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Handling of copper, gold, gas reserves a big question mark

By Kamran Khan

KARACHI: An intriguing attitude of the Ministry of Petroleum and Natural Resources toward the change of foreign ownership of Pakistan’s massive copper, gold and gas reserves in Balochistan in the past two years has left Islamabad as a silent spectator to the fortunes made from its precious mineral resources by a small group of little known foreign companies, interviews with industry analysts and informed officials said.

As a result, the world’s largest copper and significant quantity of gold reserves in Balochistan are now under the control of a little known Australian company and an equally little known Canadian company that had won a major gas reserve from Pakistan for free is now selling the same facility to a Pakistani company for a hefty premium.

Industry analysts said that the Pakistan government, for reasons unspecified, made no objection when the world famous Australian company BHP Billiton decided to sell its stake in the Riko Diq copper project - considered as the world’s largest copper reserves - to a newly formed Australian company named Tethyan Copper Company Limited last year.

The government had awarded a contract to the BHP Billiton in 1994 to explore copper and gold reserves in the mineral rich Chagai range of Balochistan that also include the Riko Diq which has the potential to produce about 500 million tonnes of copper every year.

The most credible international surveys suggest that Riko Diq is one of the biggest undeveloped copper projects in the world with over 11 billion pounds of copper and nine million ounces of gold.

The industry analysts are questioning as to why the government did not opt to use its right to refuse the transfer of the Riko Diq project from the internationally reputed BHP Billiton to the Tethyan Copper Company which after acquiring the Riko Diq project raised funds for the project by floating its shares in the Australian Stock Exchange.

The Balochistan government that had the basic contract with the BHP for the exploration, a senior official conceded, could have easily used the BHP’s failure to make any significant progress in the copper and gold exploration and its decision to assign the control of the Riko Diq project to a new Australian company by seeking fresh international and local offers for its most precious reserves.

"World’s best mining companies would have rushed to Pakistan to make bid for the world’s largest copper reserve in addition to proven gold reserves," said an industry analyst. "There was more to it that what was seen on the surface," he added.

The Balochistan government is only 25 per cent partner in the world’s largest copper reserves project, which is now owned 75 per cent by the Tethyan.

Significantly, the federal government or the Balochistan did not bother to examine the Tethyan’s "zero year mining experience" or even the financial strength to undertake this huge exploration work, before it agreed to the transfer of Riko Diq control from the BHP Billiton to Tethyan.

Instead a huge favour was granted to the Tethyan by the federal government that announced to grant the Riko Diq project a status of export processing zone that practically excludes the government’s oversight of transfer of funds from the zone to abroad.

Barely a few months after the take over of the Riko Diq project in Balochistan, Tethyan made headlines in the international business circles, intriguingly not in Pakistan, when it was reported in April last year that the company had found significant gold zone at its world-class Reko Diq copper gold project.

The Perth-based Tethyan Copper revealed in Australia that drilling four holes into a mineral complex called H36 (Riko Diq) had unearthed results with strong gold values. No wonder the news caused an 11 per cent surge in Tethyan shares that day in Australia.

"The extent and apparent continuity of the mineralisation suggest that a gold-copper resource may well be present an excellent compliment to the generally more copper rich mineralisation at the western porphyries," said David Moore, the managing director of Tethyan Copper, in a statement issued after the gold discovery was announced.

When asked the Tethyan’s present relationship with the BHP that initially had won the Riko Diq project from the Pakistan government, John P Schloderer, general manager, Tethyan Copper Co Ltd, said: "The BHP Billiton is still involved in the project. But they have brought in a third party to carry on the exploration with a right to come back into any major discovery under the terms of their Alliance Agreement with the Tethyan Copper Company."

Senior officials and industry sources interviewed for this article attributed Tethyan’s tremendous success in acquiring the Riko Diq project to its decision to appoint a well connected Pakistan representative for this project.

Muslim Lakhani, the company representative for the Tethyan in Islamabad, till mid 90s was known in Islamabad as one of the best friends of Asif Zardari whom he (Lakhani) often joined for polo sessions.

After the fall of the PPP government, he went through initial investigation for a few months from Nawaz government’s anti-corruption Czar Saifur Rahman, but he somehow managed to escape the typical Saifur Rahman-style investigative techniques. The overthrow of the Nawaz government ultimately brought Lakhani close to the people considered close to the military government.

Besides the Tethyan takeover of the copper-gold rich Riko Diq project, Lakhani’s name emerged again when the Oil and Gas Development Corporation decided to abandon its Rodho-2 well with estimated gas reserves of 5 billion cubic feet with a heating value of 1129 btu.

Questions were raised in the related government circles when the Rodho-2 well without a transparent procedure was granted to a newly formed company, called Scimatar Hydrocarbon Pakistan - a local subsidiary of a small Canadian company of the same name.

What was common between the Tethyan and the Scimatar was the distinction that both had Muslim Lakhani as their representative in Pakistan.

The Scimatar earned the Rodho Block by promising to invest $553,000 the infrastructure for the 5 billion cubic feet Rodho Block, but only a few months later the Scimatar, armed with the lucrative Rodho Block license from Pakistan, sold its global business interest to another Canadian company named Rally Energy Corporation, which also decided to retain the services of Muslim Lakhani.

Officials said initially the Rodho Block, also known as Safed Koh block, was awarded to Scimatar as an exploration site hence no public offers were sought.

They, however, refused to comment that Safed Koh was a confirmed gas reserve as depicted in the Pakistan Energy Book of 2002, hence the site should have been auctioned through a transparent procedure.

Recent interviews have revealed that the gas-rich Rodho Block that was initially awarded to Muslim Lakhani’s Scimatar Hydrocarbon Pakistan and later moved to Rally Energy is now being sold to a newly created oil and gas exploration wing of a known automobile-cum-industrial business house of Pakistan that has agreed to pay a multi-million-dollar premium for this confirmed gas reserve.