ISLAMABAD: The Supreme Court was informed Monday that Balochistan province will benefit economically from US$32.7 billion over 47 years of life-of-mine of the Reko Diq reconstructed project.
Financial advisor to the government of Pakistan Cailleteau Pierre, representing Lazard Freres SAS and White & Case, in a presentation to a five-judge bench said that economic benefits for the province of Balochistan would comprise direct taxes and spending, dividends. In royalties, taxes and other spending the province will get US$14bn, free carried interest $7.6bn, and net equity flows from participation through GoB SPV $11.1 bn.
The bench, headed by Chief Justice Umar Ata Bandial and comprising Justice Ijazul Ahsan, Justice Muneeb Akhtar, Justice Yahya Afridi, and Justice Jamal Khan Mandokhel, heard the presidential reference on the RekoDiq project.
Pierre said that RekoDiq is one of the largest underdeveloped copper deposits worldwide. It combines the highest life-of-mine and above average profitably on a cash cost basis. He said in the given circumstances the project will benefit Pakistan.
The public sector of Pakistan gets a majority (circa 65 per cent) of the direct economic benefits of the mine in terms of royalties, taxes and dividends, irrespective of the copper and gold price assumptions.
The province of Balochistan in particular will receive directly royalty and taxes, and indirectly through the GoB (Government of Balochistan) SPV, dividends. The GoB directly carries free-carried shares in the joint venture company that will develop the mine (10 per cent). The development of the project will require large capital expenditure (circa USD 8bn) in two phases, which are currently envisaged to be funded by 60 per cent equity and 40 percent debt. The ability of the shareholders (including the state-owned enterprises participating in the joint venture with Barrick) to assume their financial commitment will be critical to convince international lenders to fund the project.
The court inquired where the ore of gold and copper will be refined? What is the royalty on ore mining and gold refining? The advisor said that the smelting would take place outside Pakistan and it will be outsourced.
The chief justice remarked that the apex court ordinarily does not look into such a transaction but the government of Pakistan has been advised by you (Lazard) to approach the Supreme Court in light of our judgment, delivered in 2013. “We have explained in the judgment what needs to be done,” he added. He questioned what kind of assurance they (the government) want from the Supreme Court. What the other side say, what the Supreme Court expected to do, the CJP further inquired from the additional attorney general (AAG).
AAG Aamir Rehman said that on the basis of certain relaxations the project was set aside by the apex court in 2013. “We (the government) are too giving relaxation and therefore asking the court whether it is ok or not? Whether the concession we are giving to Barrick Gold is not ultra vires to the law?”
Justice Ijazul Ahsan remarked that the government wanted to avoid the complication in future that may arise due to an international agreement; therefore, has filed the Presidential reference, but the court is interested in the legal question. He said the question asked in the Hisba Bill also related to future complications but that was purely a legal one. He said the court would focus on the legal question.
The case was adjourned until Tuesday (Nov 8).
Copyright Business Recorder, 2022
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