VZCZCXRO7631
PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #0108/01 0090943
ZNR UUUUU ZZH
P 090943Z JAN 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 2338
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0584
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHNY/AMEMBASSY OSLO 0554
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4352

UNCLAS SECTION 01 OF 02 KABUL 000108 
 
SIPDIS 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A (DEUTSCH) 
DEPT PASS AID/ANE, OPIC 
DEPT PASS USTR FOR LILIENFELD AND KLEIN 
DEPT PASS OPIC FOR ZAHNISER 
DEPT PASS TDA FOR STEIN AND GREENIP 
CENTCOM FOR CG CFC-A, CG CJTF-76, POLAD, JICENT 
NSC FOR JWOOD 
TREASURY FOR ABAUKOL, BDAHL, AND MNUGENT 
MANILA PLEASE PASS ADB/USED 
PARIS FOR USOECD/ENERGY ATTACHE 
OSD FOR SHIVERS, SHINN 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
TOKYO ALSO FOR AID COUNSELOR AANENSON 
 
SENSITIVE 
SIPDIS 
 
REF: KABUL 3932 
 
E.O. 12958 N/A 
TAGS: EMIN EPET EFIN ETRD KPWR EAID AF CH
SUBJECT: AF: Afghan Ministry of Mines: Big Plans for 2008. 
 
Sensitive but Unclassified 
 
¶1. (SBU) Summary:  Minister of Mines Adel told EconOff he intends to 
shepherd several natural resource tenders, including oil, gas and 
iron ore deposits, through the biding process this coming year.  The 
Ministry intends to tender two blocks for commercial gas exploration 
and one for oil exploration at the Sheberghan field.  These will be 
in addition to a current USAID project to rehabilitate existing gas 
wells at the Sheberghan site.  Contract negotiations for the 
exploitation of the Aynak copper deposit are set to begin January 12 
and expected to run three weeks.  Railroad and power plant 
negotiations for the project will be separate. 
 
¶2. (SBU) In the New Year, the Minister expects to oppose proposed 
Parliamentary amendments to the Minerals Law and oversee the final 
passage of the Hydrocarbons Law and its accompanying regulations. 
Adel is eager to obtain several international advisors who could 
help the ministry oversee the Aynak project and ensure the Chinese 
firm awarded the tender is adhering to its contractual obligations. 
The one impediment to his agenda is the lack of Ministry funds for 
the preparation of tender documents.  Previous funding has come from 
the World Bank.  The Minister is interested in exploring the 
possible availability of USG funds for tender document preparation. 
End Summary. 
 
--------------------------------------------- ------ 
Aynak Copper: Contracts, Power Plants and Railroads 
--------------------------------------------- ------ 
 
¶3. (SBU) On December 29, 2007, Minister of Mines Mohammad Ibrahim 
Adel told EconOff about his priorities for the Ministry in 2008. 
Since the official Aynak copper tender award to the China 
Metallurgical Group (CMG) in October 2007 (Reftel), Adel has been 
negotiating the "basis and protocols" under which contract 
negotiations will be held.  These will begin January 12, 2008.  Adel 
expects "ten to twenty days, no more" will be needed.  Gustavson and 
Co., the Denver, Colorado firm retained by the World Bank to oversee 
the tender process, will serve as contract advisor to the Ministry 
of Mines.  Negotiations for the construction of a coal-fired power 
plant at the project site and a railway to transport the copper ore 
will be held separately. 
 
¶4. (SBU) Adel expects the rail road, which is part of the Aynak 
deal, to be built from either Hairatan on the border with Uzbekistan 
or Sher Khan Bandar (site of the Tajik bridge) on the Tajik border. 
The route would then lead south through Samangan or Kunduz province 
to Pul-e-Khumri, from there to Doshi, to Hajikak (west of Kabul in 
northern Wardak province, where iron ore deposits are located) and 
on to Kabul.  It would then turn east towards Jalalabad and 
terminate at Torkham, on the border with Pakistan.  He expects the 
Chinese to undertake a one to two year feasibility study, to be 
followed by seven or more years of actual construction.  (We believe 
this is a very optimistic timeline.) 
 
------------------------ 
Potential Tenders Galore 
------------------------ 
 
¶5. (SBU) Minister Adel envisions three new natural resource tenders, 
at a minimum, for 2008.  The Ministry has been working closely with 
the Norwegian foreign aid agency NORAD to prepare tender documents 
 
KABUL 00000108  002 OF 002 
 
 
for the commercial exploration of two gas and one oil blocks in the 
Sheberghan area.  These blocks are not in the area in which USAID 
currently has a project to rehabilitate existing Soviet-era oil 
wells.  According to the Hydrocarbons Law, this exploration should 
be structured along a Production Sharing Agreement (PSA) model. 
 
¶6. (SBU) After the successful award of the Aynak tender, Adel has 
now set his sights on the Hajikak (or Hajigak) iron ore deposit to 
the west of Kabul, on the border between Bamyan and Wardak 
provinces.  Until the construction of a rail road makes the 
extraction of ore for export possible, Adel envisions the 
construction of an on-site smelter to process the ore for domestic 
use.  If such a condition is written into a proposed tender, it may 
prove difficult to find interested bidders.  Unlike Aynak and the 
Sheberghan fields, the Ministry of Mines does not currently have 
advisors to assist with the preparation of this tender.  Adel 
bemoaned this fact and appealed for donor support for Hajikak, as 
well as his planned development of exploratory oil and gas blocks in 
the Afghan-Tajik Basin. 
 
¶7. (SBU) The Afghan-Tajik basin has recently reappeared on Minister 
Adel's radar with the news that the Tajiks have contracted an 
internationally renowned firm to begin exploratory drilling in the 
basin on their side of the border.  Adel wants Afghanistan to begin 
its own exploration as soon as possible to ensure the resources are 
exploited equitably.  In order to proceed however, the Ministry of 
Mines needs to identify funds and an interested donor to help them 
prepare tender documents. 
 
¶8. (SBU) Adel listed a number of other potential projects, including 
the extraction of palladium, platinum, gold, copper and lead.  For 
the exploitation of these sites, as well as others with proven 
deposits of marble, lapis or other valuable minerals, the ministry 
continues to select the deposit site, advertise for the submission 
of mining proposals, select a winner, award a contract and then 
issue a mining license for the term of the contract.  The Minister 
expects to see a 20 percent production increase in 2007 from these 
operations. 
 
--------------------- 
Legislative Prospects 
--------------------- 
 
¶9. (SBU) Despite progress on the passage of the Hydrocarbons Law in 
2007, its accompanying regulations remain under review at the 
Ministry of Justice (MOJ).  Adel expects the MOJ to pass them to the 
Cabinet for approval in the first three months of the year. 
According to the Minister, despite the fact that the Mineral Law has 
been passed, an amendment has been proposed in Parliament which 
would require both Cabinet and Parliamentary review and approval of 
any investment in mineral extraction/processing of USD 50 million or 
more.  Adel is opposed to this amendment and intends to work to 
prevent its adoption in 2008. 
 
Wood