Home Opinion Op-Ed Mine-d your own business: Khewra, Reko Diq, and Saindak

Mine-d your own business: Khewra, Reko Diq, and Saindak

Almighty Allah has blessed Pakistan with abundant resources, but what He did not provide us with, yet, is an honest leadership who can mine out such minerals and resources and use these for Pakistan's betterment.

Reko

Pakistan is a land blessed with an abundant quantity of natural resources – this cliché is one all Pakistanis have heard and repeated themselves copiously. While God’s magnanimity has been endless for Pakistan, the people, institutions, and businesses, have failed to fully exploit our underground birthrights.

The greatest tragedy in life is unrealized potential. Relatively recently, three cases have come to light that underpin the excess of what we have been given, and how we are squandering it all. These cases, all related to mining, are the Himalayan Salt case, Reko Diq, and Saindak.

These three cases will underscore how due to mismanagement and corruption (among other things), we have failed to capitalize on our own resources. In Pakistan, unfortunately yet discernably, common sense and good governance usually fall in abeyance.

Khewra & Himalayan Salt

Pakistan houses around 10 billion tons reserves of salt and is the world’s largest salt producer. Khewra Salt Mine is Pakistan’s largest and the world’s 2nd largest salt mine. Pakistan is essentially the raison d’être for Himalayan (pink salt) as most of the world’s Himalayan salt mines are present in the country – with Khewra producing 350,000 tons of Himalayan Salt annually.

Many claim that this salt is beneficial to health and has thus gained a significant cult following – but there is a lack of scientific study to back this assertion. Regardless, it is consumed, used as lamps, utilized in spa treatments, and used to cure ailments all around the world. It can cost from $5 to $8 per 100 grams, which is 20 times more than the price of regular table salt.

Pakistan is a land blessed with an abundant quantity of natural resources – this cliché is one all Pakistanis have heard and repeated themselves copiously

The Khewra Salt Mine is owned by Pakistan Mineral Development Corporation (PMDC) and mining is carried out by both the PMDC as well as private companies (PMDC have leased some mines). Pakistan’s main salt export destinations are China, India, America, and Germany.

The major historical issues relating to Khewra and Himalayan salt export are the usual suspects such as incoherent trading policies, illegal trade, a bureaucratic system emplaced by previous governments, and banking irregularities for exporters etcetera. Despite being the largest salt producer globally, Pakistan ranks at number 20 vis-à-vis salt export.

However, the main issue that has brought Khewra into the limelight recently is something quite bewildering. Social media has been abuzz with how the country has been cheaply selling Pakistani raw salt to India for years whilst India repackages and exports it for exponentially more money.

Read more: PPP critical of PM Khan’s Inquiry Commission on Reko Diq Case

The hashtag #OurSaltOurAsset went viral as Pakistanis shared images of Pakistani Himalayan salt being neatly packed in bottles, marketed as Indian salt and sold around the world. Besides India, there are reports that Israel and France also resell the Pakistani commodity in the international market. Although, Pakistan and Israel have no direct trade agreements, one can locate Pakistani salt packed by Israel in international markets.

In 2016, Pakistan exported 625 metric tons of Himalayan salt to India at a meager Rs. 2.98 per kilogram while India rebranded and exported 15.09 metric tons at Rs. 125 per kilogram to various countries. There was also talk on social media and even some mainstream outlets that Pakistan was obligated to sell salt to India regardless of peace or war under a dated trade agreement between both countries.

However, this information is erroneous and should cease to be circulated. According to Article IX of the trade agreement signed in 1949, the deal was to “remain in force for a period of twelve months” from the 1st of July 1949 to the 30th of June 1950. This means that both countries have not renegotiated this deal, which should have ceased to be active in 1950 – 69 years ago.

Secondly, and more interestingly, Article VI of the agreement barred both countries from re-exporting any commodity in the form in “which it was imported”. Furthermore, the same article states that a change in packing does not constitute change of form. There is evidence that many Indian companies are simply re-packaging and re-exporting the salt (which means they are not changing the form) and hence are neglecting the agreement’s terms (which is expired as is).

Social media has been abuzz with how the country has been cheaply selling Pakistani raw salt to India for years whilst India repackages and exports it for exponentially more money

This agreement has been made a mockery of and the government must act with haste. A senior official of Pakistan’s Commerce Ministry stated that the country needs to develop a proper “Salt export policy”.

He said that the non-existence of a Global Indication Law meant that Pakistan could not directly export the salt with its own branding which has severely hurt the economy – furthermore the illegal trading/exporting of salt by the private sector to India at an unregulated price has worsened the situation. In sum, an antagonistic neighbor is exploiting Pakistan’s Himalayan salt (“pink gold”) while Pakistan has been caught slumbering.

Reko Diq

Reko Diq is a town in Balochistan’s Chagai District – a district famously known as the “Museum of minerals”. Near the town lies a massive copper and gold mine with an estimated 5.9 billion tonnes of copper (grade 0.41%) as well as 41.5 million oz. of gold reserves.

This makes Reko Diq one of the largest copper mines in not only Pakistan but also one of the largest in the world. More than a decade ago, Tethyan Copper Company (TCC), a fully owned joint venture of Barrick Gold of Canada and Antofagasta Minerals of Chile, found a formidable presence of gold and copper at Reko Diq and subsequently planned an open-pit mining operation.

The mining project would cost a total of $3.3 billion and would consist of four main operation components: an open-pit mine, a processing facility, a transport pipeline, and a project village for employees. The company had established the basis for “mine development until August 2010 and submitted a Mining Lease Application in February 2011”.

Read more: Reko Diq Case: How Mismanagement landed Pakistan in Quagmire

The nascent project came to a screeching halt in 2011 as the Balochistan government refused their lease request and in 2013, the Supreme Court of Pakistan under Iftikhar Chuadhary declared the lease invalid. Before the lease was terminated, the amount invested by the consortium was $220 million.

The Reko Diq Case began after the Supreme Court terminated the mining contract between the Balochistan government and TCC. TCC seeking international arbitration pleaded their case in front of the International Centre for Settlement of Investment Disputes (ICSID). The international tribunal awarded $5.9 billion to TCC in July 2019 to the dismay of Pakistan.

Not to mention the money, almost $30 million, Pakistan spent fighting the case – three separate international firms were hired at different stages to plead their case. Some good news out of this fiasco was that Pakistan’s legal team were able to reduce the TCC claim of $16 billion to $5.9 billion. Moreover, TCC has shown interest in negotiating a settlement with Pakistan even after this verdict.

Many analysts and commentators have blamed then Chief Justice Iftikhar Chaudhary for this huge penalty. Even the 700-page ruling issued by the ICSID stated, on page 171, that the Pakistani Supreme Court was oblivious to international law and conventions relating to the contracts and displayed lack of professionalism. However, some think that the Supreme Court did the right thing (even if it was legally unsound) as the agreement would have hurt Pakistan in the long run.

The company had established the basis for “mine development until August 2010 and submitted a Mining Lease Application in February 2011”

The deal signed between Balochistan government and the TCC stated that Pakistan would have 25% stake in the multi-billion dollar project while TCC would have a massive 75% share.  Furthermore, the Balochistan government would only get a meagre 2% of royalties. There were also objections raised because the consortium wanted to smelt and refine the products outside of Pakistan.

The question is why was such a lopsided deal signed and that too by the unelected interim Moeen Qureshi caretaker setup? Furthermore, the lack of rectitude after signing the deal has displayed Pakistan’s non-contrite behavior to international investors. Questions were also raised about the transparency of TCC’s feasibility report, which heightened concerns about Pakistan being cheated.

PML-N member Naeem Awan described it as “highway robbery”. Many analysts and the current Prime Minister Imran Khan himself believes that massive corruption took place in the Reko Diq fiasco, but he remains hopeful for the mine’s future. Imran Khan’s government has launched an inquiry into the Reko Diq case to affix responsibility for this bizarre turn of even.

Read more: Tethyan Copper Company wishes to Resume Reko Diq Project: PM Imran Khan

Perhaps, if Pakistan’s stakeholders had not signed such an abysmal agreement this could have all been avoided. Furthermore, since such an agreement was signed, one could hope that if the Supreme Court had been judicious in its decision-making – and maybe have recommended a renegotiated contract or settlement rather than terminating the existing deal abruptly – we would not be in such dire straits economically today.

Regardless on whom the blame is pinned on, the fact is that Pakistan has unfortunately wasted time, resources, and a lot of money as Reko Diq remains unoperational.

Saindak

The Saindak Copper-Gold Mine is situated near the town of Saindak in Chagai District, akin to Reko Diq, in Balochistan. The Saindak Mine consists of three ore bodies – the South Ore Body, the North Ore Body, and the East Ore Body. The mining capacity is 4.25 million tons of ore per annum and a copper smelting capacity of 20,000 tons per annum.

In the 1970s in collaboration with a Chinese firm, copper deposits were discovered in Saindak. After infrastructure was built in the mining region, Saindak Metals Ltd (owned by Pakistan government) and Chinese company, China Metallurgical Group Corporations (MCC), conducted a trail run in 1995.

This initial cooperation was not a fruitful endeavor however. An official document reveals that “…from 1996 to 2001, the government of Pakistan sustained a loss of 300 million rupees annually” vis-à-vis Saindak. In 2002, the government decided to stay away from the mining aspect and lease Saindak Mine to MCC for a share in the profits – this deal was to last for 10 years, then was renewed for 5 more years, and then renewed for another 5 until 2022.

Regardless on whom the blame is pinned on, the fact is that Pakistan has unfortunately wasted time, resources, and a lot of money as Reko Diq remains unoperational

There are several major perennial issues vis-à-vis this project. The federal government leased the mine a third time in 2017 to the dismay of many in Balochistan. Under the 18th amendment and the Aghaz-e-Haqooq-e-Balochistan Project, the Saindak project was supposed to be under the aegis of the Balochistan government.

This did not happen as the federal government re-leased the mine to the Chinese but according to federal government, they did it with the consent of the provincial government. Regardless of consent, in principle, the Balochistan government should have control of the mine and whom it is leased to, as this is its constitutional right – Baloch MP’s have asserted the same.

The federal government receives 50% share in profits while the remainder goes to the Chinese company. Of the 50% the government receives, it keeps 20% for itself and hands 30% to the Balochistan government. Balochistan also receives an underwhelming 5% royalty. The Chinese have also been blamed for over-mining, but this blame must be shared by Pakistan as officials claim that there is a lack of an effective overseeing and evaluating body.

Read more: The Reko Diq Conundrum and lawfare against Pakistan

Author of The Economic Development of Balochistan, Syed Fazl-e-Haider, stated “The Chinese exploited Saindak’s resources for 16 long years without any check.” Locals around the mine have also alleged that work on the North Ore Body had already begun even before the latest lease was signed on October 16, 2017.

The other frightening concern is the lack of money spent on local villages. These kinds of massive projects have an ethical obligation under their Corporate Social Responsibility (CSR) umbrella, however this does not appear to be in effect. Saindak parallels Sui it appears.

Locals have complained of having no electricity for decades; they also state that the Chinese have made roads that lead to company sites yet village roads remain unpaved. There is also severe apprehension regarding the lack of “good” jobs provided by the company to the locals.

Read more: Unbridled greed

Locals of Chaghai complain that even their people who have secured a professional degree are not preferred over people from outside the province. Others work menial jobs in security and labor for minimal wages – in fact, there was recently a workers strike in Saindak by laborers demanding better wages and medical allowance.

Again all blame cannot be pinned on the Chinese, as the government is as complicit for lack of oversight and accountability. From 2003 to 2017, the project has paid over seven billion rupees to the Balochistan government according to a Saindak official yet the locals’ conditions are substandard at best.

Where has this money gone? The irony of having riches beneath your feet, but it being reaped for others. Akin to natural resources Pakistan also appears to never run out of tragedies – Saindak is yet another case of exploitation of resources and of the locals.

Sarmad Ishfaq writes as a researcher for Lahore Centre for Peace Research. Sarmad has several publications in international journals and magazines in the fields of Terrorism/Counterterrorism and International Relations. The views expressed in this article are author’s own and do not necessarily reflect Global Village Space’s editorial policy.

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