SAIL-led group gets a big bite of Afghan mining pie

A month after signing a strategic partnership deal with Afghanistan, a consortium of Indian companies bagged mining rights for three of the four iron ore blocks in the Hajigak deposit in mountainous Bamiyan province, 130 kilometre west of the capital, Kabul.

Against the backdrop of the US’ indication to withdraw troops from the insurgency-ridden nation beginning 2014, the development would help India emerge as one of Afghanistan’s biggest economic partners and allow forging security channels between the two neighbours.

Led by Steel Authority of India Ltd (SAIL), the consortium of public and private sector companies has gained access to 1.28 billion tonnes of high grade iron ore, a critical input for steel making.

The deal would be among Afghanistan’s largest ever foreign investment agreements, as the country plans to attract $14.6 billion in foreign investment over the next 30 years.

As a part of the deal, the Afghan Iron and Steel Consortium would develop the three blocks, set up a six-million tonne per annum steel plant and a 1,000-megawatt power plant, and establish rail and road evacuation links for transporting the mineral. “We will invest close to $11 billion in these activities over the next eight years. This is the first time Indian public and private sector companies have together clinched a raw material securing deal abroad,” said SAIL chairman C S Verma.

He said the consortium had sought financial assistance from the Indian government in the form of soft loans and grants-in-aid, as member companies were unable to meet the investment requirement for a project of this size and nature.

State-owned Rashtriya Ispat Nigam Ltd and NMDC, and private sector JSW Steel, JSW Ispat, Jindal Steel and Power Ltd, and Monnet Ispat are part of the group. “Getting funds from banks and financial institutions would not be easy in this case, as Afghanistan is in India’s negative list,” Verma said.

India’s hunger for iron ore is set to grow fourfold to an estimated 400 mt over the next decade to meet the 110-mt steel output targeted under the National Steel Policy. Declining to divulge the production estimated from the project, Verma said the consortium could explore trading the Hajigak ore to other nations depending on market conditions.

The immediate plan is to invest $75 million in conducting geological study of the deposit over a three-year period by a team of experts. The team would visit the project site next week. SAIL is planning to employ a 48,000-strong workforce and establish a corporate office near Bamiyan to oversee the project work. Commenting on security risks associated with the project, Verma said, “In a business, higher the risks, higher the gains.”

The consortium’s commitment towards social development and local infrastructure, including the steel facility, worked in its favor in clinching the deal, sources said.

Around a per cent of the profit before tax from the Hajigak project would be spent on corporate social responsibility (CSR) initiatives.