Indian Consortium Involved in Afghan Hajigak Iron Ore Project Seeks State Funding

The consortium of seven Indian companies, led by state-owned Steel Authority of India (SAIL), that won the mining rights to develop the huge Hajigak deposit in Central Afghanistan has requested assistance from the Indian government for $7.8 billion in state aid and loans to develop and push through with the project.

The proposal laid by the Afghan Iron & Steel Consortium reportedly has the support of India's steel ministry, Bloomberg News said. The ministry will assist in soliciting loan approvals from foreign and finance ministries, but without saying a deadline.

The consortium said it needs $11 billion to mine the Hajigak deposit, build a steel mill, a power plant and transport links.

"We have told the government that it will be difficult to raise debt for the Afghanistan project and the government should help us in getting that funding either through sovereign guarantees or any other means," C.S. Verma, Steel Authority Chairman, said in Bloomberg News.

In November, Afghanistan's Karzai government awarded three of four blocks at the Hajigak ore deposit to the seven companies. Located in Bamyan Province, the iron ore rich Hajigak mine holds the best known and largest iron oxide deposit in Afghanistan. It extends over 32 kilometres and covers 16 separate zones, up to 5 kilometres in length, 380 metres wide and extending 550 metres down. The mine could give up to $6 billion to the government's coffers.

Once online, the project will help India overtake China as the largest overseas investor in Afghanistan, which the U.S. says holds $1 trillion in untapped mineral reserves, and increase its strategic presence in the war-ravaged nation.

The Afghan government, eager to rebuild its nation as well as attract foreign direct investment, had been proclaiming it holds an estimated $3 trillion in natural resources. The deposits, which yield copper and iron ore, oil and gas, niobium, cobalt, gold, molybdenum, silver and lithium, could lift the country's coffers by some $3.5 billion a year.

The Hajigak mine, which holds an estimated two billion tonnes of iron ore deposits, is expected to begin by 2015.

Apart from SAIL, the Indian group also included mineral giant NMDC Ltd., state-run Rashtriya Ispat Nigam Ltd., and private-sector firms JSW Steel Ltd., Jindal Steel & Power Ltd., JSW Ispat Steel Ltd. and Monnet Ispat & Energy Ltd.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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