Massive Afghan Iron Resource Bid Tilting Toward India's SAIL Consortium

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The result of bidding to develop Afghanistan's Hajigak iron ore mines will be announced within days, and Indian companies are hopeful that they may be the winners against intense Chinese competition.

Hajigak has estimated reserves of 1.8 billion tons of iron ore with a concentration of 62% iron. Another attraction to the location is the fact that coking coal resources exist near the iron ore, which is suitable for blast furnaces and smelting.

"Two Indian bidders have emerged as the most potential companies for Hakigak," said Afghanistan's Minister of Mines, Wahidullah Shahrani. This position reflects positive exchanges by top government officials that involve promised Indian support for Afghanistan's infrastructure and industrial development targets.

Infrastructure development will be key to the development of the Hajigak resource, apart from the severe security risks posed by continuing armed conflict in the country. The accessing and extracting of minerals demands time and the ability to sustain investment. Hajigak is a region with a range of treeless mountain ridges with a sparse population of nomads and subsistence farmers. Investors will have to finance the construction of roads and railways to support any mining output.

One of the Indian bidders is a powerful consortium that includes state-controlled Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi) and NMDC Limited (BSE:526371) (Hyderabad, Andhra Pradesh) and is identified with the recent initiative of India's Prime Minister Manmohan Singh to pledge $2 billion of Indian investment into the country. Another Indian company, Ispat Alloys (Delhi), has bid separately. The SAIL-led consortium has bid for all four Hajigak mining blocks on offer.

U.S. government agencies estimate the country has untapped mineral resources worth $1 trillion.

China signed a $4 billion deal in 2007 for copper mining in Logar province. In December this year, the result of bidding for oil and gas exploration in northern Afghanistan will be decided with a Chinese company on the inside track.

It is reported that, as Indian and Chinese companies vie for Afghanistan's mineral resources, bidders from Western countries are critical that the Asian bids are usually government-backed, giving them an unfair advantage.

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