Reposted from Pak Tribune | May 27, 2011 | Original story
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QUETTA: The Balochistan government is expected to decide on issuing a mining lease for a $3.3 billion copper and gold project owned by Chile's Antofagasta (ANTO.L) and Canada's Barrick Gold (ABX.TO) next week, officials said on Thursday.

The two companies are partners in the Tethyan Copper Co (TCC) joint venture, which has a 75 percent interest in the Reko Diq project in Balochistan, and hold the exploration licence for the site.

Reko Diq holds an estimated 5.9 billion tonnes of mineral resources with an average copper grade of 0.41 percent and an average gold grade of 0.22 grams a tonne, according to data released by Antofagasta.

The TCC says it has the right to mine at Reko Diq under Balochistan's 2002 Mineral Rules, but the provincial government last year warned that it would cancel the project amid growing anger over outsiders exploiting natural resources in Pakistan's biggest but poorest province.

The Supreme Court had barred the Balochistan government from giving approval for the Reko Diq mining lease until it rules on an investigation over the awarding of the concession to the TCC.

But on Wednesday, the Supreme Court allowed the provincial government the right to decide on the granting of the lease. The court investigation will continue.

"We have called a meeting in the first week of June. The representatives of the TCC will also be invited ... to renegotiate the issue," Balochistan Chief Secretary Ahmed Bakhsh Lehri told Reuters. "We want them to set up their refinery here. We hope that the government will take the decision by next week."

Monitoring desk adds: The owner of TCC and Barrick Gold said in Toronto his company will be "very cautious" in its plans for the Reko Diq copper and gold project in Pakistan, but still views the asset as attractive.

Barrick CEO Aaron Regent said, as the Supreme Court suspended its proceedings until a mining licence was issued by the government of Balochistan: "This is an outstanding deposit and also technically fairly straightforward. It just happens to be located in a very challenging country." He made the comments in a presentation in New York that was broadcast over the Internet.

Barrick, the world's biggest gold miner and Chile's Antofagasta Minerals each own half of the Tethyan Copper Company (TCC), which in turn holds 75% of the Reko Diq project. Balochistan holds the balance, where the project is located.

The partners completed a feasibility study and environmental and social impact assessment on the project last year and have now applied for a mining licence. Various authorities are reviewing the licence application and there are also court proceedings under way after the local government's authority to grant the mining licence was challenged, Regent said.

Pakistan authorities may be under increasing pressure to award the project to a Chinese group, rather than to the western-linked TCC joint venture, a Canadian newspaper said on May 17.

Resource-hungry China has been actively acquiring mineral deposits around the world and the Pakistan government could be more susceptible to overtures in the wake of the US Navy Seals attack on a Pakistan compound in which al-Qaeda leader Osama bin Laden was shot and killed.

Based on the TCC feasibility numbers, Reko Diq would cost about $3.3 billion on a 100% basis, for a 120 000 t/d processing plant. But Barrick also announced last month it would pay C$7.3 billion for Equinox Minerals, a copper producer, to gain the smaller firm's assets in Zambia and Saudi Arabia.

Barrick's share of annual production in the first five years was estimated at around 100,000 oz of gold and 150-million to 160-million pounds of copper and the project has total measured and indicated resources of more than 25-million ounces of gold and 31-billion pounds of copper, according to the company's website.

"It's a massive orebody," Regent commented, noting that the size and grade of the resource makes the project comparable with Chile's Escondida operation, which is the biggest copper mine in the world.

"For us, this is a great deposit. But it's one where we are going to be very cautious in terms of how we move forward," Regent said. "We'll take it one step at a time and make sure that we are fully satisfied from a risk-management perspective that this project is in fact doable. But I'd say the prize is worth it in terms of the quality of the deposit."

Reko Diq is not included in Barrick's plan to boost production from up to eight-million ounces this year to nine-million ounces a year of gold in five years' time.

That growth will come from big new mines being built in South America, as well as additional production from the company's Cortez Hills operation in Nevada.

Barrick will start commissioning its new Pueblo Viejo mine in the Dominican Republic late this year, followed by first production at the Pascua Lama project, on the border of Chile and Argentina, scheduled for 2013.

Beyond that, projects like Cerro Casale in Chile, Donline Creek in Alaska, Reko Diq and a potential expansion at the Turqoise Ridge mine in Nevada, fall into the "year five to ten" category, Regent said.

Regent repeated earlier statements that the acquisition does not represent a shift away from gold, but said the company is bullish on the outlook for copper, as constrained mine supply will not be able to meet growing demand for the industrial metal.