Chile and Pakistan: A Missed Opportunity for Mineral Relations at Reko Diq

Looking at a planetary map, one would find very little in common between South America’s most developed country, Chile, and South Asia’s beleaguered nuclear power, Pakistan. Apart from the physical distance, there is little commonality in linguistic, religious or ethno-cultural background. Yet minerals and economic expedience have brought these two countries closer to possible cooperation. What is arguably Pakistan’s largest mineral deposit in terms of net worth, the Reko Diq copper and gold mineral prospect in the Chaghai region of Balochistan, has garnered investment from the family-owned Chilean mining firm Antofogasta minerals.

In 1993 Australian mining giant BHP negotiated the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) with the province of Balochistan to explore the desolate triangular region of Pakistan’s geography that borders Afghanistan and Iran. In  1997 BHP discovered significant copper-gold deposit at the Reko Diq site and in year 2000, Tethyan Copper Company was established by Mincor Resources after taking over the project from BHP. In 2006, Antofagasta PLC  of Chile and Barrick Gold Corporation of Canada  formed a JV and acquired 100% of Tethyan Copper Company Pty. Limited, an Australian company which subsequently transferred all mining rights to its Pakistani subsidiary, Tethyan Copper Company Pakistan.

During a recent research visit to Chile, I had a rare opportunity to meet, Fernando Crisosto,  a social engagement officer who had worked with Antofagasta Minerals and visited Pakistan several times when the project still had some potential for development through joint foreign engagement. Fernando was very nostalgic about the time he spent on the Reko Diq site and showed tremendous affection for the people of Balochistan and of Pakistan. Unfortunately due to mismanagement at various tiers of government, errant data being communicated, and the rise of resource nationalism, the project is now stuck in the courts and international arbitration mechanisms. No doubt the distrust was also exacerbated by badly sourcing the feasibility study of the project by a Canadian firm SNC-Lavalin which was subsequently been ”blacklisted” by the World Bank. Fernando indicated to me that even though their plans for social development were far more detailed than the neighbouring  Saindak mine which is operated by a Chinese government partnership, there was a deficiency of community engagement and communicating those plans effectively to tribal leaders.

Nevertheless, Baloch or Pakistani nationalists alike should first of all be very cautious about believing random data points and value of the reserve at Reko Diq which are asserted in media appearances by said “experts.”  The geologic reality of the Reko Diq deposit is that it is essentially a low-grade copper-gold porphyry which clearly has much potential but is by no means “Solomon’s fortune” as it is sometimes made out to be. Utterly absurd and unsubstantiated numbers for the value of gold and copper reserves in Afghanistan and Pakistan are wantonly paraded in prominent media venues in both countries.  For example one news story in Pakistan’s most widely circulating English daily  this year asserted that the value of the mineral wealth in Reko Diq was in excess of $3 trillion. This number has absolutely no empirical or even remotely rational basis. Indeed the estimated value by the World Gold Council at current prices of all the gold ever mined in the history of the planet is around $8.8 trillion. It would be delusional to think that a low-grade deposit in Balochistan has more than 1/3 the value of the gold ever mined in the history of the Earth!

Pakistan’s media should consult more deliberately with international geological experts who do not have any particular vested interest in the development of the project rather than interviewing hyper-nationalist geologists that have limited substantiation of facts and grossly exaggerate value of the reserve as well as Pakistani technical expertise to extract the resource. In particular the research of Pakistani-Canadian mining academic Professor Laeeque K Daneshmend deserves greater appreciation and engagement to counter the unsubstantiated data being branded about in the media.

Yet conspiracy theorists continue to churn out estimates which have no basis in reality and are misleading the Baloch and Pakistani public. Further misinformation about the Chilean company that invested in this project has also been spread by some of these negative elements. For example in my last visit to Pakistan I heard baseless rumours that the Reko Diq mining concessions was now owned by “Zionist” family interests. Regardless of whether or not such ownership should even be a concern in commercial contracts, it is patently not true. Antofagasta Minerals is owned by the Luksic family of Chile that has Croatian origin. The founder of the company and family patriarch Andronico Luksic (died in 2005) had a Croatian father and a Bolivian mother and absolutely no connection to any ethno-religious causes.

Rather than demonizing foreign investors, Pakistanis and Baloch, regardless of their political persuasion, should consider means of cooperation with Chile in such mineral investments. As a country which has developed their mineral wealth with care to escape a past of desperate poverty and military rule, Chile has much to teach Pakistan. As my friend Fernando noted to me when I said goodbye to him in Santiago, “Chileans have been in the same place as Pakistan. We can help if only they would trust us.” Indeed, Chile has come a long way from its dark past to become a vibrant economy which is now a member of the OECD and from January 2014 will be the first South American country to be part of the United States Visa Waiver program. Imagine that for Pakistan!

Pakistan opened an embassy in the Chilean capital Santiago in 2008 and there is small group of Pakistanis who live in the remote northern town of Iquique which even boasts a Pakistani school. These migrants came through the cargo traffic to this port and settled over a period of several decades. Despite the huge loss of several hundred million dollars that Antofagasta Minerals has faced in terms of the inability to progress the Reko Diq project, there is continuing interest of Chilean investors through occasional investor visits.  Chile-Pakistan relations encountered an interesting twist in 2010 when a Pakistani student was apprehended at the US embassy in Santiago for allegedly having explosives but was later cleared of all wrong-doing. Several Chilean government officials expressed solidarity with Saif-ur-Rehman  Khan after this humiliating episode and he was able to get considerable sympathy in Chilean media venues and fully exonerated by the Chilean judiciary.

Chile and Pakistan have thus had a limited history of engagement which has shown a modicum of camaraderie despite the broader spectre of security narratives. Allowing Chilean investment and mining expertise to assist the development of Balochistan should be encouraged, particularly because Chile also has experience with provincial sensitivities and combing state-owned enterprises (such as Codelco) with private investment.

The federal and provincial governments in Pakistan have to find a path to using minerals as a cooperative mechanism rather than a wedge with Baloch nationalist elements. It is high time we focus on constructive engagement domestically and internationally towards this common goal rather than perpetuating mistrust and fear of partnerships. Minerals development with reliable partners, alongside a diversified economy, has much potential to lift Pakistan and its fractured provinces out of their current predicament of despair.

Changing Planet

Saleem H. Ali is Blue and Gold Distinguished Professor of Energy and the Environment at the University of Delaware (USA) and a Professorial Research Fellow at the University of Queensland, Australia. He is also a Senior Fellow at Columbia University's Center on Sustainable Enterprise. Dr. Ali is a National Geographic Emerging Explorer for 2010 and World Economic Forum "Young Global Leader" (2011). His books include "Environmental Diplomacy" (with Lawrence Susskind, Oxford Univ. Press) and "Treasures of the Earth: Need, Greed and a Sustainable Future" (Yale University Press). He can be followed on Twitter @saleem_ali.