Destined Towards a Rich Pakistan: Reko Diq Mineral Resources

As the value of minerals in western porphyries alone is $500 billion, therefore, the total value of the Reko Diq asset is close to $1 trillion. With such a valuable mineral deposit discovered by GSP in Balochistan, Pakistan should consider itself extremely fortunate. However, feeling content on our good fortune will not suffice. A huge effort is required to bring this immense wealth to the surface. All the different metals have to be refined in appropriate plants and made available to down-line industry to enable Pakistan to bring on track, a vibrant and prosperous economy.

Pakistan is endowed with immense natural wealth which includes our hydroelectric resources, extremely valuable mineral deposits, vast areas of fertile land, ten months of clear sun shine and above all a very intelligent human resource. In this article the discussion will focus mainly on the biggest deposit of copper, gold, silver and several other metals of strategic importance. A world famous copper belt known as the Tethyan Metallogenic Belt starting in South Eastern China near the Tibet Province runs parallel to the Himalayas and turns down into Pakistan through the Gilgit Baltistan region (Fig.1.). Copper, gold and silver are being mined at Saindak in Balochistan and Shinkai in North Waziristan since the last several years. Both these mineral deposits are on this belt.

The Saindak project was established with Chinese assistance in the late nineties. It went into serious production from the year 2001 and is running to date. At Saindak there is a deposit of about six hundred million tons of ore averaging 0.6 % of copper. This project has been yielding twelve to fifteen thousand tons of copper along with approximately twentyfive tons of gold every year. A sizeable amount of silver is also being produced from this mine. Iron ore as a biproduct also occurs at the mine and it is separated from the ore with a magnetic separator before being dispatched to the Pakistan Steel Mill at Karachi.

The ore at Shinkai is of good quality with an average grade of 1.2% copper along with cobalt metal and silver (Fig.2). The price of cobalt is about forty times the price of copper. This ore at Shinkai is at a shallow depth and can be manually mined with convenience. The locals of North Waziristan sell the mined ore to two different plants in the private sector operating in Punjab where copper and other metals are separated from the raw ore. This fact illustrates the simplicity of the process for separation of copper from mined ore. Reko Diq is a small locality in the extreme west of Balochistan, close to the Afghanistan border. It is about 100 km from Iran. The distance between Reko Diq and Saindak is about 35 km (Fig.3).

The Geological Survey of Pakistan (GSP) discovered the mineral deposits at Reko Diq in 1969. After a detailed survey a map of thirteen mineral deposits was published by GSP in 1978-79 (Fig.4). All the copper and gold deposits occur in an area of one hundred sq. kms with a mineral worth of nearly $ 500 billion. Eighty percent of this copper, gold etc. exists at H13, H14 and H15 called the Western Porphyries. The western porphyries have substantial deposits of copper, gold, silver, molybdenum etc. H8 deposit is almost exclusively gold and the H4 deposit is almost all copper. Copper occurs in the entire Reko Diq area in different concentrations. A surface analysis of copper occurrence is shown in (Fig.5). The red dots represent the highest concentration of copper, the pink dots comparatively lower concentrations and so on. It was observed that wherever there is copper, gold occurs alongside it. Gold occurs uniformly over the entire Reko Diq complex and its concentrations are illustrated in (Fig.6).

destined towards1There have been several estimations of the wealth of the minerals at Reko Diq. The total value curve has been plotted for the general Reko Diq area by Sancor of Australia and is shown in (Fig.7). It is quite apparent from the above curve that as the value of minerals in Western Porphyries alone is $500 billion, Therefore, the total value of the Reko Diq asset is close to $1 trillion. With such a valuable mineral deposit discovered by GSP in Balochistan, Pakistan should consider itself extremely fortunate. However, feeling content on our good fortune will not suffice. A huge effort is required to bring this immense wealth to the surface. All the different metals have to be refined in appropriate plants and made available to down-line industry to enable Pakistan to bring on track, a vibrant and prosperous economy.

With such a valuable mineral resource occurring in Balochistan and discovered and published by GSP in a series of international publications in 1978-79, it was but natural for the developed world to take note and come into Pakistan seeking mining leases in the areas of interest. Several such leases for exploration of minerals were granted to several mining companies at Reko Diq and surrounding areas (Fig.8). This process started in 1993 with a company called BHP Billiton securing exploration license over an area exceeding 400 Sq. kms at Reko Diq. A contract called the CHEJVA (Chagai Hills Joint Venture Agreement) was signed between the company and Balochistan. The agreement envisaged a partnership of 75% for the company and 25% for the Government of Balochistan (GoB). In addition, 2% in royalties would occur to GoB on the total value of metal extracted and sold. This company later sold its interest to an Australian company called Sancor. After another period of three years Sancor sold its entire interest in Reko Diq to a company called Tethyan Copper Company (TCC) which is an equal partnership between Barrak Gold of Canada and Antafagosta of Chilli. The share of GoB stayed at 25%.

destined towards2TCC held an exploration lease on the nearly 400 Sq. km of area at EL5, EL6 and EL8 for nine years. The initial exploration license of three years duration was extended twice (three years each time). This activity commenced in 2002. After the expiry of the second extension, a feasibility report was submitted by TCC to GoB in October 2010. As per mining plan, the total ore to be excavated is 2.219 billion tons at the rate of 110,000 tons per day in a total life span of fifty six years for the plant. The profit (internal rate of return) indicated by TCC is 12.3%. If GoB could invest $ 600 m upfront in the joint venture, then it would be entitled to 25% share in profit i.e. 3% approximately with an additional royalty of 2%. The total receipts to GoB would be about $75 million per year from a gross value of copper and gold leaving the country per year valued at nearly $ 1.2 billion. The return for GoB after investing $ 600 million in the joint venture is so paltry that it is barely comparable with the interest on a $ 600 million fixed deposit. This is what should happen to a nation which doesn't do anything itself and entrusts all it has to foreign companies.

TCC had planned to convert the ore into concentrate containing 30% copper and 3 grams per ton of gold. This concentrate would be mixed with water, converted into slurry and transported across Balochistan to Gwadar Port through a pipeline which would be 685 kms in length. The slurry would be filled into tanker ships and transported to a third country for extraction of pure metals. GoB would be told about the content of copper, gold, silver and other metals removed from Reko Diq in the above fashion by TCC. There would be no possibility of knowing how much mineral wealth has actually left Balochistan via the pipeline. In this scenario it became quite apparent that 95% of Reko Diq assets would leave the country with a meagre 5% of their value available to GoB. No industry based on indigenously produced cheap copper would be established in Balochistan eliminating the possibility of providing hundreds of thousands of jobs to the local people. The province would remain poor and prone to extremist activities.

In the year 2009, the GoB submitted a PC-1 project proposal to the Planning Commission for recommendation and subsequent approval by ECNEC. The project was purely an indigenous project aimed at the refinement of ore into metals of high purity. The Planning Commission examined the financial, social, economic and technical aspects of the project and recommended it to ECNEC where it was approved at a cost of Rs. 8.8 billion in December 2010. Due to legal proceedings between the GoB and TCC, both in the Supreme Court of Pakistan as well as in the International Tribunals of the International Chamber of Commerce (ICC) and the International Center for Settlement of Investment Disputes (ICSID), the implementation of the project was kept in abeyance by the GoB. The first case filed by TCC in two International Tribunals sought to restrain the GoB from the implementation of its indigenous project namely Balochistan Copper Gold Project (BCGP) at Reko Diq. Late in 2012, GoB contested the above case in London in the two Tribunals. By February 2013, both ICSID and ICC rejected TCC's request for stay order and consequently gave a go ahead to the GoB to launch BCGP at Reko Diq. The Supreme Court of Pakistan, later in 2013, consequent upon detailed hearings, gave a decision on the CHEJVA agreement of 1993, declaring it non-estab initio.

In light of decisions cited above, TCC made a submission to both the International Tribunals that it was withdrawing the request for grant of a mining lease at Reko Diq. TCC now is seeking financial compensation for its limited exploration effort at Reko Diq as declared by it formally in its feasibility report submitted to the GoB.

destined towards3The GoB decided to commence its indigenous project in early 2013. With the approval of the cabinet, the entire funds for four years needed for the implementation of the BCGP were put in fixed deposit account. Money was to be released to BCGP on the approval of each year's budget. An interim amount of Rs. 900 million was made available to the project in March 2013 to begin the work. An area of eight sq. km was allocated for mining operations at the H4 mineral deposit (refer fig.4). Several operations in parallel were started at the H4 site at Reko Diq. Construction works for housing colony, technical buildings, power stations, analytical laboratories were all started. Exploratory drilling commenced to determine accurately the depth and extent of the ore deposits. Ore samples extracted as a result of exploration activity which covered more than 3500 km of drilling were sent to an International analytical facility and results thus obtained gave a detailed and accurate assessment of ore deposits and their copper content. Fairly good ore began to appear at a shallow depth of 15 to 20 metres. The average grade of copper in the ore is higher than 0.8 %. The maximum concentration goes above 2.2 %. This ore, therefore, is superior in quality to the ore at Saindak. Because of its shallow depth, there will be not too much over burden to remove and consequently the mining operations shall be economical and quick. Thus an exploration study over an area of eight sq. km stands completed in six months at a cost of about $4 million. It is pertinent to mention that TCC sat in occupation of more than 400 sq. km of Reko Diq and submitted an exploration feasibility on three sq. km at the end of eleven years. They are now seeking a financial compensation from the International Tribunals for this work. In these eleven years the GoB could have started mining and refining at several locations in Reko Diq and benefitted economically.

Contingent upon the smooth flow of funds for the project, copper production is expected to begin at BCGP in less than three years. The plant will reach its full first phase production capacity of 20,000 tons of pure copper metal in six years. As is typical with all mining operations, the production of ore from any open pit mine increases as the diametre and depth of the mine grows with time. H4 would be yielding about 15,000 tons of ore per day in the beginning. This is expected to reach about 40,000 tons per day by tenth year of operation. The copper production would increase proportionately with time. Therefore the revenue and profits from the project would also increase as the activity increases. In the first few years of production, BCGP would be producing copper at 60 % of the price of copper at London Metal Exchange (LME). The profits per year in the beginning are estimated at $ 220 million per year. Beyond tenth year of production, these profits would reach $400 million approximately.

The possibility of the availability of indigenous copper at 60 % of the price of imported copper will be a great incentive for copper based industry to find its way into Balochistan. Presently 100,000 tons of copper is imported into Pakistan every year. It feeds our electric cable industry, copper tube, copper plates and brass production. Several thousand items of domestic use are produced from this brass by industrial complexes manufacturing bathroom fittings, items of kitchen ware and also in the defence industry. During full scale production, BCGP alone would be meeting half the copper needs of the country. All the products made from this copper would obviously be competitive for exports. The boost to the national economy would be very significant. The provision of jobs to the people of Balochistan in the mining sector as well as in the manufacturing sector would change the economy and social outlook in the province.

Saindak operations are expected to last till 2016. A considerable amount of trained manpower would become available from Saindak by the time BCGP would be taking off. More than 1600 Pakistanis out of a total strength of 1850 technical people have been working in Saindak for last 14 years. The establishment of BCGP would not only provide this manpower with an alternate project to work in but would be a technical base for the GoB where from it could assess the launching of other mining and refining operations by indigenous or international companies. BCGP could act in an advisory role to the GoB for prequalification of mining contractors, preparation of international tender bids for exploration, mining and refining at different mineral deposits in Balochistan. In short, the beginning of mining and refining activity with Pakistan's own human resources would break the inertia that the country has been suffering from mining any of its valuable resources whether they are of coal in Thar or of other valuable minerals in Balochistan. With this we may expect the dawn of affluence to break in Pakistan.

The writer is an eminent scientist who led the team of scientists and engineers to conduct Pakistan's Nuclear Tests at Chagai in May 1998. He did his masters in Physics with academic “roll of honour” from Government College Lahore in 1962 and later did his D. Phil in Experimental Nuclear Physics from the University of Oxford in 1966. He was later appointed Chairman of NESCOM in 2000. On joining the Planning Commission of Pakistan he was responsible for conceiving and implementation of the Reko Diq Copper Gold Project and the Underground Coal Gasification Project at Thar Coal Fields.

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