Afghanistan opens bids on gold, copper deposits

[December 06, 2011]  KABUL, Afghanistan (AP) -- Afghanistan opened bids Tuesday on billions of dollars worth of copper and gold deposits in four areas of the country that together are roughly half the size of the Grand Canyon.

Despite ongoing violence, Afghanistan has high hopes that its budding mining industry will generate billions in revenue to help rebuild the nation after 30 years of war. For Afghanistan, a landlocked country with virtually no exports, the minerals are a potential windfall but it will require international investment, a better transportation network and improved security.

Geologists have known for decades about Afghanistan's vast deposits of iron, copper, cobalt, gold and other prized minerals, including rare earth minerals used in cell phones, hybrid car batteries, defense industries and wind turbines.

The U.S. Defense Department put a startling $1 trillion price tag on the vast mineral reserves, but the Afghan minister said other geological assessments and industry reports estimate the nation's mineral wealth at $3 trillion or more.

The Afghan Ministry of Mines invited investors to bid on multiple contracts to unearth copper and gold hidden beneath 846 square miles (2,191 square kilometers) in Badakhshan, Ghazni and Herat provinces and a fourth area that spans both Balkh and Sar-e-Pul provinces. The tender offers were posted on its web site.

Afghan Minister of Mines Wahidullah Shahrani told The Associated Press in a telephone interview from London, where he was speaking at a mining conference, that the value of the deposits was "in the billions." He did not give a more specific estimate.

Afghanistan plans to sell the rights for up to five mines every year until 2014, when most international combat troops are to have left the country, Shahrani said.

Shahrani has been traveling extensively to woo investors to bid on mining contracts. Though the war continues, Shahrani said he was optimistic that investors are interested and that a mine protection force has already started work at several mining sites around the nation.

In late 2007, a $3 billion contract was awarded to China Metallurgical Group Corp. to mine copper at Aynak in Logar province, 21 miles (35 kilometers) southeast of Kabul. The mine is thought to hold one of the world's largest untapped copper reserves.

Mining the copper could create 4,000 to 5,000 Afghan jobs in the next five years and hundreds of millions of dollars a year to the government treasury, according to the ministry. The project also includes construction of two coal-fired electric power plants, a segment of rail and a roadway from the mine to Kabul.

In December 2010, Afghan officials approved a multimillion-dollar contract to mine gold in Dushi district of Baghlan province. It was the first mining project in Afghanistan backed by private investors from the West, who pledged $50 million for the project.

Last month, the Afghan government gave investors from India and Canada permission to mine an estimated 1.8 billion tons of iron ore in Bamiyan province, projects that government officials hope will reap revenue for the nation and jobs for its unemployed.

With rising revenues from mining projects, customs and taxes, the Afghan government predicts it can increase the ratio of revenues to its gross domestic product from 11 percent to 15 percent within four years and to 20 percent by 2025, according to the Ministry of Finance.

Still, with the planned withdrawal of most international combat forces and an expected decline in foreign assistance, Afghanistan is facing a fiscal crisis.

At an international conference on Monday in Bonn, Germany, Afghan President Hamid Karzai said that Afghanistan would need the financial support of other countries for at least another decade beyond 2014.

Afghanistan estimates it will need outside contributions of roughly $10 billion in 2015 and onward, slightly less than half the country's annual gross national product, mostly because it won't be able to pay for its security forces.

[Associated Press; By DEB RIECHMANN]

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