Tuesday, June 15, 2010

Afghan Minerals Long Time Coming

Yesterday afternoon, Marketwatch commentator Nick Godt noted that the metals market shrugged off the report about the possible extent of mineral wealth in Afghanistan. Instead of dropping, which would be the result of an anticipated flood of new supply coming in to the market, the metals rose a little.

An article by one of the geologists involved with the report, Antony Benham, explains why. After illustrating why Afghanistan is geologically interesting, he says that any large-scale mining operation is going to be a long time coming:
Of course, the security situation has made it very difficult for any mining company to get involved, and so there's not really any mining industry at present – and little infrastructure, either. The only exception to that is at the Aynak copper deposit south of Kabul, an undeveloped deposit almost untouched since the Russians left. A Chinese company won the contract to develop it in 2008, and that was the biggest prospect that's been pushed by the Afghan government so far. But there's still investigation to be done on the feasibility of extracting the copper ore, and exactly how much of it there is in the ground.

The wider picture is that the mineral potential of the country is still comparatively unknown. A mining law was recently published, which is progress, but with no history of large-scale operations it may take the Afghan government and any mining companies some time to establish how to work together.

In theory, if the security situation did stabilise, there would be a lot of opportunities for mining companies to get involved in looking for these new resources. But this isn't going to be an overnight, quick-win situation. It's going to take a long time for Afghanistan's mineral deposits to be developed to their full potential.

Something to remember for more quotidian mining ventures, even in safer climes: getting a mine up and running is a lot harder, and takes a lot longer, than it looks.

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