Reuters, October 26, 2010

Afghanistan to develop $3 trillion in mining potential

"We estimate that there are 2 billion tonnes of reserves in Hajigak, with a 62 percent of iron concentration,"

By Amena Bakr

Afghanistan is estimated to be sitting on $3 trillion worth of untapped mineral deposits, but poor infrastructure and investor caution are inhibiting development of its mining industry, its mines minister said.

Hajigak west of Kabul
Hajigak west of Kabul (Photo: Canada Afghanistan Business Council)

"This estimate is based only on 30 percent of the country's area; there is still 70 percent we have no idea about," Afghan Mines Minister Wahidullah Shahrani told Reuters in an interview on the sidelines of an industry conference in Dubai on Monday.

Since the start of the year, the ministry has been making presentations in London and New York to drum up investor interest in the nascent mining sector.

By July next year, the ministry hopes to award a tender to a foreign company for the development of the Hajigak iron ore deposit west of Kabul, said Shahrani.

"We estimate that there are 2 billion tonnes of reserves in Hajigak, with a 62 percent of iron concentration," he added.

U.S. defense officials, who recently examined the results of a 2007 USGS survey and other information from the Soviet era, estimate Afghanistan's mineral wealth could top $1 trillion.

Mining experts say this figure is untested, however, and caution that it will take years, even decades, for that level of revenue to materialize because of a host of problems from war and infrastructure to a government trying to overcome years of corruption.

In February, Afghanistan had scrapped an earlier tender for the Hajigak deposit, citing global recession and low investor interest in a large vertically integrated project.

Afghanistan awarded a giant copper contract in 2007 to a Chinese consortium to develop a deposit in the Aynak region south of Kabul, and Shahrani said he expected there would be Chinese and Indian interest in the forthcoming iron ore tender.

The ministry also plans to launch tenders by late 2011 for the Balkhab copper deposit, which has reserves of around 45 million tonnes and is located in the north, he said.

"This will be a very active year for issuing tenders, and we want to assure investors that the government will not interfere in the mining business and will only have a regulatory role in the process," he added.

(Reporting by Amena Bakr; Editing by Jane Baird)

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