Pakistan to pay firm $6bn over mine closure

Mining in Pakistan’s Balochistan province is dominated by small companies focused primarily on marble and granite. (Reuters/ File)
Updated 14 July 2019

Pakistan to pay firm $6bn over mine closure

  • Country’s legal experts are ‘studying’ financial and legal implications
  • The consortium Tethyan Copper is the largest foreign direct investment mining project in Pakistan

ISLAMABAD: Pakistan will have to pay almost $6 billion in damages to a foreign gold mining firm whose dig was shut down by the government in 2011, the World Bank said on Sunday.

The consortium Tethyan Copper company — of which Canadian gold firm Barrick and Chile’s Antofagasta Minerals control 37.5 percent each — is the largest foreign direct investment mining project in the country.

More than a decade ago the group found vast gold and copper deposits at Reko Diq, in the turbulent southwestern Balochistan province, and had planned a hugely lucrative open-pit mine.

But the project came to a standstill in 2011 after the local government refused to renew the consortium’s lease, and in 2013 Pakistan’s top court declared it invalid.

On Friday, the World Bank’s international arbitration tribunal committee awarded $5.84 billion in damages to Tethyan, according to a statement from the company, because of the government’s decision to shut down the mine.

Pakistan’s attorney general, Anwar Mansoor Khan, said in a statement they had noted the decision “with disappointment.”

The country’s legal experts were “studying the Award and reflecting upon its financial and legal implications,” the statement continued.

Ivan Arriagada, Antofagasta’s Chief Executive Officer, said: “We are pleased to reach this milestone after more than seven years of arbitration.”

“We remain willing to discuss the potential for a negotiated settlement with Pakistan and will continue to protect our commercial interests and legal rights until the conclusion of this dispute,” consortium chairman William Hayes added.

It comes weeks after Prime Minister Imran Khan secured a $6 billion bailout from the International Monetary Fund (IMF), amid devaluations of the rupee and soaring inflation.

Barrick and Antofagasta say the proposed plant could produce 600,000 tons of copper and 250,000 ounces of gold a year.

The provincial government is also a sleeping partner in the Reko Diq project with a 25 percent stake.

Mining in Balochistan is dominated by small companies focused primarily on marble and granite, experts say, which waste up to 80 percent of potential because of poor extraction techniques.

Experts have called for more transparent policies to allow mining to flourish.


Saudi Arabia looks to cut spending in bid to shrink deficit

Updated 01 October 2020

Saudi Arabia looks to cut spending in bid to shrink deficit

  • Saudi Arabia has issued about SR84 billion in sukuk in the year to date

LONDON: Saudi Arabia plans to reduce spending next year by about 7.5 percent to SR990 billion ($263.9 billion) as it seeks to reduce its deficit. This compares to spending of SR1.07 trillion this year, it said in a preliminary budget statement.

The Kingdom anticipates a budget deficit of about 12 percent this year falling to 5.1 percent next year.

Saudi Arabia released data on Wednesday showing that the economy contracted by about 7 percent in the second quarter as regional economies faced the twin blow of the coronavirus pandemic and continued oil price weakness.

The unemployment rate among Saudis increased to 15.4 percent in the second quarter compared with 11.8 percent in the first quarter of the year.

The challenging headwinds facing regional economies is expected to spur activity across debt markets as countries sell bonds to help fund spending.

Saudi Arabia has already issued about SR84 billion in sukuk in the year to date.

“Over the past three years, the government has developed (from scratch) a well-functioning and increasingly deeper domestic sukuk market that has allowed it to tap into growing domestic and international demand for Shariah-compliant fixed income assets,” Moody’s said in a statement on Wednesday. 

“This, in turn, has helped diversify its funding sources compared with what was available during the oil price shock of 2015-16 and ease liquidity pressures amid a more than doubling of government financing needs this year,” the ratings agency added.