A large copper and gold mining project in south-western Pakistan will be developed by the provincial government rather than Canada's Barrick Gold and Chilean miner Antofagasta, according to the local chief minister.
Nawab Muhammad Aslam Khan Raisani, chief minister of Baluchistan, told the Financial Times a new public sector company would take over extraction and processing at the remote Reko Diq site, which had promised to be one of the largest foreign direct investmentsin Pakistan.
"We will not extend any further contracts either to the existing companies or to anyone else," said Mr Raisani. "They [the two companies] only have an exploration licence which does not cover extraction."
The pair bought a 75 per cent interest in the Reko Diq project from an Australian miner in 2006, with Baluchistan retaining 25 per cent. The current provincial government, backed by the national authorities, set aside the concession, arguing it was against the interests of Pakistanis.
Speaking for the joint-venture partners, Vincent Borg of Barrick said: "We haven't received any notification. We believe we've satisfied the terms of the licence."
Mr Raisani estimated total reserves at Reko Diq as worth $1,000bn (€734bn, £639bn). "Even if we get $1bn a year out of this project, our economic returns for Baluchistan will improve very rapidly. But we are looking at much larger returns."
Development costs are estimated at $3bn. Provincial officials expressed confidence that the local government could secure bank loans to finance development. The site holds up to 11bn pounds of copper and 9m ounces of gold, says the government.
Foreign investors have lost their appetite for Pakistan because of insecurity. Baluchistan, bordering Iran and Afghanistan, has been the scene of a separatist insurgency for decades. Rich in minerals, it is the poorest of Pakistan's five provinces. Rebels have long demanded royalties from the federal government for gas pumped to other parts of Pakistan.
Last month, Shaukat Tarin, the finance minister, told the FT raw copper from Reko Diq would, under the Barrick and Antofagasta concession, earn about $40bn-$50bn over the next 25-30 years. "This is a tenth of what we could earn for Pakistan if the investor was to put in a processing plant to smelt the copper and export it in a refined form. Why should they [investors] take our raw material for processing to a third country and then make huge profits?" he asked.