Considering the huge mineral potential and future cash flow prospects of Reko-Diq Copper and Gold Mining project, international lending institutions have indicated their interest with potential financing quantum of almost $4.5 billion for the project.
The engagement with project lenders to secure debt financing for the project is at an advanced stage and third party guarantee to back equity obligation of the Government of Balochistan is critical to achieve successful financial close of the project, which is expected in October, 2025, official source told The Nation.
The total revenue of the project till life of mine i.e. 2065 is expected to be $147.644 billion, while it will fetch $ 14.855 billion in royalty/ tax revenue for the Government of Pakistan and province of Balochistan during the period, the source said.
The source further informed that the Reko-Diq Joint Venture Agreement requires a third party equity guarantee from a AA rated guarantor to backstop equity obligation of the GoB/BMRL till commissioning of Phase-I of the project i.e. FY 2027-2028. The Asian Development Bank (ADB), having a AAA rating, has been approached for procurement of the equity guarantee. The structure of the guarantee would be such that a standby L/C facility will be procured from a commercial bank/L/C bank equivalent to $120 million, which will be backstopped by Partial Credit Guarantee (PCG) provided by the ADB.
To kickstart ADB's internal approval process which includes ADB's Investment Committee approval and will be subsequently placed before the ADB board for approval, the government has obtained the concept clearance of the PCG from the concerned forum, the source said. Under the JV agreement, the guarantee was committed to be procured by 31st December, 2023, however the date was later extended.
The Reko-Diq is one of the largest copper and gold mines located in Balochistan Province. The reconstituted Reko-Diq mining project is a Joint Venture between Barrick Gold Corporation, having 50% equity share in the project with management control, while the Government of Pakistan, through its three State Owned Entities, has 25% shareholding and the Government of the Balochistan holds 25% share. Out of 25% shareholding of the Government of oB, 10% is free-carried interest and 15% is contributory interest of GoB's SPV i.e. Balochistan Mineral Resource Limited (BMRL). The total project cost of Phase-I is estimated to be $ 6.765 billion, as per updated feasibility study as of December, 2024, with approximate 45:55 debt equity financing ratio. The equity contribution of the project involves Federal Government's capital commitment, on behalf of the BMRL of approximately $ 628 million in the form of annual equity contribution for a period of six years. The Finance Division has been financing the equity share of the GoB/BMRL for Phase-I of the project.
The Reko-DiQ mining project is a multi-billion dollar project expected to bring in FDI of almost $5 billion in the country. The total revenue of the project till life of mine i.e. 2065 is expected to be $147.644 billion as per updated feasibility study. In addition to that, the project will fetch royalty of almost $ 7.779 billion for Government of Balochistan and tax revenue of almost $ 7.076 billion for the GoP till Y 2065.
Considering the project's huge mineral potential and future cash flow prospects, a number of international financial institutions, multilateral lending institutions and international Exim banks have indicated their interest to extend financing for the project with potential financing quantum of almost $4.5 billion. The engagement with project lenders to secure debt financing for the project is at an advanced stage and 3rd party guarantee to back equity obligation of the GoB/BMRL is critical to achieve successful financial close of the project, which is expected in October, 2025. Furthermore, the procurement of guarantee by the GoP will showcase commitment to meet its contractual obligations under the JV agreement and help boost investors' confidence in the mineral sector of Pakistan.
Provided by SyndiGate Media Inc. (Syndigate.info).
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