The Truth about Reko Diq

How valuable is ones wealth if it is buried

underground and one has no way of getting it out?
And what would one say to somebody who came
along and volunteered to extract this wealth,
providing all of the technical expertise and
putting up the entire investment costs, and letting
you keep half of the profits? Would it be fair
to say that this person was indulging in
exploitative behaviour? Or would we say that a
fair deal was on offer?

The above scenario is not hypothetical. It is

exactly what is currently going on in the case of the Reko Diq mining project in Balochistan. The
Tethyan Copper Company, a joint venture between Canadas Barrick Gold and Chiles
Antofagasta, has spent $220 million to explore the Reko Diq area and, having discovered a
feasible reserve of minerals, is now willing to spend the further $3.3 billion it would take to
extract the minerals. And yet it is being treated like a neo-imperialist villain out to pillage
Pakistans national treasures.

Here are the facts: The Balochistan government gets a 25 per cent stake in the profits of the
company for doing absolutely nothing besides being lucky enough to have jurisdiction over Reko
Diq. It also gets a royalty fee on every penny of revenue earned by the Tethyan Copper Company.
In addition, the company will pay the full 35 per cent of its income in corporate income taxes to
the federal government. When all is said and done, the provincial and federal governments walk
away with 52 per cent of the net cash flows of the project, while putting up none of the
investment. By what standard is that a bad deal?

Yet if one were to pay attention to all of the populist screeching emanating from every corner of
the print and electronic media, and now from 19-odd senators who have filed a petition in the
Supreme Court on the matter, and also from people who have absolutely no expertise in resource
economics, one could be forgiven for thinking that a great crime is about to occur. The truth,
however, is that the crime is being committed right now, with the people of Pakistan being used
as accessories to one of the biggest highway robberies in history.

The populist frenzy currently being whipped up on television and in newspapers is no accident.
You see, a field is worth almost nothing when it has no proven reserves. Yet it can suddenly
become worth billions the minute it is announced that there are significant quantities of minerals
buried underneath. And that is when the vultures start to circle, smelling a fortune to be made by
crooked means.

Here is how it will happen: The government officials who gave away the licences to the Tethyan
Copper Company before it discovered anything at Reko Diq were unable to extort any bribes
when the field was worth nothing. Now that it is worth billions, however, they can either extort
bribes from Tethyan or from another mining company (and at least two Chinesecompanies have
shown interest). Yet in order to get those bribes from Tethyan, the threat of losing the contract
needs to be real enough. Hence the creation of a popular hysteria to give these officials the
political cover they need for their banditry.

The other option is to actually kick out Tethyan (for which the popular hysteria is still useful) and
then quietly give away the contract to the company willing to offer the highest kickbacks. Either
way, the national interest, in the truest sense of the word, will have been cast aside since no
company in its right mind will want to do business in a country that kicks an investor out the
minute the latter finds something worth mining. The legendary wealth of Balochistan will remain
buried beneath the sands of misery that currently haunt the Baloch people.

But, of course, the chest-thumping politicians will have made their cut and the journalists who
helped them drum up the smokescreen of patriotic fervour will have unwittingly destroyed the
nations interests. I do not know about you, but I do not like being used in this manner.

Published in The Express Tribune, January 26 th, 2011.