Pakistan threatens to pull $3bn mining project

Pakistan is threatening to cancel a $3bn copper and gold exploration project by Canada’s Barrick Gold and Chilean miner Antofagasta in the country’s resource-rich south-western Baluchistan province, citing the pressing need to “protect the country’s national interests”.

Speaking to the Financial Times, Shaukat Tarin, Pakistan’s finance minister, said: “We can’t continue with this project in its present form. We have to protect our key national interests.”

The provincial government of Baluchistan last month recommended the cancellation of the Reko Diq contract, a move that needs the federal government’s backing before it can be formalised.

The province of Baluchistan has a 25 per cent stake in the project, expected to cost $3bn to develop, with the rest owned by the two mining companies since 2006.

Mr Tarin’s comments are likely to upset the few foreign investors still prepared to venture into the strife-ridden south Asian country but the government wants to avoid selling valuable assets at a throwaway price.

The minister said raw copper extracted from the Reko Diq site in Baluchistan would earn between $40bn and $50bn in the next 25-30 years.

He argued that Pakistan would earn 10 times the amount if the copper was processed and sold in a refined form. “Why should they [the investors] take our raw material for processing to a third country and then make huge profits?”

A senior official in the provincial government of Baluchistan said that sales from the site could jump to $1,000bn in the next 25-30 years if earnings from gold and other precious minerals were included. The Reko Diq site holds up to 11bn pounds of copper and 9m ounces of gold reserves, according to the government.

Baluchistan, surrounded by borders with Iran and Afghanistan, and a southern coastline touching the Arabian sea, has been at the centre of a continuing nationalist insurgency for almost four decades. Rich in mineral resources, Baluchistan is also the most sparsely populated and the poorest of Pakistan’s five provinces.

The government of Pakistan’s president Asif Ali Zardari has been trying to pacify armed militants in Baluchistan, by offering incentives such as more money for social services and larger representation for people from the province to high level government positions.

A key contentious issue remains a deep sea port developed with China’s financial assistance at Gwadar – once a dusty fishing town on Baluchistan’s Arabian sea coast. Nationalists from Baluchistan have repeatedly demanded the revenues from Gwadar to be given to the province rather than shared with the federal government.

This follows a long standing demand by Baluch nationalists for billions of dollars in payments from the federal government for outstanding royalties for the gas pumped from the province to other parts of Pakistan.