Tethyan invested enormous time, effort, and capital in the Chagai area. Through that investment, we took a small copper exploration target in a previously underexplored segment of the Tethyan Belt and developed it into a world class mining project at Reko Diq. While we have long hoped to mine Reko Diq, as is Tethyan’s right, the conduct of Pakistan and Balochistan has made that goal impracticable.
The story of TCC’s plight is long and twisted, beginning in 2006, when the company took over an exploration license originally granted by Pakistan to BHP Billiton. Under the terms inherited from the original deal, the provincial government of Balochistan owned 25% of the exploration joint venture, while TCC’s owers—Chilean giant Antofagasta and Canada-based Barrick Corp.—spilt the rest with 37.5% each. In TCC’s understanding, it would pay to explore the mineral-rich tract and produce a feasibility study, after which point the exploration license would simply be traded for a mining license. TCC would do the work—making substantial improvements to the local infrastructure and economy along the way—and Balochistan would take its cut of the profits.
But before an ounce of metal could be turned to cash, the entire arrangement became politicized, with ambitious nationalists like Dr. Samar Mubarakmand pressuring the federal government to nationalize copper and gold mining in the region,* and Supreme Court Chief Justice Iftikhar Muhammad Chaudhry—who will likely seek political office in his hometown of Quetta once he retires from the Court—unilaterally involving his court in the matter.Even before the Supreme Court began hearings about the Reko Diq case, TCC offered to renegotiate the terms of its agreement with Balochistan, but political tussling by provincial and federal stakeholders made this impossible. Eventually the federal Supreme Court invalidated TCC’s claims. TCC turned to international arbitration—against the federal government at ICSID and against the provincial government at the ICA—to enforce what it believed was its right to a mining license. As noted above, the company has now given up that aspect of its fight, and is now seeking to recover the money it sunk into the project, as well as the profits it would have earned.
The entire case—from the confusion over whether the federal or provincial government had the right to grant a mining license; to the cynical manipulation of the matter by political players; to the Pakistan Supreme Court’s arbitrary and opaque decisions against TCC; as well as the influence of Pakistan’s “all-weather friend” China, which already controls significant assets in Balochistan—will no doubt be seen as an object lesson by other foreign firms flirting with the idea of investing in Pakistan. TCC’s was the largest direct foreign investment ever proposed in the country’s mineral sector. Had the project gone forward, it would have brought wealth not only to Barrick’s and Antofagasta’s shareholders, but to the province of Balochistan. The residents of the Chagai Hills district would have seen a spate of new employment opportunities, new roads, and new schools and health care centers. Done properly, the Reko Diq project could have showcased a new model for responsible and sustainable natural resource development in an area wracked by poverty, misgovernment, and civil conflict. Instead it has become an emblem of the risks capricious states and stakeholders can pose not only to foreign investors, but to the wellbeing of their own nations.
*Historical side note: the Chagai Hills district, where Reko Diq is located, was also the site of Pakistan’s first nuclear weapons tests, which Mubarakmand oversaw along with Dr. A. Q. Khan.