It isn’t clear what the state is going to do with Reko Diq. Recent remarks from the Balochistan Chief Minister convey a sense of hopelessness. Earlier this week, the CM told the media that the provincial government was hoping to attract big local business groups to invest in Reko Diq Copper & Gold Mines through consortium. Has all hope been lost to attract fresh foreign investment in the controversial project?
Putting project development cost at over $3 billion, the CM ruled out federal or provincial investment in the mining project. It is clear that the public sector neither has the capacity to finance nor the know-how to execute a mammoth project in the middle of nowhere. (Read more about the state’s difficulties here: “Reko Diq: time to negotiate,” published July 16, 2019).
Meanwhile, Pakistani authorities are trying to buy some time by seeking a review of the $6 billion penalty awarded to the TCC – the litigant and previous developer of Reko Diq mines – earlier in July this year. That may kick the can down the road, but only for some time. The fear is that even an amicable resolution between the two parties won’t repair the reputational damage in the eyes of global mining multinationals.
Unless the TCC agrees to participate in the project again under some complex arrangement or unless the Chinese are granted a lease on those copper and gold mines, chances of attracting foreign investment are indeed very slim. That very much leaves large local conglomerates. But there are issues on both the public and private sides that impair the prospects of a viable public-private-partnership in the field of large-scale mining of metallic minerals.
On the public side, the provincial government would need to modernize the technical, financial and legal aspects of its mineral licensing and regulatory frameworks. Corrupt practices do not grow in isolation – arbitrary decision-making and discretionary practices need to be curbed first. Moreover, the capacity building of mining-related departments needs to be enhanced in order to secure public interests.
As for the private sector, unfortunately no big business group has the know-how of developing a large metallic mineral mine. Perhaps if Saindak Copper Gold Project had involved a Pakistani private sector partner when the Chinese had started working there, a local mining major may have emerged from the desert district.
Then, lack of experience alone is not the problem. It is obvious that Pakistan’s Big Business is largely risk-averse and wants quick returns. This lack of patience is topped up by rent-seeking behaviour.
However, the private sector does have an experience of developing a large hydrocarbon mineral development project in Thar, through the Sindh Engro Coal Mining Company. After years of efforts, the Government of Sindh and Engro Energy (along with other big groups) have been able to commercially extract coal from Thar Block II and install two coal-based power plants totaling 330MW of electricity.
If all else came to naught, it would be interesting to see how the federal and Balochistan government go about incentivizing local conglomerates. Don’t hold your breath, though.