Antofagasta rises on $6bn win in legal fight with Pakistan
World Bank tribunal rules in favour of Antofagasta-Barrick joint venture
Shares in copper miner Antofagasta climbed to the top of the FTSE 100 leaderboard on Monday after it was awarded almost $6bn in damages from a legal fight with the government of Pakistan.
A seven-year battle over an all but forgotten copper project ended on Saturday when a World Bank international arbitration tribunal ruled in favour of Tethyan Copper Company, a joint venture between Antofagasta and Canada’s Barrick Gold.
The case was filed with the World Bank’s International Centre for Settlement of Investment Disputes in 2011 after Tethyan was unexpectedly denied a mining lease for the Reko Diq project, one of the world’s biggest undeveloped copper and gold projects.
Among the reasons given by Pakistan for the surprise decision was security and opposition from local communities.
“This is positive news for Antongasta on an all but forgotten project, but one that obviously cannot be fully relied on until the money is in the bank,” said analysts at Investec.
Shares in Antofagasta were up 39.4p, or 4.8 per cent, at 904p in early trading on Monday.
The damages include compensation of $4bn - the market value of the project at the time of the “unlawful” mining lease denial, plus interest.
“We remain willing to discuss the potential for a negotiated settlement with Pakistan and will continue to protect our commercial interests and legal rights until the conclusion of this dispute,” said Tethyan chairman William Hayes.
Pakistan said it was disappointed by the ruling but had taken note of the statement by Mr Hays.
“The Government of Pakistan welcomes this approach to work towards a mutually beneficial solution that works for both sides,” it said.
The ruling comes at a delicate time for Pakistan, which has just secured a $6bn bailout from International Monetary Fund to help tackle a balance of payments deficit caused by high imports and sluggish exports.
Reko Diq was discovered by BHP, the world’s biggest mining company in the late 1990s at the foot of an extinct volcano near Pakistan’s frontier with Iran and Afghanistan.
BHP effectively quit the project when it struck a joint venture agreement with Mincor, a junior Australian, miner in 2000. Reko Diq was later demerged and subsequently acquired by Antofagasta, which is best known for its copper mines in Chile.
“Given the size of the award, we expect the government of Pakistan to appeal by any route possible and to defer and delay to all and any extent possible,” said Edward Sterck, analyst at BMO Capital Markets.
“The end amount, form and timing of any eventual payment is very hard to determine and we do not believe the market is pricing in anything like the full settlement, and arguably nor should it.”