Afghanistan Watch: China to explore mining

August 17, 2006

China to explore mining

A look at Afghanistan's Copper and Coal

China willing to invest in mining sector: Minister
KABUL, Aug 13 (Pajhwok Afghan News) by Zainab Mohammadi:
Minister for Mines engineer Mohammad Ibrahim Adil has said that Chinese investors are eager to invest in mining sector in Afghanistan...(article continued on 2nd page...)

Afghanistan--sometimes perceived as poor in natural resources--actually holds abundant reserves of oil and several mineable resources, especially copper, which may exist in vast quantities. With its neighbors in China and India hungry for new sources of energy and materials--and with new firms emerging that are willing to take greater risks--Afghanistan may not be a bad bet.

Copper: Copper is currently at near record prices, recently hitting $3.50 a pound (versus its low of $0.70 per pound five years ago). One result has been the emergence of smaller mining companies that are less risk-averse than the big players.

The Wall Street Journal today ran a piece on how these "junior miners" were taking on large but previously unexploited deposits in Africa:

junior miners likely will play a bigger role, and possibly help bring commodity prices back to earth. That is because they are willing to operate in higher-risk areas, as many big players focus more on mergers and acquisitions than on developing new mines.

In the past year, junior miners accounted for 63% of the increase in exploration spending, a number which is expected to grow.

Afghanistan would seem an appealing target for these smaller firms. A BBC story in 2003 noted that:

According to Russian estimates, the area holds reserves of 11 billion tonnes, which would make it the biggest copper mining area in the world. The exploration area in question is in the Logar Province where mines were previously used by the Russians. An international consortium was also signed up to work in the area in 1998, but work was never carried out due to the civil war, and the mines fell into disrepair.

Afghanistan's copper mines have been highlighted in numerous economic reports as one potential area for future growth. But experts warn that the estimated reserves were never proved and some doubt that Afghanistan's geology could be so rich in copper.

An Afghan Government / British Geological Survey report notes that:

Afghanistan has yet to be evaluated in the light of modern mineral deposit models and improved analytical methods. From a global perspective, Afghanistan is relatively under explored and the potential for further discoveries of copper and other minerals is high.

Afghanistan's risks and unproven deposits are the sort of investment that big players would typically avoid--but which some of the junior miners might explore.

Coal: Afghanistan has 73 million tons of coal reserves (located mostly in the north between Herat and Badashkan). This is not a vast stock, but in the early 1990s produced 100,000 tons of coal per year. With the Soviet departure and civil war, production trickled to 1,000 tons by the end of the decade (see Department of Energy Afghanistan Fact Sheet, 2004.) Currently the mines are moribund, decripit, and dangerous. But demand for coal is high, and mining has again drawn interest. (Note: Photo on right is from a January 2006 photo essay on Afghanistan's coal mines by Patrick Andrade; you can see his work here.)

---

Of course, natural resources provide a Midas's curse for most developing countries. Weak states rich in mineral wealth are highly vulnerable, both to internal looting and external exploitation. In Africa, for example, research by Paul Collier suggests that the odds of a civil war in a given five-year period correlate with resource wealth (ranging from 1% in the resource poor to nearly 25% in the resource rich.)

Yet a new source of wealth would seem the last of Afghanistan's worries--especially since the nation is already awash in a lucrative and highly-lootable source of instability: the opium poppy.

China willing to invest in mining sector: Minister
KABUL, Aug 13 (Pajhwok Afghan News) by Zainab Mohammadi:
Minister for Mines engineer Mohammad Ibrahim Adil has said that Chinese investors are eager to invest in mining sector in Afghanistan. Speaking at a news conference after return from his two-day visit to China, the minister said the Chinese investors wanted to explore the mining sector. They did not invest in the past because they were not fully informed about the prospects.

He said during his meetings with officials and investors, he had informed them about the investment-friendly environment in Afghanistan. They were also briefed about security and told that 80 per cent of the country was peaceful.

He said after briefing them on security, laws and investment opportunities, several companies had shown interest in coming to Afghanistan to venture in the mining sector.

The minister said Turkey was the only country which had invested in the mining sector while Britain would soon start its project. He said the Chinese officials had been asked to extend the China-Tajikistan railway track to Hajigak Port of Afghanistan.

The minister said during his meetings, he had asked the Chinese authorities to pay the one billion US dollar of $10 billion China had allocated for the poor countries. The Chinese authorities promised to cooperate with the Afghan government, said the minister.

Posted by Carl Robichaud on August 17, 2006 at 10:45 AM in Economics, Investment | Permalink

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August 17, 2006

China to explore mining

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