https://www.dailymaverick.co.za/article ... f-lithium/
Afghanistan enjoys an estimated $1-trillion in mineral wealth, including stores of copper, iron ore, precious gems, gold and lithium among other things. The first challenge seems to have been met: valuable stuff is in the ground, and in quantity. The next challenge is to get it out.
Afghans had hoped to see $1-billion in annual revenue and at least 8,500 direct jobs and 30,000 indirect jobs from the mining sector by 2017, comprising the Mes Aynak copper mine ($350-million) 40 kilometres southeast of Kabul, the Hajigak iron ore mine near Bamiyan ($550-million) and $150-million from hydrocarbons and gemstones.
Various national policy documents and programmes laid down the path to these developments. The US Geological Service collected data on assets during the 2000s, building on a wealth of material gathered during the Soviet period.
Afghanistan’s mineral sector seemed ready for take off. Yet rather than benefit from this wealth, major investments have stalled, leaving warlords richer but the fiscus high and dry. Currently, the government’s overall revenue is just half ($2-billion) of its budget, the rest being made up by donors.
Take Mes Aynak, which attracted a Chinese investor back in 2007. The deposit is said to be the second-largest copper body in the world, with an estimated 5.5 million tons of high-grade ore. The contract awarded to the Chinese was worth $2.9-billion, the largest in Afghanistan’s history, and included the construction of a 400-megawatt power plant, a coal mine, a processing plant and railway links. But, 13 years later, the investment was frozen.
Some speculate this impasse was a result of US pressure, others cite the lack of transparency in the deal from the outset, while still others blame the decline in the copper price.
There were other concerns. Mes Aynak is a major archaeological site, with a Silk Road-era settlement comprising 400 Buddha statues, stupas and a 40-hectare monastery complex, which, like Bamiyan to the north, is a jewel among the “more than 500” Buddhist sites countrywide.
To ensure security around the Mes Aynak mine site, the government deployed 1,750 policemen with more than 80 checkpoints and security towers. More than $500-million has been spent by the government on security there since 2007. Over 150 security guards have been killed, even though the Taliban has explicitly promised not to target Mes Aynak or other infrastructure projects.
Minister of Mines and Petroleum Mohammad Haroon Chakhansuri says a lack of legal capacity and inconsistency over the last 15 years has blighted investment. A lack of transparency has not helped, though change is promised. The ministry has 2,666 staff, he notes, and an annual budget of $26-million, against mining revenue of just $24.5-million.
“At least 1,200 staff are in technical positions, but very few are qualified. Most have a school certificate. Our hydrocarbon specialist is an agriculture graduate and our laboratory manager has a 9th-grade school certificate,” explains the minister.
It is not surprising that Mes Aynak was awarded to the Chinese consortium over a rival Canadian bidder on the basis of its promises to pay a royalty of 19%, he says, plus a forward payment of $850-million, while building the railway, processing plant and power station.
“We did not have the capacity then to scrutinise this,” he admits. Fast forward 12 years and the Chinese company wants to amend “around 50 or more articles of the contract, including reducing royalties to 2.5%, forward payment of just $450-million in instalments, no railway, no power-station and no processing plant”.
Elsewhere, contractual challenges have slowed the Hajigak iron ore facility, while the minister, Wahidullah Shahrani, who presided over the award of a cement deal in Herat “to the Iranians”, was jailed on corruption charges over the deal. Other big projects are proceeding slowly, including the hydrocarbon basins of Katawaz, Helmand and Herat.
Attracting mining investment today is a relatively straightforward process which governments seek to make fraught by their own greed. However understandable that might be, it is a sure way to put off the best long-term investor, one actually intent on developing (rather than speculating on) the endowment.
The formula for attracting long-term foreign investors is well-known in the copper sector.