March 21, 2022 (MLN): The board of directors of Oil & Gas Development Company Limited (PSX: OGDC) has resolved to enter into a non-binding framework agreement with the Government of Pakistan, Government of Balochistan, Pakistan Petroleum Limited (PPL), Government Holding (Private) Limited (GHPL) and Barrick Gold Corporation to revive a joint mining project at Reko Diq stalled since 2011, according to the notice issued to PSX today.
As per the notice, the agreement sets out inter alia the ownership/transaction structure, rights, obligations and common objectives of the parties towards facilitating the implementation of the reconstitution of a joint mining project at Reko Diq, on an expedited basis (the “Project”).
“On the basis of directions issued by the Federal Cabinet, the company resolved to enter into an agreement with the President of the Islamic Republic of Pakistan on behalf of the Islamic Republic of Pakistan, the Governor of Balochistan on behalf of the Province of Balochistan, Pakistan Petroleum Limited (PPL), Government Holding (Private) Limited (GHPL) and Barrick Gold Corporation,” the notice said.
Through the Framework Agreement, the company has, in principle, agreed to participate in 8.33% equity (which may be held through onshore or offshore holding companies) along with PPL and GHPL, in aggregate amounting to 25% of the equity in the project divided equally amongst the company, PPL and GHPL.
As per the notice, 50% of the equity will be held by Barrick who shall also have management and operator rights and the remaining 25% of the equity will be held by the Government of Balochistan directly and/or through any of its owned entity, of which 10% shall be free carry of the Government of Balochistan.
To the extent of the agreed initial entry fee attributable to the company, the company has, on the basis of directions issued by the Federal Cabinet, agreed to support the Government of Pakistan (through cash collateral, the contribution of funds, or availing such other funded or unfunded facilities) with respect to payment obligations of the Government of Pakistan in respect of settlement of the historic Reko Diq dispute.
The company's participation in the project remains subject to, inter a//a, receipt of internal and corporate approvals, regulatory approvals, execution of definitive long-form agreements and other conditions precedent agreed in the Framework Agreement.
The company shall continue to notify the Pakistan Stock Exchange / Securities & Exchange Commission of Pakistan of any material information or developments that may arise with respect to the company's participation in the project.
The same information was disseminated by the PPL through a notice to exchange.
In developing the project, nearly USD 10 billion shall be invested in Balochistan, including USD one billion that shall be invested in social uplift projects such as roads, schools, hospitals and the creation of technical training institutes for mining.
The investment shall create over 8000 new jobs. This project shall make Balochistan the largest recipient of foreign direct investment in Pakistan and the Reko Diq project shall be one of the largest copper and gold mining projects in the world. To ensure optimal utilization of the nation’s mineral wealth the government was also considering setting up a smelter.
To note, Reko Diq is one of the largest copper and gold deposits in the world, capable of producing 200,000 tons of copper and 250,000 ounces of gold a year for more than half a century. The project was suspended in 2011 after Pakistan refused to license Barrick and Antofagasta Plc to develop Reko Diq, which led to a dispute.
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