Barrick Gold, the world’s second largest gold producer, is looking to bring Saudi Arabia’s Public Investment Fund (PIF) as one of its partners in the Reko Diq project, a massive copper and gold deposit in Balochistan.

The company has received approval from the Special Investment Facilitation Council (SFIC) to hire consultants for Saudi Arabia to negotiate the partnership. However, Barrick Gold’s CEO has stated that the company will not dilute its 50% equity in the project, which means that the stake of the state-owned enterprises (SOEs) may be reduced or diluted.

The Reko Diq project is currently owned by Barrick Gold (50%), Balochistan (25%), and three SOEs (25%). The SOEs are Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), and Government Holding (Private) Limited. Each SOE paid a fee of USD 187.5 million in an escrow account for the acquisition in March 2022.

The Ministry of Energy and the negotiating committee are expected to initiate the talks with Saudi Arabia and finalize the shareholding by December 25, 2023. According to KTrade Research, there are two possible scenarios for the outcome of the negotiations:

  • Scenario 1: Reduction in shareholding of SOEs. This means that some of the existing shares of SOEs will be transferred to PIF, resulting in a one-time gain for the SOEs due to the devaluation of PKR. According to a sensitivity analysis, if the shareholding of OGDC and PPL is reduced from 8.3% each to 5% or 2% each, they will gain PKR 9.4 billion or PKR 18.8 billion respectively, assuming a USD PKR parity of 300.
  • Scenario 2: Dilution in shareholding of SOEs. This means that Barrick Gold will increase its investment in Reko Diq project to maintain its controlling share of 50%, depending on the stake of PIF. This will dilute the existing share of SOEs, having no financial impact on them.

The Reko Diq project is one of the largest undeveloped copper and gold deposits in the world, with a life of at least 40 years and a process capacity of 80 million tons per annum. The project feasibility is expected to be completed by 2024, with first production targeted in 2028 at an initial estimated capex of USD 7.0 billion.