Reko Diq: A tale of sand and copper
It is the same famous Chagai district in Balochistan, famous for Pakistani nuclear tests, where the town of Reko Diq that became the limelight recently, when the International Centre for Settlement of Investment Disputes (ICSID), one of the five organizations of the World Bank Group, has announced a huge award of $5.976 billion against Pakistan in the Reko Diq case.
The amount has to be paid from taxpayer money but the majority of them do not even know what kind of mud trap we are into right now when we are already facing a hectic economic crisis.
While Pakistan plans to challenge it, when exactly did the story begin?
The story starts in April 1992 when the foreign gold-diggers working for BHP Minerals, a firm based in the US, came to the area to mine gold and copper soon to be haunted by the aggressive go rich desert wind surviving only because of the refugee given to them by the locals at Siah Rek.
July 29, 1993, was the day when Chagai Hills Exploration Joint Venture Agreement (CHEJVA) took place between the Balochistan Development Authority (BDA) and BHP Minerals at Governor House Quetta. BHP and BDA would form a joint venture for prospecting and exploring gold and copper in Reko Diq.
BHP and BDA were to make a commitment of 75 percent and 25 percent to the investment required for the undertaking; they would share the incomes likewise by a similar extent. Since the provincial government did not have any funds accessible for investment, BHP consented to loan it the assets it required depending on the prerequisite that BHP will recover the cash once the undertaking begins delivering mineral and metals — with an accumulating funds, charged at London Inter-Bank Offered Rate (Libor) in addition to two percent, added to the whole.
What is Reko Diq?
Siah Rek and its nearby village Humai are now known as Reko Diq gold and copper mining project. The mines with an average copper grade of 0.53% and gold grade of 0.30 g/ton, with annual production estimated at 200,000 tons of copper and 250,000 ounces of gold contained in 600,000 tons of concentrate and is considered to be 5th largest in the world.
The intensity of the money and resources involved is clear. The fact that must be known is that BDA had no legal authority to sign Chejva, rather they needed permission from Additional secretary but under very doubtful circumstances, the provincial authority had to give clean chit to BDA, to sign a provisional agreement that can be amended later on just 10 days after Brigadier (retd) Abdul Rahim Durrani had assumed the post of Governor of Balochistan under very suspicious circumstances.
Since 1993, BHP, a firm based in Delaware, US was literally controlling the behavior of Balochistan government, exploiting corrupt legal system buying every corrupt individual they can to solidify Chejva agreement in their favor as well as getting even laws passed by the Balochistan assembly to get more and more concessions such as Balochistan Mineral Concession Rules, 2000 (BMR 2000). The new rules gave
As a part of these malicious activities under yet another interim government just like that of Durrani. Several amendments were done to Chejva that replaced TCC (Tethyan Copper Company) as a party with BHP as well as BDA with Balochistan government. This was also done under a governor and this time it was a retired judge named Justice (retd) Amirul Mulk Mengal, instead of a retired army officer such as Durrani.
Tethyan Copper Company or TCC was registered in Australia by BHP with the help of Mincor Resources, an Australian mining firm to establish a new corporate entity to control the operations. Meanwhile, Antofagasta, a Chile-based firm registered in England, and Barrick Gold of Canada established an organization, Atacama, possessed equally and incorporated in the United Kingdom. The Atacama eventually purchased 100 percent of TCC in 2006 through the Australian stock exchange.
TCC had total jurisdiction over the area it was prospecting and exploring. No other mineral company operating anywhere in Pakistan has ever enjoyed such perks and privileges. All this, while the social and political structure of Balochistan was under turmoil and issues such as separatism and missing persons, was on its peak. Fundamental rights of the people of Balochistan were being suppressed.
Fast forward to 2007, TCC arranged a draft agreement which was heavily in their favor to begin mining in the Reko Diq area and started campaigning to have their agreement passed. The draft understanding offered just two percent royalty to Balochistan government (global rate for royalty in mineral activities is six percent) and it additionally is given that the organization would set up none of the advanced processing installations it was required to under BMR 2000. Heavy delays occurred due to high political tension in Pakistan.
The military rule was nearing to end and the power was about to be transferred to civilians hence the lobbying that was possible in the last decade (1990-2000) and Military rule (1999-2007) was a bit difficult and as expected.
The newly led PPP government in 2008 in Balochistan under Nawab Aslam Raisani started critical assessment of the whole project. He started holding meetings over the Reko Diq project and, after one such meeting on December 24, 2009, he revoked the whole CHEJVA.
TCC kept moving forward and in submitted a pre-feasibility report in 2010, which discovered the land of just 6 square kilometer that has a vast amount of reserves. The report did hide many other rich sites such as Tanjeel, which has 10 billion worth of proven reserves.
TCC, Reko Diq, and international arbitration proceedings:
Around same time during 2010-2011, Raisani and the PPP-led Balochistan government turned down a TCC application for a mining license. Following that, TCC in November 2011 commenced international arbitration proceedings at two forums: one against the Pakistan government with the International Centre for Settlement of Investment Disputes, asserting breaches of the Bilateral Investment Treaty between Australia (where the TCC is incorporated) and Pakistan, and another against the Balochistan government with the International Chamber of Commerce, asserting breaches of the CHEJVA..
The Balochistan government decided to launch mining operations in Tanjeel under Dr. Samar Mubarakmand with the objective to prove to the international arbitration forums – where TCC filed a case in 2010 – that an early start of gold and copper mining was needed to Pakistan’s economy (it could save 820 million US dollars every year for the country’s weak economy in copper imports).
There were three reasons for that:
- The government could not wait for a lengthy legal battle between TCC and Pakistan.
- Second, to test Pakistani indigenous capacity to conduct mining and mineral purification operations on its own
- Third, to find a new workplace for the locals trained and employed at soon-to-be-closed gold and copper mine at Saindak, also in Chagai.
The project was named Balochistan Copper and Gold Project. This project was later abandoned on February 10, 2015, by Balochistan government of Dr. Abdul Malik Baloch’s coalition government, they concluded that continuing the project was not economically feasible. In reality, the government was really never serious as it never provided the funds to continue the project and large official corruption was also involved.
All this while the case in ICSID was still going on. ICSID constituted the tribunal on July 12, 2012. After a lengthy period of 4 years in 2017, the ICSID ruled against Pakistan, however, the sum of damages was to be still fought for between both TCC and the government of Pakistan. Last Friday, ICSID in their 700-page judgment against Pakistan ruled that $5.976 billion has to be paid by them to TCC for their losses, in which $4.08bn was a penalty and $1.87bn as interest.
Years of military control, civil rights violation and political malpractices has left Balochistan far behind in progress while the corruption of several elites such as in politics, judiciary, bureaucracy, and the military has for several years has stroked us with a blowing $6 billion in penalties to be paid, which of courses will be out of pocket of the common tax-payers while the elites sitting in the upper echelons of Pakistani state will suffer no harm.
The blood-shed in Balochistan and its poverty while still being resource-rich is not a curse but a purposely caused trouble to keep the common citizens of Pakistan afar from the progress while the corrupt elites live in lavish.
May this “blood-gold” finds its way back to the people so that this nation can finance it and progress, instead of few selfish.
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