REJOINDER BY TCC-Nov.27th 2010
Tethyan Copper Company Pakistan (Pvt.) Limited (TCC) strongly denies the allegations made in the news story titled “Reko Diq War Gets Dirty” published by The News on November 24th, 2010. This story like Mr. Shaheen Sehbai’s earlier story against TCC and its co-owners is baseless and malafide. The gross factual mistakes made by the writer clearly indicate the poor level of research done by him. His attempt to build a case around inadequate and flawed understanding of the mining industry shows that his tirade against responsible and serious investors like Barrick Gold Corporation and Antofagasta plc is meant not only to sabotage this project of national importance but also to defame TCC and its owners.
As already clearly stated by TCC in its earlier rejoinder that TCC is a partner of government of Balochistan and shares with it all the information, both technical and financial on regular basis. As a member of the Operating Committee under the JV Agreement, the Government of Balochistan has full access to operational and financial details. There is no reason for TCC to misreport to the government about the Reko Diq deposit because as partners both parties benefit from any upturn in the resource size and value.
In order to prove his point the writer has quoted the figures reported by Barrick Gold in the Canadian and American Mines handbook (2009-2010) and also a study by both the companies published in “Economic Geology”, (Vol. 103 December 2008 No. 8).
Again the writer has committed the same blunder that he has been doing in his previous stories which shows he does not understand the reporting standards of the mining industry. All the figures quoted by him are the resources and he is comparing those with TCC’s figures based on mineable portion of the resource. All mining companies report resources till the finalization/approval of Feasibility report. A resource is classified as “Measured”, “Indicated” or “Inferred” depending on the degree of confidence in continuity and grade. The mineable portion of the resource contains the measured and portion of indicated resources. Total mineral resources at Reko Diq are estimated at 5.9 billion tons. In Reko Diq, the economically mineable resources have been estimated by the Feasibility Study at 2.2 billion tons. Metallurgical recoveries have to be considered to obtain the final payable metal figures which in case of Reko Diq are 2.2 billion pounds of copper (10 million tons) and 13 million oz of gold. So to simply multiply overall resources (which are never fully extractable) with bullish prices (all analysts use long term prices for financial modeling) is totally amateurish and irresponsible on the part of the writer. In fact the resources quoted by the writer are old estimates (2008) as the latest combined resources of 5.9 bn tons reported by TCC ,as finalized in feasibility study in early 2010, are much higher.
The writer has tried to validate his comments by referring to quotes by CEO of a company called Benway which 100% owns Exploration License (EL24) and is in litigation with TCC over an airstrip issue at Reko Diq. The obvious bias is there. TCC has complied with all legal formalities for the use of the surface rights and for the construction and operation of the airstrip. It holds a valid lease for surface rights (as opposed to subsurface rights of Benway) over the area for which full fee/payment was paid to the Balochistan Board of Revenue. In any case this airstrip was built by TCC for exploration phase purposes and once the project moves forward, TCC will relinquish the surface rights of that area of approx.3 sq.km.
It will be worthwhile to point out yet another piece of irresponsible and faulty research done by the writer in his story titled “Documents surface proving 30-year lease to TCC” dated Nov.5th where he alleged that there was a 4 time increase of leased area. In fact there was no increase in leased area as it was a simple correction issued by the government as its first notification mentioned 144568-0-0 acres as equivalent to 147 sq. km when should have been 585 sq.km. The 30 years lease for surface rights has been granted to TCC by the Government of Balochistan’s Board of Revenue against full payment of the due fee/charges. Due process of law has been followed in having this area of land leased. This area is in and around EL-5 which has been obtained as part of advance planning of the project design to house project infrastructure.
A similar mistake of calculations was also made in another article published in The News International by Ikram Sehgal, titled “Who is selling this gold mine?” November 22, 2010. Firstly the writer does not reveal as to what is the source of cost of production that he used as benchmark. And secondly even by his own calculations the annual profits for gold do not come to $2.5 bn but to $0.25 bn($250 million) . It is indeed surprising that how can a reputable columnist make such a mistake and inflate the figures to match the ones been published by newspaper earlier.
TCC has established its credibility and commitment not by empty words but by investing more than $220 million in exploration and technical studies to present a world class bankable Feasibility report to the government of Balochistan. The government, if it so wishes, may get it scrutinized by reputable independent experts. Since 2006 when the present co-owners took over, the project’s profile in terms of resources and scale has improved significantly-only $30 million were spent in 13 years on Reko Diq prior to takeover by present owners. There are other exploration license holders in the area too. It will be worthwhile for serious analysts to see if any progress has been made in those concessions. TCC remains committed to develop this project in the interest of all stakeholders.
TCC is committed to transparency and compliance with law. TCC’s owner companies are bound to total transparency by their own corporate values, by their own stakeholders and by the regulations of the stock exchanges where they are listed.