At its inception in 2007, the Gwadar port was expected to be a success. Its strategic location at the mouth of the Strait of Hormuz, a major waterway that empties into the ocean and through which more than a sixth of the world’s oil production and a third of liquefied natural gas (LPG) passes, was expected to of the world, would attract international shipping, commerce and industry to the port.
However, these expectations have not materialized. While 15 to 17 million barrels of oil pass through the waters off the coast of Gwadar every day, the port itself has been quiet with very little activity.
There are several reasons for the lack of activity in the port of Gwadar. The most important of these is the political instability and armed insurgency in the province of Balochistan during the last two decades. But also, the current low capacity of cranes, wharves, berths, storage and other infrastructure and facilities at the port is a major obstacle to making the port a successful “gateway” to the China-Pakistan Economic Corridor (CPEC).
However, through the expansion of the port facilities, the construction of the free zone and the eastern highway in Gwadar, both Pakistan and China have been trying to attract trade and dealings with foreign companies. One of those agreements that is in sight is that with the Canadian Barrick Gold Corporationone of the largest gold mining companies in the world.
Barrick plans to mine gold in Balochistan in areas that are about 1,000 kilometers from the port of Karachi and 650 kilometers from the port of Gwadar. Currently, Chinese companies extracting minerals from northwestern Balochistan are trucking them to the already busy port of Karachi.
As the Barrick team and the Gwadar Ports Authority (GPA) discussed at their recent meeting, the use of the port of Gwadar would reduce the distance, time and cost of transportation. Half of the distance between the gold reserves and the port of Gwadar is accessible through the M8 motorway. A new highway will need to be built for the remainder of the route.
Barrick’s interest in investing billions of dollars in the Gwadar port and gold mining project, and using the latter to ship the minerals, appears to be an opportunity for Gwadar to realize its long-anticipated economic potential.
But past experiences with international investors and mineral mining in Balochistan raise a lot of skepticism. This skepticism is not without foundation.
Barrick plans to work on the Reko Diq gold mines in the Chaghi district of Balochistan, which borders Iran and Afghanistan (Pakistan’s 1998 nuclear tests were carried out in Chaghi).
The government of Pakistan, the provincial government of Baluchistan 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 remaining 50 percent will be shared equally between the federal and Baloch governments.
According to reports, the Reqo Dik area contains the fifth largest gold deposit in the world, 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.
His interest began as early as 1961 after the Pakistan Geological Survey and US Geological Survey identified the region as rich in minerals. Larger studies in 1971 and 1974 confirmed the findings of earlier 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 started mining at Saindak in 2002. As for Reqo Dik, the Balochistan Development Authority and an Australian mining company BHP Minerals signed an agreement in 1993 establishing the Chaghi Hills Exploration Joint Venture 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-gold deposits, it stated 75 percent share in general discoveries for the next 56 years. However, the company did not start mining for several years.
Then in 2000, BHP delivered the Reqo Dik agreement with Tethyan Copper Company (TCC), a joint venture between Chile’s Antofagasta and Barrick Gold Corporation. both of these companies spent $200-400 million to fully take over the project in 2006. Meanwhile, in 2010, media investigations published the terms of the deal, angering Baloch nationalist activists and politicians, as the terms were seen as allowing ” outsiders” to exploit and benefit from Balochistan’s natural resources even as the province’s people struggled with extreme poverty.
Under pressure from nationalists, the Baluchistan government refused to convert the exploration permit into 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 favour of the Baluchistan government. TCC did not give up and took the case the same year to the World Bank under the International Center for Settlement of Investment Disputes. In 2016, TCC won the case and Pakistan was required to pay billions in damages for breach of agreement and denial of a mining license to TCC.
To avoid paying the sanctions, Pakistan engaged in extrajudicial negotiations with the TCC for several years. Finally, in early 2022, announced a settlement in the case but through a new agreement under which Antofagasta refrained from reinvesting or restarting any project related to Reqo Dik. However, Barrick Gold Corporation is once again in the game.
From now on, Barrick plans to invest not only in mineral extraction, but also in the port of Gwadar for the purposes of transportation and development of the social sector of the larger Gwadar and Baluchistan area. Mining work is expected to start in 2027-28. The first investments are expected to create thousands of jobs in the region, especially in Chaghi and Gwadar. But it remains to be seen whether the local population will benefit.
Several studies, including a a recent one by scholars from the China Maritime Studies Institute (CMSI) at the US Naval War College, emphasize that the extraction and export of Balochistan’s mineral resources is a major business opportunity for the region. These studies point out that a large number of shipments and quantities of exports, especially of high-value resources, can generate unprecedented profits for Pakistan and make the port of Gwadar one of the key ports in the region.
But the fact that Barrick has taken Pakistan to court before in cases that lasted more than a decade and could have cost Islamabad billions of dollars does not bode well. It is a fact that Pakistan allowed Barrick to return only to avoid paying huge fines.
Indeed, Gwadar could emerge as a major port. But first, the Pakistani and Chinese authorities and now the Barrick Corporation must improve the port’s access to water, power and other basic facilities. Importantly, Barrick, the federal and provincial governments and the Gwadar Port Authority must make the details of the agreement public so that people are aware of what is happening with their resources and the port, and where they fit into the big picture.