Strategic Mineral Alliance: What Makes Pakistan the Perfect GCC Partner?

Pakistan sits on copper reserves of about 600 million metric tons, making it a potential leader in the global minerals sector. The country’s natural wealth includes the world’s fifth-largest copper and gold deposits. The massive Reko Diq mine alone contains 12.3 million tons of copper and 21 million ounces of gold, showing the country’s wealth of untapped natural resources.

The mineral sector’s potential remains largely unexplored. It adds only 3% to Pakistan’s GDP, while mineral exports make up just 0.1% of global trade. The country has 92 known minerals and 52 of these see commercial use today. This presents a great chance for international investors, especially when you have interest from the GCC region. Pakistan’s advantages include more than 5,000 active mines and the strategic deep-sea port of Gwawar that make mineral sector development attractive.

This piece shows why Pakistan could be an ideal mineral alliance partner for GCC nations. The focus lies on understanding its big resources, strategic benefits, and how such collaborations could help both regions grow together.

Pakistan’s Mineral Wealth: A GCC Investment Goldmine

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Pakistan’s rugged mountains and vast plains hide a wealth of untapped minerals valued at AED 29.38 trillion. These riches spread across 600,000 square kilometers and include 92 known minerals. Companies currently exploit 52 of these minerals commercially.

Mapping Pakistan’s untapped natural resources

Each Pakistani province holds unique concentrations of mineral wealth. Balochistan stands out with its crown jewel – the world-class Reko Diq copper-gold deposit. This massive reserve contains nearly 12.3 million tons of copper and 21 million ounces of gold. The province of Khyber Pakhtunkhwa holds about 92% of the country’s gypsum reserves, estimated at 5.5 billion tons. Punjab boasts the world’s second-largest salt mines, while Sindh contains massive coal reserves of roughly 185 billion tons.

High-value minerals attracting global attention

Global investors have shown keen interest in Pakistan’s most valuable minerals. Here’s what makes them so attractive:

1. Copper and Gold: The Reko Diq project should generate AED 271.72 billion in free cash flow over 37 years. Saudi Arabia’s mining giant Manara Minerals plans to acquire a 15% stake by investing about AED 3.67 billion.
2. Critical Technology Minerals: The country has large deposits of lithium and rare earth elements (REEs). These minerals power electric vehicles, renewable energy infrastructure, and advanced electronics.
3. Industrial Minerals: World-class reserves include dimension stones like marble and granite (297 billion tons), gypsum (6 billion tons), and limestone.

Current extraction rates vs potential capacity

Pakistan currently extracts a mere 0.005% of its resource potential. The production numbers from July-March FY2024 show promising growth – coal increased by 37.7%, chromite by 36.9%, and marble by 23.2%. Yet these figures represent just a small fraction of the country’s capacity.

The country runs 5,000 operational mines that employ 300,000 workers. The mining sector adds only 2.5-3% to Pakistan’s GDP. Similar mining-rich countries contribute over 8% to their economies. This gap explains why GCC nations see Pakistan as an investment goldmine. The underdeveloped sector offers exceptional returns through mutually beneficial alliances and stands ready for rapid growth.

Strategic Advantages of Pakistan-GCC Mineral Alliance

The Pakistan-GCC mineral alliance rests on three core pillars that make a strong case to strengthen cooperation beyond natural resources. These advantages could change the relationship between both regions significantly.

Geographic proximity and logistical benefits

Pakistan sits right at the Gulf’s doorstep and serves as a natural gateway for GCC countries. People often call it “the Gulf’s front yard”. This location brings real benefits as cargo ships can reach the UAE from Karachi in just 30-35 hours. Gwadar port is a vital trade hub that connects Pakistan to the Arabian Sea and opens a path to China’s landlocked Xinjiang province through the Strait of Hormuz. The China-Pakistan Economic Corridor (CPEC) makes these logistics even better by cutting down transportation costs.

Complementary economic priorities

Both regions’ economic goals fit together perfectly. GCC nations want to vary their income beyond oil and gas, which makes Pakistan’s mineral wealth very attractive for investment. Pakistan created the Special Investment Facilitation Council (SIFC) in June 2023 to bring in GCC investment in minerals and mining, among other key sectors. On top of that, a preliminary free trade agreement between Pakistan and GCC countries has already picked mining as a priority sector. This partnership gives GCC nations access to critical minerals for their tech sectors. These oil-rich economies can now secure resources they need for their economic plans.

Countering regional competitors

Strategic collaborations between Pakistan and GCC nations help both sides stand stronger against regional rivals. Pakistan has helped Saudi Arabia, Qatar, and Oman protect their borders and oil wells through the years. The GCC states have backed Pakistan against India, and the Gulf area acts as a buffer between these South Asian rivals. This matters because India remains Pakistan’s main competitor in GCC markets due to better costs and logistics—GCC pays USAED 367.19 more per metric ton to import Basmati rice from Pakistan than from India.

How GCC Nations Benefit from Pakistan’s Resources

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GCC nations and Pakistan share mutually beneficial alliances that go far beyond basic resource sharing. Their mineral partnership brings advantages that match the Gulf states’ long-term vision and economic goals.

Diversification beyond oil and gas

Oil-dependent economies need to secure their future prosperity. GCC nations now actively pursue economic diversification plans. Saudi Arabia’s Vision 2030 points to mining as a key area to revolutionize their economy. Gulf states build complementary industrial systems through Pakistani investments that reduce their oil dependence. Saudi Arabia has put $24 billion into Pakistan’s IT, agriculture, and mining sectors, while the UAE has pledged $22 billion for similar initiatives. These investments help GCC nations develop value-added industries such as plastics, metallic alloys, and advanced building materials.

Access to critical minerals for technology sectors

The shift to knowledge economies needs reliable access to tech-enabling minerals—Pakistan meets this need perfectly. GCC nations now have direct access to lithium for electric vehicle batteries, rare earth elements for defense and telecommunications, and copper for electric transmission. These minerals are the foundations of future technologies that GCC states develop as part of their economic updates. Saudi Arabia’s plan to buy a 15% stake in the Reko Diq mine for AED 1.98 billion shows the kingdom’s steadfast dedication to securing these resources.

Long-term investment returns

Pakistan’s mineral sector offers GCC investors exceptional financial gains beyond immediate benefits. The Reko Diq project will generate AED 271.72 billion in free cash flow over 37 years. Gulf investments also open doors to Central Asia’s untapped markets through Pakistan’s strategic position. The Saudi Development Fund plans infrastructure investments over AED 367.19 million to improve mining operations. These investments promise substantial returns and strengthen Saudi Arabia’s place in global mineral supply chains.

Case Study: Saudi Arabia’s Manara Global in Reko Diq

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Saudi Arabia has made a bold move into Pakistan’s mining sector by buying into the Reko Diq copper-gold project through Manara Minerals. This game-changing deal shows how GCC countries are staking their claim in the worldwide minerals competition. They secure vital resources while boosting Pakistan’s economy.

Investment structure and partnership model

Manara Minerals plans to buy 10-20% of Reko Diq from Pakistan’s government. The company is a joint venture between Saudi Arabia’s Public Investment Fund (PIF) and Ma’aden, their state-run mining company. The deal costs between AED 1.84 billion and AED 3.67 billion. This gives Saudi Arabia a strong position in one of the world’s biggest untapped copper-gold deposits. Barrick Gold leads the project with 50% ownership. Pakistani federal entities hold 25%, and Balochistan’s provincial government owns the remaining 25%. Balochistan receives dividends and royalties without putting up any money.

Expected economic outcomes

The project should generate AED 271.72 billion in free cash flow over its 38-year lifespan. Development will happen in two phases:

• Phase 1: The starter mine needs AED 20.20 billion and will produce 200,000 tons of copper and 250,000 ounces of gold yearly
• Phase 2: AED 12.85 billion more will double output to 400,000 tons of copper and 500,000 ounces of gold

Construction work has started. Production should begin by 2028-2029. The fully operational project will process over 90 million tons of ore each year.

Lessons for future GCC investments

This partnership reveals smart strategies for GCC mineral investments. Saudi Arabia secured future production through supply agreements. The investment matches Saudi Vision 2030’s goals to diversify their economy. They support wider development with an extra AED 367.19 million through their development fund. The project shows how GCC nations can get critical minerals without running operations directly. This puts them in a strong position within global supply chains.

Pakistan holds mineral resources worth AED 29.38 trillion, which creates a perfect chance for GCC nations to expand beyond their oil-based economies. The country’s prime location and resilient infrastructure make it an attractive investment destination for Gulf states.

Saudi Arabia’s recent investment in Reko Diq through Manara Minerals shows these partnerships work effectively. GCC nations can now access crucial technology minerals securely while helping Pakistan realize its resource potential. Reko Diq’s soaring win provides a clear roadmap for future mineral investments and shows how both regions achieve their economic goals through collaborative efforts.

These mineral partnerships between Pakistan and GCC will transform regional economies. Both regions will strengthen their position in global mineral supply chains as these relationships grow stronger. Pakistan’s rich resources combined with GCC’s strong investment power create lasting economic growth and shared prosperity.