Copper miner Antofagasta (ANTO) has risen to the top of the FTSE 100 leader board after winning a seven-year legal fight against Pakistan authorities over a denied mining licence.
The Chile-based operator saw its share price climb 3% to 890p after confirming the news in an announcement. It stated that the World Bank arbitration court has ordered the Pakistani government to pay damages of $5.8bn to Tethyan Copper, a joint venture between the company and its partner Barrick Gold.
CASH PAYOUT DISCOUNTED
Despite the sizeable award, it remains doubtful whether the joint venture will end up receiving the full cash.
Investec Securities mining analyst Hunter Hillcoat believes that the market is pricing in the company receiving ‘circa 15% to 20%’ of the money.
After the ruling, Tethyan Copper said it is willing to negotiate a settlement with Pakistan, and Hillcoat said an agreement could potentially be reached given that Pakistan will want to be seen to be abiding by rules from the likes of the World Bank, organisations which give significant aid to the country.
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He added that today’s ruling could also send a message to other governments in dispute with miners, and possibly benefit Acacia Mining (ACA), which is in a tax dispute with the Tanzanian government.
BACKGROUND TO DISPUTE
The dispute started after a plan by Antofagasta and Barrick Gold to mine copper and gold in Reko Diq, a remote and rocky desert area close to Pakistan’s border with Iran and Afghanistan, was halted in 2011 after Pakistan refused to grant a mining lease.
Tethyan Copper discovered a vast wealth of minerals, which was set to rank as one of the world’s biggest untapped gold and copper mines, over a decade ago.
But Pakistan unexpectedly denied the joint venture a licence citing security concerns in the area, as well as public anger with the apparent lack of economic benefit to people in the surrounding region of Balochistan.
Tethyan Copper said it had invested $220m by the time the licence was denied, and part of the damages ruling includes $4.09bn in compensation for the project’s fair market value when the licence was denied, as well as $1.75bn in interest.
