Barrick Gold and Antofagasta win $5.8 billion ruling on project in Pakistan

July 16, 2019

Barrick Gold Corp. and Antofagasta Plc have been awarded a US$5.8 billion arbitration ruling on a massive copper and gold deposit in Pakistan.

Development of the Reko Diq project was blocked by Pakistan in 2011over a dispute about the lease. The World Bank’s International Centre of the Settlement of Investment Disputes ruled in favor of the joint venture of Barrick and Antofagasta, however, it may be difficult for the miners to collect the settlement given Pakistan’s fragile economic state.

“I think, at the end of the day, Reko Diq will be developed,” Barrick Chief Executive Officer Mark Bristow said. “The question is when, and by who.”

Despite the potential challenges of collecting, the ruling could pave the way for the project to go ahead after years of delays. The damages almost match the US$6 billion bailout Pakistan agreed to with the International Monetary Fund two months ago to help the country avert an economic crisis. Pakistan’s government said it will review the ruling and consider a potential petition to the tribunal, the Financial Post reported.

“Along with our partners at Antofagasta, we remain willing to engage with Pakistan to explore the potential for a negotiated settlement,” Bristow said in a separate statement.

The damages include compensation of US$4.09 billion for the fair market value of the Reko Diq project when the mining lease was denied and interest of US$1.75 billion. The tribunal also awarded the joint venture just under US$62 million in costs.

The joint venture said it had spent more than US$500 million on the Reko Diq project and located enough ore to produce 180 kt/a (200,000 stpy) of copper and 7 t/a (250,000 oz/year) of gold a year for 56 years. The initial capital investment would have exceeded more than US$3 billion.
The loan Pakistan agreed to with the IMF in May represents the 13th bailout since the late 1980s for a country facing a balance-of-payments crisis triggered by high fiscal and current-account deficits and dwindling foreign exchange reserves.

Bristow and Barrick’s executive chairman John Thornton have previously suggested it would make sense to combine some of Barrick’s copper assets through partnerships. The Toronto-based miner’s operating copper assets are Jabal Sayid in Saudi Arabia and Lumwana in Zambia. There has been speculation it might sell Lumwana though in an interview from Zambia, Bristow said it might make more sense to look at partnerships there as well.

 

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