Despite the crackle of gunfire in the mountains of northern Afghanistan, the wealth of gold beneath will be mined under a multimillion US 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 Brinkley said in a statement on Monday.
“It represents a turning point in the history of international -investment into Afghanistan,” Brinkley added.
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 US and Britain — are investing an estimated US$50 million in the gold project in the Dushi district of Baghlan Province, about 135km northwest of Kabul, according to Afghan Mine Minister Wahidullah Shahrani. The only other gold mine in Afghanistan is in neighboring Takhar Province.
Shahrani said he hoped that getting the deal approved by the Afghan 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.
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 US$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 US$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 US$3 billion contract was awarded to China Metallurgical Group to mine copper at Aynak, 35km 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 US 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 US$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.”
JPMorgan Chase, 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.
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