[R-G] China group wins Afghan copper rights

[Anthony Fenton]

China group wins Afghan copper rights

ByJon Boone in Kabul and Geoff Dyer in Shanghai

Published: November 20 2007 18:13 | Last updated: November 20 2007 18:13
http://www.ft.com/cms/s/0/6a84aa06-9790-11dc-9e08-0000779fd2ac.html? 
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A state-owned Chinese company has won the right to develop a large  
copper deposit in Afghanistan after agreeing to invest $3bn (€2.02bn,  
£1.45bn) in the project, the Afghan mines minister announced on Tuesday.

The deal is the largest foreign investment in Afghanistan’s history  
and will give China Metallurgical Group (MCC) the right to extract  
high-quality copper from the Aynak copper field near Kabul.

The company will pay the Afghan government $400m a year to exploit  
what some geologists think could be the world’s biggest copper deposit.

“This is the biggest investment in Afghanistan’s history and 10,000  
people will be employed to work there,” said Ibrahim Adel,  
Afghanistan’s mines minister.

“We estimate there are 13m tonnes of copper present,” said Mr Adel.  
The minister said that figure might rise to 20m tonnes. At today’s  
prices the value of the copper would be $30bn, according to some  
estimates.

Years of war in Afghanistan have ensured that the deposit has  
remained largely untouched since Soviet geologists surveyed the field  
in 1979.

Enormous obstacles need to be overcome before the site, which lacks  
either power or transport links, can be properly exploited.

MCC will first have to build a power station to run power to the mine  
and find coal deposits to fuel the power station. Excess electricity  
from the station will power Kabul, which, at present, enjoys only a  
few hours of electricity a day.

The Chinese offer beat four other shortlisted bids –Strikeforce, part  
of Russia’s Basic Element Group, the London-based Kazakhmys  
Consortium, Hunter Dickinson of Canada and US copper mining firm,  
Phelps Dodge. The $3bn bid surprised some analysts in Kabul who were  
expecting the tender to go for less than $2bn.

The high-profile Aynak deal has been seen as a litmus test of how the  
country deals with the international mining industry. Concerns were  
raised by the World Bank about the bidding process, which had been  
ongoing for more than two years. On Tuesday, the bank said it was  
broadly happy with the way the process had been conducted.

MCC is one of the largest state-owned companies in China, with  
activities ranging from engineering and property to pulp and paper  
and mining.

The group, which made net profits of more than Rmb3bn ($404m, £196m,  
€273m) in 2006, says it has invested $1bn in overseas mining  
operations in countries including Brazil and Pakistan and in  
resources ranging from iron ore and copper to gold and nickel. Its  
largest division is in equipment manufacturing, where it is one of  
the world leaders in manufacturing machinery for steel plants.

According to reports in the Chinese media, MCC bid for the contract  
in Afghanistan in collaboration with two other Chinese mining groups,  
Jiangxi Copper, the biggest copper producer in the country, and Zijin  
Mining Group, China’s leading gold mining company.