World’s Mining Companies Covet Afghan Riches
By JAMES RISEN Published: June 17, 2010
WASHINGTON — Mining companies around the world are eager to exploit Afghanistan’s newly discovered mineral wealth, but executives of Western firms caution that war, corruption and lack of roads and other infrastructure are likely to delay exploration for years.
A few high-risk investors are sufficiently intrigued by the country’s potential to take an early look. JP Morgan, for instance, has just sent a team of mining experts to Afghanistan to examine possible projects to develop.
“Afghanistan could be one of the leading producers of copper, gold, lithium and iron ore in the world,” said Ian Hannam, a London-based banker and mining expert with JP Morgan. “I believe this has the potential to be transforming for Afghanistan.”
But executives with international mining firms said in interviews that while they believed that Afghanistan’s mineral deposits held great potential, their businesses were not planning to move into the country until the war was over and the country more stable.
“There are huge deposits there,” said David Beatty, chief executive of Rio-Novo Gold, a mining company based in Toronto. “But as chief executive, would I send a team to Kandahar? And then call a guy’s wife after he gets shot? No.”
It has long been known that Afghanistan had significant deposits of gemstones, copper and other minerals, but United States officials say they have discovered and documented major, previously unknown deposits, including copper, iron, gold and industrial metals like lithium.
A Pentagon team, working with geologists and other experts, has shared its data with the Afghan government, and is working with the Afghan Ministry of Mines to prepare information for potential investors in hopes of placing some mineral exploration rights up for auction within the next six months. On Thursday, Afghan officials said they believed that the American estimates of the value of the mineral deposits — nearly $1 trillion — were too conservative, and that they could be worth as much as $3 trillion.
The Ministry of Mines also announced that it would take the first steps toward opening the country’s reserves to international investors at a meeting next week in London. Two hundred investors from around the world have been invited to offer suggestions for how to develop the iron ore deposits at the Hajigak area of Bamian Province, according to Craig Andrews, the principal mining specialist for Afghanistan for the World Bank.
Nongovernment Western mining experts will be helping the ministry develop the bidding process, Mr. Andrews said.
At a news conference in Kabul, Wahidullah Shahrani, the mines minister, pledged to make the bidding and contracting of mining rights as transparent as possible to reduce the possibility of corruption. He said the ministry would post contracts on its Web site.
Mr. Shahrani and his advisers cautioned against overly high expectations, underscoring that development would take years and that there were many obstacles to overcome, not least of all the lack of security in some of the areas with the most minerals and the lack of a transportation infrastructure.
International mining officials and independent experts echoed that view. Jim Yeager, a Colorado-based geologist and former consultant to the Afghan mines ministry, said that poorly written mining regulations could also hamper future development.
Afghan officials have interpreted their mining regulations in such a way that if a company is awarded a concession to explore and then discovers valuable minerals, the government can tender the concession back and rebid it, undermining any incentive for a foreign firm to actually find large deposits, he said.
“They can take it back after you discover something,” Mr. Yeager said. “That needs to be corrected.”
Several mining executives and other experts said that the multibillion-dollar investment required to build a large copper mine, for example, meant that the industry would focus on other deposits in less risky countries before they turned to Afghanistan.
“The industry is going to take a look at Afghanistan, but they will weigh their risks carefully,” said Steve Vaughn, a Canadian lawyer and mining expert. “There is every indication that these deposits are very large. But as political risks increase, they will lay off spending.”
Today, many of the world’s leading mining companies are based in Canada and Australia, but resource-hungry China is rapidly emerging as a major competitor for mineral deposits. A Chinese state-owned firm has already been awarded the concession for a copper mine in eastern Afghanistan.
No, many mining industry executives say they expect the Chinese to bid aggressively on Afghanistan’s newly discovered mineral deposits even as many Western firms sit it out.
Robert Schafer, executive vice president of Hunter Dickinson, an exploration and mining firm based in Vancouver, Canada, which lost the bid for the copper mine concession to the Chinese company, said he believed that the Chinese “have a different perception of the risk” because they see mineral resource development as part of a national strategy.
“Their concern is for the supply of a commodity, so they are willing to do things at a loss,” Mr. Schafer said. “So yes, I could see the Chinese being willing to make investments in areas where we are unwilling to.”
Mining industry executives, as well as American officials, are also concerned about the corruption in the Afghan government, and are uncertain how to avoid turning the discovery of great mineral wealth into nothing more than a windfall for Kabul’s oligarchs.
“I know some people have gone in to kick the tires, and some guys found there was too much risk, too much corruption, and didn’t want to play the game,” observed Mr. Yeager, the Colorado geologist. “They have got to resolve the corruption issue.”
Alissa J. Rubin and Mujim Mashal contributed reporting from Kabul.
Pentagon geologists discovered $1 trillion in untapped mineral deposits in Afghanistan
Major findings, 2010
In 2010, a small team of Pentagon officials and American geologists discovered nearly $1 trillion in untapped mineral deposits in Afghanistan  , far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials. According to other reports the total mineral riches of Afghanistan may be worth over three trillion US dollars. “The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world”, the United States officials believe. The Ghazni Province may hold the world’s largest lithium reserves.
The deposits were already described in the USGS report on Afghanistan issued in 2007. President Hamid Karzai remarked “Whereas Saudi Arabia is the oil capital of the world, Afghanistan will be the lithium capital of the world.” Deposits in the United States and Canada which need mining operations similar to those necessary for the deposits in Afghanistan went out of production due to cheaper production from lithium containing brines. Afghanistan invited 200 global companies for the development of its mines. 
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Shoring Up the Elements of a Clean Tech Economy
Heard of germanium? How about neodymium? Or terbium? Or rhenium? They’re not extras from a Star Trek film—these are real world elements are some of the rarest members of the periodic table. But as hard as they are to find, these substances are increasingly important to green tech, clean tech and high tech—and the U.S. doesn’t have enough of them. “These elements until the last decade were laboratory curiosities,” says Tom Graedel, a professor of chemical engineering at the Yale School of Forestry and Environmental Studies. “But they’re central to such technologies as electric cars, wind turbines, solar cells, flat panel display screen and military technologies. They’re energy critical elements.”
Graedel is the co-author of a new report on those energy critical elements (ECE) from the American Physical Society and the Materials Research Society that was released today at AAAS. Graedel and his co-author—Robert Jaffe, a physicist at the Massachusetts Institute of Technology—took the stage at AAAS to describe a plan to ensure a sustainable supply of ECEs and rare earths, another set of materials key to clean tech. The report came out against the backdrop of rising fears in the U.S. over Chinese dominance in the rare earth market, where China is estimated to produce as much as 90 to 95% of the world’s rare earths. Unless the U.S. moves to expand production of the elements, husband its resources and look to innovate replacements or recycle existing supplies, there is a real risk that the clean energy economy could falter as it scales up—or the U.S. could find itself trading dependence on foreign oil for dependence on foreign elements. “The problems of ECEs are real and serious,” says Jaffe. “If appropriate steps are not taken we face possible short-term constraints of supply to what could otherwise be game changing energy technologies.”
What are ECEs? They include rare metals like lithium, a vital ingredient for both wind turbines and hybrid cars—and one still produced mostly by China, though there are major deposits in Afghanistan and Bolivia. They include elements like tellurium, a brittle, silvery-white metallic element used in solar panels. And there’s rhenium, a silvery-white metal with a high melting point that is used to make advanced turbines and jet engine parts. What they have in common is that global supplies are limited, in part because the elements rarely form in any concentration, and are instead scattered around the planet.
Despite the dependence of both the high tech and clean tech industries on these elements, the U.S. hasn’t done much to increase its own supply—and in fact, policymakers don’t even have a very good grasp of the global supply of these elements. (Deals are often done commercially, and the data is kept private.) Jaffe and Graedel say that laissez-faire attitude has to change. In their report they urged the federal government to gather and analyze data on ECE across the lifecycle supply chain. They want the government to launch a research and development program focused on expanding ECE supplies and innovating possible substitutes—something that the company GE was able to do when supplies of rhenium ran low. They want industry and the government to recycle ECEs and rare earths as much as possible—even retaking the valuable metals found in tiny increments in your iPhone. “Private industry and government needs to be in the market of enhancing recycling,” says Jaffe. “You need high tech recycling technology.”
Policymakers in Washington are beginning to wake up to the rare earth/ECE deficit. Mark Udall, a Democratic senator from Colorado, recently introduced a bill that would codify most of the report’s suggestion, increasing domestic production of the elements. And China’s strangehold on rare earth production may not last much longer. Molycorp Minerals has raised hundreds of millions of dollars to reopen a closed rare earths mine in Mountain Pass, California. Craig Cogut of Pegasus Capital Advisers, which has invested in Molycorp, believes that the mine could make the U.S. all but self-sufficient for rare earths. “This mine has history and quality,” says Cogut. “And it’s a big reserve—enough to produce 20 to 25% of the world’s supply.”
It will take a lot more than one mine to ensure the U.S. is ready for the clean tech era—although most other ECEs are scattered around the world, so no one country can lock down supplies. That’s a relief—the clean tech era shouldn’t be held hostage to the same geopolitics we suffered through with oil.