FEATURE: MINE Magazine – The race to mine Afghanistan

A UH-60 Black Hawk flies over the Bamyan river valley, June 24, 2012.

The US administration is reportedly keen to develop Afghanistan’s extractive sector, having invested nearly $500m already. However, with rampant looting and occupation of mines by the Taliban and other insurgency groups, as well as corruption and stability concerns, some question the country’s readiness for foreign investment, as well the US administrations intentions.

For years, governments and experts have contemplated the mineral resource wealth of Afghanistan, where the US has been at war since 2001 – its longest ever conflict.

While the estimation that the country has untapped reserves to the value of $1tn has been widely disputed and downgraded given current commodity prices, Afghanistan is known to have large deposits of copper, iron ore, gold, rare earths, lapis lazuli and more.

US President Donald Trump is reported by The New York Times to have discussed the country’s mineral deposits with Afghan President Ashraf Ghani.

Trump believes developing Afghanistan’ extractive sector to be a “win-win” that could boost the country’s flailing economy, generate jobs for Americans and give the US a valuable new position in the rare earth minerals market, currently monopolised by China.

Furthermore, NGOs and other stakeholders hope that developing a legitimate mining sector, with Western help and expertise, could end the current stronghold of the Taliban and other insurgency groups on the sector, while raising much-needed revenue. According to a Global Witness report, mining is thought to be the Taliban’s second-largest source of funding, despite contributing less than 1% of state income in 2013.

However, these groups also warn of the many challenges ahead and that without a robust mining law, Afghanistan could be just another country on a long list of those affected by the so-called ‘resource curse’ – its revenues further fuelling conflict and providing little benefit to local populations.

New and old players

Trump is not the first US president wanting to develop Afghanistan’s mineral reserves; both Barack Obama and George Bush tried and failed before him.

A report by the Special Inspector General for Afghanistan Reconstruction states that by 2009, the Department of Defense’s temporary Task Force for Business and Stability Operations and the US Agency for International Development had allocated nearly $488m to efforts to develop the extractive industries in Afghanistan. So far, there seems to be little to show for the investment.

At present, one of the largest mines in the country is the Aynak copper licence, held by a Chinese consortium of the state-owned Metallurgical Corporation of China and Jiangxi Copper Corporation. The deposit is reportedly worth upwards of $50bn but has languished undeveloped for nine years, demonstrating that mining in Afghanistan is no easy feat.

According to a report by William A Byrd from the US Institute of Peace (USIP), the delay is partly due to the consortium making unrealistic promises that would be ‘impossible or highly unprofitable to fulfil’, resulting in a need to renegotiate contract terms in its favour, which the Afghan Government has been reluctant to do. Security and inexperience appear to be additional issues, as well as the company being “rather risk averse, in contrast to the risk tolerance exhibited by experienced international mining companies in other insecure countries,” writes Byrd.

Other foreign interests include, Afghan Gold and Minerals Company, founded by City of London banker Ian Hannam. The firm has been named as the preferred bidder for the Balkhab copper deposit and the Badakshan Gold License. The company is part-owned by an Afghan consortium led by local businessman Sadat Naderi, with the rest held by Centar, a Guernsey-based mining company headed by Hannam and backed by US and British investors. The website of Centar and its subsidiaries states they have invested more than $30m to secure mining licences in the country’s “best gold and copper resource areas”.

 

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