Pakistan's top court rules Reko Diq mine deal invalid

Mon Jan 7, 2013 4:44pm EST
 

TORONTO (Reuters) - Pakistan's top court has ruled against Canada's Barrick Gold Corp (ABX.TO: Quote) and Chile's Antofagasta Plc (ANTO.L: Quote) in a long-running dispute with a provincial government over their right to develop a $3.3 billion copper-gold deposit.

The companies were told on Monday that Pakistan's Supreme Court had ruled an agreement by their Tethyan Copper Co joint venture to develop the Reko Diq mine in southwestern Pakistan is invalid, Barrick spokesman Andy Lloyd said.

The province of Baluchistan originally signed a deal in 1993 to develop Reko Diq with Australia's BHP, now BHP Billiton Ltd (BHP.AX: Quote). Antofagasta and Barrick spent $200 million to take over the project in 2006. But the Baluchistan government has refused to convert the exploration permit into a mining license.

It was unclear what impact the ruling would have on an international arbitration process now underway to resolve the dispute.

Development of Reko Diq has been on hold since 2011, when the Baluchistan government rejected Tethyan's application for a mining license. The deposit, near the country's borders with Afghanistan and Iran, was expected to produce about 200,000 tonnes of copper and 250,000 ounces of gold annually.

Baluchistan, Pakistan's largest and poorest province, holds a 25 percent stake in the project, with Tethyan holding the remaining 75 percent.

The development has faced speed bumps since 2010 when the province said it would cancel the project in response to growing anger in Baluchistan over outsiders exploiting natural resources.

For decades separatists in Baluchistan have fought a low-level insurgency for control of provincial gas and mineral resources, which they say are unfairly exploited by the country's richer and more powerful provinces.

If developed, the Reko Diq mine would mark the largest foreign direct investment into Pakistan's mining sector and a major investment in Baluchistan.

(Reporting by Julie Gordon; Editing by Peter Galloway)