Mining in Afghanistan - Overview

Overview

It is estimated that forty million years ago the tectonic plates of India-Europe, Asia and Africa collided in a massive upheaval. This upheaval created the region of towering mountains that now includes Afghanistan. This diverse geological foundation has resulted in a significant mineral heritage with over 1,400 mineral occurrences recorded to date, including gold, copper, lithium, uranium, iron ore, cobalt, natural gas and oil. Afghanistan's resources could make it one of the richest mining regions in the world.

Afghanistan has large untapped energy and mineral resources, which have great potential to contribute to the country's economic development and growth. The major mineral resources include chromium, copper, gold, iron ore, lead and zinc, lithium, marble, precious and semiprecious stones, sulfur and talc among many other minerals. The energy resources consist of natural gas and petroleum. The government was working to introduce new mineral and hydrocarbon laws that would meet international standards of governance.

The United States Geological Survey (USGS) and the British geological survey were doing resource estimation work in the country. Prior to that work, Afghanistan's exploration activity had been conducted by geologists from the Soviet Union who left good-quality geologic records that indicate significant mineral potential. Resource development would require improvements in the infrastructure and security in Afghanistan. The government had awarded contracts to develop the Aynak copper project and the hajigak iron ore project; in addition, the government could offer tenders for new exploration, including exploration of copper at Balkhab, gold at Badakhshan, gemstones and lithium at nuristan, and oil and gas at sheberghan.

The Ministry of Mines drew up its first business reform plan in a bid to create a more accountable and transparent mining industry. Afghanistan joined the extractive industries transparency initiative as a candidate country. It was expected that after 5 years, the contribution of royalties from mineral production to the revenues of the government would be at least $1.2 billion per year, and that after 15 years, the contribution would increase to $3.5 billion per year. Afghanistan has no local ownership requirements and its Constitution does not allow for nationalization. The 20% corporate tax rate was the lowest in the region.

Afghanistan's mining industry was at a primitive artisanal stage of development; the operations were all low scale and output was supplied to local and regional markets. The government considered development of the country's mineral resources to be a priority for economic growth, including development of the industrial mineral resources (such as gravel, sand, and limestone for cement) for use by the domestic construction industry. Investment in infrastructure and transportation projects for mining was a critical aspect of developing the mining industry.

The government completed Afghanistan's first railway with an investment of $170 million in 2010. The 76-kilometer (km) route link Mazar-i-Sharif to the extensive rail networks in Uzbekistan. The new route would allow Afghan exporters to transport minerals and other goods into Europe. China Metallurgical Group Corporation (MCC) is building a railroad to transport copper ore in Afghanistan from Logar to Kabul.

Owing to the lack of mineral production data reported by the miners, information about Afghanistan's mining activities was not readily available, but they appeared to be limited in scope. Production of Barite was estimated by the USGS to be about 2,000 metric tons; chromite, 6,000 tons; and natural gas liquids, 45,000 barrels. In the process of reconstruction and infrastructure development, output of construction minerals was estimated to have increased to meet the domestic requirements. Production of cement increased by 13% compared with that of 2009.

Privatization of Afghanistan's state-owned companies, which controlled many of the country's mineral resources, was ongoing but not complete. Investment in the mining sector by private domestic companies and foreign investors was encouraged by the government, which had offered the first contract for development of the Aynak copper project to two Chinese companies in 2007. The government also issued the tenders for the development of the hajigak iron ore project in 2009 and tenders for oil and gas exploration in 2010. The Ministry of Mines is involved in the exploration for and development, exploitation, and processing of minerals and hydrocarbons. The Ministry is also responsible for protecting the ownership and regulating the transportation and marketing of mineral resources in accordance with the country's new laws. Regulations to clarify the country's environmental laws were scheduled for adoption in 2010.