Bids for Hajigak mines to be opened today

Consortium led by SAIL, Corporate Ispat Alloys in fray; India seeks to use project to expand engagement in region
Ruchira Singh &
Six companies and consortia, including two bidders from India, are in the race to develop Afghanistan’s 1.8 billion tonnes Hajigak iron ore mines, bids for which will be opened on Tuesday.

Ravaged by a decade-long war, Afghanistan hopes to generate substantial revenue from the mines—located in Bamiyan province, 130km west of capital Kabul—to boost reconstruction efforts. But security concerns and the massive infrastructural expenditure needed to get the remote mines up and running will pose the biggest challenges for miners.

The bidders are an Indian mining consortium led by state-owned Steel Authority of India Ltd (SAIL); another Indian firm Corporate Ispat Alloys Ltd; Iran’s largest iron ore firm Gol-e-Gohar Iron Ore Co.; Iran’s Behin Sanate Diba Co.; Acatco, a US-Afghanistan firm; and Canada’s Kilo Goldmines Ltd. The bid evaluation will start on Tuesday, with the results expected to be declared in October.

“SAIL has made a consortium. The nationalities of some of the companies (bidders) are Iranian, Canadian, American,” Jalil Jumriany, director general for policy and promotion in Afghanistan’s ministry of mines, said on phone from Kabul.

“In the bids, everything has a weightage. How much financially, royalty will be given to the country, how much infrastructure will be created for the country, are they going to do vertical integration, we will also look at technical and financial capabilities of the players,” Jumriany said.

The SAIL-led consortium, formed at the Indian government’s behest, is comprised of NMDC Ltd, Rashtriya Ispat Nigam Ltd (RINL), JSW Steel Ltd, JSW Ispat Steel Ltd, Jindal Steel and Power Ltd (JSPL) and Monnet Ispat and Energy Ltd. Tata Steel Ltd was initially a part of the consortium, but eventually opted out.

The deposits are attractive for Indian companies as their local expansion plans are hobbled by land acquisition and environmental concerns.

“If we become successful for this bid, it will set the stage for large cooperative efforts between the public and private sector steel companies in times to come in other sectors as well, such as coal,” said C.S. Verma, chairman, SAIL, which is also interested in setting up a steel plant in Afghanistan.

Gol-e-Gohar and Kilo Goldmines did not respond to emails seeking comment sent on Monday.

Global miners such as BHP Billiton Ltd, Rio Tinto Plc of Australia and Vale SA of Brazil were also expected to bid for the project but stayed away.

“These companies have big engagements in different parts of the world,” Jumriany said. “The economic mobilization would be much more (suitable) for countries like Iran and India for this place.”

Analysts said infrastructure costs and worries over security are the biggest impediments for the project.

The country has been facing an insurgency since US-led forces toppled the Taliban government in Kabul in the aftermath of the 11 September 2001 attacks in the US. Efforts to negotiate with the insurgents are yet to succeed, and US troops are expected to leave the country by 2014, deepening concerns about the security of commercial projects.

Rio Tinto did not bid because of security concerns, said Nik Senapati, managing director of the company’s India unit.

“For the company, safety comes first. No subsidiary of the company is bidding either. A mine in Afghanistan can at best work with the help of a government-to-government deal,” he said.

Vale and BHP Billiton did not respond to emails seeking comment sent last week.

The SAIL-led bid, if successful, will expand India’s engagement with war-torn Afghanistan, where it has already invested $1.3 billion (Rs.nearly 6,000 crore) in rebuilding. India views the country as key to its strategic interests, partly because it is situated between South Asia and energy-rich Central Asia.

India is also pushing the bid for geopolitical reasons. It fears Chinese companies may begin to dominate Afghanistan, having already secured the Aynak copper deposit in 2007.

Afghanistan invited international bids for the Hajigak deposit in January. The country has been promoting its minerals sector to foreign firms in the hope of boosting economic growth and employment. It aims to generate a revenue of $2 billion annually by 2017-18 from the mining sector, including oil and gas, from about $100 million now.

Afghanistan is keen to develop itself as a mining destination, with tenders for four more assets containing copper and gold deposits which will be opened in October. The Afghan government will conduct road shows in Singapore and Canada for the assets at the end of September.

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Livemint.com