Islamabad:
Pakistan revised up on Thursday for the cost of the first phase of Reko Diq Copper and Gold Mines project for the second time in six months. The cost has now sprung 79% to $ 7.7 billion from the original estimate due to higher costs of loans taken for the project and to offset any future price shocks.
The Cabinet’s Economic Coordination (ECC) approved the second audit in the total cost of the first phase of the project. Finance Minister Muhammad Aurangzeb was chairman of the meeting. The ECC also cleared the signing of implementation agreements to formally start the strategically important project.
In addition, the ECC SOVEREIGN guarantees to support a $ 390 million loan to be taken by Reko Diq Mining Company to finance Pakistan Railways for the construction of an 880 kilometer railway track. This line transports minerals to Karachi Seaport.
The ECC raised the total project costs for phase-i to $ 7.72 billion. This includes $ 5.8 billion in capital costs.
This is the second revision of six months. In March of this year, the ECC had approved to raise costs to $ 6.8 billion.
A Ministry of Finance said the ECC considered a summary of the Petroleum Division. The summary related to approvals of final agreements and financial obligations for the REKO DIQ project.
“The ECC approved the proposed final conditions for the agreements,” the statement states. It added that if legal and financial advisers together with Reko Diq Mining Company identified any material deviations, these would be sent back to ECC for approval.
The Minister of Finance observed that the inclusion of contingency costs showed the company’s concerns about risks in the implementation of the project. He called on the authorities to take all steps to end the project on time.
Two and a half years ago, the project was estimated at $ 4.3 billion. It is now up 79% or $ 3.4 billion before production even begins.
Phase II is due in 2034 against an additional cost of $ 3.3 billion. This will raise capacity to 90 million tonnes a year (MTPA), the report says. With this, the total project costs will affect nearly $ 10 billion.
The ECC also approved to raise the debt component from $ 3 billion to $ 3.5 billion. The extra borrowing of $ 500 million adds an additional $ 180 million dollars in interest costs.
Officials informed the ECC that the increase was due to around $ 2 billion in project financing needs. Inflation during construction, operating costs during the construction period and expenses before 2025 also pushed up in the figure, according to the Ministry of Finance’s officials.
Due to the higher debt, shareholders’ contributions have also risen by $ 458 million. However, Reko Diq Mining Company is still trying to keep costs below $ 7 billion. If successful, shareholder obligations would fall to $ 3.5 billion.
The first revision was based on a new feasibility and technical report prepared by Barrick Gold, which owns 50% of the project.
The project is of global interest that attracts both the US and China. Its net cash flow over 37 years is expected at $ 70 billion. It is almost 10 times Pakistan’s current currency reserves.
The technical report says production will begin with the end of 2028. The mine originally gives 200,000 tonnes of copper a year in phase-i at a cost of $ 5.7 billion. The end of this first phase is expected in 2029.
Pakistan’s shareholding is divided between three federal companies – Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited and Government Holdings (Private) Limited. Each owner 8.33% and represents a total 25% share. Another 25% is owned by the Balochistan government, while Barrick Gold owns 50% and is the operator.
The ECC was also informed of the draft long -shaped thermal. This sheet outlines general terms of lenders and will form the basis for final agreements.
These agreements include a direct agreement with lenders, a federal warranty agreement, an agreement on the implementation of Balochistan, SOES implementation agreement and a transfer limitation agreement.
The ECC enabled SOEs to repatriate funds from January 2023 over seven years or longer. This will meet their funding share of $ 2.2 billion.
It also made it possible for OgDcl and PPL to arrange currency from their own resources. If they are facing deficits, the federal government will provide currency.
The ECC also approved the oil and financial secretaries for the Finaliae Exemption Forms for the agreements.
Railway project
The ECC also underwent a summary of the Ministry of Railway. It related to a rail development agreement and a brofinansing agreement with Reco Diq Mining Company. The company will expand $ 390 million in brofinansing to put a 1,350 km of a trace from Balochistan to Karachi, the Ministry of Finance said.
ECC approved the proposal. It instructed the Ministry of Railway to share the documents with the Finance Department for Assessment. It also asked both ministries to submit an implementation update by March next year.
Petroleum Minister Ali Pervaiz Malik emphasized the monitoring of the project, allowing Pakistan Railways to return the $ 390 million with interest in three years.
The finance minister said ECC’s approvals signalized the government’s obligation to Reco DIQ. He said the project could transform Balochistan’s economy and benefit the whole country.
He added that Reko Diq would unlock one of the world’s largest undeveloped copper gold deposits. It would create jobs, improve the infrastructure and support long -term socio -economic growth.
The rail link is important for the commercial success of the project. It allows the shipment of copper concentrate for treatment and sale abroad. The mining company has favored a railway link via Port Qasim connecting ML-III and ML-I.
The $ 390 million financing approved by the Prime Minister last month will carry a three -year tenor to approx. 7% interest. The existing ML-III track from Nokundi to Rohri needs urgent upgrade. Without it, the line cannot handle the projected heavy freight traffic from Reko DIQ to Karachi Port.
