Islamabad:
Pakistan reviewed on Thursday the cost of the first phase of the Reko Diq Copper and Gold Mines project for the second time in six months. The cost has now increased 79% to $ 7.7 billion of the initial estimate due to the higher cost of the loans taken for the project and compensate any clash of future prices.
The Cabinet Economic Coordination Committee (ECC) approved the second review in the total cost of the first phase of the project. The Minister of Finance, Muhammad Aurengzeb, presided over the meeting. The ECC also eliminated the signing of the implementation agreements to formally launch the strategically important project.
In addition, the ECC approved the sovereign guarantees to support a loan of $ 390 million to be taken by the Reko DIQ mining company to finance the Pakistan railroads for the construction of a railway road of 880 kilometers. This line will transport minerals to Karachi Seort.
The ECC increased the total cost of the project for phase I to $ 7.72 billion. This includes $ 5.8 billion in capital expenses.
This is the second review in six months. In March of this year, the ECC had approved to increase the cost to $ 6.8 billion.
A brochure from the Ministry of Finance said the ECC considered a summary of the oil division. The summary related to the approval for final agreements and financial commitments for the Reko DIQ project.
“The ECC approved the proposed final terms of the agreements,” the statement said. He added that if the legal and financial advisors, together with the Reko Diq Mining Company, identified any material deviation, would be sent to ECC for approval.
The finance minister noted that the inclusion of contingency costs showed the company’s concerns about the risks in the implementation of the project. He urged the authorities to take all the steps to finish the project on time.
Two and a half years ago, the project had been estimated at $ 4.3 billion. Now increases 79% or $ 3.4 billion before production begins.
Phase II must be presented in 2034 at an additional cost of $ 3.3 billion. This will increase the capacity to 90 million tons per year (MTPA), establish the report. With this, the total cost of the project will have almost $ 10 billion.
The ECC also approved to increase the debt component from $ 3 billion to $ 3.5 billion. The additional loan of $ 500 million adds another $ 180 million in cost of interest.
The authorities informed ECC that the increase was due to around $ 2 billion in project financing needs. Inflation during construction, operating costs during the construction period and expenses prior to 2025 also increased the figure, according to officials of the Ministry of Finance.
Due to the highest debt, the shareholders’ contribution has also increased by $ 458 million. However, Reko Diq Mining Company is still trying to maintain the cost below $ 7 billion. If you succeed, the shareholders’ commitments would fall to $ 3.5 billion.
The first review was based on a new technical report and reports prepared by Barrick Gold, which has 50% of the project.
The project is of global interest, attracting both the United States and China. Its net cash flow of more than 37 is projected at $ 70 billion. That is almost 10 times the current foreign exchange reserves of Pakistan.
The technical report says that production will begin at the end of 2028. Initially, the mine will produce 200,000 tons of copper per year in phase I at a cost of $ 5.7 billion. The completion of this first phase in 2029 is expected.
Pakistan’s participation is divided between three federal companies: the Petroleum and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited and government holdings (private) Limited. Each has 8.33%, which makes a combined 25%participation. The Baluchistan government has another 25%, while Barrick Gold has 50% and is the operator.
The ECC was also informed about the draft of the terms leaf long. This sheet describes the common terms for lenders and will form the basis of definitive agreements.
These agreements include a direct agreement of the Government with the lenders, a Federal Guarantee Agreement, a Baluchistan completion agreement, a SOE completion agreement and a transfer restriction agreement.
The ECC allowed the OE to repatriate funds since January 2023 for seven years or more. This will comply with its financing action of $ 2.2 billion.
It also allowed OGDCL and PPL to organize currencies of their own resources. If they face deficit, the federal government will provide currencies.
The ECC also authorized the secretaries of oil and finance to the Finaliae execution forms of the agreements.
Rail project
The ECC also reviewed a summary of the railway ministry. It was related to a rail development agreement and a bridge financing agreement with Reko Diq Mining Company. The company will extend $ 390 million in bridge financing to establish a 1,350 km track of Baluchistan to Karachi, said the Ministry of Finance.
The ECC approved the proposal. He addressed the railway ministry to share the documents with the Finance Division for the evaluation. He also asked both ministries to present an implementation update for March next year.
Petroleum Minister Ali Pervaiz Malik emphasized project monitoring so that Pakistan Railways can return $ 390 million with interest in three years.
The Minister of Finance said that ECC approval indicated the government’s commitment to Reko Diq. He said the project could transform Baluchistan’s economy and benefit the entire country.
He added that Reko Diq would unlock one of the non -developed copper gold deposits in the world. It would create jobs, improve infrastructure and support long -term socioeconomic growth.
The rail link is essential for the commercial success of the project. It will allow the shipment of copper concentrate for processing and sale abroad. The mining company has favored a railway link through Port Qasim, connecting ML-III and ML-I.
Financing of $ 390 million, approved by Prime Minister last month, will entail a three -year tenor with an interest of approximately 7%. Nokundi’s ML-III track to Rohri needs an urgent update. Without it, the line cannot handle the projected heavy load traffic from Reko diq to the port of Karachi.
