Massive Afghan iron ore deposit up for tender again

By Emma Graham-Harrison
HAJIGAK, Afghanistan | Sat Sep 25, 2010 2:31pm EDT
(Reuters) - Afghanistan put its Hajigak iron ore deposit back up for tender on Saturday, after taking it off the market last year, promising security for investors despite a worsening insurgency.

Afghan Mines Minister Wahidullah Shahrani said he hoped production would start by 2014 on what he said was a huge, high-quality ore vein, that offered investors a rare opportunity with reserves estimated to be worth as much as $350 billion.

Security is likely to be the main concern to potential investors when Shahrani meets them at a conference in New York on September 29, with the insurgency at its most violent since the 2001 overthrow of the Taliban government.

The Hajigak deposit straddles Bamiyan, Parwan and Wardak provinces, with only Bamiyan relatively peaceful.

Shahrani said that the Aynak copper mine south of the capital, developed by Chinese firms since 2008 and worth about $43 billion, proved Afghanistan could protect important assets.

The government has a specially trained force to protect mines and other infrastructure, with many of its members drawn from villages surrounding the asset under guard.

"The community has been taking care of the Aynak deposit, even though that is in a very insecure part of the country ... in the last two years there has not been a single incident," Shahrani told reporters visiting the mountainous region to the west of Kabul where the Hajigak deposit lies.


Villagers from nearby, mostly subsistence farmers, say they would try to protect any investment that brought jobs or infrastructure improvements such as paved roads.

"Most of the young people have already left to find work, in Kabul or even Pakistan. I would very much like them to be able to stay here," said Mohammed Sadiq, a 35 year-old farmer from Kotal Sufla village at the base of mountains that form Hajigak.

Shahrani expects the mine to create at least 7,000 direct, long-term jobs and many thousands more working in spin-off industries such as services, construction and logistics. "Mining companies know how to operate in insecure areas," he said.

Expressions of interest are expected by mid-January, and Shahrani hopes to award the tender in August 2011, with at least two more years of detailed exploration to follow.

He did not say how much investment his government is seeking for the project, but forecast central government revenues of $300 million to $400 million per year once it reaches full production of an estimated 10 million tons a year.

The deposit was first discovered by British geologists in the 1890s, and mapped in more detail by Russians in the 1960s, who estimated it held some 1.8 billion metric tons of ore.

But decades of unrest means the rich vein, containing an estimated 62 percent iron, has not been exploited commercially.

A planned tender last year was canceled, with the ministry citing the global recession and changes in the world market structure for iron as the key problems, although it came months after corruption allegations around the sector in Afghanistan.

Shahrani has promised to run a clean bidding process, with much of the documentation posted on the ministry's website.

He said he is looking mostly for investors willing to put money into infrastructure and steel production in Afghanistan, rather than simply ore extraction for export.