Chinese return to Afghan mine project - minister

KABUL Thu Nov 29, 2012 10:58pm IST

Afghan Mining Minister Wahidullah Shahrani speaks during an interview in Kabul September 29, 2012. REUTERS/Mohammad Ismail

Afghan Mining Minister Wahidullah Shahrani speaks during an interview in Kabul September 29, 2012.

Credit: Reuters/Mohammad Ismail

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KABUL (Reuters) - Most of the roughly 170 Chinese workers who fled rocket attacks on the largest foreign investment project in Afghanistan have returned because of improved security, the Afghan mining minister said on Thursday.

Officials had been trying to convince Chinese workers to restart work at the Aynak copper deposit in Logar province, one of the most dangerous regions of the country.

Insurgents have been trying to wreck the flagship government mining project. But Mining Minister Wahidullah Shahrani said about 150 Chinese engineers, geologists and experts had returned because the Interior Ministry has given a special citizens' protection force better weapons and increased checkpoints on hilltops.

He said Afghanistan would welcome foreign investors in addition to the consortium running the Aynak copper deposit, China Metallurgical Group (MCC) CNMET.UL and Jiangxi Copper JXPROM.UL 600362.SS.

"The first policy priority is to get more investment regardless of where the investment will come," Shahrani told Reuters.

"I am very much in favour of bringing some degree of diversification in the investment."

The project has been under way since 2007, with licenses expected to be issued at the end of December and Chinese companies overseeing the project about to begin the final stage of construction, expected to take at least three years.

With commercial production expected to start at the end of 2014, according to the minister, the mine could generate annual income of close to half a billion dollars.

International aid for Afghanistan is already expected to fall short of the $6 billion a year required to promote economic growth, and a further $4.1 billion needed to pay the bill for the 350,000-strong security forces as NATO draws down.

HUGE POTENTIAL, MANY RISKS

Afghanistan, one of the world's poorest countries, wants to tap into what Shahrani says is more than $1 trillion in mineral deposits.

In the 10 years following the 2014 pullout of most NATO combat troops, he hopes the government revenues from oil, natural gas iron, copper and other mining ventures will generate $4 billion in annual revenue for the government.

But Shahrani says that will only come under the right conditions: better security, government transparency, better terms for foreign investors and less corruption.

Major infrastructure work is also an issue. To move commodities, Afghanistan would have to build costly railroads through rough and mountainous terrain.

"We are not going to deny the difficulty with regard to the governance issues. At the same time, in the last two years a lot of reforms have been launched," he said.

"(At) Aynak, one of the mistakes we made was we did not have the monitoring mechanisms in place. No mining contract will be considered as a state secret or hidden document anymore."

Turning to the dominant issue of security, he said Afghan forces have come a long way, but at this stage would not be ready to protect Afghanistan's economic interests.

"If the (foreign) forces left tomorrow, for example, the negative impact would not be limited to mining," he said.

He said the government hoped to give the local community around mining projects jobs and a sense of ownership in ventures and access to basic services to stifle Taliban recruitment.

The Taliban have fired rockets at mining projects, planted improvised explosive devices along roads and arrived armed on motorcycles to threaten people.

"The Taliban are not strong enough to take control of a big mining area. But they will try to disturb the area. It has been happening for a while," said Shahrani.

Some companies see enough potential in Afghanistan's natural resources to commit to the country.

A consortium comprised of Turkish Petroleum Corporation, Kuwait Energy and Dubai-based Dragon Oil have been selected in the last two days to explore and produce two oil blocks in the Afghan Tajik basin, said Shahrani.

He expects production to start in four years.

A decision is also near in tenders for four major gold and copper deposits in different parts of the country, he said.

The country has no major mining projects in operation.

But Shahrani is encouraged by the few ventures in their early stages, like an 1.8 million tonne iron ore deposit that he said had attracted the attention of the Indian government and a private Canadian company.

Looking ahead, he believes China and India will be the biggest players in the nascent Afghan mining sector but he is hoping to lure other investors, predicting that one day international commodity trade houses will eye Afghanistan.

"Our expectation is that in the next ten years with all this development, Afghanistan will emerge as a major commodity-producing country in the region," he said. (Reporting by Michael Georgy; Editing by Hugh Lawson)

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