Consortium Revises Offer to Secure Reko Diq Lease
Original story at Dawn | Dec 24, 2010 | Original story
Related reporting at The Baloch Hal | Nov 6, 2010 | Balochistan to Move Supreme Court Against Deal With PSA
By Khaleeq Kiani
ISLAMABAD: With the Balochistan government seeking a financially better deal, the Tethyan Copper Company (TCC) Pakistan, a consortium of Chilean and Canadian companies, has made a revised offer to secure a mining lease and production sharing agreement with the provincial government for commercial production at Reko Diq, one of the world's biggest copper-cum-gold reserves in Chagai district.
This has come amid a high-profile controversy over the value of the deposit and concerns that a high-value national resource was being handed over to foreign firms for negligible returns to the province. Having proven mineral resource of 5.9 billion tons established through a bankable feasibility study, the Reko Diq also attracted Chinese, Russian and American companies to secure the high-value natural resource.
Sources said a Chinese firm, which is engaged in the production of copper and gold at a much smaller reserve, expressed a desire to compete for the project as late as during the recent visit of the Chinese prime minister to Pakistan. The federal government, however, decided not to oblige. The chairman of Board of Investment, Salim Mandviwala, said the "Reko Diq will stay with TCC. The Chinese will get new concessions which are available to all".
Sources told Dawn that the revised offer had come after a meeting between Balochistan Chief Minister Nawab Aslam Raisani and chief executive of the TCC, Gerhard Von Borries, in which the provincial leader sought improved offer that corresponded better to "˜aspirations of the government and people of Balochistan'.
According to a revised proposal, the TCC has offered to raise $600 million loans to fund the provincial government's 25 per cent share of the capital contribution for equity participation at no interest to start mine development. About $100-125 million interest cost of the loan would therefore be picked up by the TCC "” owned equally by Barrick Gold of Canada and Antofagasta of Chile. Under the Chaghi Hills Exploration Joint Venture Agreement (CHEJVA) signed in 1993 and revised in 2006, the Balochistan government was to raise this amount at Libor plus two per cent interest rate.
The project needs about $3.3 billion to be raised from the international market to make it a commercial success. About $230 million have been spent on project exploration over an area of 585 square kilometers, proving the project was commercially viable. The government did not invest during the exploration phase.
The TCC has also offered to give up the Balochistan government's share of the management fee of the project that roughly provides another saving of about $25 million to the province. In another relaxation in loan repayment, the consortium said the Balochistan government would be entitled to start receiving dividends once net profits commenced and would have to allocate half of its dividends towards the repayment to TCC of the principal amount of the loan, extending the loan repayment period beyond eight years envisaged under the original agreement.
