Barrick Gold confirms 37-year mine life for Reko Diq, with $90 billion in projected cash flow

Barrick Gold Corporation, the 50% operating partner in Pakistan's Reko Diq Mining project, has endorsed that the estimated production span will be around 37 years with probable gross reserves now standing at 3 billion tons of copper and 2.9 billion tons of gold.

According to a recent report prepared by Barrick Gold, the updated feasibility study for Reko Diq estimates a 37-year mine life with a total estimated capital investment on a 100% basis of $8.83 billion, to be divided into phases, with Phase 1 having an estimated total cost of capacity of $5.6-6 billion.

On Feb 11, Barrick Gold's Board of Directors conditionally approved development under Phase 1 subject to the closing of $3 billion limited recourse financing project. Assuming $3 billion of project financing, Barrick's share of the total partner equity contribution required for development of Phase 1 is expected to be $1.8 to $2 billion.

Early construction work commenced during the first quarter of 2025, with first production anticipated by the end of 2028. The project will leverage five of the fifteen identified porphyry surface expressions within the current mining lease, highlighting substantial future growth.

Under the updated feasibility study, Phase 1 will see 45 million tons of mill feed processed annually, ramping up to 240,000 tons of copper and 297,000 ounces of gold, the report of Barrick said.

By 2034, Phase 2 will expand operations to 90 million tons per annum, increasing annual production to an average 460,000 tons of copper and 520,000 ounces of gold for the first 10 years from 2034-2043.

Internal rate of return of 21.32%

Based on a three-year trailing average copper price of $4.03 per pound and gold price of $2.045 per ounce, Barrick estimates the project will deliver an internal rate of return of 21.32%, generating $90 billion in operating cash flow and $70 billion in free cash flow over the life of mine and generating $54 billion revenue within Pakistan.

According to a report of brokerage house AKD Securities, listed state-run enterprises are anticipated to invest $55-60 million each annually ahead of Phase-1, with the project's NPV estimated at $9 billion assuming a 16% cost of capital.

This is based on Barrick Gold's historical cost of production metrics and assumed long-term copper and gold prices of $8,500 per ton and $2,500 per ounce, respectively. Furthermore, the brokerage incorporated Barrick Gold's projected third-stage production expansion from CY43 onward, where output is expected to double from Phase 2 levels. Consequently, it estimates the project to generate a sustainable IRR of 25% for minority partners over CY29-65.

"Factoring in OGDC/PPL's pre-divested 8.33% stakes, we estimate the mining project to contribute PKR 51/81 per share to respective valuations before adjusting for the minority stake discount," the report said.

Reko Diq is owned 50% by Barrick, 25% by three federal state-owned enterprises, 25% by the Balochistan government of which 15% is on a fully funded basis and 10% is on a free carried basis.

Reko Diq is nestled in the Chagai district of Balochistan, the largest district by area, with close proximity to the Afghanistan and Iran borders. The district is characterized by arid and semi-arid terrain with vast deserts, mountain ranges, and sparse vegetation.