Talal Akbar Bugti, a Baloch tribal leader, says Canadian diplomats invited him to a five-star hotel in Islamabad last year to discuss a gold mine in his province. Their main concern, he said, was that a Chinese company might get the mining license instead of a Canadian-Chilean consortium.Graeme Smith/The Globe and Mail
A tribal leader from the badlands near Pakistan's western border sat down last year with a delegation of Canadians at the best hotel in Islamabad, a glittering palace of hand-hewn marble.
Talal Akbar Bugti, whose Baloch tribesmen hold sway in the territory rich with gold and copper, said the Canadians swept the room for surveillance equipment before raising a delicate question: How to beat the Chinese in the race for Pakistan's mineral wealth?
"You have a problem," Mr. Bugti recalls saying. "Pakistan's military wants the Chinese as strong allies, and our mines will get offered up to keep them happy."
The threat from Chinese competition has always loomed over the Reko Diq project in western Pakistan, where Toronto-based Barrick Gold Corp. and its Chilean partner Antofagasta have spent years exploring and now find themselves waiting anxiously for a mining license.
Analysts say the risk that a Chinese company could scoop up the license grew dramatically this month when U.S. commandos shot Osama bin Laden. In the political aftermath of the raid, Pakistan abruptly turned away from the West and renewed its friendship with China.
China has been winning valuable mineral concessions in other developing regions of the world in exchange for investment. In the Democratic Republic of Congo, for example, Chinese mining firms were granted valuable copper deposits after the Chinese government promised to invest billions of dollars in infrastructure projects for the African country.
In Afghanistan, a consortium of Chinese bidders was awarded the right to develop the $4-billion (U.S.) Aynak copper mine, beating out bids from several international mining companies, including Canada's Hunter Dickinson Inc.
Pakistani Prime Minister Yousuf Raza Gilani landed in Shanghai on Tuesday evening for a four-day visit; one of the first items of business, as reported by Pakistan's state news service, is a license extension for a Chinese mine known as Saindak.
That mine is located near the bigger prize, Reko Diq, where a feasibility study has concluded it will take half a century to extract the vast deposits of gold and copper. In the first five years, Barrick estimates that its share of annual production from the mine could amount to 100,000 ounces of gold and 150 to 160 million pounds of copper, though Reko Diq remains an early-stage project for Barrick, and its gold and copper are not counted among its current proven reserves.
Reko Diq's production estimates are based on a joint venture agreement with the provincial government in Balochistan, however, which looks increasingly shaky as the Supreme Court reviews the deal and local politicians oppose its terms.
The powerful military establishment in Pakistan appears to view the mine as a bargaining chip when dealing with China, which supplies weapons and nuclear assistance to its neighbour.
"The Chinese want Reko very badly," said Shaukat Hameed Khan, who discussed the mine with Chinese officials during his years as a member of Pakistan's Planning Commission.
China will almost certainly renew its lobbying for Reko Diq during the Prime Minister's visit this week, Mr. Khan said, with Beijing likely offering to help Pakistan develop its own processing capacity in exchange for mining rights.
"Because of the global situation, many people feel that Pakistan is being hit on the head a little too much [by the United States] and we run to the Chinese," Mr. Khan said. "The Chinese take advantage of this, but we're pushed into the Chinese arms."
Some local officials in Quetta, the provincial capital, say they favour the prospect of Chinese involvement because it holds the promise that Balochistan could some day build broad infrastructure in the province that would be a major boost for the economy by processing the ore locally and exporting copper wire, pipes, and other finished goods instead of following the Canadian-Chilean plan to ship out raw ore.
"The district has mineral wealth, but no industry," said Akbar Hussain Durrani, home secretary for the province, and former deputy commissioner for the Chagai district where the mine is located. "The locals need the minerals to stay there, to process it there. Why not?"
Lawyers for the Canadian-Chilean consortium, Tethyan Copper Company Pakistan Ltd., have advised their clients to avoid commenting on the project while it remains before the Supreme Court. Spokespeople for TCC in Quetta and Karachi and for Barrick in Toronto declined to comment for this story.
But in the hearings, which have dragged on for months, the company argued that it's not in the business of refining metals and that setting up such facilities would be impractical in Balochistan.
Not only is the mine located in one of Pakistan's most dangerous provinces, the company argues, but the location lacks the electricity and fresh water supplies necessary for large-scale processing.
Some government officials have countered that Pakistan could develop the site more slowly but profitably, using traditional mining techniques and processing the smaller amounts inside the country.
"We're sitting on a world-famous copper belt," said Samar Mubarakmand, a member of the Planning Commission and chairman of an oversight committee assigned to the project by the provincial government. "We can dig forever."
Local tribes feel greater urgency, clamouring for a quick start to the project so they can bring employment and other benefits to their desperately poor region. Malik Noor Bux Riki, whose Riki tribe claims ancestral rights to the project site, said residents of his district are worried that the Chinese would import their own workers if they win the license.
"The people here want Canada to do this," the elder said. "We think they will solve our problems, health and education."
Pakistan's Supreme Court is scheduled to resume hearings on May 24.