The great treasure hunt this time leading to Chiniot (Business Recorder (Pakistan))

Prime Minister Nawaz Sharif and Chief Minister Shahbaz Sharif announced at an impressive ceremony last week at Chiniot that abundance of gold and copper deposits have been found in search of iron, hoping that the same would go a long way in bringing prosperity to the country and changing its destiny.
The presence of iron ore deposits at Chiniot is known since decades. But, the news of the availability of gold and copper deposits is something new. We understand this is a firstlevel indication, based on limited sampling, whereas, much work is yet to be done by the German and Chinese experts hired to arrive at a comprehensive prefeasibility study expected to be completed by the end of 2015. The picture will then be a bit more clear.
The real game changer to put the country on the track of prosperity may appear somewhat realistic when we come up with a bankable feasibility study, which is acceptable and sellable to the investors, leading to a business and investment plan. This level of feasibility study and planning requires worldclass expertise, time and great investment. The countdown to prosperity may start from the time the investors are in place and ready to start. We are couple of years away from this starting point. To reach this very point there are many challenges for the government to cross the biggest being the technicalfinanciallegal competency, good governance and transparency exercised in the process. The previous mining adventures in Pakistan failed on lack of all of this.
At the inception of Pakistan we heard and rightly so that the country is blessed with natural resources. In the early years we achieved much success in exploring natural gas and making use of water by building hydropower plants, which did make the country stand well on its feet.
This is all what we achieved in exploiting our natural resources in the last 68 years. The rest is much of a pathetic record of failures especially that related to mineral resources.
Let’s start with Saindak CopperGold Mine Project which is located in Chagai District of Balochistan. The discovery of deposits was made in the 70s. Later, the coppergold mine was developed by Saindak Metals Ltd under Pakistan and China Cooperation at a cost of US$ 350 million. In 1995, trial production of copper, gold and silver was started. The government required Rs 17 billion to start the commercial production, which could not be managed due to political wrangling and bureaucratic delays as a result of which the project remained dormant till 2002. Under the invitation to invoke foreign investment the mine was leased in 2002 for a 10year period to Metallurgical Corporation of China (MCC) with 50% revenues from mine going to MCC, 48% to government of Pakistan and 2% to government of Balochistan. In 2011, the lease was renegotiated and extended till 2017 with 45% proceeds going to MCC while an addition 5% for Balochistan. The project has the capacity to annually produce 15,800 tons of copper, 1.5 tons of gold and 2.8 tons of silver. It is reported that the production at site is intermittent with no real benefit to any of the partners.
The second mining case under relevance is the Reko Diq mining project located in Balochistan. It is an over US $ 3 billion project with a mine life of 58 year. The annual production at Reko Diq is estimated at 200,000 tons of copper and 250,000 ounces of gold from 600,000 tons of concentrates requiring 110,000 tons of ore to be processed daily. By international benchmark it is a large mining project and the largest investment and technologydriven mining project of Pakistan. The project mining and technical studies started in 2006. Tethyan Copper Company (TCC) of Australia was awarded the contract to prepare the project feasibility study. In 2010, they presented the bankable feasibility study to the Government of Pakistan. In 2011, TCC submitted to the government a Mining Lease agreement, which was rejected by the government of Baluchistan. TCC consequently opted for international arbitration at International Centre for settlement of investment disputes and at the International Chamber of Commerce against government of Pakistan and Balochistan respectively asserting breaches of the bilateral investment treaty between Pakistan and Australia and breach of JV agreement between TCC and government of Balochistan. The status today is that Reko Diq is dormant and there are no signs of its resurgence soon.
The 3rd mining project is the mega Thar Coal fields in Sindh. The coal deposits here are reported to be the 6th largest in the world and one of the largest lignite deposits spread over 9000 sq km containing 175 billion tons of coal estimated to be equivalent to 50 billion tons of oil which is equated to the total oil reserves of Saudi Arabia and Iran. The deposits were discovered in 1991 by the joint survey conducted by the Geological Survey of Pakistan and USAID. The last 23 years’ history of Thar coal is that of failure to invoke technology and investment, incompetence and vested interests prevailing over national interests. Even the JV between Engro group and government of Sindh formed in 2009 (SECMC) has not gone beyond preparing a firstlevel feasibility study, which has not been able to invoke the interest of the foreign nor the local investors. The last on the subject is that in January 2014, PM Nawaz Sharif and former President Zardari jointly performed the groundbreaking of a US$ 1.6 billion Thar mining and 660MW power plant under SECMC with the mandate to provide this power on national grid by 2017. As per ground realities this is not likely to happen.
Given the track record of setbacks at the mining projects in Pakistan, the nation requires a road map with realistic timelines and milestones and deserves an explanation from government of Punjab how the Chiniot Mining Project will be different from the previous three. Pending availability of the same the nation is in no frame of mind to accept idle promises and illusions of a better tomorrow.
The writer is Chairman Avant Ventures and former President OICCI and ABB Asea Brown Boverie