KABUL: Despite the crackle of gunfire in the mountains of northern Afghanistan, the wealth of gold beneath will be mined under a multimillion-dollar contract that government officials approved on Monday.
The deal is the first mining project in Afghanistan backed by private investors in the West. Afghan and US officials hope many more deals will follow to help jump-start the economy of this impoverished nation in its 10 year of war.
"This project is an important step forward for Afghanistan’s economic sovereignty," US deputy undersecretary of defense Paul A. Brinkley said in a statement on Monday. "It represents a turning point in the history of international investment into Afghanistan."
Brinkley, who directs the defense department’s Task Force for Business and Stability Operations, said the gold mine deal is evidence that Western investors are showing confidence in Afghanistan’s economic future.
About 10 investors — most of them from the United States and Britain — are investing an estimated $50 million in the gold project in Dushi district of Baghlan province, about 84 miles (135 kilometers) northwest of Kabul, Wahidullah Shahrani, Afghanistan’s minister of mines, told the Associated Press. The only other gold mine in Afghanistan is in neighboring Takhar province.
Shahrani said he hoped that getting the deal approved by the Inter-Ministerial Council, which comprises the government’s top finance and economic officials, will send a strong signal to global mining companies that there are investment opportunities in Afghanistan, especially in the mining sector.
The government also signed a six-month contract Monday to sell crude oil to an Afghan company as part of the push to show private investors that Afghanistan is a safe place they can do business.
The oil contract — the first awarded by President Hamid Karzai’s government — provides for Ghazanfar Group to buy oil from Angot field in Sar-e-Pul province at $80 dollars a barrel, said Jalil Jumriany, the policy director for the mining ministry.
Production from the field — which has been closed for years after militias were stopped from exploiting it illegally — is expected to hit 800 barrels a day. Revenue is expected to be about $1 million a month. After six months, the field will be transferred to whoever wins the bid for a larger oil operation in Sar-e-Pul, Jumriany said.
"It is just the beginning of the extraction of crude oil," Shahrani said. The larger Sar-e-Pul oil block has 80 million barrels of oil, including the Angot field, he said. And an oil field in northern Mazar-e-Sharif that will be tendered in July has an estimated 1.8 billion barrels.
"Most of the the big companies are focusing on the Mazar-e-Sharif block," Shahrani said.
Geologists have known for decades about Afghanistan’s vast deposits of iron, copper, cobalt, gold and other prized minerals. In June, the US Defense Department put a startling $1 trillion price tag on the reserves, but 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 violent, landlocked country with virtually no exports, the minerals are a potential windfall, although formidable obstacles remain, including lack of investment, infrastructure and adequate security in most of the nation.
In late 2007, a $3 billion contract was awarded to China Metallurgical Group Corp. to mine copper at Aynak, 21 miles (35 kilometers) southeast of Kabul. The mine 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.
Afghanistan’s gold deposits are more modest. Shahrani said that Soviet-era studies valued Afghanistan’s gold deposits at up to $25 billion.
He said the estimate was conservative and added that new gold discoveries have been made. Afghanistan’s gold is found across the country, but the heaviest known deposits are in Badakhshan, Takhar, Bamiyan, Ghazni and Zabul.
"There is growing global demand for gold and right now the price of gold has reached the highest point in the history of mankind," Shahrani said.
"Investing in gold is very attractive."
J.P. Morgan, an international financial services firm, promoted the project and attracted the investors.
They invested in an Afghan company called Afghan Gold. The chairman of the company is Sadat Mansoor Naderi, who runs SMN Group, one of the largest companies in Afghanistan. SMN, which employs about 3,000 people, operates a small chain of supermarkets, builds roads, airports and bridges and distributes telecom cards and fuel.
Taliban insurgents have been slowly expanding their presence in Baghlan and neighboring provinces, but the mine is located a three- to four-hour drive from the scene of recent fighting, Naderi said. Initially, the mine will employ a few hundred workers, but the payroll will increase as more gold is extracted, he said.
"Within six months to a year maximum, we want to start production," Naderi said.
Under the contract, 95 percent of the mine workers must be hired locally, said Richard Williams, the mining company’s chief executive officer, who is from Britain. Over time, the company is required to train locals for technical positions initially filled by outsiders, he said.
Additional reporting by Heidi Vogt.
