Reko Diq to see a mining licence soon

The mining licence dispute for the sizable Reko Diq copper-gold project in Pakistan’s southwest Balochistan province seems to be coming to an end after much uncertainty.

On May 25, Pakistan’s Supreme Court gave the provincial government the right to decide on granting the mining licence for the project, which is owned by Barrick Gold (ABX-T, ABX-N) and Chile’s Antofagasta (ANTO-L).

Both companies each own half of the Tethyan Copper Co. joint venture, which has a 75% interest in Reko Diq, while the Balochistan government owns the remaining 25%.

Reko Diq is an “outstanding deposit, and also technically fairly straightforward,” commented Barrick’s CEO Aaron Regent at a recent Goldman Sachs‘ (GS-N) basic materials conference in New York. “It just happens to be located in a very challenging country.”

Earlier this year, the Supreme Court had restrained the local government from granting a mining licence as it was hearing several constitutional petitions, such as competing claims for the property, how best to develop it, and arguments from some government officials saying that Pakistan would benefit more by developing the project on its own, or by seeking a Chinese partner.

(The project is close to the relatively smaller Saindak gold-copper mine, which is run by the Chinese Metallurgical Construction company.)

On May 26, Reuters reported that according to Pakistani officials the provincial government will release a verdict on the mining licence in early June; however, court investigations may continue.  

Simon Rothschild, Antofagasta’s spokesperson, says that the company has always known that that process would take time, but remains optimistic.

He added that while the local authority would handle the granting of the licence, the declaration also noted that the existing joint-venture is valid, which may put some concerns swirling around the subsidiary in the Pakistani media to rest.

One such concern, reported widely in local Pakistani papers, was that the province’s former advocate general Salahuddin Mengal told the Supreme Court in an earlier hearing that Tethyan did not submit a project fee or a feasibility report for Reko Diq.

However, Barrick and Antofagasta completed a bankable feasibility study and an environmental and social impact assessment on the project, and stated that a copy was delivered to the Balochistan government as part of the joint-venture agreement, which includes the local government.

The study estimates that Reko Diq would cost about $3.3 billion to develop on a 100% basis as a 120,000 ton-per-day operation.

“The price is worth it,” says Regent of Barrick, “in terms of the quality of the deposit.”

Reko Diq, which sits in the highly prospective Tethyan belt, is comparable to Chile’s Escondida copper mine, notes Regent, adding that it’s a massive orebody about 5 billion tons grading 1.7% copper-equivalent.

Barrick predicts its share of average annual production for the first five years would be 100,000 oz. gold and 150-160 million lbs. copper, at total cash costs of $420-$450 per oz. gold and $1-$1.10 per lb. copper.

The company also adds that its share of measured and indicated resources are 9.5 million oz., and it has another 6.4 million oz. in the inferred category. For copper, it has measured and indicated resources of 11.7 billion lbs., and another 8.4 billion lbs. in inferred.

Regent says Reko Diq is part of Barrick’s next generation of projects and is not included in the company’s recent plans to boost its gold production.

The partners say they have spent a total of $500 million on the deposit, so far.