Bloomberg News

Indian Group Wins Rights to Mine in Afghanistan’s Hajigak

December 06, 2011

(Updates with comment from India’s steel secretary in seventh paragraph.)

Nov. 29 (Bloomberg) -- President Hamid Karzai’s government offered India a new strategic role in Afghanistan by awarding mining rights for the country’s biggest iron deposit to a group of Indian state-run and private companies.

Karzai and his cabinet awarded three of four blocks at the Hajigak ore deposit to seven companies that bid with support from India’s government, and offered the final block to Canada’s Kilo Goldmines Ltd., according to a Ministry of Mines statement issued yesterday. The country expects to attract $14.6 billion in foreign investment over 30 years, including $10.7 billion from India, the ministry’s policy director Abdul Jalil Jumriany said by phone today.

India’s government backed the group led by state-owned Steel Authority of India Ltd. and NMDC Ltd. to widen the country’s strategic presence in Afghanistan, which Prime Minister Manmohan Singh has said is essential for Indian security. By adding a multi-billion dollar mining project to its aid programs, India will join China as one of Afghanistan’s main foreign investors, an elevation of its role that analysts say is likely to upset its main rival, Pakistan.

Hajigak, a series of rugged mountain ridges 100 kilometers (60 miles) west of Kabul, holds an estimated 1.8 billion metric tons of ore and is the biggest mining project on offer in a country that the U.S. government estimated last year holds $1 trillion in untapped minerals.

Copper, Gold

Afghan Mines Minister Wahidullah Shahrani will visit London Dec. 6 to promote four copper and gold deposits that are among the next tenders the government will offer, Mines Ministry spokesman Jawad Omar said.

The government will soon start negotiations with the Indian group for investment that includes the building of the nation’s first steel mill for $7.8 billion, a power plant and facilities for ore extraction and processing, Jumriany said. State-owned Rashtriya Ispat Nigam Ltd., and private-sector companies JSW Steel Ltd., Jindal Steel & Power Ltd., Monnet Ispat Ltd. and JSW Ispat Steel Ltd. are part of the group.

The Indian government may help the consortium with financing, P.K. Misra, India’s steel secretary, said in an interview today.

“SAIL has approached us for some financial assistance,” Misra said. “Once we get confirmation from the Afghanistan government, we will discuss with the External Affairs Ministry about what role the government can play.”

‘Vast’ Resources

The Hajigak deal will be “an important step in developing our vast mineral resources, which is the key to the sustainability of economic growth in the country,” Shahrani said in a statement issued by his office yesterday.

Monnet Ispat Managing Director Sandeep Jajodia said that for India, the Afghan decision “will pave the path for more such formations bidding jointly for overseas assets.” Such a joint state-backed bid “is something that China has done for years,” and “this success clearly shows that Indian companies can join hands to tackle China’s might,” he said.

S. Thiagarajan, finance director at NMDC, India’s largest iron ore producer, said the company will manage mining of the steelmaking ingredient. Manish Kalghatgi, spokesman at JSW Steel and JSW Ispat declined to comment.

The Indian group’s bid includes an investment of $1 billion in a railroad to export the ore, Jumriany said in Kabul. India has said it is exploring a rail line from Hajigak to the Iranian port of Chabahar.

Aynak Copper

Those plans would place the Hajigak project alongside the Aynak copper mine, being developed by the state-owned Metallurgical Corporation of China, as one of Afghanistan’s two largest investments.

India’s role in Afghanistan so far has included $1 billion in aid since 2002, mainly devoted to construction work and development projects. An expanded Indian presence is likely to upset rival Pakistan, according to analysts such as Bashir Ahmed, a senior fellow and retired army brigadier at the Institute of Regional Studies in Islamabad.

Singh and Karzai signed a strategic partnership agreement last month that officials of their governments say will allow for Indian training of Afghan troops. India has vowed to maintain and expand India’s role in Afghanistan as the U.S. seeks to end its main military presence there by 2014.

The government will soon open negotiations with Kilo and the Indian group to finalize contracts, Jumriany said. Unsuccessful bidders included India’s Corporate Ispat Alloys Ltd. and Iran’s Gol-e-Gohar Iron Ore Co. and Behin Sanate Diba Co.

--With assistance from James Rupert and Rajesh Kumar Singh in New Delhi and Abhishek Shanker in Mumbai. Editors: Mark Williams, Sam Nagarajan

To contact the reporter on this story: Eltaf Najafizada in Kabul at enajafizada1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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