Via The Financial Times, an interesting article on the global competition for access to Afghanistan’s iron deposits:

“…India is well-versed in resource diplomacy. Just a day after the Pentagon published projections for Afghanistan’s mineral fortune last year, New Delhi called itself Kabul’s ‘natural ally’ and set up ministerial meetings. Now, less than a year later, the short-list of contenders for what Afghanistan says is the world’s biggest iron ore deposit in Hajigak are all (15) Indian.

Wahidullah Shahrani , Afghanistan’s mining minister (pictured),  told beyondbrics that India and China are making the best offers for resources tenders in a war-torn country that most western companies still won’t touch with a stick.

About the Hajigak tender he remarked, “Rio Tinto did not show up (to bid for the tender).” Nor did any other major western miner, something which Shahrani said he hoped would change. About future tenders he said, “The process should be more competitive.”

The Hajigak iron ore deposit is being touted by the Afghans as the world’s largest deposit with 1.8bn tonnes of iron ore. But this figure is at best an estimate and comes from Soviet scientists in the 1960s.

The Indian companies on the short list are certainly not small fry. They were selected for the final bidding round based on a host of criteria including the market cap and experience, Shahrani said. Companies like Tata Steel and JSW, India’s third largest private steel company, will put in their final bids on August 3 and a final decision will be made in September.

Speaking from London where the mining minister is visiting to drum up investor support for five new tenders ranging from gold, copper, iron ore, oil and gas, Shahrani emphasised how recent reforms in Afghanistan’s mining sector have created a more transparent sector which he said has given investors more confidence.

With new reforms in place, the Afghan government is keen for western companies with significant competitive advantage and technical know-how to invest in the country. Shahrani said, “We strongly urge Western companies not to lose the opportunities”.

Shahrani told beyondbrics that Chinese and other emerging market companies have won earlier tenders, such as the Aynak copper deposit south-east of Kabul which China Metallurgical Corp bid $3.4bn for, because they got there first, and in the case of Aynak, “because of their package” (which included a $6bn railway for transportation).

In Afghanistan, the issue isn’t so much that emerging market companies are gaining a ahead,  but that western companies are still concerned with security.

Beyondbrics couldn’t find a mining analyst that is looking seriously at the prospects of mining in Afghanistan.  As well as the violence, companies face formidable infrastructure challenges. Metallurgical Corporation of China , which bid $3.4bn for a copper deposit in Aynak in 2008, has pledged to build a $6bn railway to transport the copper it mines (although production won’t begin for some years).

Peter Zeihan, a global analyst at Stratfor, the global intelligence company, told beyondbrics that the country would need at least $60bn investment to build up proper rail infrastructure for mining.

But the 15 Indian companies who plan to place their bids on Hajigak in August are clearly ready to grapple with these challenges.”