Reko Diq is a copper-gold deposit located in Balochistan, Pakistan, 35 km south of the Afghan border and 55 km east of the Iranian border. Reko Diq is situated in the Chagai Belt, part of the Tethyan Belt, which extends from Central Europe and Turkey, through Iran, to western Pakistan. The deposit was discovered by BHP in the early 1990s and drilling commenced in 1996. BHP held a 75% stake via the Tethyan Copper Company (TCC), with the Government of Balochistan holding 25%. Through a number of acquisitions, TCC ended up as a 50-50 ownership between Antofagasta and Barrick. Due to disputes in 2010 and subsequent arbitration, the project was put on hold until 2019, when the ICSID tribunal ruled in favour of TCC, awarding nearly $6 billion in damages. Subsequent negotiations for settlement resulted in a reconstitution of the project as Reko Diq Mining Company, with Barrick holding 50%, Balochistan holding 25%, Pakistan holding 25%, and Antofagasta exiting with $900 million.
Reko Diq is planned as two large scale open pit mines, comprising of the main pit at Western Porphyries and a satellite pit at Tanjeel. Over its 37-year mine life, Reko Diq is expected to process three billion tonnes of ore at an average grade of 0.48% copper and 0.26 g/t gold, with a strip ratio of just 1.07. Using a copper price of US$4.03/lb, Barrick reported Pre-Tax Cashflow of US$77,254 M, after-tax NPV8% of US$13,014 M, and IRR of 21%. Over project life, only $7.1 B is paid in taxes, representing less than 10% of project cashflow. No income tax has been collected and according to the Technical Report, no additional taxes are applicable. Using inputs from the Technical Report, Mining Momentum was able to reproduce the financial model within 5% accuracy and estimated a pre-tax NPV10% of US$8,867 M, half of which is attributable to Barrick.
| Tonnes (Mt) | Cu (%) | Au (g/t) | Cu (M lbs) | Au (Moz) | |
|---|---|---|---|---|---|
| Reserve | 3,008 | 0.49% | 0.28 | 14.6 | 25.8 |
| Western Porphyries | 2,861 | 0.48% | 0.28 | 13.7 | 25.8 |
| Tanjeel | 147 | 0.62% | – | 0.9 | – |
| M+I | 922 | 0.18% | 0.13 | 1.7 | 3.2 |
| Western Porphyries | 792 | 0.16% | 0.13 | 1.3 | 3.2 |
| Tanjeel | 130 | 0.30% | – | 0.4 | – |
| Inferred | 1,378 | 0.30% | 0.20 | 4.1 | 8.2 |
| Western Porphyries | 1,276 | 0.30% | 0.20 | 3.8 | 8.2 |
| Tanjeel | 102 | 0.30% | – | 0.3 | – |
Which project has garnered as much attention in recent years as Reko Diq? Reko Diq has quickly risen to become one of the crown jewels of Barrick, perhaps even surpassing Nevada Gold Mines. It possesses both quality and quantity, boasting LOM production of 26 Moz gold and 15 Mlbs copper for almost four decades. However, reality is somewhat more complicated and the old saying goes, “if something is too good to be true, it probably is”.
Reko Diq has had a storied past, from its BHP era to years of disputes with local governments, its political risk cannot be overstated. Balochistan is, after all, a geopolitical powder keg. Just look at the recent, deadly train hostage crisis. It makes you wonder whether the 8% discount rate sufficiently captures geographical risk in the current world economy. After all, Reko Diq is sensitive to discount rate. A 2% increase in discount rate resulted in a 34% reduction in pre-tax NPV10% of US$8.9 B, further dropping to US$5.9 B when discounted 12%. This comes at a cost of nearly US$9 B initial and ramp up CAPEX, with Barrick owning just 50% of the project. This may actually be a blessing in disguise. Based on the Technical Report, Barrick pays no income tax, and with 50% ownership, local governments are strongly motivated to ensure the success of the project. Mining Momentum also finds the $72 M closure cost comparatively low for 6.2 Bt material mined and would hardly surprised if closure cost was five to ten times this amount, still a small impact on overall project economics incurred at the end of mine life.
Where do we stand on Reko Diq? We neither love it nor hate it. Downside risks exist, but none are fatal, albeit perhaps worth tempering expectations. Between the FS case and the Reserve case, there exists a comfortable margin to weather a storm. Mining Momentum will present a Murphy’s Law scenario where NPV becomes negative: +50% CAPEX, US$3/lb Cu, 12% interest rate. You decide for yourself whether you like Reko Diq or not. We doubt Reko Diq is the best thing that ever happened to mining, but at the same time, it will undoubtedly be one of the most important mineral deposits in the world for the next few decades.
The information presented above does not constitute investment advice. This is a summary from the NI 43-101 Technical Report effective December 31, 2024 (INSERT), with commentary from the author. Statements above do not represent the views of Barrick Gold. If any discrepancies arise, the information contained within the NI 43-101 are official and final. For latest depletion data, please refer to the AIF update.