Saudi Arabia’s Public Investment Fund (PIF) is in discussions with Canadian mining giant Barrick Gold about the potential purchase of equity in the Reko Diq copper and gold mine in Pakistan’s restive Balochistan province.
The development, reported by Bloomberg last week, is part of energy superpower Saudi Arabia’s pivot toward renewables.
Through Manara and separately, Ma’aden and the PIF are moving fast in striking strategic partnerships. Last month, Manara signed an agreement to purchase a 10 percent stake in the base metals spinoff of Brazil’s Vale. And in January, Ma’aden sealed a joint venture agreement with Barrick Gold for copper exploration at two sites in Saudi Arabia.
The $7 billion Reko Diq megaproject, described by Barrick Gold as “one of the world’s largest undeveloped copper-gold deposits,” could produce a combined 80 million tonnes per annum by its second phase.
The stakes are also huge for cash-strapped Pakistan. Masood Nabi, the chief executive officer of a Pakistani state-owned oil and gas exploration company, says Reko Diq has the potential to make Pakistan “another Chile” — currently the world’s largest producer of copper.
But there’s peril along with Reko Diq’s promise. The project — located less than a hundred miles from Afghanistan and Iran in an insurgency-hit province — is laden with tremendous political, geopolitical, and security risks.
The Reko Diq Backstory
Reko Diq is in many ways a metaphor for Pakistan’s potential and troubles.
In 1993, mining giant BHP signed an exploration agreement with the Balochistan Development Authority. The Reko Diq project lingered for more than a decade. In 2006, the Tethyan Copper Company (TCC) — a Barrick Gold and Antofagasta Minerals joint venture — took over the project from BHP.
After conducting a feasibility study, TCC submitted a mining application in 2011, which was rejected by the Balochistan government. TCC then filed an arbitration case at the World Bank’s International Center for Settlement of Investment Disputes (ICSID). Then, in 2013, Pakistan’s activist Supreme Court voided the 1993 joint venture agreement taken over by TCC.
In 2019, the ICSID ruled in TCC’s favor, ordering Pakistan to pay $5.9 billion in damages and costs to TCC — amounting to roughly 75 percent of Pakistan’s foreign exchange reserves at the time.
Last year, Pakistan reached an out-of-court settlement with TCC. Antofagasta exited the joint venture and its shares were bought out by three Pakistani state-owned companies. The terms of the agreement were revised, with an increased revenue share for Pakistani state entities.
The Reko Diq project is now not only moving forward but also gaining momentum. Barrick Gold co-organized a summit in Islamabad last month on mining opportunities in Pakistan, with significant representation not just from Saudi Arabia and other sovereign extractives players, but also executives from private mining giants BHP and Rio Tinto.
Barrick CEO Mark Bristow says the Reko Diq project “at the moment is in its early stages of its final feasibility study,” which will be completed by the end of next year. Production could begin by 2028. And it could not come at a more critical time for the metals market.
Saudi Arabia and the Global Copper Scramble
If all goes well, Reko Diq will be supplying much-needed copper concentrate at an inflection point in the global economy. But, like all mining projects, Reko Diq will be capital-intensive. Road infrastructure, for example, will have to be developed from the project site to Pakistan’s Gwadar port, where the copper will either be refined and smelted or transported to other venues for processing.
Extensive capital injections are required to unlock Reko Diq’s riches. That’s where Saudi Arabia comes into the mix. Flush with cash, Saudi Arabia’s PIF is making big moves in the world of sport, technology, and clean energy.
Financing from a sovereign wealth fund, especially from a country like Saudi Arabia with strong diplomatic influence in Pakistan, some experts say, can reduce the political risk of a project like this.
Saudi Arabia also has its own drivers for getting involved in Reko Diq. It’s making a big bet on renewables, investing in green hydrogen and solar power projects domestically and abroad. Saudi Arabia is also the majority owner of Lucid Motors, a luxury EV maker, and has established its own electric vehicle brand, Ceer Motors, in partnership with Foxconn.
Ma’aden has emerged as a major global player in the minerals industry. Along with Barrick Gold, it is among the world’s top 15 mining companies by market cap. The two companies are partnering amid a global scramble for copper. Chinese investments in metals and mining are on a record-breaking trajectory this year. And now Saudi money is competing with the Chinese.
Political, Security Risks Abound
The Reko Diq mine is located in Pakistan’s restive Balochistan province, which has seen an upsurge in anti-state ethnic nationalist and jihadist violence, some of which has targeted Chinese nationals and investments — including the Saindak Copper-Gold Mine.
Resource nationalism is a major driver of the separatist insurgency. Without a political framework to address the insurgency, Reko Diq could become a magnet for insurgent and terrorist violence.
The plan is to transport Reko Diq’s copper and gold — first by truck, and maybe by pipeline in the future — to the Chinese-operated port of Gwadar, which has also seen numerous attacks by separatist militants. Both modes of transport would be vulnerable to insurgent violence.
To deal with the political and security risk, the army is stepping into the mix. Addressing last week’s mining summit, Pakistan’s powerful army chief General Asim Munir spoke like a co-leader of the country, promising “an investor-friendly system that avoids unnecessary delays and provides easy terms and conditions for business.”
In recent weeks, the Pakistani government has taken steps to formalize the army’s huge role in Pakistan’s economy. It established a Special Investment Facilitation Council (SIFC) to fast-track investments from Gulf Arab states.
The SIFC — of which the army chief is a member — has extraordinary powers, including the ability to recommend regulatory exemptions for individual investors.
The Pakistan Army, through its Frontier Works Organization and other companies, also has commercial interests in the extractives and transport industries.
But as the army promises an environment of stability, it is also cracking down on the country’s most popular politician and political party.
Former Prime Minister Imran Khan was sentenced to three years in prison on Saturday. His party has seen large-scale forced defections since May due to pressure from the Pakistani intelligence services. To keep Khan out of power, the army may resort to even more draconian measures. And it may do the same in Balochistan, where, for nearly two decades, it has waged a counterinsurgency criticized by human rights organizations.
The army’s reliance on force against its adversaries not only has fueled the flames of Pakistan’s conflicts, but could also expose Barrick Gold to reputational risk.
Together, Barrick Gold and the Saudis can provide the capital and technical expertise to unlock Reko Diq’s riches. But only Pakistanis can resolve the political barriers to realizing this megaproject. The country’s authoritarian trajectory suggests they aren’t close to doing that.
Arif Rafiq is the editor of Globely News. Rafiq has contributed commentary and analysis on global issues for publications such as Foreign Affairs, Foreign Policy, the New Republic, the New York Times, and POLITICO Magazine.
He has appeared on numerous broadcast outlets, including Al Jazeera English, the BBC World Service, CNN International, and National Public Radio.