New Afghanistan mining projects create opportunity for India

Photo: courtesy Ajai Shukla

Part of the proposed site for the 2 billion-tonne Hajigak mining project in Central Afghanistan, for which two Indian consortia are submitting bids in July

by Ajai Shukla

Kabul, Afghanistan

Business Standard, 7th June 2011

The new Great Game for the rights to mine Afghanistan’s enormous mineral wealth is gathering momentum. With the global mining industry, and especially Indian mining majors, already focused on the unfolding competition for the massive Hajigak iron-ore mine, Afghanistan has announced five potentially lucrative mines.

Speaking exclusively to Business Standard in Kabul, Afghanistan’s Minister for Mines Wahidullah Shahrani revealed, “After Hajigak, in July this year, I will put five major projects on tender: three copper and two gold deposits and, in February 2012, I will put a huge oil basin in the northern city of Mazar-e-Sharif on tender

Immediate attention, though, is focused on the tender for Hajigak, a two-billion-tonne deposit of high-grade iron ore in the central province of Bamiyan, for which bids are required to be submitted by August 3. Shahrani said the winner of the Hajigak contract would be finalised by October.

Afghanistan has shortlisted a total of 22 companies for the Hajigak contract. Of these, 14 are Indian companies. According to Indian media reports, Steel Authority of India Ltd and NMDC are putting together rival consortia to bid for the project.

The bids are likely to include the setting up of an integrated steel plant that will consume high-grade coking coal from nearby deposits; a road or rail evacuation route; a full-scale worker skill programme; and an education programme for villagers living nearby.

“The bidders’ commitment to corporate social responsibility norms, and their ability to bring about sustainable development of the area, will be major factors in our evaluation of the bids,” he says.

According to him, the winner will be selected on “comprehensive economic criteria… (including) royalty to the Afghanistan government, infrastructure development, vertical integration to maximise employment, environment, and proposals for community and social development.”

From May 7 to 12, the Afghan government took representatives of 16 of the shortlisted companies (including 11 Indian) to the proposed site of the Hajigak mine for an on-ground evaluation. During that visit, organised by Afghanistan’s mining ministry, company representatives were acquainted with the geological, geographical, security and social realities of the project site.

A key aspect of each proposal will be the evacuation infrastructure that the bidders propose. China, which was awarded the Aynak copper mines in Loghar province, Afghanistan’s first big sale of mining rights in the post-Taliban era, has undertaken to build a railway line from the northern provinces, to Bamiyan (where Hajigak is located), to Kabul, and then to Torkham on the Pakistan border at the Khyber Pass.

Shahrani believes that a viable alternative that could form the Hajigak evacuation infrastructure would be a railway line running westwards to Iran, along the Zaranj-Delaram highway that India had built in the mid-2000s, to the Iranian port of Chabahar.

Meanwhile, China continues to grapple with several issues at its copper mine in Aynak, including local resentment at being deprived of their land; security problems, including at least one rocket attack on their encampment; and the unearthing of ancient religious relics, which has somewhat delayed the project.

But Shahrani says Afghanistan has learnt from those experiences and the relatively secure environment around Bamiyan, populated by the Shia Hazara tribes, provides a stable atmosphere for whichever company or consortium wins the contract.

“The companies (at Hajigak) need to be secure and the Afghan government is making all arrangements. Security at the work camps, the steel plant, movement of men and materials, everything will be taken care of by the government of Afghanistan. We will permanently locate 1,500 persons of the Afghan National Police at Hajigak.”

In case the contractor wants to bring in their own security, like for an “inner ring” as the Chinese have done, Shahrani says Kabul will be “flexible”.