VZCZCXRO9570
PP RUEHBW RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #1047/01 1191122
ZNR UUUUU ZZH
P 281122Z APR 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 3714
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0626
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHNY/AMEMBASSY OSLO 0559
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

UNCLAS SECTION 01 OF 02 KABUL 001047 
 
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 
 
Reftel: Kabul 0108 
 
E.O. 12958 N/A 
TAGS: EMIN EPET EFIN ETRD ENRG KPWR EAID AF CH
SUBJECT: AF: Aynak Copper Mine Technical Negotiations Complete. 
 
Sensitive but Unclassified 
 
¶1. (U) Summary:  Technical negotiations associated with the Aynak 
Copper Mine project have concluded successfully.  The Afghan deposit 
is estimated to be among the largest in the world and is expected to 
bring in over USD 450 million in yearly revenues to the government 
when it begins operation in 2014.  Although negotiations on the 
mine's operation are complete, the Ministry of Mines remains under 
deadline to negotiate several Memoranda of Agreement (MOA) 
pertaining to associated projects including a railroad, power plant, 
as well as water use and security arrangements.  Advisors to the 
process believe close cooperation with ISAF forces operating in the 
area will be needed, particularly in the early stages of project 
planning.  End Summary. 
 
¶2. (U) On April 15, Rainer Hengstmann, the World Bank-funded advisor 
to the Aynak Copper Mine project told EconOff that the technical 
negotiations for the development of the mine have concluded.  One 
outstanding issue, related to the double taxation of repatriated 
Chinese profits (Reftel), was resolved when the Chinese firm, MCC, 
acceded to the Afghan's demands.  (Another indication of how eager 
they are to conclude the deal at any cost.)  The agreed upon draft 
contract was initialed by both sides.  Final signature is pending 
the approval of the Afghan Council of Ministers and MCC leadership. 
 
 
OUTSTANDING GOODIES: RAILROAD, POWER PLANT 
 
¶3. (U) With the conclusion of negotiations for the main mine 
project, deadlines to sign Memoranda of Agreement (MOA) on 
additional projects including a railroad to run past the project 
site are fast approaching.  According to Hengstmann, the parties now 
have 12 months to reach agreement on a MOA outlining the conditions 
under which a 700 kilometer railroad, running from Uzbekistan 
through Afghanistan (past Aynak as well as the Hajigak iron ore 
deposit) to Pakistan, will be built.  The project is envisioned as a 
Build, Own, Operate, Transfer (BOOT) arrangement although the 
timeline for transferring the railway's operations into Afghan hands 
has yet to be determined. 
 
¶4. (U) Before using the railway to move copper however, the project 
site must have an internal power supply to power operations.  As of 
April, the parties have two months (with a possible 2 month 
extension) during which to conclude a MOA on power supply.  The 
proposal is to construct a coal-fired 400 MW plant on the Aynak site 
which will use 200 MW to power the copper mine and sell the 
additional 200 MW into the national power grid.  Power payment and 
interconnection details will need to be outlined in the MOA. 
Hengstmann indicated that the parties will make use of the two month 
deadline extension as there are many technical and financial details 
to work out surrounding power arrangements. 
 
MORE MUNDANE MATTERS... 
 
¶5. (U) Details outlining the construction of well and pipe systems 
to provide much needed water to the mine site (water use and 
recirculation) must also be negotiated.  The deadline for this MOA 
negotiation is 3 months, with a possible 3 months extension.  (Given 
the sensitivity of water issues in Afghanistan, as well as the 
plethora of ministries and agencies - approximately 12 - involved in 
the sector, we expect this MOA negotiation to also make use of its 3 
month extension.) 
 
 
KABUL 00001047  002 OF 002 
 
 
¶6. (U) Security for the Aynak site, especially during the initial 
due diligence and feasibility study phases, will be key to the 
success of the project.  An MOA placing site security responsibility 
squarely on to the IRoA (probably Ministry of Interior) is to be 
negotiated by June 2008.  Despite this, the World Bank plans to keep 
ISAF forces in the area fully briefed on project activities.  It 
also hopes to be able to rely on ISAF and local Afghan Army units in 
the area for emergency support should an unfortunate situation 
arise.  To that end, Rainer and his colleagues hope to brief ISAF 
headquarters on a regular basis.  The project also intends to employ 
one or more private security firms already fully licensed in 
Afghanistan. 
 
¶7. (U) The World Bank has further outlined some of the benefits to 
the local Afghan population in Logar province, where the project is 
located.  They predict over 5,000 new jobs will be created and 
expect another 15,000 to be employed at the coal mine to be 
developed for the power plant.  MCC, the project company, will build 
approximately 4200 new homes for its workers and is expected to pave 
or create over 50 kilometers of new roads in the immediate area.  A 
local hospital, mosque, schools and even power distribution lines to 
the surrounding communities are also expected to be built, although 
nothing has yet been finalized. 
 
WOOD