Reko Diq project: Balochistan likely to pay $350m in out-of-court settlement
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The News | 23 March 2017

Reko Diq project: Balochistan likely to pay $350m in out-of-court settlement

by Mehtab Haider

Balochistan government on Wednesday claimed that Tethyan Copper Company (TCC) had agreed to out of court settlement and now both sides were busy in finalising compensation figures after scrapping deal of the company for working at Reko Diq project.

“We are in negotiation with TCC for amicable settlement. We have already agreed to out of court settlement with them. Now currently both sides are finalising figures for compensation for the TCC and this issue will be resolved soon,” Chief Minister Balochistan’s spokesman Jan Achakzai said while talking to The News on phone on Wednesday.

Earlier, Federal Minister for Finance Ishaq Dar told this corrrespondent that Balochistan’s chief minister and attorney general (AG) were handling this issue and could give you appropriate response on this subject.

When Ministry of Law and Justice high-ups were contacted, they said that out of the court settlement and arbitration process at World Bank’s International Centre for Settlement of Investment Disputes or "ICSID" tribunal could be pursued simultaneously.

“It will not be viable option to rely upon only out of court settlement and do not pursue case at ICSID forum of the WB,” they added. Some circles believe that both sides might strike deal for compensation losses to the tune of $300 to $350 million for ensuring out of court settlement. However, despite making efforts no one could be contacted at TCC to confirm whether the company had agreed to an out of the court settlement or not. This correspondent sent written questions to TCC but got no response till filing of this report.

The WB’s ICSID tribunal on Tuesday rejected Pakistan’s final defence against liability, and confirmed that Pakistan had violated several provisions of its bilateral investment treaty with Australia, where TCC is incorporated. After this judgment, the legal position of TCC had strengthened.

The damages phase of the proceedings had begun from March 22, during which the tribunal would consider submissions from the parties to determine the amount that Pakistan must pay to TCC. A ruling on the quantum of damages is expected in 2018.

The TCC had stated on its website that the Reko Diq Mining Project is a $3.3 billion capital investment project that promises to build and operate a world class copper-gold open-pit mine at Reko Diq in the northwest district Chagai of Balochistan province in Pakistan.

TCC completed an extensive and detailed bankable feasibility study establishing the basis for mine development at Reko Diq during August 2010 and submitted a Mining Lease Application in February 2011, along with an Environmental and Social Impact Assessment (ESIA) report.

Progress on the project came to a standstill in November 2011, when the Government of Balochistan summarily rejected the application by TCC’s local operating subsidiary, Tethyan Copper Company Pakistan (Private) Limited (TCCP), for a mining lease in respect of Reko Diq. TCC believes that, under the Chagai Hills Joint Venture Agreement (CHEJVA) between TCC and the Government of Balochistan, as well as under the Balochistan Mineral Rules 2002, TCCP was legally entitled to the mining lease subject only to “routine” government requirements.

In order to protect its legal rights, in November 2011 TCC commenced international arbitration proceedings at two forums: one against the Government of Pakistan with the International Centre for Settlement of Investment Disputes, asserting breaches of the Bilateral Investment Treaty between Australia (where TCC is incorporated) and Pakistan, and another against the Government of Balochistan with the International Chamber of Commerce, asserting breaches of the CHEJVA.

“Despite the initiation of arbitral proceedings in order to protect its rights, TCC remains hopeful of an opportunity to reach a negotiated resolution to the case” stated the company.

The initial mine development plan envisages that in the processing plant about 110,000 tons of ore per day will be processed through flotation process and a 680 km concentrate pipeline will transport the product from the mine site to the port of Gwadar to a dedicated marine terminal facility at the port for storage and transfer of to shipping vessels for supply to smelters throughout the world. In order to secure optimal economies of scale efficiencies, lower mining and processing unit costs, a large scale mining and processing project is required.

The proposed processing plant will produce approximately 600,000 tons of copper concentrate a year, which will contain 28-31% copper and 7-22 g/ton gold which translates to about 200,000 tons copper and 250,000 ounces of gold per year. The commercial mining operations are anticipated to last for over 56 years with an estimated annual operating expense of about US$ 400 million of which 45%-50% will be spent nationally.

TCC is committed to the development of a mining initiative that has the potential to cause the transformation of Balochistan’s dormant mineral resources into profitable mineral reserves. The project offers the scale to significantly contribute to the uplift of the local people and strengthen the economy in general by generating long term revenues in the form of royalties, taxes, profit-sharing and employment opportunities.

The project stakeholders including the Government of Balochistan and the Government of Pakistan shall be able to add significantly to their provincial and federal treasuries in order to undertake wider development projects in the best interest of the general masses. As soon as the TCC Reko Diq project goes into operation, it will become a beacon for further investment into exploration and mining sectors in Balochistan and Pakistan in general, it concluded.

source: The News