Reko Diq is symptomatic of how development investments fall prey to the security situation in Pakistan. The ongoing security funding dispute between Reko Diq Mining Company and the government underscores broader governance and financial challenges in Pakistan’s resource sector.

Reko Diq Mining Company has voiced serious concerns over the government’s failure to meet its obligations under the Security Services Framework Agreement (SSFA) and a memorandum of understanding (MoU). This non-compliance has resulted in additional costs amounting to $390,000 for the company, sources revealed.

The Reko Diq Mining Company (RDMC) is owned by Barrick Gold (headquartered in Toronto, Canada), the governments of Pakistan and Balochistan, and three state-owned enterprises of Pakistan.

The ongoing security funding dispute between Reko Diq Mining Company and the government underscores broader governance and financial challenges in Pakistan’s resource sector. While the project remains a beacon of economic hope, unresolved financial and security concerns could jeopardize its progress.

According to Reko Diq, the government must honour its commitments under the SSFA and MoU, provide adequate security funding, and establish transparent revenue-sharing mechanisms to ensure sustainable success.

The Prime Minister’s Office has since intervened, requesting the timely disbursement of funds that the mining company had deposited with the Frontier Corps Balochistan (South). However, bureaucratic delays and financial constraints have hindered the flow of funds, affecting security arrangements at the high-profile Reko Diq project.

The Interior Division, during a recent meeting of the Economic Coordination Committee (ECC), emphasized that the Frontier Corps Balochistan (South) was engaged in various essential security operations. These include border control, internal security, law enforcement, counterterrorism efforts, and most critically, securing the Reko Diq mining site.

Under the terms of the MoU and SSFA, the mining company was required to provide a one-time grant to the Frontier Corps for security enhancements. Following the deposit of this grant, a summary was submitted for the disbursement of Pakistani Rs. 2.801 billion covering security expenses. However, the Finance Division approved only Pakistani Rs. 1,952 million for essential procurement, leaving an outstanding Pakistani Rs. 848.6 million unpaid.

Request for Additional Funding

To address these security-related shortfalls, the Interior Division has requested a technical supplementary grant of Pakistani Rs. 1.792 billion. However, the Finance Division has only endorsed Pakistani Rs. 257 million to cover non-recurring costs, including procurement of vehicles, protective gear, and the construction of security accommodations.

A significant financial burden has also arisen due to rising operational costs. Daily fuel and vehicle maintenance expenses for security deployments exceed budgeted allocations, exacerbating the issue. Furthermore, the lack of permanent accommodations in the project area has led to high rental costs for security personnel, adding to the overall expenditure. As of now, Pakistani Rs. 62.728 million owed to the Frontier Corps remains unpaid, further straining security operations.

The Interior Division has reiterated the urgent need for full funding to ensure uninterrupted security services, particularly for foreign nationals working on the project. However, the Finance Division remains cautious, citing the Frontier Corps’ existing budget allocations and calling for further deliberations on financial viability.

Broader Implications for Reko Diq Project

The Reko Diq copper and gold project is a strategic initiative with the potential to transform Pakistan’s economy. The government has laid out a $1.9 billion funding plan, with total project costs estimated at $4.297 billion. However, ongoing security and financial disputes pose a risk to timely execution.

According to The Friday Times, the project, led by Barrick Gold Corporation, is expected to generate substantial economic benefits. Yet, concerns persist over transparency, share valuations, and potential exploitation of resources. The project area, located in Chagai, Balochistan, remains underdeveloped, with limited infrastructure, education, and healthcare facilities. The region’s low population density and challenging geography further complicate operations.

In December 2022, the project reached a critical milestone, with Barrick Gold updating feasibility studies and aiming for initial production by 2028. The company holds a 50 per cent stake, while Pakistan’s federal and provincial governments collectively own the remaining 50 per cent.

As part of its corporate social responsibility initiatives, Barrick Gold has claimed that 77 per cent of Reko Diq Mining Company’s workforce hails from Balochistan. Additionally, the company has invested in education, clean water access, and community development, spending $2.5 million on local initiatives.

Legal Context and Economic Potential

The Reko Diq project has been mired in legal disputes for years. Initially signed with Broken Hills Properties Minerals in 1993, the agreement underwent multiple ownership changes before being acquired by Tethyan Copper Company (TCC). However, in 2013, Pakistan’s Supreme Court nullified the deal, leading to an $11 billion arbitration case at the International Centre for Settlement of Investment Disputes (ICSID). This fine was later waived as part of a renegotiated agreement with Barrick Gold.

Balochistan’s government has since set stricter conditions, including on-site mineral processing and increased provincial stakes. In 2022, Barrick paid Rs710 million as an advance royalty, further securing the project’s continuation.

Despite its potential, experts argue that Pakistan must ensure transparency and robust contractual safeguards. Renowned economist Qaiser Bengali warns that without proper oversight, Reko Diq could mirror past failures, such as the Saindak copper project, which failed to yield tangible benefits for Balochistan.

Pakistan has already sold 15 per cent of its Reko Diq shares to Saudi Arabia for $540 million. However, experts argue that this valuation is significantly below the project’s actual worth. To maximize benefits, they suggest local mineral processing and improved infrastructure, such as a railway connecting Reko Diq to Gwadar Port.

Barrick Gold CEO Mark Bristow remains optimistic, stating that the project will be a historic milestone for Pakistan’s mining industry. He reiterated the company’s commitment to hiring local talent and investing in community welfare programs. He also hinted at potential Saudi collaboration to further expand mining operations.