Afghanistan is attempting to accelerate development of its rich mineral deposits by offering four to five concessions of iron ore, oil, copper, gold, and other minerals for international tender every year.
This week, the country opened a tender process for four large copper and gold concessions, which had been discovered and planned for development decades ago before Afghanistan’s civil war.
While railroads for mineral exports are only beginning to be developed in a mountainous country where Nato and Afghan forces are battling a stubborn insurgency, Afghanistan’s mining minister says he expects international competition for up to five mineral concessions per year from 2012.
Afghanistan’s ambitions for its resource sector gained ground in November when a consortium of Indian steel companies won the rights to develop Hajigak, a vast iron ore deposit. The award of the Hajigak concession was the most significant mining tender process in Afghanistan since 2008, when Metallurgical Corp of China won the rights to the Aynak copper deposit.
A consortium led by Jan Kulczyk, Poland's richest man, is expected to bid for at least one of the gold concessions now on offer, after Mr Kulczyk met the mining minister this week. The consortium, which was put together by JPMorgan, is already developing a gold deposit in Afghanistan.
“Besides making some money from it, I think it’s great for the Afghan economy to have something besides poppies,” said Peter Hambro, the London-based gold mining entrepreneur, who is another investor in the Kulczyk-led JPMorgan consortium.
Wahidullah Shahrani, the minister of mines, said the government expected to offer “a huge oil basin” for tender in March 2012, followed by “a big gas field on the border of Turkmenistan”. In the summer of 2012, “another huge iron ore deposit” near Hajigak was to come up for tender, he added.
The government had set a target for the mineral sector to yield 25 per cent of gross domestic product by 2016, the minister said in a meeting attended by advisers to the U.S. Department of Defense.
“These tenders will help us move forward toward self-sufficiency,” Mr Shahrani said. “We know what the contribution of oil, gas, and minerals should be to our GDP, given that we are a country heavily dependent on international aid, which is not sustainable.”
But the timeframe for rebalancing the economy is ambitious. Billions of dollars will need to be raised to build not only the mines and oilfields but also the transport infrastructure necessary for export.
MMC, the Chinese company developing the Aynak copper mine, has commissioned China Railways Corp to construct a railway to the unbuilt mine. But the railroad is in a design phase that will take 18 months, and there remain huge security challenges that may delay the projects.
Bombings in Kabul and Mazar-e-Sharif killed more than 55 people on Tuesday, when Afghan officials announced the new gold and copper concessions. The violence led President Hamid Karzai to cancel a trip to London, where he was due to meet Mr. Kulczyk and other potential investors in the next round of mineral concessions.