A Canadian-Chilean mining consortium has filed for arbitration in a dispute over one of the world's richest deposits of gold and copper in the remote hills along Pakistan's western border.
The move represents an effort by Toronto-based Barrick Gold Corp. and its Chilean consortium partner Antofagasta to recover the millions of dollars spent exploring the Reko Diq site, and some of the future profits that vanished after Pakistani authorities rejected their application for a mining license earlier this month.
The arbitration is expected to take place in Paris and Washington, and the claims will probably run into the hundreds of millions -- or even billions -- of dollars. The foreign companies say they spent $220-million (U.S.) on exploration and technical studies since 2006, the year that Barrick bought a stake in the project for a reported $130-million.
Under Pakistan’s laws, mining licenses are issued by the provincial government; in this case, the poor and lawless territory of Balochistan. A spokesman for the Balochistan government has previously claimed that if no mining license gets issued, the government would compensate the foreign mining companies for the cost of their exploration work. That pledge was never delivered to the companies in writing, however, and it’s unclear how the impoverished local authorities would find the necessary cash.
Tim Livesey, chief executive of the consortium, Tethyan Copper Company (TCC), issued a statement making it clear that arbitration was a last resort.
“We are disappointed we have not yet been given the opportunity to resolve this by negotiation,” Mr. Livesey said. “We have to initiate arbitral proceedings in order to protect our legal rights, but we remain open to meeting with the Government of Balochistan and its regulatory body to work towards an amicable, negotiated resolution to the dispute.”
The exploration license for Reko Diq expired in February, 2011, and the consortium had been waiting anxiously for a mining license since submitting a feasibility study prepared by SNC-Lavalin Group Inc., of Montreal.
The study estimated that annual production in the first five years from Reko Diq could have amounted to 100,000 ounces of gold and 150 to 160 million pounds of copper. None of the assets were counted among Barrick's proven reserves.
Follow us on Twitter: