KOLKATA (miningweekly.com) - The signing of a mining contract agreement by a consortium of Indian companies hoping to develop the Hajigak iron-ore reserve, some 180 km from Kabul, was being delayed by the conditions proposed by the Afghan government.
The Afghan government was insisting on a clause stipulating that the Indian consortium had to start exploratory projects within six months of signing the contract agreement, or the contract would be terminated, an official with one of the companies in the consortium said.
It had been more than a year since the consortium of Indian companies, under the banner of Afghan Iron & Steel Company Limited (Afisco), bagged the rights to develop the Hajigak reserves through competitive bidding. However, since that time, a mining contract with the Afghan Mines Ministry could not be concluded because of the stiff conditions, the official said.
According to the official, there were several justifiable issues raised by both sides. From the Indian point of view, investments in large projects, particularly in the mining and steel production facilities, in the Afghan environment were extremely challenging, and a six month project start-up schedule might not be practical or feasible.
From the Afghan point of view, Indian companies were not particularly reputed for timely project implementation, particularly in the mining sector and hence the insistence of the Afghan Mines Ministry to lay down definitive timelines for the Hajigak project.
In 2011, Afisco, which is led by the country’s largest steel producer Steel Authority of India Limited (SAIL), won the rights to develop the 1.8-billion-ton iron-ore reserves in Hajigak province.
Afisco, which also included NMDC, Rashtriya Ispat Nigam Limited (RINL) and JSW Steel Limited, planned an investment to the tune of $11-billion for the development of the reserves, a steel production unit and associated logistics and infrastructure necessary for evacuation of ore and the transportation of finished steel.
However, according NMDC and SAIL chairperson C S Verma, there was no ‘stalemate’ as far as the project was concerned.
“There are one or two minor issues but for the rest the document is frozen. It was normal for any contract to take time,” local media quoted Verma as saying.
With mineral-rich countries across the world facing the political challenge of resource nationalism, Afghanistan had proposed to lay down a cap of six-million tons a year of iron-ore exports from Hajigak. However, SAIL had failed to agree to the limit on exports, claiming that such a condition was not part of the request for proposals issued by the Afghan government during the bidding process.
Another issue that was resulting in the delay of a legal mining contract was the Afghan government’s proposal that the contract between the parties would be liable for termination in the case of failure to meet six-month production targets.
SAIL had argued that global iron-ore markets were subject to cyclical vagaries in supplies and pricing and there would times, therefore, when neither production nor selling fixed volumes would be economically feasible.
A fresh round of negotiations between Afisco and the Afghan Mines Ministry was scheduled shortly in an effort to sort out these contentious issues, officials said.