the lease. After the provincial government summarily dismissed its application, TCC decided to go for international arbitration. “We are disappointed we have not yet been given the opportunity to resolve this by negotiation. We firmly believe that our feasibility study and MLA submission are in accordance with the Balochistan Mineral Rules 2002, and that there should be no regulatory or legal obstacle to the granting of the MLA. We have to initiate arbitral proceedings in order to protect our legal rights, but we remain open to meeting with the Government of Balochistan and its regulatory body to work towards an amicable, negotiated resolution to the dispute”, said Tethyan Chief Executive Tim Livesey in a brief statement.

About TCC and Reko Diq
TCC a joint venture of the world’s leading miners Antofagasta and Barrick Gold had served a “notice of dispute” to the government of Balochistan over its Reko Diq project giving 120 days for the settlement of the dispute otherwise the company will seek international arbitration. The joint venture partners have spent $200 million to buy the exploration license from Australian BHP Billiton in 2006. The copper reserves at the Reko Diq are estimated 5.9 billion tonnes, with an average copper grade of 0.41 per cent and an average gold grade of 0.22 grams a ton. TCC planned to initially invest $3.3 billion in the project that would have increased during 56 year mining operation period. According to experts, TCC will be claiming all its investment costs and future profit losses due to the non conversion of the exploration license into MLA. They said the international arbitration is expected to take years to complete and during that time no mining work could be carried out in the area.

Feasibility study
In February 2011, the company filed an application for a mining lease over a mining area within the exploration license EL-5 in the Chagai district of Balochistan. The basis of the application was a feasibility study of an initial mine development at the Reko Diq project. The feasibility study was given to the provincial government in August 2010 under an existing agreement between TCC and Balochistan. At the time of the completion of the feasibility study in 2010, under provisions of the agreement, Balochistan was entitled to become a 25 per cent equity partner in the project, enabling them to profit additionally from the mine development and operations over and above the normal royalty and taxation payments. The provincial government on November 24, 2010 decided not to become a participating party in the project. Upon receipt of the mining lease application from the company in February 2011, the provincial regulatory body responded in September 2011 with a number of observations, made in the context of an intended refusal. TCC was given 30 days to respond to the observations. The company sought meeting with the provincial government to better understand their observations and concerns and requested an extension of an additional 60 days in order to engage with the provincial government, however no extension was granted, and its application was dismissed.