REKO Diq, a world-class copper and gold mine in district Chagai of Balochistan estimated at a value of between $250bn to $500bn, is a commercially mouth-watering prospect for international mining giants.

American, Chinese, Australian, Chilean and Canadian firms have been in the race for wining a mining lease contract for the Reko Diq project. Will international interest in Balochistan’s huge copper deposits push the province to an era of copper politics? Chagai has huge copper-gold deposits at Saindak and Reko Diq. Will it be the next Chile that witnessed an era of copper politics under socialist president Salvador Allende?

Copper politics involves corporate greed and shenanigans to activate state actors in tug-of war games. There are indications that copper politics is brewing in Balochistan. Chagai is poised to appear soon on the world’s copper-producing map after it first attracted the world’s attention in May 1998 when Pakistan conducted nuclear tests.

Reko Diq has been on the radar screen of global miners since July 1993 when Anglo-Australian mining giant BHP Billiton signed a joint venture agreement with Balochistan government. BHP transferred its 75 per cent interests to the Tethyan Copper Company (TCC), a subsidiary of Australian Mincor Resources, in 2000. Antofagasta of Chile and Canada’s Barrick Gold Corp jointly took over 100 per cent shares of TCC in 2006 and spent over $200m on exploration and feasibility.

The dispute between Balochistan and TCC, now a joint venture, recently took an ugly turn when the Balochistan government rejected TCC’s mining lease application for Reko Diq. TCC has taken the matter to the international arbitration court. After rejection of the bid, prospective competitors are likely to be the New York-based Benway Corporation, which holds two wholly owned exploration licences near the Reko Diq mine, and the state-owned Metallurgical Corporation of China (MCC), operator of the Saindak copper-gold project in Chagai.

The Reko Diq area is part of the Tethyan Magmatic Arc which extends from Pakistan through Iran into Turkey and hosts numerous porphyry copper-gold deposits including the operating mine of Sarchesmeh in Iran. Reko Diq is not only four times larger in copper ore tonnage than Saindak, but also bigger than Sarcheshmeh in Iran and Escondida in Chile.

Sarcheshmeh holds 1.2 billion tonnes with 0.8 per cent copper and 0.3 grams a tonne gold, while Reko Diq holds an estimated 5.9 billion tonnes of mineral resources, with an average copper grade of 0.41 per cent and an average gold grade of 0.22 grams a tonne. Escondida with 57.6 million tons of resources, is currently the highest producing copper mine in the world.

Chile is the world’s top producer and exporter of copper. During 1968, US corporate holdings in Chile amounted to $964m. Chile’s copper reserves had produced in 60 years for American copper miners the equivalent of over half of Chile’s total assets accumulated over the previous 400 years. But copper wealth did not dent Chile’s crippling poverty and Chileans continued to reel under poverty. Chile’s economy was heavily dependent on American imports and foreign loans.

ITT, a subsidiary of American Rockefeller Group, was engaged in copper politics in Chile during the Allende administration in the early 1970s. It earned huge profits as the largest stakeholder in Chile’s copper mining. Allende’s decision to nationalise all copper mines in 1971 opened the floodgates of trouble. ITT hatched a conspiracy with the help of the CIA and the then US secretary of state Henry Kissinger to topple the Allende regime in Chile.

The US resorted to an economic boycott of the Allende government, while CIA launched an anti-communist propaganda campaign in Chile. International lenders including the World Bank cancelled credits, and the country continued to pay off old loans, receiving no fresh loans. Allende’s nationalisation policy reflected the popular sentiment that the country had been plundered. His demise in September 1973 ended the era of copper politics in Chile.

Like Chile, there are indications that Chagai will soon be in the grip of copper politics. Last year, Benway blamed Antofagasta and Barrick Gold for not fully declaring Reko Diq deposits to the government of Balochistan. The CEO of Benway in a statement indicated his interest in becoming a party in the Reko Diq case in the Supreme Court, saying that some of the mining companies were playing games with the government of Balochistan’s partners.

Last year, the sale of Reko Diq assets to TCC was challenged in the apex court after media reports alleged that Antofagasta and Barrick Gold were engaged in behind-the-scene negotiations and bargaining through middlemen with top officials in Islamabad to clinch a mining deal for Reko Diq at a throwaway price.

China’s MCC is competing for securing a mining lease for the Reko Diq project, while China Minmetals Corp is reportedly mulling over partnering with TCC in the project. MCC exploited the occasion and submitted its offer to secure a mining lease for Reko Diq during Chinese Prime Minister Wen Jiabao’s visit to Pakistan in December 2010. MCC has been involved in excessive mining at Saindak that has reduced the lifespan of the mine and brought no economic spillover but environmental degradation in the area.

Benway and MCC, which already hold stakes in Chagai, are likely to be the real competitors for the project after rejection of TCC’s bid. Benway Corp is a privately held, New York-based mining firm. It holds eight exploration licences in Pakistan including two in Chagai.

The United States and China have been exercising their influence over Islamabad to win contracts, while Islamabad has been trying to win the pleasure of both, sometimes even at the cost of merit and a competitive bidding process. The Pakistan Railways’ deals with China’s Dong Fang Electric Corporation and General Electric of the US for purchase of locomotives are the classic examples of winning international contracts through exercise of influence by big powers.

Like Escondida in Chile , Reko Diq could become an important part of the national as well as provincial economy. A short-sighted mineral policy may deprive the country and the least developed province of the economic bonanza associated with the Chagai’s mines. It would be irrational to close the door to foreign investment and transfer of technology in the country by saying ‘no’ to global miners. Balochistan government’s complete control over the metal mining industry may enable the province to collect taxes, particularly corporate tax. Balochistan needs to constitute a constitutional body of experts that could evaluate and monitor the mining operations at the site.

The writer the author of The Economic Development of Balochistan.

sfazlehaider05@yahoo.com