AYNAK COPPER PROJECT
SAID ISSAQ SAID
In consideration of high interests of Afghan people and the future generations, a review of Aynak Copper Project is an obligation not.
Afghanistan has been endowed with ample resources. Aynak Copper Mine with an exceptional high concentration of copper is unique , no other mine in the entire world has such a large scale deposits. This fact of highly richness in content, makes the mine highly profitable as ex-factory cost of copper will be the lowest in the world.
Currently in spite of the universal slow economy, copper prices are high at $4.10a pound at London Metal Exchange ( LME ). Accordingly at this price level, annual revenue of the project will be $1.80 billion.
No copper mine in the world has been operating without a cost to the community. But there is a benefit against this cost, i-e, financial. Has this cost benefit ratio been fair in case of Aynak?
It has got to be mentioned that the development of this resource is accompanied by certain major challenges such as environment, ( Based on a Northern Peru uses mine project a project of this size requires 700litres of water every second. Similarly a coal power plant of 500MW capacity uses about 500,000 gallons of water per hour ) transportation and energy. To meet these challenges a well coordinated strategy is required to be implemented on fast track zero time tolerance basis. To transport the product (copper) railway is required. To build railway tracks of 1000 km length, tens of thousands of steel is needed. Cost of steel plus transportation charges exceeds a mid size steel mill project cost at Hajigak The optimal project implementation schedule has to split the railway construction in 4-5 segments, like that of Canadian east west railway. By this the railway construction time will be cut considerably. The same is true with the other sections of the project, i-e- Thermal power plant and transmission lines can start at the same time as smelter and mining facilities.
What will be a fair price for the copper ore?
This is a highly technical question, but with the commitment and dedications of both sides a mutually beneficial business deal was possible. One way would have been to work backwards, at a given market price of copper and an agreed upon profit margin, with deduction off production, overheads, depreciation and transportation expenses copper ore cost could have been fixed.
Usually Internal Rate of Return (IRR) and Net Present Value ( NPV ) are the criteria.
Under current arrangements MCC will pay only $4oo million to Afghanistan annually. This is while in China itself copper mining investors pay 41.7%. At present price level of $4.1 per pound Afghanistan gets about $ 350 million less in taxes every year.
COST ANALYSIS, PROFITABLITY AND TAXISATION:
This is established fact that Aynak Copper Mine is a bankable project promising a very good return on investment. This being the case, it is important to present to the Afghan decision makers the tools to make decisions based on realities, That is to evaluate the project. Evaluation of mining projects differ from other project due to the extensive investment requirements, project life (about thirty years in this case) and determination of royalties to name.
The mining project evaluation contains about twenty items as a chick list. The most relevant items in this case are:
Identify all feasible alternatives
Obtain data from existing geologic and technologic evaluations to obtain estimated grades, quantities, operating and capital costs, and prices for copper.
On a constant dollar basis, identify and forecast all relevant variables, such as prices and costs.
Construct a constant dollar pro forma cash flow with known taxes and royalties and determine NPV, IRR and Payback period.
Do a reality Check
Conduct a sensitivity analysis to identify critical variables and possible floor and ceiling values of the project, i-e copper prices @ $2.50/lb and $5.00/lb. And also changes in capital costs and gestation period, variations in energy costs both electricity and oil and transportation charges.
Write an interim feasibility report for a selected group of decision makers.
Other criteria ERR and Environmental impact.
Reconcile project report and findings with other stakeholders.
In order to have more realistic picture of the project reliable capital and operative cost figures with underlying assumptions is a must.
Operating Cost which includes LABOR, ENERGY, MATERIALS AND SUPPLIES, TRANSPORTATION AND ROYALTIES is one of the keys to a profitable mineral project. Aynak Project on per unit of production bases due to its copper density is the highest profitable copper mine. It is very important to determine the dollar amount of these items. How much will be the energy cost? Electrical power. Oil. And all the other items.
Different figures have been given for the cost of production of copper:
Galenco Mine in Northern Peru $0.51/lb ( Copper Concentration 0.5% )
International Copper Study Group $0.85/lb
Another figure ( break down) Cents per pound;
General and Admin 4.7
As some mining contracts were signed during the nineties when copper prices were extremely low, there is misconception that with every mining contract ;
“ Prosperity for a few and misery for many”. That is why now in most of the countries particularly African Democratic Republic of Congo and Zambia the new contracts are negotiated.
Right and Accountability in Development, a UK based NGO is advocating a renegotiation of the Congolese contracts. They want a new contract based on a lower IRR.
In Zambia the government wants renegotiations of the copper mining contracts based on copper prices;
Tax for copper prices per pound $2.50- $3.00 25%
$3.00- $3.50 50%
Above $3.50 75%
For Aynak, taking into consideration all the facts a combination of IRR and a progressive tax regime above certain price level could be negotiated.
Copper project tests Afghanistan's resources
Financial Times Deutschland, Germany
von Jon Boone (Kabul)
The war-battered country might not be able to handle a huge but potentially lucrative deal.
The debris left over from previous attempts to extract some of Afghanistan's colossal mineral wealth can be found just 35km south-east of Kabul.
All that remains from Soviet attempts in the 1970s to assess one of the world's biggest copper reserves is exploratory drill holes. But in five years, if all goes to plan, the landscape in the Aynak exploration area will finally be changed into one of the world's largest opencast mines, thanks to a $3bn (Pfund1.5bn) investment by the China Metallurgical Group Corporation (MCC).
In November, the Chinese state-owned company beat eight other leading mining groups, including Phelps Dodge of the US, Hunter Dickinson of Canada and London-based Kazakhmys, to become the government's preferred bidder.
If contract negotiations are successfully concluded, MCC will have access to a reserve that, with copper prices running high, could be worth $42bn, according to one estimate.
By international standards, it is a huge project, involving the second-largest unexploited deposit in the world. By Afghan standards, it is gargantuan.
And therein lies both the potential reward and risk for a war-battered country that desperately needs the money such a deal could bring but which experts say is unprepared for regulating the sort of mega-projects that have caused social, political and economic catastrophes in other developing nations.
Lorenzo Delesgues, executive director of Integrity Watch Afghanistan, an independent research organisation that last month published a report on Aynak, says Afghanistan is not evenly matched with the company. "This is a multi-national company that is far bigger financially than Afghanistan. It's like David and Goliath, only David doesn't have any laws or regulatory framework to help him."
Copper mining can be destructive to the environment. Acid waste, for example, needs to be controlled to stop it polluting drinking water supplies and the run-off from Aynak could spill into Kabul's water supply, experts have warned.
But the rewards for getting the project right could be huge for Afghanistan. The investment in the project is equal to 35 per cent of all the international development money spent on Afghanistan since 2002.
Analysts say annual royalties will be about $400m - or 40 per cent of the 2006 Afghan state budget. The cash will be vital for a country that struggles to collect taxes and knows it has to wean itself off international aid money.
The project will also bring infrastructure development for which the country would otherwise have to wait decades, including a first railway line, which would link Afghanistan to Tajikistan and Pakistan.
Mahmoud Saikal, an economic adviser to the government, says Afghanistan should look to the example of post-independence India, which focused on developing its mineral wealth.
"The MCC deal only ¬covers one quarter of the exploration area and the country's other resources could be a lot more than we currently understand," he says. "There will be opportunities for similar deals."
Those other minerals include iron ore, gold, marble, emeralds, lapis lazuli and hydrocarbons.
But if the Aynak deal, which is seen as a test of how the country handles big foreign investment projects, goes sour, then much of that potential will remain untapped.
In the summer, concerns were raised about the tendering process by James Yeager, a consultant who worked with the ministry of mines. He warned that legal requirements for an inter-ministerial council to consider the rival bidders were simply being ignored. Other sources close to the deal have warned that the process lacked transparency.
The World Bank, which is bankrolling efforts to sharpen the ministry's capacity to handle mega-deals, said it was satisfied with the tendering process.
Analysts warn, however, that the contract negotiations and a yet-to-be-done feasibility study still offer potential pitfalls.
One westerner with intimate knowledge of the country's embryonic mineral extraction regime described it as a "Soviet-era structure that simply does not have the capacity to do the job".
"The risk will be that without the lawyers and accountants in place to monitor all of this, they won't be able to stop problems before it's too late," he said.
But Ibrahim Adel, Afghanistan's mining minister, said his ministry was being well advised by international experts and the country still had plenty of time.
"Extraction will not start for five years, so there will be sufficient time to get our experts and environmental inspectors trained," he said.
If those challenges cannot be tackled, however, the landscape
around Aynak will be disfigured by more than a few Soviet-era holes.
Published online 22 October 2007 | Nature 449, 968-971 (2007) | doi:10.1038/449968a
Under the rubble of war-torn Afghanistan lie natural resources worth billions. Rex Dalton reports from Kabul on the scientists risking their lives to see them developed for the good of the country.
In a canyon just outside Kabul, the rocky terrain is strewn with debris symbolizing the troubled past and tenuous future of war-torn Afghanistan.
Exploratory cores, drilled decades ago by Soviets probing for minerals, are scattered across a landscape peppered with landmines. A line of bomb craters crosses the basin, which was home to a terrorist training camp until late 2001, when US B-52s swept overhead, dropping bunker-busters in retaliation for the terrorist attacks of 11 September. Among other things, the Americans destroyed a building that had been used to store geological cores, later turned into an ammunitions dump.
“The Taliban would have killed them if they had found the reports.”
Below this rubble lies a potential economic and social boon for the troubled nation — a massive copper deposit estimated to be worth US$30 billion at today's high prices. The deposit, called Aynak, has never been developed into a viable mine, but international corporations are now competing to win a major mining concession there. What happens at Aynak could eventually serve as a model for developing Afghanistan's other natural resources, ranging from mineral wealth to reserves of coal and petroleum.
But concerns about the Aynak bidding process have set off a behind-the-scenes scramble among consulting scientists, diplomats and aid agency officials to try to ensure its success. In June, the top World Bank geological consultant to the Afghanistan government sent a report to the office of President Hamid Karzai that sharply criticized how the country's ministry of mines was handling the competition. The consultant, James Yeager, called for new analysis of the bids, more emphasis on social and economic benefits and a stronger analytical role by the inter-ministerial council that administers the process. The government is soon expected to announce two finalists for the concession, narrowing the field from the current five.
Because he raised the alarm, Yeager thinks that he was targeted for assassination. A capped beer bottle of hydrochloric acid was slipped into the refrigerator of his heavily guarded apartment in Kabul; he stopped just short of drinking it. Yeager did not renew his World Bank contract and instead returned home to Denver, Colorado, joining numerous other consulting scientists leaving Afghanistan at a time when their experience is sorely needed. Meanwhile, researchers who remain there face a range of threats, from kidnapping to landmines to booby traps.
Nevertheless, some are optimistic that Afghanistan's natural resources can be developed in a stable and sustainable manner. Officials at the World Bank, for instance, say that the inter-ministerial council has started to strengthen its role in the Aynak bidding process by asserting power over the ministry of mines and shifting the competition onto a steadier course. Using the phrase that has been a byword for conflict in the region since the days of Rudyard Kipling's Kim , World Bank mining engineer Michael Stanley says: “We are into a new phase of the Great Game.”
Afghanistan is a key player in the game because of its panoply of geological riches, created as the Indian subcontinent rams into Asia, and thrust into the air and exposed in the Hindu Kush mountain range. Coal, rare industrial metals and precious stones abound at various points along the range. The northern provinces of the country also have oil and gas reserves.
Abandoned shell casings litter the exploration tunnels around the Aynak copper deposit.J. YEAGER
For centuries, Aynak has been known for its copper, used for weapons, tools and trade along the Silk Road. Before withdrawing from Afghanistan in 1989, the Soviets drilled countless cores to assess the deposit, now estimated to hold 240 million tonnes of the metal. Work halted for years during Taliban rule, but after 2001, reconstruction teams started to identify the country's assets. In the United States, the Bush administration encouraged Afghan expatriates to help develop their homeland; some scientists who had fled the country returned (see 'Science after the Taliban').
Work in post-Taliban Afghanistan wasn't easy. In Kabul, the Afghanistan Geological Survey building had been reduced to a shell, pockmarked by rocket blasts. Its equipment, samples and library were destroyed; anything burnable had been used for fuel. US officials helped to reconstruct the building, spending at least $6.2 million to modernize the facilities with computers, labs, sample storage racks and a library housing old, rare and sometimes bullet-scarred reference volumes. The UK government also chipped in with US$8 million and a three-year contract for scientists from the British Geological Survey (BGS) to analyse natural resources.
Although Aynak is only about 35 kilometres southeast of Kabul, the BGS scientists were forbidden to go there without military protection. Even when they did manage to get there, they couldn't sample for minerals in the scattered cores. The cores had been blasted apart by bombs aimed at the old mining tunnels, which had been suspected of housing Osama bin Laden.
Back in Kabul, the team managed to patch together a detailed picture of the copper deposit from surviving Soviet core reports. Courageous staff from the Afghanistan Geological Survey had hidden the 20-year-old documents during the Taliban regime. “The Taliban would have killed them if they had found the reports,” says Antony Benham, a mineral specialist at the BGS.
Working with these formerly hidden records, BGS scientists plugged in data from the cores to create a computerized model of copper distribution at Aynak. “It was a remarkable job,” says geologist Richard Ellison, the official in charge of the agency's contract, which ended on 1 September. The BGS is now negotiating for a new contract with the World Bank.
The firm that eventually wins the Aynak concession will face many difficult tasks, but perhaps the most daunting will be to secure electricity for mining and smelting equipment. The villages around Aynak have only generators as a source of power, and building an enormous copper production facility will require lots of power from coal-fired plants. But before hundreds of millions of dollars are invested in power plants and mining facilities, coal supplies must be located, assessed and graded for development.
To evaluate coal resources in Afghanistan, the US Geological Survey (USGS) sent in a task force led by geologist John SanFilipo. SanFilipo had earned an international reputation for assessing coal in dangerous environments, particularly in adjacent Pakistan. There, he discovered one of Asia's largest coal reserves, the Thar deposit in the Sindh province of southeastern Pakistan. But much of Thar's coal is difficult to mine because of political difficulties in the country.
SanFilipo and his colleagues faced similar challenges in assessing Afghanistan's coal resources. The Soviets and officials from the Afghanistan Geological Survey had previously found a massive coal band running across much of northern Afghanistan, with mining centred around the town of Pul-I-Khumri, northwest of Kabul. Another known coal band runs along the country's southeastern border with Pakistan, in the Katawaz Basin.
Historically, this coal has been tapped by artisanal methods — in mines called 'dog holes', dug by locals who use donkeys for underground hauling. With little shoring or proper ventilation, the tunnels regularly collapse, killing villagers. In these warrens, the geologists went coal-hunting, sometimes using old ways. Yeager, for instance, carried a bird to test air quality. “When the bird died, I left,” he says.
Details on the locations of the coal deposit were extremely sketchy, and map conditions worse. “The Afghans had squirrelled the maps away during the Taliban days,” says SanFilipo. “When I got there, they had brought them back to the Afghanistan Survey building, where they were piled like junk. We set out to organize, scan and digitize them for a permanent record.”
The quality of Afghanistan's coal deposits varies greatly. Some contain coal that burns hot and clean; other coals are more problematic, rich in sulphur and fluorine, and emitting noxious gases when burnt. Just north of Aynak lies a coal deposit called Chalaw. The coal there could fire a power plant for the Aynak mine, officials say, but it is rich in fluorine — which requires added measures to limit pollution from power plants, and protective venting if burned inside houses.
Another challenge is to find coal that is not buried so deep that it can't be extracted. “The critical step is to determine where coal is not at the surface, but is still easily minable,” says SanFilipo. Geologists thus search for a relatively flat area where coal is just below a weathered surface.
Dating the coal is also crucial, because coals of the same age will tend to be of the same quality. Older geological maps show coal reserves that might have been dated incorrectly. “We want to create a stratigraphic picture of coal deposits across the entire country,” says SanFilipo. The USGS team uses palaeobotanical clues such as pollen to date the coal. It relies on scientists such as Rahman Ashraf, a palaeobotanist who fled Afghanistan after the Soviet invasion but now serves as special adviser to President Karzai. “It was a dream that I could return to work in my country,” says Ashraf, who has also been appointed chancellor of Kabul University.
The power lines of Afghan politics run through nearly all attempts to characterize the country's natural resources. In one case, sources allege that SanFilipo was blocked from returning to Afghanistan for coal exploration by the actions of another USGS geologist — Afghanistan-born Said Mirzad.
Originally trained in France, Mirzad was director of the Afghanistan Geological Survey before the Soviet invasion in 1979. After that he ran computer services for a small USGS office in San Diego, California. After the terrorist attacks of 11 September, Mirzad's Afghan friendships vaulted him to the USGS headquarters in Reston, Virginia, to help coordinate resource development in Afghanistan.
Mirzad has deep and historic connections in Afghanistan, where his brother-in-law is the minister of defence. Mirzad is also the mentor of the minister of mines, Mohamad Ibrahim Adel, who was one of those criticized for the handling of the Aynak copper bidding competition. And Mirzad has powerful allies in Washington DC; both the US state and defence departments awarded him medals for outstanding service in 2005.
“It was a dream that I could return to work in my country.”
In Afghanistan, Mirzad has aided multiple projects, such as an airborne geological assessment he urged the Karzai government to fund after aid agencies declined. But some also see him as an obstructionist. Beginning in early 2005, SanFilipo attempted unsuccessfully to return to Afghanistan to continue his fieldwork and geological map inventory. His repeated requests to US officials in Kabul for clearance to return were denied, keeping him out of the country for 15 months. He was finally allowed to return three times in 2006, but not since then. “A geologist must go out in the field to see,” says Ashraf, praising Yeager and SanFilipo's expeditions.
Sources say that denials for SanFilipo's travel to Afghanistan were traced to Mirzad, who was in Kabul advising Zalmay Khalilzad, then the US ambassador to Afghanistan. Khalilzad is arguably the Bush administration's most-favoured Afghan and has since been appointed as the US ambassador to the United Nations. Mirzad's historic friendships also extend to the presidential palace in Afghanistan: he used to play bridge with President Karzai's father.
Mirzad, though, denies hindering SanFilipo's work in any way. “This is all gossip,” he says. “There is not a shred of evidence.” But neither he nor the USGS officials could explain why SanFilipo was refused access to Afghanistan during the time in question.
In October 2006, SanFilipo lectured at the annual meeting of the Geological Society of America in Philadelphia, Pennsylvania, on the poor state of mining in Afghanistan. Not long afterwards, he was removed as the project leader for the USGS effort. Since the meeting, he has declined to discuss the issue publicly.
These events set back coal exploration in Afghanistan substantially, say several sources in Afghanistan and the United States, who requested anonymity so they may continue to help the country without reprisals. “It is unforgivable what has happened, a disaster,” says Mary Louise Vitelli, a US attorney in Kabul who has worked extensively in war-torn regions. “Guys like SanFilipo are rare; he produces quality analysis under difficult circumstances.”
Researchers such as Antony Benham (left) and Bob McIntosh (right) are helping to revitalize research at the Afghanistan Geological Survey building (far left).A. BENHAM
And some scientists with long-term experience in the subcontinent saw the tapping of Mirzad for a reconstruction role as counterproductive — as were other selections by the Bush administration in Afghanistan and Iraq. Jack Shroder, a geologist at the University of Nebraska in Omaha, has worked in Afghanistan for 35 years, conducting glacial, mapping and global-positioning-system studies. He has been integrally involved in the American Institute of Afghanistan Studies, a multidisciplinary organization to foster research. But Shroder says that he and his fellow institute leaders were never consulted about the Bush administration's science policy for Afghanistan. “We were the boots-on-the ground guys — in and out of Afghanistan before the terrorist attacks,” he says. “They completely ignored us; they think academics are all left-wingers.”
Shroder also says that he has repeatedly encountered difficulties dealing with Mirzad, whom he calls a hard-core nationalist. “He didn't want foreigners to get access to maps, even if they were helping,” says Shroder. But Mirzad expressed surprise that he would be seen as an obstructionist. “I believe the only thing that can save Afghanistan is its indigenous wealth. I am completely behind that,” he says.
USGS managers of international programmes, such as Asia project chief Jack Medlin, praise Mirzad for fighting to secure funds for the agency to work in Afghanistan. Even so, the USGS wanted $12 million a year for five years to develop resources in Afghanistan, but scrapes by with about $9 million a year.
On 13 November, the USGS is scheduled to release a status report on minerals in Afghanistan, after some delay. The main coal report isn't to be released until next year, albeit short of data as few USGS scientists have gone to Afghanistan this year. Expatriate Afghan geologist Shah Wali Faryad, now of Charles University in Prague, repeatedly invited USGS scientists to attend a conference on geological opportunities on 15–16 October in Kabul, but the agency didn't respond. Medlin cites security issues as the reason.
As the coal debacle simmers in the background, bigger questions arise about the Aynak copper project. Nine corporations originally sought the concession, which includes an option on the nearby Darband deposit. By June, the field of contenders had been narrowed to five firms, all mining heavyweights: Strikeforce, part of Russia's largest private employer, the Basic Element Group; China Metallurgical Group, a Chinese government-owned conglomerate based in Beijing; London-based Kazakhmys Consortium, which mines and processes copper in Kazakhstan; Hunter Dickinson of Vancouver, Canada, which mines minerals internationally; and Phelps Dodge, a leading US copper mining firm based in Phoenix, Arizona. An informed source says that a few months ago the favourite of the ministry of mines' technical group was the China Metallurgical Group, with Hunter Dickinson a distant second.
In his critique of the process, Yeager wrote that Afghan expertise wasn't being used to its fullest extent, and that officials controlled by Adel, the mining minister, had too much influence in the process. No economists, attorneys, environmentalists or foreign-affairs specialists had been involved in the technical analysis, he asserted, which violates the laws Afghanistan implemented after the Taliban were ousted. Yeager also noted the importance of the bidders' track records: the top-ranked company has come under fire for poor environmental records in mining in nations other than its native China.
Yeager also contends that the strategic implications of selecting either an Eastern or Western firm have not been addressed. If Afghanistan were to choose a Russian, Kazakh or Chinese bid, Yeager wrote, firms from Western nations might not seek other mineral concessions in the region in the future, fearing that Afghanistan's neighbours may have undue influence.
But Adel counters that the tender bids have been “very strong, and everyone is happy with the progress.” He adds that he has not seen Yeager's report, but considered its transmission to Karzai's office “a breach” of the adviser's duties. “He is not directly responsible for the bidding,” says Adel.
For environmental specialist Daud Saba, a human development adviser to President Karzai, the difficulties with Aynak have been particularly painful. Developing such a rich natural resource should be spearheaded by the country's leading scientists, he feels. “It breaks my heart when I see what is happening,” he says. And unless Afghanistan puts resource development on a steady course, many more hearts may also be broken by the opportunities lost.
احتمال به هدر رفتن پروژه مس عینک
یک نهاد تحقیقاتی در
افغانستان ابراز نگرانی کرده است که اگر دولت در استخراج معدن مس عینک از دقت و
هوشیاری کافی کار نگیرد، افغانستان از این پروژه مفاد زیادی نخواهد برد.
به نقل ازبی بی سی، مسوولان یک نهاد غیردولتی به نام "نگاه شفاف به افغانستان" میگویند تجربه کاری در حال حاضر برای استخراج معدن بزرگی چون مس عینک تا حدی نیست که بتواند با شرکت های بزرگ جهانی که دارای توانایی های اقتصادی و سیاسی هستند به شکل مشترک کار کند.
افغانستان اعلام کرده که یک شرکت چینی با هزینه نزدیک به سه میلیارد دالر استخراج معدن مس عینک را بر عهده گرفته است.
این معدن، بزرگترین معدن مس در افغانستان و دومین معدن بزرگ مس در سراسر جهان است که در چهل کیلومتری جنوب شرق کابل در ولایت لوگر موقعیت دارد.
مسوولان نهاد نگاه شفاف به افغانستان می گویند استخراج این معدن افغانستان را در ردیف پانزده کشور بزرگ تولید کننده مس در جهان قرار می دهد. این نهاد در عین حالی که اقدام برای استخراج معدن مس عینک را تلاش خوبی برای آغاز سرمایه گذاری های بزرگ در افغانستان می داند، تاکید دارد که در اجرای این برنامه باید از دقت وهوشیاری کار گرفته شود.
لورینزو دلسگس، مسوول این نهاد در کابل میگوید برنامه استخراج معدن مس عینک در حالی در ولایت لوگر آغاز می شود که حاکمیت قانون در این منطقه کم است.