Mohsin Siddiqui (Chief Reporter)
The Ministry of Finance (MoF) has announced that the Asian Development Bank (ADB) is expected to approve a third-party guarantee arrangement for the Reko Diq project by February 2025.
The development is crucial for the financial close (FC) of this significant mining project, which holds the potential to generate substantial economic benefits for Pakistan, especially in the province of Balochistan.
The Reko Diq Mining Company (RDMC) recently gave a presentation outlining the overall progress and important milestones that need to be met by December 2024 to stay on schedule. These milestones are critical in ensuring that the financial obligations and legal clearances are in place for the project to proceed as planned.
In the meeting, the RDMC’s country director expressed gratitude towards the Project Support Team (PST) for their assistance in overcoming several pending issues. The RDMC is committed to completing the project on time, with the focus now shifting towards securing financial backing and approvals from various stakeholders, including provincial and federal governments.
One of the main topics discussed in the meeting was achieving the financial close (FC) of the Reko Diq project by June 2025. Key requirements include the provision of a government guarantee or additional security from the Government of Balochistan (GoB) and Balochistan Mineral Resources Limited (BMRL). Moreover, equity funding and the acquisition of a third-party guarantee for Balochistan’s equity share are crucial to moving the project forward.
A representative from the Finance Division revealed that the acquisition of third-party guarantee arrangements from the ADB is currently under review. The anticipated approval is set to be decided during the ADB’s board meeting in February 2025. The Finance Division, along with the Petroleum Division, is also working to finalize credit enhancement measures to address State-Owned Enterprises’ (SOEs) creditworthiness, ensuring that project financing can proceed smoothly.
In addition to financial considerations, logistical issues were discussed. The financial close of the project is dependent on finalizing the track access and operator agreement between Pakistan Railways and RDMC. Multiple meetings have already taken place, and the Ministry of Railways aims to present a draft agreement by October 5, 2024.
Regarding port facilities, the Pakistan International Bulk Terminal Limited (PIBT) at Port Qasim is expected to play a critical role in exporting copper concentrate from the Reko Diq mine. However, the RDMC indicated that an amendment to the PIBT concession agreement may be required for this export activity to take place. The Maritime Division has been instructed to expedite this process to ensure timely completion.
One of the critical milestones for the project is the approval of the Environmental and Social Impact Assessment (ESIA). The project company plans to submit the ESIA this month, with a decision on its approval expected by December 2024. Approval of the ESIA is essential for ensuring the timely financial close of the project, as environmental and social compliance is a key factor in large-scale mining operations.
The RDMC has been tasked with keeping the Prime Minister’s Office (PMO) informed to ensure coordination between the chief secretaries of Balochistan and Sindh, facilitating the approval process.
The project also requires land leases for constructing a water pipeline corridor. The RDMC applied for water NOC and land acquisition back in December 2023, with the lease being approved by the Chief Minister of Balochistan in July 2024. However, the lease deed must be signed by the end of the current month to ensure that the revised feasibility study for the project is completed by December 2024. The water abstraction permit for the project is expected to be granted in the upcoming months.
The RDMC also provided updates regarding the project’s energy requirements. The mining project will need 180 MW of power for its first phase, spanning from 2024 to 2028. RDMC will establish captive power plants to meet this demand. As the project advances into its second phase (2028-2038), the energy requirement is expected to increase to 400 MW. The exact figures will be confirmed once the revised feasibility study is completed by the end of December 2024, and the project’s power needs will be communicated to the National Transmission & Dispatch Company (NTDC) and the Power Division.
The Petroleum Division mentioned that the draft Mines and Minerals Act-2024 will be presented to the Special Apex Committee of the Special Investment Facilitation Council (SIFC) for approval in the coming weeks. This legal framework is crucial to the smooth functioning and regulation of the mining industry, including the Reko Diq project.
Security arrangements are also a top priority for the RDMC and the Ministry of Interior, which are working together to implement a security framework for the protection of project staff and contractors.
The RDMC has set a target to complete the revised feasibility study by December 2024, with the Board expected to approve the study by March 2025. The project also requires amendments to surface rights leases and the acquisition of additional land for operations, including water supply infrastructure. The Government of Balochistan is expected to support the RDMC in facilitating these developments.
The company also stressed the need to implement agreed-upon export regimes, such as the Export Processing Zone and customs regimes, at a working level to further support the project’s development.
The RDMC is also working on securing the necessary permits for airport facilities, explosives, and other critical infrastructure required for the smooth functioning of the project. These developments are being coordinated with the Ministries of Industries and Production, Interior, and other relevant authorities.
