Untapped mineral assets
Pakistan is working with international development partners and expert groups to channel local and foreign capital into key mining assets and high-value projects via pension funds, project-specific sovereign bonds, and portfolios of welfare organisations and state-owned enterprises.
Background conversations with several important parties indicate that attempts are underway to devise a strategy to move out of the rough patch in mining and minerals caused by the mismanagement of the Reko Diq conflict, which is now coming to an end.
In the first instance, the government intends to hold roadshows in the near future for a few selected projects that have bankable feasibility studies and are ready to attract investors. Five critical projects would be included in this marketing drive, starting with Chiniot Steel Mills and Iron Ore Development, for which a handful of nations such as Saudi Arabia and China have previously expressed great interest.
Chiniot has been dubbed “the greatest internationally benchmarked metallic mineral exploration property” and is now open for bidding. Officials said the above-mentioned nations hoped to obtain the project on a G2G basis, but given what they learned from Reko Diq, the majority preference is for bidding.
The project was discovered unexpectedly in 1969 in Sargodha, Punjab, using magnetic mapping as part of a joint search for oil and gas surveys by the Oil & Gas Development Company and the Soviet Union, but little attempt was made to develop it for the next two decades. The Pakistani Geological Survey returned to the site in 1989 and dug five boreholes, yielding positive results for iron deposits by 1992. For the following eight years, there was utter quiet until Punjmin, a Punjab government mining firm, did another extensive magnetic survey in the Rajoa and Chiniot areas in 2000. By 2007, nine further boreholes had been drilled, bringing the total to 14, confirming the presence of a significant amount of iron ore underneath.
Chiniot has been dubbed “the greatest globally benchmarked metallic mineral exploration property” and has been validated by top international specialists. It is now open for bidding.
In 2008, the Punjab government signed a contentious deal with a business whose qualifications had been questioned publicly, but which was handed ownership and a 75% stake in the Chiniot Iron Ore Project. In 2010, the Lahore High Court declared the project invalid ab initio when it grew questionable. The Supreme Court of Pakistan upheld the verdict of the Lahore High Court and ordered a full techno-economic assessment for the development of a steel factory in 2013. German consultants, Swiss laboratories, British financiers, Turkish contractors, and Canadian and US technical and business specialists came to the conclusion that there are 150 million tonnes of iron ore with a 33 percent iron content in known reserves.
This means that the deposit could run a steel factory the size of Pakistan Steel Mills for 33 years. In actuality, 80,000 metres of oblique drilling yielded 250 million tonnes of iron, 31 million tonnes of copper, and 1 million tonnes per year of steel production, with a 20 percent internal rate of return on capital outlay of $1.3 billion and a nine-year payback time. The project is expected to last more than 30 years and will benefit nearby special economic zones (SEZs), notably the Allama Iqbal SEZ in Faisalabad. The deposit features a 1.5-kilometer thick iron ore layer, which is a rare blessing since it contains 20% hematite and 80% magnetite, which is typically regarded shipping quality iron. The iron deposit’s in situ (on-the-spot) value of $6-8 billion dollars provides a strong case for a local refinery to assist iron ore development in Chiniot, Kalabagh, and Balochistan.
The project was first included in the China-Pakistan Economic Corridor (CPEC) during the 6th Joint Coordination Committee meeting in December 2016, however due to a continuing study phase at Chiniot, no significant progress has been achieved. When Saudi Crown Prince Muhammad bin Salman visited Islamabad in February 2019, the project was named among the finest projects available for investment. The project consists of two phases: mining ($150-200 million) and processing ($200-300 million), with the second phase involving the construction of a $950 million smelting mill.
Unfortunately, the project was unable to go to the bidding stage because the new political government has ceased supporting Punjmin, the Punjab government agency, and has failed to name its chief executive officer since 2018, ostensibly to avoid giving credit to the previous administration.
The idea was re-presented to the Prime Minister a few days ago, with a request to assist roadshows to build investor interest before official bidding begins at the beginning of the next calendar year.
Kalabagh Steel Mills, East Ore Body (EOB) at Saindak, Barite-Lead-Zinc Project and Bolan Mining Enterprises (BME, Khuzdar), and North Waziristan Copper Deposit — the last of which is now with Frontier Works Organisation — were among the other critical and ready-for-bid projects (FWO).
This is part of Prime Minister Imran Khan’s Strategic Plan for Mines Sector Development, which has been approved in principle for implementation through consultations with relevant institutional frameworks and could lead to integrated value chain development and mining with a goal of achieving 10% GDP in 10-15 years. At the present rate, mineral resources provide around $30 billion to the national economy. For economies of scale and economic viability, as well as job creation, import substitution, and export improvement, this must be accomplished through international and domestic investment.
In the short term (before December 2022), stakeholders were given deadlines to hold roadshows, complete feasibility studies, establish a national mineral data centre, and harmonise legal frameworks with provinces, with fiscal incentives and government strategic investments following by December 2023, allowing credit facilitation, critical infrastructure development, and local and foreign investment to be lined up until 2030.
The prime minister has set up a progress assessment group, chaired by the minister of planning, to fine-tune the strategic plan and draught a “PM Mineral Development Package.” The World Bank and the Asian Development Bank have been invited to provide technical support to the Ministry of Economic Affairs.
