Islamabad:
Pakistan revised the total cost of the first phase of the Reko Diq Copper and Gold Mines project on Tuesday on Tuesday at 6.8 billion dollars – an increase of 58% – improving the scope of the strategically significant scheme and taking into account the inflationary impact and higher production needs.
The revision was carried out on the basis of a new feasibility study and a technical report of the project carried out by Barrick Gold Company – the partner of 50% of the project.
The increase of 2.5 billion dollars or 58% compared to the cost approved originally will be offset by higher prices of gold and copper in international markets, according to the Pakistani authorities.
The federal and provincial governments of Pakistan will also receive $ 7.1 billion in fees and taxes during the 30 -year period, in addition to obtaining dividends from its 50%.
The Economic Coordination Committee (ECC) of the firm approved the increase in the cost of the project to $ 6.8 billion, including operating expenses of $ 1.1 billion, according to the Pakistani authorities.
About two years ago, the cost of the project was estimated at $ 4.3 billion. Following the upward revision, the federal government’s obligation for its 25% participation through three public entities will reach $ 1.9 billion, an increase of $ 685 million. Likewise, the Balutchistan government’s financial obligation will increase $ 1.1 billion from $ 1.1 billion, the ECC has been informed.
The federal government will pay on behalf of the Balutchistan government while the three companies will organize funds of their own resources. In the event that these three companies are faced with any deficit, the federal government will fill the gap, according to the decision.
Based on the feasibility study, the capital cost of the phase I project was estimated at $ 5.7 billion “with an accuracy of 15% more or less,” said the technical report of the Reko Diq project. The phase I will help reach the initial production of 45 MTPA.
With phase II, to be completed by 2034, an additional $ 3.3 billion will be spent to increase production capacity to 90MTPA, the report said. This will bring the total cost of the project to almost $ 9 billion.
The mining project also arouses greater interest by the United States and China. The net cash flow of the project over a period of 37 years is $ 70 billion, almost 10 times more than the existing official gross exchange reserves of Pakistan.
The technical report indicates that the project is on the right track to start production by the end of 2028, starting with 200,000 tonnes of copper per year during its first phase, which will cost around $ 5.7 billion. The completion of the first phase is expected by 2029.
The Reko Diq project is located in the northwest corner of Balutchistan.
The Minister of Finance Muhammad Aurangzeb practically presided over the meeting of the ECC. The Minister is in China where he attended the Boao forum for the 2025 Asian meetings. The Minister of the Minister of Petroleum, Ali Perviz Malik, presented the summary of the approval of the ECC.
The ECC followed a summary of the oil division concerning the Reko DIQ project and changes in its global development plan and its related financial commitments and the project financing considerations due to inflation and improved scope of the project concerning capacity, energy mixing, alternative water supply options and processing factories and updated machines, according to a presenter from the Ministry of Finance.
“The ECC noted the factors leading to the climbing of the project and approved the proposals contained in the summary with the instructions towards the ministries of oil and finance to continue the close coordination in order to guarantee the appropriate implementation of all the agreed actions”, according to a press release published by the Ministry of Finance after the meeting.
The ECC provided full support for the project, calling it a project of immense national importance. Of the $ 6.8 billion, the debt of $ 3 billion will be lifted for the project. Debt negotiations are at an advanced stadium, led by a branch of the World Bank group.
The remaining $ 3.7 billion will be organized by shareholders in equity investment in accordance with their existing challenges.
The three public companies in Pakistan – The Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited and the Holdings Government (Private) Limited – also hold 8.33% as part of a 25% collective owned by the federal government.
From the share of the remaining Pakistani share, 25% are held by the Balutchistan government and 50% are held by Barrick Gold Corporation, who is the project operator.
Given the cost increase, the OGDCL decided Tuesday to increase its contribution for the project to $ 627 million. This included $ 349 million in stock contributions. The PPL has also decided to increase its contribution to $ 649 million, followed by Government Holding Limited.
In the midst of the deterioration of the public order situation in Balutchistan, the government has also approved RS1.8 billion funds for project security.
The recently completed feasibility study details two project development phases. The initial flow of phase I will now be 45 MTPA of ore which begins production in 2028; And with the completion of phase II, total flow will go to 90MTPA which should occur from 2034, according to the technical report.
The internal rate of return of the project (S in) is estimated at 21.32% on the basis of a copper price of $ 4.03 / LB and a gold price of $ 2,045 / OZ, depending on the report. The recovery period is six years and two months at this price, showed the report.
Infrastructure
The project proposes to use rail, road and port infrastructures throughout the region, including a route from the existing rail network to Port Qasim for export to international markets. The project should be linked to the national road (N40) via a 45 -kilometer long road. The roads of the site will link various areas of the project and allow the transport of extracted materials and other vehicle movements.
The groundwater is provided as the main water supply. The water will be provided from boreholes north of the mine and will be provided by a pipeline of around 70 km. The water demand has been calculated and on the basis of the provided for water for construction and operations.
The part of the initial investment costs of phase I attributable to Barrick Gold under the terms of the joint venture agreement is $ 3.1 billion per equity base, assuming no debt.
It is estimated that the Reko Diq extraction company pays a total of $ 7.1 billion in taxes during the lifespan of the mine. Among this, $ 3.9 billion will go to the governments of Balutchistan and Sindh, $ 2.2 billion in the workers’ benefit funds and $ 823 million in contribution to the final tax regime.
The project has obtained many permits to support the first work in progress. However, on the date of this technical report, a certain number of permits and approvals are still being obtained necessary for construction and operating, according to the report.
To ensure that Balutchistan receives significant cash flows during the project development and construction phases, the mineral agreement provides for fees of fees in the following advance, to pay on an annual basis at the end of the relevant year. The Balutchistan government will obtain $ 5 million in fee in advance in advance the first year, $ 7.5 million in the second year and $ 10 million a year until the start of production.
In October 2024, Barrick initiated a third -party consultant (SRK consulting) to carry out an independent examination of mining components of the Reko Diq feasibility study. External consultants checked the content of the feasibility study.
Economic analysis indicates that the project has a clear current value of $ 13 billion at an 8%discount rate.
