Cabinet approved $900m escrow account for Reko Diq in March, SC told

ISLAMABAD: The federal cabinet approved the creation of a $900 million escrow account for payments to the Chilean firm Antofagasta on March 14, 2022, whereas negotiations to reach a settlement with Barrick Gold Corporation (BCG) for the Reko Diq mining project were finalised on March 17, Additional Attorney General Chaudhry Aamir Rehman told the Supreme Court on Tuesday.

Headed by Chief Justice of Pakistan (CJP) Umar Ata Bandial, a five-judge Supreme Court bench had taken up on Oct 18 a presidential reference on Reko Diq.

Earlier, Antofagasta had proposal an amount of $1.75 billion for settlement of the dispute to the extent of their share, of which $700 million had to be paid within 10 days after the settlement of the agreement, whereas $350m each had to be paid in three-year instalments.

AAG Rehman informed the bench that Barrick Gold had said it would return and invest in the project provided they were given certain fiscal incentives like tax holidays for 15 years and concessionary rates.

Tracing the chronology explaining what measures the government adopted to ensure due diligence in the settlement of the mining deal with the BGC, the AAG said Evercore — international transaction experts — and Torys — the legal advisers — after initial valuation of the mining project and the framework of the fresh agreement proposed settlement with Antofagasta between $700m to $1.2bn. But the federal cabinet finally approved the amount at $900m.

Later, Pakistan hired the services of Lazard Freres SAS and the White and Case since they have the technical know-how about the complex nature of such an exploration project. The services of JP Morgan, City Bank, and other international firms were engaged in negotiating the deal.

An overarching steering committee was formed to look into viable legal options as well as negotiate the legal aspect and the settlement of the ICSID award of $6.4bn, the AAG argued.

A Reko Diq task force was established on Dec 24, 2021, to scru­tinise the terms of the settlement and the agreement with BGC.

Chief Justice Umar Ata Bandial wondered would the finances after the purification of the minerals will be deposited in Pakistan as was done in the agreements signed between Pakistan and the International Power Producers as a result of which the international investors kept their money in Pakistan. However, the AAG explained that the holding companies formed by the investor will receive their payments after the sale of the finished goods offshore.

With an idea to conduct an exploration of the minerals, it was decided earlier to form a company called Balochistan Mineral Exploration Company (BMEC) after a meeting on June 15, 2020, by the chief minister of the province. With 10 per cent shares of the federal government and 90 per cent shares of Balochistan, the BMEC even issued a letter of interest, but only a Chinese company approached Pakistan but was not willing to discharge the liability of the $4.6 billion award.