Barrick and Pakistan set up a financing structure for the copper-gold project
The operation will be owned 50% by Barrick, 25% by the province and 25% by state-owned Pakistani companies. Once definitive agreements are finalized, Barrick will update the unpublished 2010 Feasibility Study.
The structure, the gold miner said, ensures that Balochistan receives a “substantial” share of the profits generated by the operation.
“Balochistan’s stake in Reko Diq will be fully funded by its partners and the federal government, meaning the province will reap dividends, royalties and other benefits from its 25% stake without having to contribute financially to the construction and operation of the mine,” general manager Mark Bristow said in the statement.
Barrick said it will implement a range of social development programs before final agreements are finalized and has pledged to spend $70 million during the construction period. This includes initial commitments of up to $3 million in the first year following closing and up to $7 million in the second year.
The transaction will also advance royalties to the Government of Balochistan of up to $5 million in the first year following closing, up to $7.5 million in the second year and up to $10 million annually. thereafter until the start of commercial production. That’s subject to a cumulative maximum of $50 million in advance payments, Barrick said.
The Reko Diq project, which hosts one of the largest undeveloped open-pit copper-gold deposits in the world, has been on hold since 2011 due to a dispute over the legality of its licensing process.
Barrick resolved the long-running dispute earlier this year, reaching a preliminary out-of-court settlement that paved the way for a final agreement on how to run the mine and profit-sharing agreements.
The project is now looking for financing partners, with a target of 50% debt to total capitalization.
The company plans to deliver production as early as 2027-2028 from Phase 1 at a cost of around $4 billion, with Phase 2 to follow in five years and cost around $3 billion.
The miner noted that the construction of the first phase of Reko Diq, near the borders of Iran and Afghanistan, will follow the study.
The conceptual design calls for the construction of an open pit in two phases, starting with a plant that will be able to process around 40 million tonnes of ore per year, which could be doubled in five years.
The latest plan calls for double the annual throughput capacity and more than double the investment estimated in an unpublished 2010 feasibility study.
At the peak of construction, the project is expected to employ 7,500 people and once in production will create 4,000 long-term jobs over the planned 40-year life of the mine.
Some analysts believe that Pakistan’s lack of experience in the mining sector and its political instability make it a risky deal.
Bristow, however, said in May that he had worked in difficult situations all his life and was “very comfortable” with the project. He added that it was “the perfect opportunity for the mining industry to demonstrate what it can bring to the economy” of a “neglected” region which struggles to access drinking water.