Reko Diq is a small town in Chagai Balochistan, Chagai is the largest District of Pakistan. The Reko Diq mines have been the center of much controversy since their discovery by BHP. CHEJVA, signed in 1993 by Balochistan’s then caretaker chief minister Naseer Mengal, granted exploration rights to BHP (Australian based mining company) for the entire Chagai area.
Reko Diq is a sparsely populated and is located in a desert area, 70 kilometers north-west of Naukundi, close to Pakistan’s border with Iran and Afghanistan. The area is located in Tethyan belt that stretches all the way from Turkey and Iran into Pakistan. Access to the Chagai district is via the Zahidan – Quetta highway also known as the London Road.
The population of Chagai District was estimated to be over 250,000 in 2005. According to Dr. Samar Mubarakmand (Member Science & Technology, Planning Commission of Pakistan) Geological Survey of Pakistan had discovered the Reko Diq reserves way back in 1978. Reko Diq, which means sandy peak in Baluchi language, is also the name of an ancient volcano.
Reko Diq Mine is famous because of its vast Gold and Copper Reserves and its believed to have the world 5th largest gold deposit.
From BHP to TCC
In 1993 BHP negotiated the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) with the province of Balochistan to explore the Chagai Hills region. From 1994 to 1997 BHP discovered significant copper-gold deposit at Reko Diq.
In the year 2000, Tethyan Copper Company was established by Mincor Resources NL after taking over the project from BHP. In 2006, Antofagasta PLC and Barrick Gold Corporation formed a JV and acquired 100% of Tethyan Copper Company Pvt. Limited, an Australian company. Tethyan Australia subsequently transferred all mining rights to its Pakistani subsidiary, Tethyan Copper Company Pakistan (TCC).
Tethyan Copper Company Pakistan (Pvt.) Limited is a Joint Venture between two of world’s major miners; Barrick Gold Corporation and Antofagasta PLC. Together the shareholders provide international experience and state of the art mining expertise.
TCC was collectively bought over in the year 2006 through a shareholder agreement between Chile-based Antofagasta PLC and Barrick Gold Corporation of Canada. TCC’s principal asset is a 75% interest in the exploration license (EL-5) for copper-gold prospects at Reko Diq in district Chagai of Balochistan in which the Government of Balochistan holds the remaining 25% share.
TCC and the Government of Balochistan are partners under the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) which was originally signed between BHP and the Government of Balochistan in 1993.
TCC has no right Over Reko Diq: SC of Pakistan.
According to the TCC, the Reko Diq Mining Project was a US$ 3.3 billion investment project that promised to build and operate a world-class copper-gold open-pit mine in the northwest area of Balochistan, where the project was planned to have an estimated mine life of 56 years. The annual production of the TCC Reko Diq project was estimated at 200,000 tons of copper and 250,000 ounces of gold from 600,000 tons of concentrate. In order to achieve this production rate approximately 110,000 tons of ore was aimed to be processed daily.
In August 2010, the TCC completed the feasibility study in respect of the project and submitted that to the government of Balochistan. Earlier report TCC completed an extensive exploration program at Reko Diq with more than 300,000 meters drilling comprising mainly diamond and reverse circulation drilling.
The Feasibility Report was based on extensive world-class engineering, technical and financial studies.
The report named Environmental and Social Impact Assessment (ESIA) was submitted to further make ways for negotiations with the Government of Balochistan and Federal Government of Pakistan for future investment in the project.
On 15 November 2011, TCC was informed by the government of Balochistan that the government had rejected its application for a mining lease.TCC began two international arbitration in order to protect its legal right.
The TCC lost the cases in the International Chamber of Commerce International Court of Arbitration (ICCICA) and in International Center for Settlement of Investment Disputed (ICSID) against the government of Balochistan.
The court’s decision weakened the TCC’s case in the international tribunal as Chagai Hills Exploration Joint Venture Agreement (CHEJVA) was declared void, which means that TCC had no rights to claim under the 1993 agreement in the international court.
The apex court in its ruling said that the agreement reached on July 23, 1993, was in conflict with the laws of the country.
The supreme court of Pakistan had already declared the contract illogical with TCC that the company did not have any right over Reko-Diq. Finally, on 10th May 2013, it appeared in media that Tethyan Copper Company (TCC) abandoned the project.
Youth Is anxiously waiting for “Kamyab Jawan”.
Why the CHEJVA deal is Illegal?
TCC was disqualified by the Supreme Court of Pakistan in 2013 after a lengthy legal fight. In 2006, Maulana Abdul Haq and others filed a constitutional petition in the Balochistan High Court, challenging the legality of the Chagai Hills Exploration Joint Venture Agreement (Chejva), validity of the act of relaxation of BMCR 1970 by the government of Balochistan and the failure of BHP to complete the exploration at a reasonable pace.
The high court dismissed the petition and found CHEJVA, the ‘relaxation’ of BMCR 1970 and other acts of the government of Balochistan and the Balochistan Development Authority to be legal and valid.
However, subsequent other petitioners filed before the Supreme Court under Article 184(3) of the constitution, questioning the validity of the grant of licence(s) to BHP/TCC on the ground of absence of fairness, non-transparency, violation of laws/rules, and also alleged possible risks to the vital interests of the province of Balochistan and Pakistan in the grant of mining lease to BHP/TCC.
All the titled petitions and miscellaneous applications were heard together and in a final judgment the SC termed the Reko Diq mining lease ‘illegal’
And the following points explain better why the governments of Pakistan and Balochistan cannot enter into an out of court – or ‘under the table’ deal – with TCC.
• On January 7, 2013, the Supreme Court of Pakistan declared that the agreement on Reko Diq signed on July 23, 1993, was void and in conflict with the laws of the country. The Supreme Court also stated that TCC no longer had any rights in relation to the Reko Diq agreement.
In a preview of the Supreme Court’s clear decision, the central and provincial governments’ decision to enter into a deal with a company that has been disqualified in a sixteen-page detailed verdict is a direct violation of the constitution and the Supreme Court.
• The apex court had also declared invalid the Chagai Hills Exploration Joint Venture Agreement (CHEJVA), the initial 1993 exploration agreement between the Balochistan government and Australian mining group BHP from whom TCC had purchased Reko Diq exploration rights.
All relaxation and leases were granted to TCC in a very hasty manner during the caretaker setup in Balochistan. The Supreme Court clearly mentioned in its decision that TCC attempted to take undue advantage of the political instability of the time. The foreign companies, by means of CHEJVA, Addendum No1 and other agreements, preyed upon the huge gaps in understanding on the part of the Balochistan government of large-scale mineral extraction and were in a distinct position to manipulate and dominate.
• The Supreme Court further clarified that under Article 3.2.7 of the Rome-based International Institute for the Unification of Private Law (Unidroit) Principles of International Commercial Contracts under the title of gross disparity, a contract that has been conceived by a party seeking to take unfair advantage of the other party’s dependence, economic distress or its improvidence, ignorance, inexperience and lack of bargaining skill cannot be enforced.
• Another big setback for TCC was when it also lost its case in the International Centre for Settlement of Investment Disputes (ICSID) on December 13, 2012, to block the government of Balochistan from any activity in 14 blocks of Reko Diq. The ICSID has allowed the government of Balochistan to continue with their mining project in Reko Diq. These developments were a landmark victory for the Balochistan.
• The Supreme Court repeatedly lamented the Balochistan government’s ‘inefficiency’ and ‘haste’ in disposing of a multi-billion dollar project without exploring the best possible deals in the public interest.
• The Supreme Court raised the following valid questions: Were any steps taken by the Balochistan government to fully understand the nature of gold and copper mining in Reko Diq and the global business norms for large-scale gold and copper mining and the terms of the agreement between national governments and foreign corporations?
Were competitive offers from successful mining companies operating in other countries obtained for comparison and negotiation? Were any tenders floated internationally for the extraction of gold from the Reko Diq mines, which were proven by the year 2000 when Respondent No 4 (TCC) bought the share of Respondent No 8 under CHEJVA for $60 million? Did the government of Balochistan make the decision on the basis of relevant facts brought on record related to rationality and competence, and technical and financial considerations?
• In view of the Supreme Court’s clear stance and recommendation any deal without following global business norms – like floating an international bid through a competitive process – is against the roadmap drawn by the Supreme Court in its decision. Unlike Pakistan ‘gifting’ Balochistan’s copper-gold, in late 2007 Afghanistan awarded a $3 billion contract to China Metallurgical Group Corp through an international bidding process.
• In desperation, after exhausting all legal venues, in May 2013 a frustrated TCC announced that it had withdrawn its request for ‘specific performance/ mining license’ in both international arbitrations (ICC & ICSID) and was only seeking claims for monetary damages, including lost profits for the mining operations.
Indeed, without a clear CSR blueprint and plan natural resources become a curse for countries, as has happened in the case of many resource-rich African countries. The major challenge today’s Balochistan is facing is lack of accountability and the proper tools to translate resources into development.
Pakistan Petroleum Limited sucked trillions of dollars worth of gas without leaving a single mark of human and economic development.
Saindak’s copper-gold was exploited beyond imagination – without helping a single Baloch. Saindak and PPL gas fields are barricaded and protected – completely no-go zones for Baloch people.
The people of these areas live and sleep on empty stomachs and hundreds of thousands of children are without schools and books. The fate of Reko Diq will be no different from PPL and Saindak since everything has been decided far away in cities like Paris and London.