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Thursday, Jun 17, 2010 7:07 PM UTC

Afghan mineral wealth estimated at $3 trillion

Potential windfall for the war-torn country still depends on mining resources and security

By and

Topics: Afghanistan,

Afghanistan is gearing up to award contracts to mine one the world’s largest iron ore deposits buried in a peaceful province of the nation that has at least $3 trillion in untapped minerals, the country’s top mining official said Thursday.

Geologists have known for decades about Afghanistan’s vast deposits of iron, copper, cobalt, gold and other prized minerals, but a U.S. Department of Defense briefing earlier this week put a startling, nearly $1 trillion price tag on the reserves.

Afghanistan’s Minister of Mines Wahidullah Shahrani called that a conservative estimate. He said he’s seen geological assessments and industry reports estimating the nation’s mineral wealth at $3 trillion or more.

For Afghanistan, a war-torn, landlocked country with virtually no exports, it is a potential windfall, although formidable obstacles remain including lack of investment, infrastructure and adequate security in most of the nation.

“The ministry has been working closely with the international organizations, including the World Bank, the U.S. Geological Survey and the international mining and finance community for some time to ensure all of the Afghan people benefit from our rich natural resources for decades to come,” he said.

Shahrani plans to travel to Britain next week to present 200 foreign businessmen with information about the estimated 2 billion tons of iron ore at Hajigak in Bamiyan province, where the Taliban and other insurgents have no significant presence. The project is to be bid on this fall with contracts awarded late this year or early next year, he said.

Critics of the war in Afghanistan have been skeptical that the dollar amount of the country’s untapped minerals was being promoted at a time when violence is on the upswing and the international community is hungry for positive developments in the nearly 9-year-old war.

They argue that if impoverished Afghanistan is seen as having a bright economic future, it could help foreign governments persuade their war-fatigued publics that securing the country is worth the fight and loss of troops.

But Shahrani insisted that the release of the information, first reported earlier this week by The New York Times, followed months of work to assess the mineral deposits, sometimes with the aid of data compiled by the former Soviet Union when it was fighting in Afghanistan.

A. Rahman Ashraf, senior adviser to the minister of mines, said that during decades of conflict, an Afghan geologist safeguarded data about the mineral reserves at home. He said the geologist, who has died, gave the information back to the government in 2002 and that since then, it has been used to help make modern assessments of the deposits.

Shahrani said the Ministry of Mines and the U.S. Geological Survey had been sharing information for months.

“We were just waiting for the exchange of information from Washington to Kabul,” Shahrani said.

Shahrani added that the ministry recently completed a business plan to restructure, reform and modernize the ministry and improve oversight to international standards. He said those efforts coupled with new minerals and hydrocarbon laws will work to improve the transparency and efficiency of mining in the nation.

Still, without increased security and massive investment to mine and transport the minerals, it could take years for Afghanistan to bank the rewards. A rail line, for instance, is needed before any iron ore could be transported from Bamiyan. And there’s always the potential that such a discovery could bring unintended consequences, such as corruption and competition among nations for access to the resources.

In November, two U.S. officials familiar with intelligence reports alleged that Afghanistan’s former minister of mines, Mohammad Ibrahim Adel, accepted $20 million after a $3 billion contract to mine copper was awarded in late 2007 to China Metallurgical Group Corp. The former minister has denied having taken any bribes and said the contract went through all legal channels.

Aynak, a former al-Qaida stronghold 21 miles (35 kilometers) southeast of Kabul, is thought to hold one of the world’s largest unexploited copper reserves. Mining the copper could produce 4,000 to 5,000 Afghan jobs in the next five years and hundreds of millions of dollars a year to the government treasury, Shahrani said.

Craig Andrews, a lead mining specialist for the World Bank, said Aynak was expected to start producing copper within two to three years. Production of iron ore at Hajigak could begin in five to seven years, and possibly sooner, he said.

Andrews noted that studies show that every mining job creates five to 10 other jobs.

“Clearly, these mines will have a huge economic stimulus effect on not only the national economy, but the region in which they are located in,” Andrews said. “I think when people have jobs and they have an income, they have a stake in the future and the future does not include insecurity. I think once the communities are anchored in an economy that gives them jobs money and income they would be less inclined to support the Taliban or other insurgent groups.”

He said the government, however, must guard against raising the expectations of the Afghan public.

Otherwise, “people are going to go off and pick up a rock and think that they can go to the bank,” he said. “Unfortunately the business doesn’t operate that way. It takes a lot longer.”

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