ISLAMABAD/TORONTO (Reuters) - A Pakistani provincial government plans to cancel a $3 billion joint venture copper and gold project owned by Canada's Barrick Gold ABX.TO and Chilean copper miner Antofagasta ANTO.L, a provincial mining official said on Tuesday.
The two companies are partners in the Tethyan Copper Co (TCC) joint venture, which has a 75 percent interest in the Reko Diq project in the southwestern province of Baluchistan and hold the exploration license for the site. The provincial government holds the remaining 25 percent.
The cancellation of the license -- apparently meant to ease anger in Pakistan’s poorest province over outsider exploitation of its natural resources -- would further damage Pakistan’s image as a destination for foreign investment and would throw a wrench into the plans of the mining companies.
“The cabinet has said they wanted to cancel the exploration license but it has not been finalized,” Mushtaq Ahmed, secretary for the provincial mining ministry, told Reuters.
He said there was a chance the deal would not be canceled, and that the situation should be clarified in coming days.
The deposit holds more than 11 billion pounds of copper and 9 million ounces of gold.
A Tethyan official said the company had not been officially informed of any decision by the provincial government to cancel the deal, although that was the company’s interpretation of developments.
Shares of both Barrick and Antofagasta, which had planned to have a feasibility study done on Reko Diq by mid-2010, were down slightly.
“TCC is looking into the current situation and seeking clarification to satisfactorily resolve (it),” said Vince Borg, spokesman for Barrick, which is the world’s top gold producer.
Barrick stock was down 2.6 percent, or C$1.10, at C$41.90 on the Toronto Stock Exchange, while London-listed Antofagasta fell 1.9 percent to 1003 pence.
Separatist guerrillas in Baluchistan have been fighting a low-level insurgency for decades for control of the province’s gas and mineral resources, which they say are unfairly exploited by the country’s richer and more powerful provinces.
The provincial government recently said the cancellation of the Reko Diq agreement would be a “step toward getting control of the provincial resources in accordance with the wishes of the people.”
Many investors are hesitant to invest in Pakistan because of security worries as the country battles a Taliban insurgency in the northwest. There has been a wave of suicide attacks over the past couple of years, some targeting foreigners.
Net foreign investment in Pakistan fell 25.6 percent to $1.08 billion in the first five months of the 2009-10 (July-June) fiscal year from $1.45 billion in the same period a year earlier, the central bank said last month.
Foreign direct investment fell 52.2 percent to $774.0 million in that period from $1.62 billion, the State Bank of Pakistan said.
Additional reporting by Sahar Ahmed; additional reporting and writing by Cameron French in Toronto; writing by Robert Birsel; editing by Rob Wilson
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