Saudi Arabia Offers $540M to Acquire 15% Shares in Multibillion Dollars Rekodiq Gold Project
Special Report :
Saudi Arabia has offered Pakistan a price of 540 million dollars to acquire 15 percent of shares in the Rekodiq copper and gold mining project.
Sources said that Saudi Arabia’s nominated entity, the Public Investment Fund (PIF) through Manara Minerals (MM), has offered to acquire 15% of state-owned entities (SOEs) shares in the Reko Diq project for US$ 540 million via two tranches under specific terms.
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It was stated that the first tranche of $330 million will be paid at the time of signing the deal for 10% shares. The second tranche of $210 million will be paid at the final investment decision (FID) for the remaining 5%.
The reimbursement of a portion of the cash calls paid by PMPL (Pakistan Mineral Private Limited), which is still under negotiation, was also mentioned.
The KSA negotiation side had also offered a grant for Reko Diq-related infrastructure projects in Balochistan for optimizing its mineral potential. This grant is valued at US$ 150 million and will be funded via the Saudi Fund for Development. As part of the deal, the Saudi grant of USD 150 million for infrastructure may be utilized for the Mashkhel-Panjgoor road.
The Economic Affairs Division (EAD) may be directed to formalize the arrangements with the Saudi Fund for Development (SFD) regarding the grant. The National Highway Authority (NHA) and Ministry of Communications may expedite their proposal for the construction of the Mashkhel-Panjgoor road and complete necessary approvals for the project.
Sources said that the hiring of RB&A Partners (UAE), an independent specialist consultancy firm, has been identified as an additional financial advisor due to the complexity of the project and regional considerations, as per the agreed terms between PMPL and RB&A.
The Petroleum Division apprised the intergovernmental cabinet body in a recent meeting that, in pursuit of the above, Pakistan Mineral Private Limited (PMPL) engaged M/s Lazard and RBA as financial advisors, M/s DMT as technical advisor, M/s White & Case LLC as English Law Counsel, and M/s Haidermota & Co. as Pakistan Law Counsel for due diligence, valuation of resources/reserves/assets, finalization of commercial terms, and completion of documentation and structure.
With the support of these advisors, the Pakistani side engaged in discussions with the KSA side to evaluate the possibility of Saudi investment in the Reko Diq project, with special focus on the technical, financial, and legal aspects of the potential investment and possible transaction structure. The Apex Committee and Executive Committee of SIPC have been regularly monitoring the progress on this matter.
A special session of the Apex Committee of SIFC was held on 15th May, 2024, under the chairmanship of the Prime Minister, with a singular focus on Saudi interest in acquiring stakes in Reko Diq—an issue of strategic importance and national interest.
During this meeting, a detailed update/presentation on the progress of negotiations with KSA for inclusion in the Reko Diq project was presented and deliberated. The offer received from KSA was placed before the committee for deliberation and decision. The broad contours of the Saudi offer are as follows:
• Tranche 1: $330 million to be paid at the time of signing the deal for 10% shares.
• Tranche 2: $210 million to be paid at the final investment decision (FID) for the remaining 5%.
Additionally, the KSA negotiation side had verbally offered a grant for Reko Diq-related infrastructure projects in Balochistan to optimize its mineral potential. This grant is valued at US$ 150 million and will be funded via the Saudi Fund for Development.
Furthermore, the KSA is committed to investing in the exploration of over 1,400 sq km in the EL 6 & 8 (Chagai) area in a joint venture (JV) with GoP/GoB entities and Barrick.
The Petroleum Division further apprised that the Apex Committee approved the terms of the Saudi offer and directed that:
• “A Memorandum of Understanding (MoU) between the Government of the Kingdom of Saudi Arabia and the Government of the Islamic Republic of Pakistan in the field of Mineral Resources Sector was signed on 17th February, 2019, after approval of the Federal Cabinet. In the MoU, it was agreed that the parties shall implement the provisions of this MoU in accordance with the laws and instructions applicable in the two countries.”
• The SOEs should initiate actions to seek formal approval from their respective boards for the transaction.
SOEs/PMPL will accept and share the term sheet with Manara Minerals/KSA, stating their position on the cash calls. Efforts should be made to convince the Saudi side to reimburse PMPL’s cash calls as far as possible without risking the overall deal.
The EAD will ensure that the US$ 150 million financial grant from the Saudi Fund for Development (SFD) is actualized as verbally committed by the Saudi negotiation team. Efforts should be made to ensure that an addendum reflecting the grant of approximately US$ 150 million by the Saudi Fund for Development (SPD) is incorporated into the definitive agreements.
The Planning Commission will work in coordination with the Petroleum Division and EAD to propose and finalize the infrastructure-related projects. Feasibility studies of proposed projects should be completed at the earliest.
The Petroleum Division also apprised that the Inter-Governmental Commercial Transactions Act-2022 (IGCTA) provides a mechanism to carry out a commercial transaction under an inter-governmental framework agreement to promote, attract, and encourage foreign states to have economic and business relations with the Islamic Republic of Pakistan.
In view of the earlier decision of the Federal Cabinet, authorizing the Negotiation Committee to enter into negotiations with KSA, and the decision of the Apex Committee on 15th May, 2024, mandating the Petroleum Division to place the matter before the CCOIGCT, the following are submitted for consideration:
It is recommended to the Federal Cabinet that KSA’s proposed commercial transaction in the Reko Diq project under the G2G Agreement signed between the Government of Pakistan and the Government of the Kingdom of Saudi Arabia (KSA) for promoting cooperation in the mineral sector, dated 17th February 2019, be dealt with under the provisions of the Inter-Governmental Commercial Transactions Act, 2022.
Approval is sought for the proposed Negotiation Committee under Section 4(2)(b) of the Act for undertaking and reviewing the price discovery mechanism (as developed and used by international advisors) and the process adopted to assess the KSA offer.
Negotiations will be held on the draft commercial agreement, and a report will be submitted to the Cabinet Committee for approval of the final negotiated price mechanism and commercial agreement.
Furthermore, the Apex Committee has also, in principle, approved the proposed JV structure for the exploration of EL 6 and EL 8 and directed the GoB and Petroleum Division to finalize the terms.
The approved structure includes:
• 15% shares to be held by GoB (15% free carried until the pre-feasibility stage and 10% free carried thereafter),
• 15% shares to be held by a federally nominated entity,
• 40% shares to be held by Barrick, and
• 30% shares to be held by Manara Minerals.
During the ensuing discussion, the Secretary of the Petroleum Division conveyed that the subject Joint Venture consists of 50% shares of Barrick, 25% from the Government of Balochistan, and 25% from the consortium of the Federal Government SOEs (OGDC, PPL, and GHPL). He suggested that the Price Negotiation Committee should be reconstituted under the IGCT Act.
The Cabinet Committee on Inter-Governmental Commercial Transactions (CCIGCT) considered the summary regarding “KSA Interest to Acquire Stakes in the Reko-Diq Project” and approved the proposal.
