Editors Notes: Related Article From May 2011: J.P. Morgan’s hunt for Afghan gold
Two former members of the UK’s SAS, the highly regarded British army special forces unit, are nowadays closely involved in exploring for, and mining, gold in Afghanistan. Perhaps it is this type of military experience that is necessary in developing the mineral resources of such a potentially hostile, geographically and politically, area of the world.
The first of the ex-SAS men is investment banker Ian Hannam, a renowned dealmaker formerly with JP Morgan Chase and, in his time, intimately associated with such mega deals as the merger of BHP and Billiton, the original launch of Xstrata, and in many of its mergers and acquisitions since and the formation of Kazkhmys, all in the resource sector. Hannam was drawn in, enthusiastically, to the prospect of helping develop Afghanistan’s mineral wealth, initially by the U.S. state department which was keen to help promote foreign investment in the country.
U.S. studies, drawing heavily on previous Soviet geological findings, had come up with Afghan mineral resources which could be worth in excess of $1 trillion and including copper, iron ore, gold, huge deposits of lithium, rare earths and others (see Mineweb articles Pentagon: Afghanistan may have $1 trillion undeveloped mineral wealth, and DOD, USGS unveil latest revolutionary Afghanistan strategic initiative–mining). U.S. government entities – notably within the military, were keen to find some means of developing the Afghan economy and it was a chance meeting in Baghdad between Hannam and Paul Brinkley, then U.S. Deputy Under Secretary of Defense charged with business development stability in the former war areas of Iraq and Afghanistan, which set Hannam on the Afghan mining path.
To cut a long story short, Hannam teamed up with an English-educated Afghan, Sadat Naderi, whose family had long-owned a small artisanal gold mining operation around 60 miles north of Kabul at Qara Zaghan. The gold operation had potential to be far larger, but Naderi had neither the expertise, nor the capital to develop it. Hannam set up a company, Centar plc, to invest in Naderi’s company Afghan Gold and Minerals and apparently holds 45% and has brought in a number of prominent investors, chief among which is Jan Kulczyk, reputed to be Poland’s richest man, Peter Hambro and Chip Goodyear (former CEO of BHP Billiton). Kulczyk’s company, Kulczyk Investments, owns 28% of Centar (Kulczyk is chairman of the company) and notes the latter’s activities as follows:
Centar’s first investment in Afghanistan is a 45% share in Afghan Gold & Minerals Co, the first Afghan exploration and production company with international shareholding. The Afghan Gold & Minerals portfolio includes: A 100% interest in the Qara Zaghan Gold Project in northern Afghanistan. Bulk sampling has started at the project site; A 50% interest in a joint venture with a Turkish company Yildizlar, the largest silver producer in Turkey, which intends to develop the Badakshan gold and silver deposit in north-east Afghanistan; A 100% interest in an Afghan company providing specialized mining services; A 100% interest in an Afghan company providing laboratory and assay services.
Interestingly the services companies noted above have been set up to explore and service the Afghan properties and others in the country – they imported the first modern exploration drill rig into Afghanistan, and are providing assay services for Qara Zaghan and other Afghan mineral properties as there had previously been no local assaying facilities.
It is at this point the second SAS man in the team comes in. He is Richard Williams, who was a former regiment commander with the SAS in Iraq and Afghanistan and is a long-time friend of Hannam’s. He has been appointed CEO of Afghan Gold and Minerals and has been tasked with bringing the Afghan operations into production.
According to reports, the logistics of getting to Qara Zaghan from Kabul are, to say the least, challenging, particularly in the winter months as it involves traversing the notorious Salang Pass at an altitude of 11,000 ft. But to an extent that is one of the appeals of the project. It is isolated and difficult for even the Taliban to get to. Gold concentrates would be airlifted out by helicopter avoiding the possibility of gold shipments being ambushed in a country where banditry can be rife, let alone the Taliban.
However, in commenting to the U.K.’s Sunday Times, Hannam makes light on the dangers involved and reckons that mining in Afghanistan is statistically no more risky than working in Nigeria.
A small but potentially profitable gold mining operation is seen as ideal for kick starting an Afghan mining industry in that the right deposit can be mined without huge capital investment. It is also seen as important that a locally owned and controlled company like Afghan Gold and Minerals should take the lead. If a small operator can be seen as successful then, the theory goes, the larger players will come in to exploit the country’s undoubted mineral riches.
Image Credit: Reuters/US Army