ISLAMABAD:
Japan has expressed interest in participating in the multibillion-dollar Reko Diq copper and gold mining project in Pakistan.
So far, Japan’s investment has mainly remained confined to Pakistan’s auto sector. Now, it is keen to become an investor, along with local and international players, in the gigantic Reko Diq project.
Earlier, Saudi Arabia showed interest in pumping capital into the scheme, along with acquisition of a 15% shareholding.
Following a query about the participation of Japan, the Economic Coordination Committee (ECC) of the cabinet was apprised that the Japanese were eager to become part of the project. The Finance Division supported the proposal and assured the ECC that there would be no capital flight in terms of remittances of dollars.
It was explained that two types of guarantees were included in the proposal: one was a sovereign guarantee from the government, which was a completion guarantee and another was from the Asian Development Bank (ADB), which was for Balochistan Mineral Resource Limited (BMRL) equity.
The Petroleum Division shared with the forum that the equity involved was worth $900 million, 50% of which was funded by sponsors, while the remaining 50% was taken care of by agencies. State-owned enterprises (SOEs) will repatriate funds through Pakistan Minerals Private Limited (PMPL) over seven years to meet their $2,145 million commitment – either as equity or shareholder loans. During discussion in a recent ECC meeting, the Petroleum Division presented an overview of the project. It was highlighted that a financing of $3.5 billion was being raised with a particular focus on health care, safety, security and community welfare as core delivery areas of the Reko Diq project.
The division pointed out that financing was being directly handled by the lenders and creditors. A bank representative underscored the importance of the project and provided details of financial close.
The economic decision-making body acknowledged the significance of Reko Diq copper and gold mining, noting that it had the potential to transform the economic landscape of Balochistan and generate substantial benefits for Pakistan.
The Petroleum Division sought approval of final terms along with final definitive agreements. It asked for giving the nod to SOEs for repatriating funds through PMPL over a period of seven years or more starting January 2023 (pursuant to the cabinet’s decision dated December 13, 2022), to meet their shareholders’ funding commitment with respect to the project up to their proportionate share of $2,145 million, which may be in the form of equity or shareholder loan (to be funded in local currency or foreign exchange).
The foreign exchange requirement for the proposed investment will be initially arranged by Oil and Gas Development Company (OGDC) and Pakistan Petroleum Ltd (PPL) from their own resources. In case of a shortfall, the government will provide the required foreign exchange. As per the current practice, the government will continue providing foreign exchange for Government Holdings Private Limited’s (GHPL) share contribution.
The Petroleum Division also requested permission for the repatriation of funds by BMRL over seven years or more starting January 2023 (pursuant to the cabinet’s decision dated December 13, 2022) to meet its shareholder funding commitment up to its proportionate share of $1,287 million, either in the form of equity or shareholder loan.
It asked the ECC to authorise the secretaries of Petroleum and Finance Divisions to finalise the GDA and government of Pakistan guarantee and sign the same under Rule 7(2) of the Rules of Business, 1973.
