ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Thursday approved definitive agreements and financial commitments of the Reko Diq project with a 14 percent increase in overall project cost to USD7.723 billion for phase-1 from earlier estimates of USD 6.765 billion.
The ECC meeting, chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb, considered a summary submitted by the Petroleum Division regarding approvals for definitive agreements and financial commitments related to the financing of the Reko Diq Project.
The ECC approved the proposed final terms of the agreements, with the instruction that any material deviations in the final execution forms — if determined by the project’s legal and financial consultants and certified by the RekoDiq Mining Company — would be brought back to the ECC for approval.
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Pursuant to decision of the ECC of the Cabinet of March 25, ratified by the Federal Cabinet on April, 9, 2025, the project parties have been engaged in completion of various steps and finalization of the terms of agreements submitted by Petroleum to the ECC on the subject title “Reko-Diq Project - Changes in Overall Development Plan and Related Financial Commitments and Project Finance Considerations”.
The summary said, in initial ECC summary, the ECC was apprised about estimated overall project cost of USD 6.765 billion for phase-1 (including Capex of USD 5.566 billion plus estimated USD 1.199 billion for interest on project financing and inflation during construction) besides giving the status of negotiations with the relevant agency lenders (“Lenders”) for the proposed secured debt financing being granted to Reko-Diq Mining Company (Private) Limited (“RDMC”) with respect to the development of the reconstituted RekoDiq Project. The ECC was also apprised of the key terms of the latest draft of the Long Form Term Sheet (“LFTS”) setting out common terms being negotiated with relevant Lenders, which would form the basis of the definitive agreements.
In paragraph 6 of the Initial ECC summary, it was further mentioned that pursuant to LFTS, various definitive agreements will need to be executed by the Government of Pakistan (GoP), government of Balochistan (GoB), State Owned Enterprises (SOEs; OGDCL, GHPL & PPL), Pakistan Minerals (Private) Limited (PMPL), and Balochistan Mineral Resources Limited (BMRL) in respect of the project financing. Such definitive agreements include (i) the Government Direct Agreement (GDA) (to be executed by the GoP and the GoB with the Lenders); (ii) the GoP Guarantee (to be executed by the GOP with the Lenders); (iii) GoB Completion Agreement (to be executed by the GOB with the Lenders); (iv) SOEs Completion Agreement (to be executed by the SOEs with the Lenders); and (v) the Transfer Restrictions Agreement (to be executed by the SOES, PMPL, GOB, and BMRL), and such other ancillary agreements as may be deemed necessary or desirable.
The ECC, while noting that currently the detailed terms of each of the agreements indicated in the Initial ECC Summary are under negotiation, directed Petroleum Division to seek the ECC’s formal approval of the substantially final terms of such agreements in due course.
The ECC approved the following proposals of the Initial ECC Summary: (i) authorization to finalize the relevant documents and for such purpose the relevant parties execute all necessary documents (as applicable); (ii) permission to SOEs for issuing a guarantee through Completion Agreement to offshore third party lenders (on a joint and several basis); (iii) permission to SOEs to repatriate funds through PMPL over a period of seven years or more starting January 2023, to meet its shareholder funding commitment with respect to the Project up to its proportionate share of USD 1.879 billion; (iv) permission to BMRL to repatriate funds over a period of seven years or more starting January 2023, to meet its shareholder funding commitment with respect to the Project up to its proportionate share being USD 1.128 million; and (v) authorized issuance of directions to the SBP under section 25 of the Foreign Exchange Regulation Act, 1947 (FERA).
Accordingly, these agreements have now been substantially finalized. Furthermore, pursuant to the terms of LFTS, the Common Terms Agreement incorporating the common terms of the Project Financing will be entered into between (among others) RDMC and the Lenders (“Common Terms Agreement”).
The Project Financing is expected to contribute up to $ 3.5 billion debt in RDMC, increasing from the initial estimates of USD 3 billion (“PF Debt Amount”). At the time of the Initial ECC summary, the total project cost for Phase-1 was estimated to be equal to $ 6.765 billion (including Capex of USD 5.566 billion plus an estimated USD 1.199 billion for project financing costs, inflation during construction, and net operating cost during construction and pre-2025 costs).
In light of the increase in PF Debt Amount, pricing discussions with the Lenders and recommendation of the independent technical consultant of the Lenders, the total project cost for Phase-1 now stands at USD 7.723 billion (including Capex of USD 5.762 million plus an estimated USD 1.961 billion for project financing costs, inflation during construction, net operating cost during construction period and pre-2025 costs).
The increase in the total project cost relative to the Initial ECC Summary is primarily due to higher financing costs resulting from the increased PF Debt Amount, as well as the inclusion of project cost contingencies, and increase in net operating cost due to construction period being extended by six months at the recommendation of the Lenders and the same has been confirmed by RDMC, and its advisors (financial and legal).
Due to the increase in the PF Debt amount, the total shareholders’ contribution towards project financial commitments has increased by USD 458 million
According to sources, RDMC is still aiming to develop the project at a cost of USD 6.946 billion (ie, USD 6.765 billion plus incremental financing cost of USD 181 million). In such a case, and provided the project financing of $ 3.5 billion is arranged, then the shareholders’ total financial contributions will reduce to USD 3.446 billion compared to earlier contributions of USD 3.765 billion. Out of the total project cost (excluding financing cost, which will be paid in USD), around 35 percent is projected to be spent in PKR, thereby materially reducing USD exposure of Pakistani shareholders.
Accordingly, the pro rata funding obligations of PMPL and BMRL under the Final Overall Development Plan are USD 2.145 billion and USD 1.287 billion, respectively. After accounting for project financing, these obligations are reduced to USD 1.173 billion and USD 704 million, respectively. These amounts are subject to any adjustments on account of inflation in terms of the Joint Venture Agreement (“JVA”) (approved by the Cabinet on December 13, 2022) and interest in terms of the financing documents.
The annualized amounts and timings of such funding are based on current estimates and may vary between the years as the Project progresses.
The summaries of the substantially final terms of the agreements, along with the substantially final forms of the agreements (GDA, GOP Guarantee, GoB Completion Agreement, SOES Completion Agreement, and Transfer Restrictions Agreement), to be executed by GOP, GOB, SOES, PMPL and BMRL.
In case there is any material deviation in the substantially final forms of these Definitive Agreements and the final execution forms, such material deviations will be presented again to the ECC for its approval. Material deviations, if any, will be determined by the project’s legal and financial consultants and certified by RDMC.
Petroleum Division has sought ECC approval of each of the substantially final terms along with the substantial final savings is requested to consider the following proposals: (i) grant permission to the SOES to repatriate funds through PMPL over a period of seven years or more starting January 2023 (pursuant to Cabinet’s decision of December 13, 2022), to meet its shareholder funding commitment with respect to the Project up to its proportionate share of USD 2.145 billion, which may be in the form of equity or shareholder loan (to be funded in local currency or foreign exchange), as detailed in paragraph 6 above.
The Foreign Exchange requirement for the proposed investment will be initially arranged by OGDCL and PPL themselves from their own foreign exchange resources. In case of a shortfall with respect to OGDCL and PPL’s foreign exchange, the Government of Pakistan will provide the required Foreign Exchange to them. As per current practice, GOP shall continue providing the required Foreign Exchange for GHPL’s share contribution ;(ii) grant permission to BMRL to repatriate funds over a period of seven years or more starting January 2023 (pursuant to Cabinet’s decision of December 13, 2022), to meet its shareholder funding commitment with respect to the Project up to its proportionate share being USD 1,287 million, either in the form of equity or shareholder loan and which will be funded either in local currency or Foreign Exchange by or on behalf of BMRL by the GoP; (iii) authorize the Secretary Petroleum Division and the Secretary Finance Division, to finalize the execution forms of the GDA and GOP Guarantee respectively and sign the same on behalf of the government of Pakistan, under Rule-7(2) of the Rules of Business 1973; (iv) to give effect to the matters authorize the Finance Division to issue the appropriate directions to the bSBP under section 25 of the Foreign Exchange Regulation Act, 1947 (FERA).
The ECC also considered a summary submitted by the Ministry of Railways regarding a rail development agreement and bridge financing agreement with the RekoDiq Mining Company for the provision of bridge financing amounting to USD 390 million to lay a 1,350 km railway track for transporting large volumes of export material from the mines in Balochistan.
The ECC approved the proposal and directed the Ministry of Railways to share both agreement documents with the Finance Division for appraisal. It further instructed the Ministry of Railways and the Ministry of Finance to submit an update to the ECC by March next year on the execution and implementation of the project.
Speaking on the occasion, the chair stated that the ECC’s approvals signify the government’s firm commitment to moving ahead with this landmark project which has the potential to transform the economic landscape of Balochistan and generate far-reaching benefits for the people of Pakistan.
He added that “the Reko Diq project will not only unlock one of the world’s largest undeveloped copper-gold deposits but also catalyze job creation, infrastructure development, and long-term socio-economic uplift across the region.”
The meeting was attended by Federal Minister for Petroleum Ali Pervaiz Malik, Federal Minister for National Food Security and Research Rana Tanveer Hussain, Federal Minister for Board of Investment Qaiser Ahmed Sheikh, federal secretaries and senior officials from concerned ministries, departments, and regulatory institutions.
Copyright Business Recorder, 2025