India Clinches $10 Billion Afghan Iron Ore Rights, Looks to Copper

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Following a strategic partnership agreement signed between Afghanistan and India in October, industry observers were not surprised when the $10.3 billion mining rights for three blocks of the Hajigak iron ore reserves were awarded to a consortium led by the state-owned Steel Authority of India (BSE:500113) (SAIL) (Kolkata, India).

The consortium includes state-owned Rashtriya Ispat Nigam and private-sector companies JSW Steel, Jindal Steel and Power, Monnet Ispat and JSW Ispat Steel.

Hajigak is situated in Bamiyan, a challenging mountainous region 100 kilometers west of the capital Kabul, and is estimated to hold 1.8 billion tons of iron ore. The Indian government has supported the successful bid and has pledged to invest in infrastructure projects in the region. These will include a $1 billion rail line to export the mined ore and funding for an 800-MW power station and a 200-kilometer road. The rail line could stretch from Hajigak to the Iranian port of Chabahar. Mining operations are scheduled to begin in 2015.

Canada's Kilo Goldmines (Toronto, Ontario), which was awarded the fourth Hajigak block, will invest $3.2 billion in the project.

India has granted $1 billion in aid to Afghanistan since 2002 that has mainly been invested in construction and development projects. In terms of the partnership agreement, India is allowed to train Afghan troops.

India will try to expand its stake in Afghanistan after a possible U.S. military withdrawal by 2014. All these elements plus the Hajigak deal put the country in a position to compete with China, which already is established in the sector, for more mining projects. It also leaves Pakistan agitated on the sidelines as far as mining goes, but deeply involved in the security instability in the region. India sees its involvement in Afghanistan as part of its own regional security strategy.

Currently, the Afghan mines minister is in London promoting copper, gold and lithium deposits that will be among the next tenders the government will offer. India is interested in these projects. Afghanistan is estimated to hold $1 trillion of unexploited mineral reserves.

The Aynak copper reserves lie 30 kilometers southeast of Kabul. The Metallurgical Corporation of China already is developing blocks for production to begin in 2014. Three more blocks at Aynak are in six new mining tenders to be issued in the first quarter of 2012. An Indian consortium led by India's National Aluminum Company (BSE:53224) (Bhubaneswar, India) and Hindustan Copper (Mumbai, India) is looking to bid for the Aynak blocks.

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