When it was founded in 2007, 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 over one-sixth of the world’s oil production and one-third of the world’s liquefied natural gas (LPG) flows — should be expected to attract international shipping as well as trade and industry to the harbour.
However, these expectations have not been fulfilled. While 15 to 17 million barrels of oil flow through the waters just off the coast of Gwadar every day, the port has remained calm even with very little activity.
There are several reasons for the lack of activity in Gwadar Port. Chief among these are the political instability and armed insurgency in Balochistan province over the past two decades. But also the current low capacity of cranes, docks, berths, warehouses and other infrastructure and facilities in the port is a major obstacle to making the port a successful “gateway” to the China Pakistan Economic Corridor (CPEC).
Through the expansion of the port facilities, the construction of the free zone and the East Expressway in Gwadar, both Pakistan and China have been looking for it Attract trade and business with foreign companies. One such deal on the horizon is with the Canadian Barrick Gold Corporationone of the world’s largest gold mining companies.
Barrick plans to mine gold in Balochistan in an area approximately 1,000 kilometers from the port of Karachi and 650 kilometers from the port of Gwadar. Currently, Chinese companies extracting minerals from northwest Balochistan are transporting them to the already busy port of Karachi.
As the Barrick team and the Gwadar Port Authority (GPA) discussed at their recent meeting, Using 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 via the M8 Motorway. A new motorway will have to be built for the remainder of the route.
Barrick’s interest in investing billions of dollars in the Gwadar gold mine project and port, and using the latter to ship the minerals, appears to be an opportunity for Gwadar to realize its long-awaited economic potential.
But past experiences with international investors and mining of minerals in Balochistan arouse a lot of skepticism. This skepticism is not unfounded.
Barrick plans to work on it Reko Diq gold mines in the Chaghi district of Balochistan, which borders Iran and Afghanistan (Pakistan’s 1998 nuclear tests were conducted in Chaghi).
The Government of Pakistan, the Baluchistan Provincial Government and Barrick Gold Corporation have entered into a preliminary agreement under which the Company will invest $7 billion into the mining project and own 50 percent of the shares, while the remaining 50 percent is divided equally between the federal government and the government of Balochistan.
The Reqo Dik area reportedly contains the the fifth largest gold deposits in the world, in addition to several other minerals. Its mineral wealth and high profit promise have prompted international companies to take the risk of investing here, despite the fragile political situation and numerous security threats they face here.
Their interest began as early as 1961 after the Geological Survey of Pakistan and the US Geological Survey identified the region as rich in minerals. More extensive studies in 1971 and 1974 confirmed the results 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 began mining in Saindak in 2002. As for Reqo Dik, the Balochistan Development Authority and an Australian mining company BHP minerals signed a contract in 1993 under which the Chaghi Hills Exploration Joint Venture was formed to explore for minerals in the Reqo Dik area.
When BHP’s feasibility study confirmed that Reqo Dik was one of the world’s largest undeveloped copper and gold deposits, it said 75 percent of the shares of total discoveries for the next 56 years. However, the company did not start mining for several years.
Then in the year 2000, BHP handed over the Reqo Dik Deal with Tethyan Copper Company (TCC), a joint venture between Antofagasta of Chile and Barrick Gold Corporation. Both Companies spent $200-$400 million to take over full management of the project in 2006. Meanwhile, media investigations in 2010 published the terms of the deal, which angered Baloch nationalist activists and politicians as the terms were viewed as allowing “outsiders” to exploit Balochistan’s natural resources and even profit from them as the people of the province were struggling with extreme poverty.
Under pressure from the nationalists, the Balochistan government refused to convert the exploration permit into a mining license, ending the deal with TCC. In 2011, the TCC brought the case to the Supreme Court of Pakistan, which ruled in favor of the government of Balochistan. TCC did not give up and that same year brought the case before the World Bank under the International Center for Settlement of Investment Disputes. In 2016, TCC won the case and Pakistan had to pay TCC billions in damages for breach of contract and denial of a mining license.
To avoid paying the fines, Pakistan engaged in out-of-court negotiations with TCC for several years. Finally, early 2022, It announced an agreement in the case but through a new deal that saw Antofagasta step down from reinvesting in or restarting projects related to Reqo Dik. However, Barrick Gold Corporation is back in the game.
Effective immediately, Barrick plans to invest not only in mineral exploration, but also in the Port of Gwadar for shipping purposes and social sector development in the Gwadar region and greater Balochistan. Dismantling work is scheduled to begin in 2027-28. Early investment is expected to create thousands of jobs in the region, particularly in Chaghi and Gwadar. It remains to be seen whether local people will benefit from this.
Several studies including a recently by scientists from the China Maritime Studies Institute (CMSI) at the US Naval War College emphasize that the mining and export of mineral resources in Balochistan represent a huge economic opportunity for the region. These studies indicate that a large number of shipments and export volumes, especially of high-value resources, can bring Pakistan unprecedented profits and make the port of Gwadar one of the most important ports in the region.
But the fact that Barrick took Pakistan to court earlier in cases that have dragged on for over a decade and could have cost Islamabad billions of dollars does not bode well. The fact is that Pakistan allowed Barrick to return just to avoid paying huge fines.
Gwadar could actually develop into an important port. But first, Pakistani and Chinese authorities, and now Barrick Corporation, must improve the port’s access to water, electricity and other basic facilities. It is important that Barrick, the federal and provincial governments and the Port Authority of Gwadar make the details of the deal public so people know what is happening to their resources and the port and where you fit into the big picture.