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Pakistan rejects Barrick-led group's bid for gold mine

The Barrick-led consortium reportedly spend $220-million on a feasibility study on the Reko Diq property, which is located near the Pakistan-Afghanistan border.

Fred Lum/Fred Lum/The Globe and Mail

Local authorities in the Pakistani province of Baluchistan refused to meet a Canadian-Chilean mining consortium for talks before rejecting a bid for one of the world's richest deposits of gold and copper, the company says.

The consortium, Tethyan Copper Co. Pakistan Ltd., (TCC) expressed its disappointment on Friday after the provincial government shot down an application for a mining licence at a remote site in the dry hills near the Afghan-Pakistan border, known as Reko Diq. Trouble with the application erupted earlier this year, when Chinese competitors pushed an alternate plan for what could become the biggest mine in Pakistan.

The latest statement from the consortium, which represents Toronto-based Barrick Gold Corp. and its Chilean partner Antofagasta, suggests that the problems ran deeper than previously understood. Communication apparently broke down between the mining group and the provincial authorities – not a good sign, because Pakistan's Supreme Court made clear this year that "this matter falls exclusively within the domain of the government of Baluchistan."

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No matter how much influence the mining companies may exert in the capital, in other words, responsibility for the licence falls into the domain of a border province that is notorious for its poverty and lawlessness.

"The GOB [government of Baluchistan]has not responded to requests for meetings to resolve the issue, and the rejection notice compromises TCC's preferred route of resolution by negotiation," the company statement says.

If the rejection proves final, Chinese companies will become the front-runners to replace TCC. Metallurgical Corp. of China is already leading development of a smaller mine nearby at Saindak, and provincial authorities have previously said the Chinese are offering something they eagerly want: a processing facility that would handle some of the raw material inside Baluchistan.

Some local officials have long pushed for China's involvement for the promise of broad investment in infrastructure in the province, such as ore processing and exporting of finished copper products, which would provide a major boost to the area's economy.

The Canadian-Chilean group claims that the rejection of the mining licence application is a breach of Pakistani laws and a 1993 joint-venture agreement with the provincial government. TCC says it remains open to talking about the deal, however, and continued touting the potential benefits of the mine: "TCC strongly believes that the Reko Diq project can contribute significantly to the development of a modern, transparent mining industry in Baluchistan," the statement said.

The exploration licence for Reko Diq expired in February and the consortium had been waiting anxiously for a mining licence since submitting a feasibility study – reportedly prepared by SNC-Lavalin Group Inc., of Montreal, at a cost of $220-million.

Estimated annual production in the first five years from Reko Diq could have amounted to 100,000 ounces of gold and 150 million pounds to 160 million pounds of copper. None of the assets were counted among Barrick's proven reserves.

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