Pakistan on Tuesday revised up the total cost of the first phase of Reko Diq Copper and Gold Mines project to $ 6.8 billion – an increase of 58% – by improving the extent of the strategically important scheme and taking into account inflation effect and higher production needs.

The audit has been conducted on the basis of a new feasibility study and a technical report on the project implemented by Barrick Gold Company – 50% partner in the project.

The increase of $ 2.5 billion or 58% against the originally approved costs are outweighed by higher prices of gold and copper in international markets, according to Pakistani authorities.

Pakistan’s federal and provincial governments will also receive $ 7.1 billion in royalties and taxes for a 30-year period, in addition to getting dividends from its 50% shareholding.

The Economic Coordination Committee (ECC) for the cabinet approved increase in the project costs $ 6.8 billion, including the $ 1.1 billion operating expenses, according to Pakistani authorities.

About two years ago, project costs were estimated at $ 4.3 billion. As a result of the upward revision, the federal government’s obligation for its 25% stock through three state-owned units will jump to $ 1.9 billion in $ 685 million. Likewise, the economic obligation of the Balochistan Government will rise from $ 717 million to $ 1.1 billion, ECC was informed.

The federal government will pay on behalf of the Balochistan Government, while the three companies will arrange funds from their own resources. In the event that these three companies are facing any deficit, the federal government will bridge the gap according to the decision.

Based on the feasibility survey, the capital cost of phase in the project is estimated at $ 5.7 billion “with an accuracy of 15% plus or minus”, the technical report from the REKO DIQ project indicates. The phase I will help achieve the first production of 45MTPA.

With phase II to be completed by 2034, an additional $ 3.3 billion will be spent to increase production capacity to 90mTPA, the report says. This brings the total project costs to almost $ 9 billion.

The mining project attracts greater interest in the US and China. The project’s net cash flow over a period of 37 years is $ 70 billion, which is almost 10 times more than Pakistan’s existing gross official currency reserves.

The technical report says the project is about to begin production by the end of 2028, starting with 200,000 tonnes of copper annually in its first phase, which will cost estimated $ 5.7 billion. The end of the first phase is expected by 2029.

The Reko DIQ project is located in the northwest corner of Balochistan.

Finance Minister Muhammad Aurangzeb was almost chairman of the ECC meeting. The minister is in China, where he participates in the Boao Forum for Asia 2025 meetings. Petroleum Minister Ali Pervaiz Malik’s Ministry presented the summary of the ECC approval.

The ECC took a summary of the petroleum department regarding the REKO DIQ project and changes in its overall development plan and related financial obligations and project financing considerations due to inflation and improved scope of the capacity project, energy mixture, alternative water supply options and updated processing plants and machines according to a financial distribution.

“The ECC noted the factors that led to the project scales and approved the proposals contained in the summary with the instructions to the ministries of petroleum and financing to continue close coordination to ensure timely implementation of all agreed actions,” according to a statement from the Ministry of Finance after the meeting.

The ECC insured full support for the project and called it a project of tremendous national importance. Out of the $ 6.8 billion, the debt of $ 3 billion is raised for the project. Debt negotiations are at an advanced stage led by an arm in the World Bank Group.

The remaining $ 3.7 billion is arranged by shareholders in equity investments in accordance with their existing efforts.

Pakistan’s three state-owned companies-Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited and Government Holding (private) Limited-have just 8.33% as part of a collective 25% owned by the federal government.

Of the remaining Pakistani share, 25% of the Balochistan government is owned and 50% is owned by Barrick Gold Corporation, which is the operator of the project.

In light of the increase in costs, Ogdcl on Tuesday decided to increase its contribution to the project to $ 627 million. This included $ 349 million in equity contributions. PPL also decided to increase its contribution to $ 649 million to be followed by the government that kept limited.

In the midst of the deteriorating law and order situation in Balochistan, the government also approved RS1.8 billion funds for the project’s security.

The recently completed opportunity study describes two phases of project development. Phase I’s original flow will now be 45mtpa of Malm, which begins production in 2028; And with the end of Phase II, the total flow will jump to 90 MTPA, which is planned to occur from 2034, according to the technical report.

The project’s internal return (IRR) is estimated at 21.32% on the basis of a copper price of $ 4.03/ LB and a gold price of $ 2,045/ OZ, according to the report. The repayment period is six years and two months at this price, the report showed.

Infrastructure

The project proposes to use railway, road and port infrastructure throughout the region, including an existing railway network route to Port Qasim for export to international markets. The project is scheduled to be connected to National Highway (N40) via a custom -built 45 kilometer long road. Place roads connect different areas within the project and allow for the transport of extracted material and other vehicle movements.

Groundwater is planned as the primary water supply. Water will be delivered from boreholes located north of the mine and will be delivered via a pipeline of about 70 km. The water requirement is calculated and based on expected water consumption for both construction and operations.

The part of phase I -Insecting capital costs attributable to Barrick Gold under the conditions of the Joint Venture Agreement is $ 3.1 billion on 100% equity basis, provided there is no debt.

Reko Diq Mining Company is estimated to pay a total of $ 7.1 billion in taxes across the mine. Out of this, $ 3.9 billion will go to the governments of Balochistan and Sindh, $ 2.2 billion for Workers profit participation fund and $ 823 million in contribution to the final tax regime.

The project has been given many of the permits to support ongoing early works. However, from the date of this technical report, there are still a number of permits and approvals that are in the process of being necessary for construction and operation, according to the report.

To ensure that Balochistan receives significant cash flows during the project’s development and construction phases, the mineral agreement contains the following offsetting payments to be paid annually on or before the end of the relevant year. The Balochistani government gets $ 5 million in advance in the first year, $ 7.5 million in the second year and $ 10 million a year until production begins.

In October 2024, Barrick engaged a third-party consultant (SRK Consulting) to conduct an independent review of the mine components of the Reco DIQ option survey. The external consultants confirmed the content of the feasibility study.

The financial analysis indicates that the project has a net contemporary value of $ 13 billion at a 8%discount rate.