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Chile and Pakistan: A Missed Opportunity for Mineral Relations at Reko Diq

Looking at a planetary map, one would find very little in common between South America’s most developed country, Chile, and South Asia’s beleaguered nuclear power, Pakistan. Apart from the physical distance, there is little commonality in linguistic, religious or ethno-cultural background. Yet minerals and economic expedience have brought these two countries closer to possible cooperation. What is arguably Pakistan’s largest mineral deposit in terms of net worth, the Reko Diq copper and gold mineral prospect in the Chaghai region of Balochistan, has garnered investment from the family-owned Chilean mining firm Antofogasta minerals.

In 1993 Australian mining giant BHP negotiated the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) with the province of Balochistan to explore the desolate triangular region of Pakistan’s geography that borders Afghanistan and Iran. In  1997 BHP discovered significant copper-gold deposit at the Reko Diq site and in year 2000, Tethyan Copper Company was established by Mincor Resources after taking over the project from BHP. In 2006, Antofagasta PLC  of Chile and Barrick Gold Corporation of Canada  formed a JV and acquired 100% of Tethyan Copper Company Pty. Limited, an Australian company which subsequently transferred all mining rights to its Pakistani subsidiary, Tethyan Copper Company Pakistan.

During a recent research visit to Chile, I had a rare opportunity to meet, Fernando Crisosto,  a social engagement officer who had worked with Antofagasta Minerals and visited Pakistan several times when the project still had some potential for development through joint foreign engagement. Fernando was very nostalgic about the time he spent on the Reko Diq site and showed tremendous affection for the people of Balochistan and of Pakistan. Unfortunately due to mismanagement at various tiers of government, errant data being communicated, and the rise of resource nationalism, the project is now stuck in the courts and international arbitration mechanisms. No doubt the distrust was also exacerbated by badly sourcing the feasibility study of the project by a Canadian firm SNC-Lavalin which was subsequently been ”blacklisted” by the World Bank. Fernando indicated to me that even though their plans for social development were far more detailed than the neighbouring  Saindak mine which is operated by a Chinese government partnership, there was a deficiency of community engagement and communicating those plans effectively to tribal leaders.

Nevertheless, Baloch or Pakistani nationalists alike should first of all be very cautious about believing random data points and value of the reserve at Reko Diq which are asserted in media appearances by said “experts.”  The geologic reality of the Reko Diq deposit is that it is essentially a low-grade copper-gold porphyry which clearly has much potential but is by no means “Solomon’s fortune” as it is sometimes made out to be. Utterly absurd and unsubstantiated numbers for the value of gold and copper reserves in Afghanistan and Pakistan are wantonly paraded in prominent media venues in both countries.  For example one news story in Pakistan’s most widely circulating English daily  this year asserted that the value of the mineral wealth in Reko Diq was in excess of $3 trillion. This number has absolutely no empirical or even remotely rational basis. Indeed the estimated value by the World Gold Council at current prices of all the gold ever mined in the history of the planet is around $8.8 trillion. It would be delusional to think that a low-grade deposit in Balochistan has more than 1/3 the value of the gold ever mined in the history of the Earth!

Pakistan’s media should consult more deliberately with international geological experts who do not have any particular vested interest in the development of the project rather than interviewing hyper-nationalist geologists that have limited substantiation of facts and grossly exaggerate value of the reserve as well as Pakistani technical expertise to extract the resource. In particular the research of Pakistani-Canadian mining academic Professor Laeeque K Daneshmend deserves greater appreciation and engagement to counter the unsubstantiated data being branded about in the media.

Yet conspiracy theorists continue to churn out estimates which have no basis in reality and are misleading the Baloch and Pakistani public. Further misinformation about the Chilean company that invested in this project has also been spread by some of these negative elements. For example in my last visit to Pakistan I heard baseless rumours that the Reko Diq mining concessions was now owned by “Zionist” family interests. Regardless of whether or not such ownership should even be a concern in commercial contracts, it is patently not true. Antofagasta Minerals is owned by the Luksic family of Chile that has Croatian origin. The founder of the company and family patriarch Andronico Luksic (died in 2005) had a Croatian father and a Bolivian mother and absolutely no connection to any ethno-religious causes.

Rather than demonizing foreign investors, Pakistanis and Baloch, regardless of their political persuasion, should consider means of cooperation with Chile in such mineral investments. As a country which has developed their mineral wealth with care to escape a past of desperate poverty and military rule, Chile has much to teach Pakistan. As my friend Fernando noted to me when I said goodbye to him in Santiago, “Chileans have been in the same place as Pakistan. We can help if only they would trust us.” Indeed, Chile has come a long way from its dark past to become a vibrant economy which is now a member of the OECD and from January 2014 will be the first South American country to be part of the United States Visa Waiver program. Imagine that for Pakistan!

Pakistan opened an embassy in the Chilean capital Santiago in 2008 and there is small group of Pakistanis who live in the remote northern town of Iquique which even boasts a Pakistani school. These migrants came through the cargo traffic to this port and settled over a period of several decades. Despite the huge loss of several hundred million dollars that Antofagasta Minerals has faced in terms of the inability to progress the Reko Diq project, there is continuing interest of Chilean investors through occasional investor visits.  Chile-Pakistan relations encountered an interesting twist in 2010 when a Pakistani student was apprehended at the US embassy in Santiago for allegedly having explosives but was later cleared of all wrong-doing. Several Chilean government officials expressed solidarity with Saif-ur-Rehman  Khan after this humiliating episode and he was able to get considerable sympathy in Chilean media venues and fully exonerated by the Chilean judiciary.

Chile and Pakistan have thus had a limited history of engagement which has shown a modicum of camaraderie despite the broader spectre of security narratives. Allowing Chilean investment and mining expertise to assist the development of Balochistan should be encouraged, particularly because Chile also has experience with provincial sensitivities and combing state-owned enterprises (such as Codelco) with private investment.

The federal and provincial governments in Pakistan have to find a path to using minerals as a cooperative mechanism rather than a wedge with Baloch nationalist elements. It is high time we focus on constructive engagement domestically and internationally towards this common goal rather than perpetuating mistrust and fear of partnerships. Minerals development with reliable partners, alongside a diversified economy, has much potential to lift Pakistan and its fractured provinces out of their current predicament of despair.

Comments

  1. Wali Bukhari
    Sydney, Australia
    March 21, 2014, 11:08 pm

    what a fantastically written article! I’m glad you sent it to me as it cleared a lot of misconstructions I had about the mineral reserves in Balochistan. At the same time, it also brings about the dismal awareness of the potentials of what “can be” as opposed to what “is”. I quote the good professor, “As a country which has developed their mineral wealth with care to escape a past of desperate poverty and military rule, Chile has much to teach Pakistan.” I read a quote some time ago (forgive me for not remembering who by) that said “It isn’t the inability of the illiterate but the ignorance of the learned that causes destructions of nations”. The corruption on the government level has so profusely blinded those in power, that they are handicapped to take reform measures, hence causing impasses to great initiatives like these.

    However, with leaders like Prof. Saleem, I have no doubt that these endeavours WILL start leaving marks on the outlook of masses.

  2. Hasan
    Karachi - Nokkundi
    January 8, 2014, 8:25 am

    Dear All,

    Your views & approach towards solution appreciated, BUT being Services Provider for Drilling & Testing WE know little more.
    About the Rekodiq & Thar UGCG Project.

    We Pakistan, unable to mine the project discuss above under the circumstance where No one Serious & Sincere with the Country.
    We served & observe closely Tharcoal Project since 1993 & Rekodiq from 2004.

  3. Amir Riaz
    December 5, 2013, 11:14 pm

    That is my point, you think but you are not sure but I am sure what I speak of.

    Was it helpful to you? I am sure it was not!Please visit a local Psychatrist than a foreign funded Psychatrist.

  4. Asad Khan
    Hyderabad
    December 5, 2013, 9:57 am

    @Amir Riaz,
    I think Philosopher would do you no good, perhaps a Psychiatrist might be more helpful.

    regards,

  5. Amir Riaz
    December 5, 2013, 12:24 am

    SO MUCH ENGLISH! I really hope you did it by yourself.
    I am not here campaigning for TCC or Imran Khan, this is not the forum, was just sharing my views.
    It is a kind of shock that a person like you really exist, who can appreciate good for nothing personalities, etc. companies. By all means you can think that and believe that but your fact or truth riddle theory will not have much impact.
    I have no doubt on the trust me on this thing! But I am not seeing any better option than Imran at the moment. (He is not corrupt! like Bhutto, Nawaz etc.)
    Corruption! How to brighten spots?
    If masses are fools then I am sorry I cannot help it. I did try though!
    A.Q, He is a man of Honor because he did so much for Pakistan but what we did with him, though nice try defending Samar but what are his accomplishments, I really do not know, he spoiled everything he chaired for, KANUP, THar Coal, Gold and Copper. I do not want to degrade him but this the reality my brother! Please share some real success stories for my knowledge (about thar, reactors and Gold).
    THAR Holds immense…….. …! What happened to believing in thing? Why looking for AID; do it by yourself.
    Good words for MCC, I am amazed, I do not know about the 45%, I knew about only Royalties and taxes, but News flash, WHO BUILT SAINDAK (who invested money in it) YES PAKISTAN did, and after investing 100% money they are getting according to you 45% and it looks fine to you?
    2018 and abiding by the law, are we living in parallel world?, where is LAW and what law, THE LAW that is amended to fulfill these hypocrites needs, in shape of NRO, SROs , Killings ever where, what happened in Hangu, Rawalpindi and happening in Karachi. I cannot see my country like this! It’s time we should wake up! I am done with sleeping.
    Regards

  6. Asad Khan
    Hyderabad
    December 4, 2013, 11:41 am

    @ Amir Riaz

    I deal with FACTS… not truth / true. If it’s truth you’re looking for, then you need to consult with a philosopher.

    The watershed moment for Pakistan will be when Pakistanis should start believing in themselves rather than running behind some Khan / Bhutto / etc etc,. Trust me on this.

    – Yes, the 3rd World main predicament is corruption / weak administration / inefficient practices, but it is not prevailed in & on every inch. Some dark hoes & there are huge shades of gray and then there are some bright spots as well. We just need to brighten these bright spots more & more.

    – If you are that much concern about Zardari Nawaz & Co. then don’t let the masses to vote for them, Simple. Tell Imran Khan not to waste time on blocking roads but block malpractices & inefficiency in his governed province.

    – A.Q Khan is a metallurgist of a high caliber. There are enough souls apart from AQ that have contributed positively to the country; their distinction is for the country is that they opt to remain nameless rather than for namesake.

    – Dr Samar is head of Science & Technology, Planning Commission of Pakistan, his credentials are impeccable. It is not about Dr. Samar or XYZ, it is about whoever will lead the Strategic Planning Commission will do its utmost to serve the country.

    – Pakistan proven hydrocarbons reserves are not large enough to fulfill ever growing country power needs. That is why the Hydro-projects were initiated in the beginning (and still ongoing) till the discovery of SUI & later THAR.

    – THAR holds immense potential, Pak has the technological design of UCG implemented & running. The circular debt CARTEL does not want to let go its grip easily. That is why the funding is not provided for UCG for THAR. Even US has politely refused to fund the UCG for THAR and offer funding for Wind power instead.

    – In early 90s some Australian Company was involved in THAR Coal but they lost interest because the Thar Coal was very low grade (Lignite, generate too much pollution if used in Open Conventional Power Plants).

    – Saindak (MCC), is running fine as per agreement, Chinese honor their agreements. Initially Pak Federal Govt failed to fulfill its side of bargain but even then Chinese acts more forthcoming rather than taking Pak to the Courts. Besides, Saindak project is on LEASE basis and the Not the ownership one. The Federal share is more than 45% and the Provincial Share is 5%, the rest belongs to MCC. (When Saindak was initiated 18th Amendment was not there and the Federal Govt looks after Mines & Minerals whole solely)

    – TCC was not offering 25% without deducting expenditure as per Profit Loss Agreement. Further, TCC was pulling far too much on Provincial Govt. TCC claims has been void in Apex Courts both in National & International Courts.

    Hope to see Imran Khan in power by 2014???.

    Next elections due on 2018. Please mark your calendar.

    Hope to see masses (we) start knowing & abiding the LAW by 2014 rather than taking XYZ in power by 2014.

    regards,

  7. Amir Riaz
    Islamabad
    December 4, 2013, 1:18 am

    Asad Khan, I wish you were true, but I will simple ask name one institution that is corruption free and is for the well fare of Pakistanis! Courtesy (Nawaz, Zardari). The justice , where when, How many cases he passed verdict on, He has not done a single favour to this Nation.

    Conspiracy theories every where, Saindak, Tethyan and mostly Good for nothing so called Dr. Samar Mubarak Mand. I really do not know what is his true potential, He is expert in Nuke, Missile, Atomic Energy, Copper & Gold, Coal mining, Power Generation from Coal + Diesel. So many things, (Decide yourself) because these fields are so much different and it is to be a miracle if he is an expert in all of above. (I only consider A.Q the True Legend of Pakistan)

    Secondly Saindak, Courtesy China, we have to do the deal that is what I think, and just only on Royalty + Taxes and no profits no share or anything else,

    But what about Reko Diq, I am sure agreement was nearly giving 52 % of the profit to Pakistan( 25 % share + Royalty + Taxes and without investing a single penny in the Project, Literally we do not a penny to invest in the Project(Courtesy Zardari & Nawaz)), but why on Earth we will accept that, we only wanted some Royalty for Pakistan and Huge Bribes for our self’s and China was really eager to get the project; why! because Saindak is been nearly destroyed by over mining and not following the standards)

    I am really disappointed how things moved in past, Not a single institution of Pakistan had the guts to speak the truth, why they are not giving the project to TCC. If they never wanted to then why they let TCC to enter Pakistan, If they were not beneficial to country why they were carrying out the project for last 15 years and why they were spending huge money on the project. This does not make any sense.

    I really hope if not TCC then this should be given to some reputed company but not less than 52% of profits i.e. we should not repeat the mistake of Saindak again where we put our money and when the cake is cooked we gave it to somebody else, please eat it.

    I have only hope with Imran Khan, but what to say, our fellow people thought it was Nawaz who can pull Pakistan from trouble.

    Hope to see Imran Khan in power by 2014.

  8. Saleem Ali
    November 29, 2013, 9:42 pm

    Asad Sahib — uranium mining in Southern Punjab was done without profitability in mind and with the military subsidizing it and even so there have been huge environmental challenges from those operations. Having a commercially viable mine in current macroeconomic conditions is very different from just doing a military style strategic extraction operation. As for ancient mines, they were infinitesimal in scale to modern commercial mines for such deposits.

    Thanks to Wahab Sahib for his local perspective and endorsement. Regards

  9. wahab mengal
    November 29, 2013, 11:31 am

    Being a resident of that same place i.e Nokkundi at chaghi which houses the Reko Dik copper-Gold deposits i fully agree with writer’s take. Lately we have been making tall claims but unfortunately we do not have any concrete plans nor any resources to get them materialized. The same team which is currently working on Reko Dik had huge plans of generating thousands of MWs of electricity from Thar coals but now that project has reached its fate and unfortunately Reko Dik is destined to reach the same destiny unless there is a paradigm shift in our investment approach. One more thing locals were very forthcoming and well coming to TCC and their CSR plans contrary to general belief which considers them to be offensive.

  10. Asad Khan
    Hyderabad
    November 28, 2013, 2:14 pm

    Pakistan has demonstrated to explore, mine & develop Uranium deposits let alone copper. The mining of low grade iron ore has been on & off for the last 30 years. Humanity knows how to mine cooper n gold long before Christ. The catch is, in today’s profit driven cut throat corporate world how does one makes a mere mine into a top performer in world stock markets.

    The irony of the third world (i.e Pakistan) is that they are politically biased in administrative matters & in-efficient in management practices further, the scarcity of capital and ever demanding population compels these countries to look for International Organizations (i.e WB, IMF, Large Corporation). These big organizations / corporations prowl on these exact weakness of the third world countries.

    Simply, TCC offer was not that attractive.

    regards.

  11. Saleem Ali
    November 28, 2013, 7:10 am

    Asad Sahib – thanks for your comment. However, the assertion that Pakistan has the capacity to mine copper and gold technically from such a low grade deposit is undemonstrated and baseless. Where have we shown to be able to do so locally? Financing is always a challenge with mining projects and that is why the norm is to have a hybrid arrangement of private investment and provincial / state interests.

    The international arbitration ruling was simply about the locus standi of TCC to halt the development of the project independently by the province and is not a commentary on whether Dr. Samar and the province can actually demonstrably develop the project.

    I wish them well if they can develop it on their own but it is highly unlikely and cooperation has always shown to produce better and more efficient mines where risk is absorbed by multiple players and expertise is shared.

    Regards

  12. Asad Khan
    Hyderabad
    November 27, 2013, 5:22 pm

    The TCC has not only been shown the door by the Courts of Pakistan but also the International Courts as well. The TCC even stop perusing the claim for prospecting in International Courts.

    The whole Saga from BHP to TCC brought nothing but loss of valuable time and capital to Pakistan.

    Pakistan knows how to mine copper / gold. The only thing is lacking is the money, which has now been allocated under a small but robust provincially operated project.

    regards,