Afghan and Chinese mining officials have not been able to sort out persisting differences that dog the Aynak copper mining project, which is a potential source of huge tax revenue.
Afghan and Chinese mining officials have not been able to sort out persisting differences that dog the Aynak copper mining project, which is a potential source of huge tax revenue.On May 25, 2008, the project was handed over to the China Metallurgical Corporation (MCC), a giant in the mining industry. Extraction of copper from Aynak, one of the world’s biggest deposits of copper, was to start five years later.
Not only did MCC miss the May 2013 deadline, the state-owned company says contentious issues have not been sorted out, and the agreement has to be reviewed.
Rafiaullah Sidiqi, spokesperson for theMinistry of Mines and Petroleum told Killid the MCC has gone back on preconditions including the construction of a railway line from Hairatan to Torkham (in Nangarhar), on the border with Pakistan,a 400 mega watts power plant, smelter and a coal mine.
There are reports in the media that MCC has asked for a five-year extension on the deadline. Despite persistent efforts the MCC refused to agree to an interview with Killid.
Opinion in Kabul about how to deal with the MCC is divided between the former and current mining ministers. The Ministry of Mines spokesperson Sidiqi said the MCC has to abide by the agreement, which was drafted with great care. “If there was no problem in the contract (at the time of signing), how is it that the MCC is defaulting on the implementation and requesting a review?” Sidiqi asked rhetorically.
Ibrahim Adel, former minister of mines, who had to resign over charges of receiving bribes from the Chinese, thinks it is the lack of professionalism in the Ministry of Mines that Afghanistan has not been able to get the benefits from the contract. The Afghan government was to receive between 250 and 500 million USD royalty payment per year once production was in full swing.”If there is a problem in the contract then why was it not solved in the past the five years?” he wonders.
In his opinion the problem arose when the Chinese, who have completed their surveys, realised “some conditions were not beneficial so they have reneged on the contract”. He says, “We (must) insist that they put in practice the conditions that have been inserted in the contract.”
Talks are going on between the Ministry of Mines and the MCC. Minister of Mines Wahidullah Shahrani has made several visits to China. “We hope the extraction (of copper) will start soon,” says Sidiqi.
The Aynak copper mine project was won by the MCCwhich offered 1 billion USD more than other competitors bidding for mining rights. The Chinese will be able to extract more than 11 million tonnes of copper, and is Afghanistan’s largest potential source of tax revenue.
But the MCC does not have to pay royalties until the mining actually starts. The MCC has given an initial signing bonus of 808 million USD.
Member of Parliament from Logar, Mohammad Akbar Stanekzai, insists the Ministry of Mines has not made the Aynak contract public. Ex-minister Adel, who is seeking to clear his name, says the contract should be published for the sake of transparency. He is ready to accept responsibility for any problems, he adds.
Conservation efforts
Meanwhile, the Ministry of Culture and Information says it has completed 90 percent of the work of moving ancient relics from Bronze Age and Buddhist era sites in the Aynak area.
Abdul Qadeer Timori, head archaeologist in the Information Ministry, says the Ministry of Mines has not cooperated in the conservation effort.”TheMinistry of Mines has not taken (conservation) action,” he says. International archaeologists who have assisted the Ministry of Culture and Information were given three years (between 2010 and 2012) to salvage as much of the hundreds of sculptures and temples.
Security issue
Armed opponents of the government are entrenched in Azra district for the past four years, and have created problems for Aynak. In August last year a Taleban rocket attack scared workers at an archaeological site.
The government decided recently to start a major operation there. “Luckily the operations were successful because insecurity in Azra created problems for the project,” said an official.
However, Logar Governor Arsala Jamal does not think insecurity has delayed the mining project.
He said special security of 1,500 soldiers has been deputed by the Ministry of Interior to police the project.
He thinks the Chinese are deliberately delaying the strip mining for copper.
“The price of copper has fallen in the world. The price that the MCC had contracted and the conditions that it had accepted are expensive as a result. This and other reasons may have encouraged the Chinese to review the contract.” Global copper prices have been falling. The price has fallen 16 percent so far, and was 34 percent below February 2011’s all-time closing high. The downturn is likely to continue for at least two years.
