Oil and Gas Development Company Limited (OGDCL), one of Pakistan’s largest E&P, has approved an increase in its funding commitment towards the Reko Diq project to $627 million.
The E&P disclosed the development in a notice to the Pakistan Stock Exchange (PSX) on Tuesday.
“The Board of Directors of the company has approved an increase in the company’s funding commitment with respect to the project, reflecting its pro rata share of total capital investment, inclusive of project financing costs, to $627 million (to be adjusted for actual project financing costs and inflation),” read the notice.
The decision follows an updated feasibility study outlining a 37-year mine life, divided into two phases, with Phase 1 having an estimated total capital outlay of $5.6 billion exclusive of the financing costs and inflation.
“Phase 1 is planned to be funded through a limited-recourse project financing facility of up to $3 billion with the remaining funded through shareholder contributions,” read the notice.
OGDCL informed that the project will leverage five of the identified 15 porphyry surface expressions within the current mining lease, signalling substantial future growth potential.
It added that negotiations for the proposed project financing are ongoing.
Meanwhile, Phase 2 is planned to be funded through a mix of revenue generation from the project, additional project financing and shareholder contributions, if required, said OGDCL.
Under the updated feasibility study, Phase 1 is planned to process 45 million tonnes of mill feed annually (Mtpa) from 2028.
“By 2034, Phase 2 is planned to double the processing capacity to 90Mtpa.
“Based on existing reserves, the Reko Diq project is expected to yield production of 13.1 million tonnes of copper and 17.9 million ounces of gold over the life of mine (100% basis),” it said.
OGDCL said that as per the estimates, the increase in copper and gold prices “has more than offset the impact of higher project costs”.
Therefore, the BoD has also given an in-principle approval to obtain project financing.
“The shareholder equity contributions by the company after taking into account project financing are expected to be $349 million (to be adjusted for actual project financing costs and inflation).”
The company said that the approvals remain subject to shareholders’ and regulatory approvals.
It is pertinent to mention that OGDCL’s share of the Reko Diq project represents 8.33% as part of the collective 25% held by the three Pakistani State-Owned Enterprises (SOEs) including Pakistan Petroleum Limited and Government Holdings (Private) Limited.
The interest of the SOEs is held through Pakistan Minerals (Private) Limited.
Of the remaining share, 25% is held by the Government of Balochistan (15% on a fully funded basis through Balochistan Mineral Resources Limited and 10% on a free carried basis) and 50% is held by Barrick Gold Corporation, which is the operator of the project.
Barrick considers the mine one of the world’s largest underdeveloped copper-gold areas, and its development is expected to have a significant impact on Pakistan’s struggling economy.