The federal cabinet has given the green light for the sale of a 15% stake in the Reko Diq mining project to Saudi Arabia, as part of an intergovernmental agreement.

The deal is valued at $540 million and would be executed in two phases, according to reports. In the first phase, the kingdom would invest $330 million for a 10% share, followed by an additional $210 million for a 5% stake in the second phase.

Moreover, the Saudi Fund for Development has committed an extra $150 million to enhance the mining sector in Balochistan. Saudi Arabia has also shown interest in further exploring mineral resources and investing in the Chagai region, known for its rich mineral deposits.

The Reko Diq project is jointly owned by the Government of Pakistan and the Balochistan government, holding a 50% stake while the remaining shares are owned by international companies.

The Reko Diq project is recognised as one of the world’s largest untapped copper and gold deposits, offering significant economic potential for Pakistan. Located in Chagai, Balochistan, the project has been at the centre of a protracted legal dispute.

In 2011, the government refused to issue a mining lease to Tethyan Copper Company (TCC), a joint venture between Barrick Gold and Antofagasta Minerals, citing contract irregularities.

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TCC had identified substantial copper and gold reserves in Reko Diq and intended to invest billions in its development. Following the government’s decision, TCC initiated international arbitration, alleging that Pakistan breached a bilateral investment treaty.

In 2019, the World Bank’s International Centre for Settlement of Investment Disputes ruled in favour of TCC, awarding the company $6 billion in damages.

To avoid the significant financial penalty, Pakistan renegotiated terms with Barrick Gold, resulting in a settlement in 2022. The agreement reinstated the project with a new ownership structure, allocating 50% of shares to the federal and provincial governments, while Barrick Gold retained the other half.