Afghanistan Awards Indian Group Hajigak Iron-Ore Mining Rights

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. (KGL), Ministry of Mines policy director Abdul Jalil Jumriany said by phone yesterday. Ministry spokesman Jawed Omar confirmed the decision.

India’s government backed the group, led by state-owned Steel Authority of India Ltd. (SAIL) and NMDC Ltd. (NMDC), 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. 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, Omar said.

‘Huge Investment’

The Hajigak deal will bring “huge investment” and also 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.

The Indian group that will mine Hajigak includes state- owned Rashtriya Ispat Nigam Ltd., and private-sector companies JSW Steel Ltd. (JSTL), Jindal Steel & Power Ltd. (JSP), Monnet Ispat Ltd. (MISP) and JSW Ispat Steel Ltd.

Monnet Ispat Managing Director Sandeep Jajodia said his company had not received official word of the Hajigak award. “By taking such a quick decision, the Afghan government has given a strong message that it wants to welcome development and investment,” he said in a phone interview yesterday.

For India, the Afghan decision “will pave the path for more such formations bidding jointly for overseas assets,” he said. “It is something that China has done for years,” and “this success clearly shows that Indian companies can join hands to tackle China’s might,” Jajodia said.

Aynak Copper

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

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.

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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