The story behind China’s long-stalled mine in Afghanistan
One-third of the Afghan population lives below the poverty line (earning less than $2 a day) and a further 50 percent are barely above this line. With a per capita GDP of only $595, Afghans hoped to see $1 billion in annual revenue and at least 8,500 direct jobs and more than 30,000 indirect jobs from the mining sector by 2017. The $1 billion in annual revenue was expected to come from the Mes Aynak copper mine ($350 million) and from the Hajigak iron ore ($550 million), with another $150 million from hydrocarbons and gemstones. This goal was set in the first and second National Priority Programs (NPP) of the infrastructure development cluster, namely the “National and Regional Resource Corridors Program” and the “National Extractive Industries Excellence Program.” The two NPPs were part of the 22 NPP packages that were designed and approved under the Kabul Process in 2010 and reconfirmed at the Tokyo Conference on Afghanistan in 2012. However, the $1 billion revenue target now looks unrealistic in 2017 and perhaps not even attainable by 2020. The problems in the Mes Aynak mine provide an illustrative case study of the difficulties.
The year 2017 marked the ninth anniversary of the Mes Aynak concession, which was awarded in May 2008 to two Chinese state-owned companies, the China Metallurgical Group Corporation (MCC) and the Jiangxi Copper Company Limited. The consortium later called itself MCC-JCL Aynak Minerals (MJAM) to formally operate the project. Mes Aynak mine is said to be the second largest copper ore body in the world, with the deposit estimated to contain 5.5 million metric tons of high-grade copper ore. The contract awarded to MJAM is worth $2.9 billion. It stipulates that copper production will commence in the fifth year of the 30-year lease, with the extracting, smelting, and processing of the raw copper to take place in Afghanistan. The contract also foresees the construction of a 400 MW coal-fired power plant and the building of a railway from Hairtan to Torkham dry ports. However, little has been done on the ground and MJAM has reportedly asked for substantial modifications to the contract.
Apparently, the 400 MW coal-fired power plant option has been cancelled by MJAM, stating that their survey found that insufficient coal resources were available in Ishpushta. MJAM also argued that phosphate, which is an essential component for smelting and processing (neutralizing the sulfuric acid) copper, is not readily available inside Afghanistan. However, my ex-colleagues in the Ministry of Mines and Petroleum told me that some potential igneous phosphate resources at Khan Neshin in Helmand have been identified yet this requires further exploration by MJAM. The main argument by MJAM is that if copper cannot be smelted and processed in Afghanistan, then the mine does not need the 400 MW coal-fired power plant.
MJAM also requested in 2013 that the Ministry of Mines and Petroleum re-negotiate the contractual terms, taking into account the points mentioned above and reducing the royalties. The Afghan government is not happy with this proposal and insists on continuing with the existing terms. Kabul and Beijing have discussed these terms during visits by former President Hamid Karzai and by current President Ashraf Ghani, and apparently no agreement has been reached thus far.
Besides contractual disputes, the Mes Aynak mine has been plagued by persistent myths.
First, deteriorating security has been reported to be one of the causes for the prolonged delay in opening the mine. But looking back over the past nine years, there have only been two major incidents affecting work in the project area. One was reportedly an attack by a vehicle-borne remote controlled bomb at the MJAM camp in 2008, which resulted in the deaths of three security guards. The second incident, in June 2012, was an attack on a group of deminers who were removing landmines and Improvised Explosive Devises (IED) from the Soviet era. Other than these two incidents, the Mes Aynak camp has not been directly targeted by insurgents. It was also reported that rockets were fired at Mes Aynak checkpoints, but it was not clear whether that was done by insurgents or local residents who had grievances over land acquisition and resettlement issues. To ensure security, the government deployed 1,750 policemen in the Mes Aynak camp with 84 checkpoints and security towers.
Logar, where Mes Aynak is found, is listed as one of the insecure provinces in Afghanistan with a strong Taliban presence and with other insurgent groups also active in several districts of Logar. The Taliban’s insurgency and fight against the Afghan National Security Forces (ANSF) continues in Logar. It is apparent that the Mes Aynak site is not a direct target of the insurgents, nor is it their intention to force MJAM to halt their work. In fact, in November last year, the Taliban released a statement promising not to target Mes Aynak and other infrastructure projects.
Second, it was widely reported in the international media that a Buddhist archaeological site and its remnants in Mes Aynak were in danger and would be demolished by the Chinese miners if action was not taken. That was not the case. From the outset of the project, the Afghan government was fully aware of the archaeological site and assumed responsibility for preserving the relics and assuring their safety. During Daud Khan’s reign (1973-1978), the Mes Aynak site was surveyed and labeled as a Buddhist archaeological site. In 2003, the Afghan government restarted surveying and protecting the area site. When the Mes Aynak mine contract was awarded, Archeologique Francaise en Afghanistan (DAFA) was requested by the Ministry of Information and Culture in April 2009 to provide technical assistance in excavating and transferring the relics to a safe place. The World Bank also provided technical support through UNESCO to assist the Afghan government in taking care of the archaeological site. More than a dozen international archaeologists, numerous national experts, and up to 500 laborers have been part of the excavation since 2012.
According to Ministry of Information and Culture, not a single Buddhist artifact has been damaged or affected during excavation thus far. My colleagues in the Ministry of Information and Culture told me that more than 2,000 Buddhist relics have been safely transferred to the Kabul museum and remnants that are not transferable have been allotted a temporary shelter site in Mohammad Agha district for storage. Therefore, the various alarming-sounding reports and documentaries that claimed Buddhist relics are under serious threat by the mine workers are not supported by the facts on the ground.
Did the excavation of the archaeological site force MJAM to postpone its physical work on the ground? Actually, no, because MJAM has so far only managed to proceed with preliminary paperwork, such as surveys, a feasibility study, and environmental impact studies, and has yet to start copper extraction. Secondly, the archaeological site is just 0.45 square kilometers in size compared to the area of the whole site which is 28 sq km. The area occupied by the archaeological portion, just 1.5 percent of the total mining site, is not sufficient to have halted the work of MJAM to such an extent as to have made extraction impossible.
Kabul and Beijing clearly understand what is going on. It is neither the security situation nor the archaeological site that has kept the Mes Aynak project from moving forward over the past nine years. It is all about agreeing on the contractual terms. The success of Mes Aynak is of great significance. It would be an important source of revenue for the Afghan government and an essential step toward realizing self-reliance in the transformative decade ahead. It would also serve as a model for the other large-scale private investments planned in Afghanistan.