US shows interest in providing loan for Reko Diq mining project

Reko Diq

US shows interest in providing loan for Reko Diq mining project

The United States has expressed interest in providing debt funding for the Reko Diq gold and mines project, marking what could be Washington’s first major investment in Pakistan in decades.

According to sources within the government and diplomatic circles, the Export-Import (Exim) Bank of the United States is keen on financing the multibillion-dollar project. The estimated cost of the Reko Diq project is projected to be between $6 billion and $6.5 billion, although a new feasibility study has yet to be finalized.

The project reportedly requires $3 billion to $3.5 billion in debt financing. It remains unclear how much of this will be covered by the US Exim Bank and how much by other creditors, including the International Finance Corporation (IFC). Sources suggest that the loan proposal is being considered for the procurement of earth-moving machinery from the US and is contingent upon granting preferred creditor status to the Exim Bank.

Qamar Abbasi, spokesperson for the finance ministry, stated, “A number of financial institutions are exploring the possibility of financing the Reko Diq project. The project authorities are engaged with these financial institutions and the discussions are ongoing, but the precise details about individual institutions are not available at this stage.”

Discussions on the matter have reportedly taken place between Finance Minister Muhammad Aurangzeb and US Ambassador to Islamabad, Donald Blome. The US embassy, when contacted, neither confirmed nor denied the development. A spokesperson reiterated the United States’ commitment to promoting US-Pakistan trade, investment, and the overall economic relationship.

If finalized, this deal would represent the first major US investment in Pakistan in decades. US-Pakistan economic relations have been strained, partly due to Pakistan’s close ties with China and the controversial China-Pakistan Economic Corridor (CPEC), which the US Congress and administration have publicly opposed.

The Reko Diq project, owned 50% by Barrick Gold, 25% by three federal government entities, and 25% by Balochistan, is currently undergoing an update to its feasibility studies. These studies are expected to be completed by December 2024, with the first production anticipated by 2028.

Prime Minister Shehbaz Sharif has expressed a preference for using the Gwadar port for the project, though Barrick Gold favors the Karachi port due to better road infrastructure.

The Reko Diq project, expected to have a lifespan of at least 40 years, will be constructed in two phases with a combined processing capacity of 80 million tonnes per annum. US lending for the project could facilitate securing loans from other creditors, but Pakistan would need to grant the Exim Bank preferred creditor status, a designation usually reserved for multilateral lenders.

Pakistan is also considering leasing adjacent Tethyan Metallogenic Belt blocks as part of the project’s expansion, according to sources. ( Monitoring Desk)