UPDATE 1-Barrick, Antofagasta give up hope on Pakistan mine

Wed May 8, 2013 11:37am EDT

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LONDON May 8 (Reuters) - Canada's Barrick Gold and Chile's Antofagasta have given up hope of mining Reko Diq, a disputed but promising copper and gold project in Pakistan's poorest region of Baluchistan, and will demand compensation instead.

Reko Diq was meant to be the biggest foreign investment in Pakistan's mining sector. But development has been frozen since 2011 after the provincial government refused a mining license for the venture jointly owned by Barrick and Antofagasta - Tethyan Copper Company - months after a request was submitted.

Tethyan began international arbitration proceedings in November 2011.

"Recent developments have regrettably compelled Tethyan to withdraw the request for specific performance... While we have long hoped to mine Reko Diq, as is Tethyan's right, the conduct of Pakistan and Baluchistan has made that goal impracticable," Tethyan's Chief Executive, Tim Livesey, said on Wednesday.

"We will pursue our claims for monetary damages, including lost profits for the mining operations, in the international arbitrations."

After years of inaction, Wednesday's decision is unlikely to come as a significant surprise. Prices have weakened and miners have been retreating from major greenfield projects in tough locations.

It is instead likely to add fuel to the argument of many investors who want major mining companies to steer clear of riskier destinations.

Barrick and Antofagasta have invested more than $220 million in the Reko Diq project, in which the two companies jointly owned a 75 percent stake and the exploration license for the site. The provincial government held the remaining 25 percent.

The mine had been projected to cost some $3.3 billion, although that was expected to climb given rising costs, particularly in remote locations like Baluchistan. It was expected to generate a huge amount of much-needed foreign direct investment for Pakistan.

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