Riyadh offers 15% equity investment in Reko Diq

Islamabad:

Saudi Arabia has made an offer to buy a 15% stake in the Reko Diq mining project and will also provide a major grant to build infrastructure around the mining site in a development that will mark the first investment under the umbrella of the Special Council Investment Facility.

The total offer includes cash for the purchase of 15% shares and a grant to build infrastructure around the mining area.

In response to the Saudi offer, Pakistan has decided to set up a negotiation committee to review the Saudi offer and recommend the final negotiated price to the federal cabinet for approval, government officials involved in the discussions told The Express Tribune.

Saudi Arabia’s Public Investment Fund (PIF) has offered to acquire a 15% stake through Manara Minerals. The federal government currently holds a 25% stake in the Reko Diq Mining project and will sell 15% of its stake to Saudi Arabia, they added.

SIFC Divisional Secretary Jameel Qureshi was not available for comment despite repeated attempts.

A Petroleum Department official said Saudi Arabia’s offer will be discussed by a negotiating committee set up to finalize the deal.

If the deal materializes, it will consolidate Pakistan-Saudi economic relations and create employment opportunities for the people of the region. Pakistan was also in the process of securing the conversion of a $5 billion cash deposit from Saudi Arabia and has also sought $1.2 billion in new oil financing.

In addition to acquiring a 15% stake, Saudi Arabia has also offered to provide a grant to build road infrastructure around the Reko Diq mining project. The government wants to construct the Mashkhel-Panjoor road for smooth traffic around the mining area.

The Ministry of Finance has accepted a grant offer with the Saudi Development Fund (SFD) to finalize the road plan, a ministry official confirmed to The Express Tribune. Once the talks make some progress, both sides will work to complete the feasibility study for the road project.

A cabinet member said on condition of anonymity that SIFC has approved the bid structure but left the final decision to the Cabinet Committee on Intergovernmental Transactions (CCIGT). The cabinet committee will approve the negotiating committee that will review the price discovery mechanism and work with Manara Minerals to finalize the deal.

The Reko Diq project is 50% owned by Barrick Gold, 25% by three federal government entities and the remaining 25% by Balochistan.

Barrick Gold is in the process of updating project feasibility studies. According to an update given to SIFC, the feasibility study will be completed by December 2024 and first production is expected by 2028.

The Reko Diq project is capital intensive and once it becomes commercially operational, the government hopes to develop the adjacent blocks with the joint investment of Reko Diq of Saudi Arabia, the Balochistan government and the federal government.

Pakistan is eyeing $5 billion in investments from Saudi Arabia by June 2025 in the mining and agriculture sectors.

Chief of Army Staff General Asim Munir is personally interested in ensuring that Saudi Arabia’s investment materializes on time.

Pakistan has already addressed Saudi concerns about withholding repatriation of profits due to external sector liquidity constraints. Pakistan has assured that Saudi investors will be given priority in repatriating profits. Prime Minister Shehbaz Sharif has already instructed the State Bank of Pakistan (SBP) to give preference to Saudi companies in repatriating profits.

The US Export-Import Bank (Exim) has also expressed interest in granting a loan for the Reko-Diq project. However, the United States Exim Bank, the state-owned export credit agency of the US government, was seeking preferential creditor status.

The estimated cost of the Reko Diq project is between $6 billion and $6.5 billion. The project requires $3 billion to $3.5 billion in debt financing. The American Exim Bank wanted to lend 1.5 to 2 billion dollars for the project, on the condition that it obtains the status of the preferred creditor.

A proposal to extend the loan for the supply of earthmoving machinery from the US is being considered, according to sources.

Once both sides finalize the price, the three federal government-owned companies that hold shares in Reko Diq on behalf of the federal government will begin the process of divesting their shares proportionately and receive the approvals of their boards of directors.

Pakistan is also trying to maximize the bid price by persuading Saudi Arabia to make advances to the Pakistani companies that have already made an initial investment in the project in lieu of their 25% stake.