Barrick Gold Corporation is postponing its large-scale copper and gold mining project in Pakistan due to the Middle East conflict and a deteriorating domestic security situation in the country. The Toronto-based mining company initiated an evaluation of the Reko Diq project last month, prompted by an increase in separatist violence in Balochistan province where the mine is located. The decision to delay follows this assessment. In letters sent this week to its Pakistani equity partners and the project's local operator, the company stated that, based on preliminary evaluation results and the subsequent escalation of security conditions in Pakistan and the Middle East, it believes a further assessment of potential impacts and delivery strategy is necessary. The correspondence added that project development will slow over the 12 months starting in July, with corresponding reductions in project spending. Both the evaluation period and the slowed development pace are expected to affect the previously announced budget and timeline. Barrick declined to comment on the matter.
The Reko Diq mine has the potential to become one of the world's largest copper and gold mines, though industry experts caution that its development is exceptionally challenging and costly. Barrick holds a 50% stake in the mine and controls the board of directors. The remaining equity is divided among three Pakistani state-owned enterprises and the Balochistan provincial government. Three individuals involved with the project revealed they have been notified of Barrick's plans. A project board meeting is scheduled for next week to finalize the project's strategy, with this decision announced just prior to the meeting. They indicated that this delay means the earliest the project could achieve its first production is 2029. Prior to this evaluation, the mine was targeting a 2028 start, a timeline that local partners privately considered overly ambitious. Escalating conflict in the Middle East has disrupted global markets, driven up oil and gas prices, caused shortages of critical supplies, and increased regional instability. According to two informed sources, conflicts involving Iran have made it difficult to transport fuel and mining equipment from the Gulf region to the mine site. Furthermore, rising oil and gas prices are forcing a review of the total costs for the $9 billion project. This decision deals a blow to Pakistan's development plans. The country had intended to develop the impoverished but mineral-rich Balochistan province to generate significant foreign exchange revenue and alleviate its growing public debt burden. The cash-strapped nation has undergone over twenty International Monetary Fund bailout programs, with the current one beginning in 2024. Barrick estimates the mine could generate more than $70 billion in free cash flow over a 37-year lifespan. Located in western Balochistan near the borders with Afghanistan and Iran, the Reko Diq project is expected to produce 400,000 tonnes of copper and 500,000 ounces of gold annually upon full development of both phases. Balochistan, an area comparable in size to Germany, has long been affected by a violent insurgency from Baloch separatist groups. This is partly driven by local opposition to foreign investors exploiting the region's abundant natural resources. In late January, militants launched bold, coordinated attacks across more than a dozen locations in the province, resulting in 48 deaths. Project insiders also revealed that the sudden departure of Barrick's CEO Mark Bristow last year raised questions about the project's future. Bristow was a key supporter of the Reko Diq project and had cultivated close ties with senior Pakistani military and political figures. His successor, Mark Hill, is perceived as more risk-averse. Copper is a critical mineral in high demand globally, with mid-term forecasts predicting a supply shortage for this industrial metal. Last year, the U.S. Export-Import Bank indicated that a $1.25 billion loan for the Reko Diq mine would be among the first projects supported by its new management. Copper is widely used in cables, construction, and is a key material for the rapid construction of AI data centers. However, declining output from aging mines and difficulties in developing new ones have led to a significant rise in copper prices. The price of gold has also surged over the past year, repeatedly setting new record highs and reaching a peak above $5,000 per troy ounce in January.
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