At its inception in 2007, Gwadar Port was expected to be a success. Its strategic location at the mouth of the Strait of Hormuz — an important waterway that opens into the ocean and through which over one-sixth of global oil production and one-third of the world’s liquefied natural gas (LPG) passes — was expected to attract international shipping, and commerce and industry to the port.
However, these expectations have not materialized. While 15-17 million barrels of oil pass through the waters just off the Gwadar coast each day, the port itself has remained silent with very little activity.
There are several reasons for the lack of activity at Gwadar Port. Foremost among these is the political instability and the armed insurgency in Balochistan Province over the last two decades. But also, the current low capacity of cranes, docks, berths, storage and other infrastructure and facilities at the port is a major hindrance in making the port a successful “gateway” to China Pakistan Economic Corridor (CPEC).
However, through expansion of port facilities, construction of the free zone and the East Expressway in Gwadar, both Pakistan and China have been seeking to attract trade and deals with foreign companies. One such deal that is in sight is that with the Canadian Barrick Gold Corporation, one of the world’s largest gold mining companies.
Barrick plans to mine gold in Balochistan from an areas which is around 1,000 kilometers from Karachi Port and 650 kilometers from Gwadar Port. At present Chinese companies, which are extracting minerals from northwest Balochistan, are trucking them all the way to the already busy Karachi Port.
As the Barrick team and the Gwadar Port Authority (GPA) discussed in their recent meeting, using Gwadar Port would reduce the distance, time and cost of transportation. Half of the distance between the gold reserves and Gwadar port is reachable through the M8 motorway. A new motorway will need to be constructed for the rest of the route.
Barrick’s interest in investing billions of dollars in the gold mining project and Gwadar Port, and in using the latter to ship out the minerals appears to be an opportunity for Gwadar to tap into its long-anticipated economic potential.
But past experiences with international investors and mineral mining in Balochistan evoke much skepticism. This skepticism is not without basis.
Barrick plans to work on the Reko Diq Gold mines in Balochistan’s Chaghi district, which borders Iran and Afghanistan (Pakistan’s nuclear tests in 1998 were carried out in Chaghi).
The Pakistan government, the Balochistan provincial government, and the Barrick Gold Corporation have reached a preliminary agreement under which the corporation will invest $7 billion in the mining project and own 50 percent of the shares, while the balance 50 percent will be shared equally between the federal and Balochistan governments.
The Reqo Dik area reportedly contains the world’s fifth largest gold deposits, in addition to several other minerals. Its mineral wealth and the high profits it promises have prompted international companies to take the risk of investing here despite the fragile political situation and multiple security threats they face here.
Their interest began as early as 1961 after the Geological Survey of Pakistan and the U.S. Geological Survey identified the region as being rich in minerals. More extensive studies in 1971 and 1974 confirmed the findings of previous surveys.
The two main areas that these surveys identified in Chaghi district were Saindak and Reko Dik. A Chinese company signed an agreement with Pakistan and began mining in Saindak in 2002. As for Reqo Dik, the Balochistan Development Authority and an Australian mining company BHP Minerals signed a deal in 1993 under which the Chaghi Hills Exploration Joint Venture was set up to explore the Reqo Dik area for minerals.
When BHP’s feasibility study confirmed Reqo Dik as one of the world’s largest undeveloped copper and gold deposits, it claimed 75 percent of the share in overall discoveries for the next 56 years. However, the company did not begin mining for several years.
Then in 2000, BHP handed over the Reqo Dik deal to Tethyan Copper Company (TCC), a joint venture of Antofagasta of Chile and the Barrick Gold Corporation. Both these companies spent $200-400 million to take complete charge of the project in 2006. Meanwhile, in 2010, media investigations publicized the terms of the deal, which angered Baloch nationalist activists and politicians as the terms were seen to allow “outsiders” to exploit and benefit from Balochistan’s natural resources even as the people of the province struggled with extreme poverty.
Under pressure from the nationalists, the Balochistan government refused to convert the exploration permit to a mining license, thus ending the deal with TCC. In 2011, the TCC took the case to the Supreme Court of Pakistan which ruled in favor of the Balochistan government. TCC did not give up and took the case the same year to the World Bank under the International Centre for Settlement of Investment Disputes. In 2016, TCC won the case and Pakistan was liable to pay billions in damages for breach of agreement and refusal of a mining license to TCC.
To avoid paying the penalties, Pakistan engaged in out-of-court negotiations with TCC for several years. Finally, in early 2022, it announced a settlement on the case but through a new deal under which Antofagasta stepped back from reinvesting in or restarting any project relating to Reqo Dik. However, Barrick Gold Corporation is once again in the game.
As of now, Barrick plans to invest not only in mineral extraction but also in the Gwadar Port for shipping purposes and social sector development of the Gwadar area and larger Balochistan. The mining work is expected to start in 2027-28. Early investments are expected to create thousands of jobs in the region, especially in Chaghi and Gwadar. But whether local people will benefit remains to be seen.
Several studies, including a recent one by scholars at the China Maritime Studies Institute (CMSI) in the U.S. Naval War College, emphasize that mining and exporting Balochistan’s mineral resources are a huge commercial opportunity for the region. These studies point out that a large number of shipments and quantities of exports especially of high-value resources can bring unprecedented profits to Pakistan and make Gwadar Port one of the key ports in the region.
But, the fact that Barrick took Pakistan to court earlier in cases that ran for over a decade and could have cost Islamabad billions of dollars does not bode well. It is a fact that Pakistan allowed Barrick back only to escape paying huge penalties.
Gwadar could indeed emerge as an important port. But first, Pakistani and Chinese authorities and now Barrick Corporation need to improve the port’s access to water, power and other basic facilities. Importantly, Barrick, the federal and provincial government and the Gwadar Port Authority should make the details of the deal public so that people are aware of what is happening to their resources and the port, and where they fit in the big picture.
