Pakistan is engaging international development partners and expert groups to channelise local and foreign funds for equity investments in strategic mining assets and targeted high-value projects through utilisation of pension funds, project-specific sovereign bonds and portfolios of welfare organisations and state-owned entities.

Background interviews with some key stakeholders suggest efforts are afoot to develop a strategy to get out of the bad patch in mining and minerals caused by mishandling of the Reko Diq dispute now nearing an absorbable close.

In the first go, the government is planning to very shortly conduct roadshows for a few selected projects, having bankable feasibility studies and ready to attract investors. Starting with Chiniot Steels Mills and Iron Ore Development for which a couple of countries like Saudi Arabia and China have already shown strong interest, five strategic projects would be part of this marketing campaign.

Read more: Chiniot, Kalabagh iron reserves to be tapped soon: PM

Chiniot is being described as “the best internationally benchmarked metallic mineral exploration project’ confirmed by top international experts and is ripe for bidding. Officials indicated the above-mentioned governments wanted to secure the project on a G2G basis but given the lessons learnt from Reko Diq, the overwhelming leaning is towards bidding.

The project was found unexpectedly in 1969 near Sargodha, Punjab with magnetic mapping in a joint search effort for oil and gas surveys by Oil & Gas Development Company and the Soviet Union but there was no effort for its development for the next two decades. In 1989, the Geological Survey of Pakistan went back to the site and drilled five boreholes with good results of iron deposits by 1992. There was again complete silence for the next eight years until 2000 when another detailed magnetic survey was conducted in Rajoa and Chiniot regions by Punjmin — a mineral company of the Punjab government. By 2007, nine additional boreholes were conducted, taking the total to 14, which confirmed a decent quantity of iron ore underground.

Chiniot is being described as ‘the best internationally benchmarked metallic mineral exploration project’ confirmed by top international experts and is ripe for bidding

In 2008, the Punjab government entered into a controversial contract with a company whose credentials were publicly questioned but was given control along with a 75 per cent share of the Chiniot Iron Ore Project. The project became suspicious and declared void ab initio by Lahore High Court in 2010. An appeal led the Supreme Court of Pakistan to uphold the Lahore High Court decision and order a detailed techno-economic study for the establishment of a steel mill in 2013. German Consultants, Swiss Laboratories, British financial, Turkish contractors and Canadian and US technical and corporate experts concluded proven reserves of 150 million tonnes of iron ore involving 33pc of iron content.

This meant the deposit is sufficient to operate a steel mill of the size of Pakistan Steel Mills for 33 years. In fact, around 80,000 meters of oblique drilling established 250m tonnes of iron resource, 31m tonnes of copper and 1m tonnes per annum of steel production, with an attractive 20pc internal rate of return on capital expenditure of $1.3 billion and a payback period of nine years. The project has an estimated life of over 30 years and can support adjoining special economic zones (SEZ), particularly Allama Iqbal SEZ Faisalabad. The deposit has a thick iron ore layer of about 1.5km — a rare blessing that contained 20pc of Hematite and 80pc of Magnetite resource — commonly considered a shipment grade iron. The in situ (on the spot at mine mouth) value of the iron deposit is estimated worth $6-8bn and justifies a robust case for a local refinery to support Chiniot, Kalabagh and Balochistan iron ore development.

Read more: Call for modernising mining sector in Balochistan

The project was originally made part of the China-Pakistan Economic Corridor (CPEC) in the 6th Joint Coordination Committee meeting in December 2016 but could not see major progress because of an ongoing research phase at Chiniot. The project was ranked among the best projects to be offered for investment when Saudi Crown Prince Muhammad bin Salman visited Islamabad in February 2019. The project has two components of mining worth $150-200m and process worth $200-300m and leads the second phase to set up of a smelter mill worth $950 million.

Unfortunately, the project could not be taken to the bidding stage because the new political government stopped funding to Punjmin — the Punjab government entity — and did not appoint its chief executive officer since 2018, apparently to avoid credit going to the previous government.

The project has been presented to the Prime Minister afresh a few days ago with a request to support roadshows to generate investor appetite before formal bidding at the start of the new calendar year.

Some other but relatively smaller strategic and ready for bidding projects also included Kalabagh Steel Mills, East Ore Body (EOB) at Saindak, Barite-Lead-Zinc Project and Bolan Mining Enterprises (BME, Khuzdar) and North Waziristan Copper Deposit — the last one currently with Frontier Works Organisation (FWO).

This is part of a Strategic Plan for Mines Sector Development cleared in principle by Prime Minister Imran Khan for implementation through consultations among the relevant institutional framework that could lead to integrated development and mining of value chain with a target of achieving 10pc of GDP in 10-15 years. At the current rate that works out to about a $30bn contribution from mineral resources to the national economy. This has to be achieved through foreign and local investment for economies of scale and commercial viability for employment generation, import substitution and export enhancement.

In the short term (before December 2022), the stakeholders had been given targets to conduct roadshows, complete feasibility studies, establish a national mineral data centre and harmonise legal framework with the provinces, to be followed by fiscal incentives and the government’s strategic investments by December 2023 so that credit facilitation, critical infrastructure development and local and foreign investment could be lined up till 2030.

The prime minister has constituted a progress review committee headed by the minister for planning to fine-tune the strategic plan and come up with a “PM Mineral Development Package”. The Ministry of Economic Affairs has been asked to secure technical assistance from the World Bank and Asian Development Bank.

Published in Dawn, The Business and Finance Weekly, November 15th, 2021