Islamabad:
Pakistan reviewed on Tuesday the total cost of the first phase of the Reko Diq Copper and Gold Mines project to $ 6.8 billion, an increase of 58%, by improving the scheme of the strategically important scheme and taking into account the inflational impact and the highest production needs.
The review has been carried out on the basis of a new feasibility study and a technical report of the project carried out by Barrick Gold Company, the 50% partner in the project.
The increase of $ 2.5 billion or 58% against the cost originally approved will be compensated for higher gold and copper prices in international markets, according to the Pakistani authorities.
The Federal and Provincial Governments of Pakistan will also receive $ 7.1 billion in royalties and taxes during the 30 -year period, in addition to obtaining dividends of their participation in 50%.
The Cabinet Economic Coordination Committee (ECC) approved an increase in the project project to $ 6.8 billion, including operational expenses of $ 1.1 billion, according to the Pakistanis authorities.
About two years ago, the cost of the project had been estimated at $ 4.3 billion. As a result of the upward revision, the Federal Government’s obligation for its participation in 25% through three state entities will increase to $ 1.9 billion, an increase of $ 685 million. Similarly, the financial obligation of the Baluchistan government will increase from $ 717 million to $ 1.1 billion, the ECC was informed.
The Federal Government will pay on behalf of the Baluchistan government, while the three companies will organize funds from their own resources. In the event that these three companies in front of any deficit, the federal government will close the gap, according to the decision.
According to the feasibility study, the capital cost of the phase I project has been estimated at $ 5.7 billion “with an more or less accuracy”, establishes the technical report of the Reko DIQ project. Phase I will help achieve the initial production of 45MTPA.
With phase II, which will be completed in 2034, another $ 3.3 billion will be spent to increase the production capacity of 90MTPA, establishes the report. This will bring the total cost of the project to almost $ 9 billion.
The mining project attracts greater interest equally in the United States and China. The net cash flow of the project for a period of 37 years is $ 70 billion, which is almost 10 times more than the existing gross currency reserves of Pakistan.
The technical report says that the project is on the way to starting production at the end of 2028, starting with 200,000 tons of copper annually in its first phase, which will cost approximately $ 5.7 billion. The completion of the first phase is expected by 2029.
The Reko DIQ project is in the northwest corner of Baluchistan.
The Minister of Finance, Muhammad Aurengzeb, practically presided over the ECC meeting. The minister is in China, where he attends the Boao Forum for Asia 2025 meetings. The Ministry of Petroleum Minister Ali Pervaiz Malik presented the summary of the approval of the ECC.
The ECC assumed a summary of the oil division with respect to the Reko DIQ project and the changes in its general development plan and related financial commitments and project financing considerations due to inflation and improved scope of the project with respect to capacity, energy mixture, alternative water supply options and processing plants and updated processing machinery, according to a financial Christmas carol.
“The ECC pointed out the factors that led to the projects of the project and approved the proposals contained in the summary with the instructions to the oil and finance ministries to continue with a close coordination in order to guarantee the timely implementation of all agreed actions,” according to a statement issued by the Ministry of Finance after the meeting.
The ECC ensured total support for the project, qualifying it as a project of immense national importance. Of the $ 6.8 billion, the debt of $ 3 billion will be collected for the project. The negotiations for the debt are in an advanced stage, led by an arm of the World Bank group.
Capital investment shareholders will organize the remaining $ 3.7 billion according to their existing shares.
The three companies owned by the Government of Pakistan, the Company for the Development of Petroleum and Gas Limited (OGDCL), the Pakistan Petroleum Limited and the Government (private) Limited, have 8.33% as part of a 25% collective in the power of the federal government.
From the remaining Pakistani participation, the Baluchistan government has 25% and Barrick Gold Corporation has 50%, which is the project operator.
In the light of the increase in cost, the OGDCL decided on Tuesday to increase its contribution to the project to $ 627 million. This included $ 349 million in capital contributions. The PPL also decided to increase its contribution to $ 649 million, followed by the Holding Limited government.
Amid the deteriorated situation of the law and order in Baluchistan, the Government also approved RS1.8 billion funds for project security.
The recently completed feasibility study details two phases of project development. The initial performance of phase I will now be 45MTPA of mineral that the production begins in 2028; And with the completion of phase II, the total performance will jump to 90MTPA that is planned to occur from 2034, according to the technical report.
The internal performance rate of the project (IRR) is estimated at 21.32% on the basis of a copper price of $ 4.03/ lb and a gold price of $ 2,045/ OZ, according to the report. The recovery period is six years and two months at this price, the report showed.
Infrastructure
The project proposes to use the rail, road and port infrastructure throughout the region, including an existing railway route to Port Qasim for export to international markets. It is planned that the project is connected to the National Highway (N40) through a 45 kilometers of 45 kilometers specially designed. The roads of the site will connect several areas within the project and allow the transport of mining material and other vehicle movements.
Groundwater is planned as the primary water supply. The water will be supplied from wells located north of the mine and will be supplied through a pipe of approximately 70 km. The demand for water has been calculated and based on the expected use of water for both construction and operations.
The part of the initial capital costs of phase I attributable to Barrick Gold under the terms of the joint business agreement is $ 3.1 billion per 100% capital, assuming there is no debt.
It is estimated that the Reko Diq mining company will pay a total of $ 7.1 billion in taxes throughout the life of the mine. Of this, $ 3.9 billion will go to the governments of Baluchistan and Sindh, $ 2.2 billion to the workers’ benefit participation fund and $ 823 million in contribution to the final tax regime.
Many permits have been granted to the project to support early work ongoing. However, as of this technical report, a series of permits and approvals are still obtained in the process of obtaining necessary for construction and operation, according to the report.
To ensure that Baluchistan is receiving significant cash flows during the project’s development and construction phases, the mineral agreement establishes the following royalty payments in advance, which will be paid annually at the end of the relevant year or before. The Baluchistan government will obtain a $ 5 million in the first year, $ 7.5 million in the second year and $ 10 million per year until production begins.
In October 2024, Barrick hired a third -party consultant (SRK Consulting) to complete an independent review of the mining components of the Reko Diq viability study. External consultants verified the content of the feasibility study.
The economic analysis indicates that the project has a net present value of $ 13 billion at a discount rate of 8%.
