AGP raises concerns over Rs89 billion investment in Reko Diq

The Auditor General of Pakistan has raised serious concerns about the Rs 89.550 billion investment in the Reko Diq project by Government Holding Private Limited (GHPL) without ensuring the availability of funds and foreign currency.

GHPL acquired an 8.33% equity stake in the Reko Diq project, which is owned 50% by Barrick, 25% by three state-owned enterprises (GHPL, OGDCL, and PPL), and 15% by the provincial government of Balochistan on a fully-funded basis and 10% on a free-carried basis.

According to the Audit Report on Petroleum Division and Oil and Gas Regulatory Authority (OGRA) 2023-24, the board of directors resolved in June 2023 to reallocate reserves of Rs51.230 billion to accumulated profits and set aside Rs5 billion each year for the next four years to accumulate new reserves for the Reko Diq project. The audit report also noted that phase-I development of Reko Diq would continue until 2028, with production of copper and gold expected to start in 2028.

However, the audit officials expressed concerns that GHPL invested in the Reko Diq project without proper due diligence, and the cash flow position was not properly assessed. As a result, funds intended for other objectives were reversed to fund the investment in Reko Diq.

Furthermore, GHPL’s share of Rs89.550 billion in the Reko Diq project would be paid in dollars, but no provision was made for maintaining funds in US dollars or a US dollar account was maintained by the management.

In response to the audit findings, GHPL management claimed that their business was not exposed to any liquidity risk and that they maintained a healthy cash flow position. They also stated that they had full capacity to fulfill their commitment towards the Reko Diq project.

The Companies Act 2017 states that “The business of the company shall be managed by the board.” Additionally, GHPL’s finance, procurement, and risk management committee meeting on August 25, 2022 noted that estimated sale volume for fiscal year 2022-23 would decrease due to natural decline in major fields.

Web Desk Karachi