Monday July 15, 2024

Reko Diq project: ECC approves opening of $900m escrow account

By Mehtab Haider
December 12, 2022
A meeting of the Economic Coordination Committee. — APP/File
A meeting of the Economic Coordination Committee. — APP/File

ISLAMABAD: After endorsement of the multi-billion dollars Reko Diq project deal by the Supreme Court of Pakistan, the Economic Coordination Committee of the Cabinet on Sunday approved opening of an escrow account for depositing $900 million for making the project operational.

The ECC also approved another summary for approving the Government of Pakistan’s funding plan to the tune of $717 million over a period of six years.

Federal Minister for Finance and Revenue Senator Ishaq Dar presided over the ECC of the Cabinet meeting virtually.

With the approval of the federal and provincial cabinets, the Government of Pakistan (GoP) and the provincial government of Balochistan (GoB) have entered into an out-of-court settlement with M/s Tethyan Copper Company Pvt. Limited, Australia (TCCA) [jointly owned by Barrick Gold Corporation of Canada and M/s Antofagasta PLC of Chile] in respect of Reko-Diq Copper-Gold Project - Chagai district (Balochistan) after the adverse arbitral awards of the International Centre for Settlement of Investment Disputes (ICSID) and expected similar award from International Chamber of Commerce (ICC) against the federation and the Balochistan province, respectively.

Under the settlement arrangement, the joint venture was divided into 50 per cent shares by Barrick Gold Corporation, 25 per cent by federal government through a single special purpose vehicle, namely, Pakistan Minerals (Private) Limited (SOEs’ SPV) and 25 per cent by Balochistan as 10pc direct free carried + 15% through Balochistan Mineral Resources Limited (GoB SPV), to be paid by GoP along with capital and operating expenses on the project.

According to an official statement, issued by the Ministry of Finance, the ECC considered and approved two important agenda items related to the Reko Diq project, thus paving the way for early start of the project.

The Ministry of Energy (Petroleum Division) submitted a summary of accrued interest with respect to the amount held in an escrow account in connection with the Reko Diq project dispute settlement. It was presented that the government of Pakistan (GoP) and the provincial Government of Balochistan (GoB) entered into an out-of-court dispute settlement with M/s Tethyan Copper Company (Pvt) Limited- a consortium of Barrick Gold Corporation of Canada and M/s Antofagasta PLC of Chile, in respect of Reko Diq Copper-Gold Project in Chaghai district of Balochistan.

As per settlement terms, the GoP has to clear liabilities to Antofagasta PLC. In the light of the terms of agreed settlement, the ECC allowed Finance Division to direct GHPL (for its own as well as GoB’s share), OGDCL and PPL to deposit the aggregate amount of interest to the sum of US$22,718,173, in the escrow account from March 31, 2022 to December 15, 2022.

The ECC further allowed Finance Division to arrange the interest payable for GoB’s share amounting to US$ 8,519,314 from the loan of Rs. 65 billion already raised by the GHPL with the GoP guarantee.

Further, the ECC allowed the Divisions of GoP concerned and the SOEs to act in such a manner to ensure that the deposited amount, along with interest deposited by the SOEs in the escrow account to form part of the consideration for share purchase of Reko Diq Mining Company Limited.

The ECC also considered and approved a proposal of Finance Division through a summary on funding plan of Government of Pakistan for share of Government of Balochistan in Reko Diq project. As per proposal, overall funding commitment of US$717 million over the period of 6 years by the GoP in respect of GoB SPV Project Capital Commitment to be provided by the Government of Pakistan.