China Eximbank agrees — at least in principle — to issue loan for Mes Aynak Copper Mine Project (Linked to Project ID#34529, #34659, #71016, #88130)

In May 2008, two Chinese state-owned enterprises—the Metallurgical Corporation of China (MCC) and Jiangxi Copper Corporation Limited (JCCL)—won a thirty-year lease to invest $4.4 billion in a copper mine at Mes Aynak after offering the Government of Afghanistan generous signing bonus, royalty payment, and local infrastructure provision commitments that could not be matched by competing bidders. Then, on September 8, 2008, MCC and JCCL established a joint venture (special purpose vehicle) called The MCC-JCL Aynak Minerals Company Limited (MJAM) to finance, design, and implement the Mes Aynak Copper Mine Project. MCC holds a 75% ownership stake and JCCL holds a 25% ownership stake. MCC assigned the rights of the Aynak Mining Contract to MJAM on November 16, 2008. China Eximbank and China Development Bank (CDB) agreed — at least in principle — to provide debt financing to MJAM (中冶江銅艾娜克礦業有限公司) in calendar year 2008 to cover 70% of the total cost of the investment project. The CDB loan pledge is captured via Project ID#88130. The China Eximbank loan pledge is captured via Project ID#69985. The purpose of the project was to develop a copper mine in the Logar Province of Afghanistan and facilitate the transportation of refined copper to Torkham, on the border with Pakistan, for export. More specifically, the project scope included the development of an open-pit and an underground mine, concentrator facility, a smelter, a heavy-oil fired power plant, a maintenance workshop, utility area, a water source site and other ancillary infrastructure (includes access roads). According to the mining contract signed between MJAM and the Government of Afghanistan, the Aynak copper deposit license area consists of an exploitation license over an area of 28 km2 that includes the Central Deposit and the West Deposit of the Aynak copper mine. The Aynak mine area is located in the north of Logar Province close to the Logar-Kabul provincial boundary. The mine area is to the southeast of the centre of Kabul city, at a distance of approximately 30 km. The elevation of the mine area is between 2,275 meters and 2,675 meters and it falls close to piedmont alluvial plain of Logar River. The mine site is surrounded on three sides by hills and mountains. The western side of the mine site opens in the Logar River valley. The proposed source of water for the Project is the Logar River basin, which is located about 15 km from the mine area. The river flows in a south-to-north direction. The elevation of the riverbank in the Project area is about 1,840 meters. A project commencement ceremony took place on July 9, 2009, and a study commissioned by USAID in 2010 concluded that the project (mine) would require at least 7-8 years to reach production. By the beginning of 2010, the road system leading from Kabul to the mining area had been built, and the dormitory area for the construction workers had been largely completed. However, the mining site at Mes Aynak is located along a transit route for Taliban fighters in one of the country’s most violent regions (Logar Province), and roadside bombs, rocket attacks, kidnappings, and other violent activities severely disrupted and delayed the MCC and JCCL’s planned schedule of activities. This project has been plagued by major delays — in the development and operation of the mine, in the development a 400-megawatt thermal power plant needed to run a nearby copper smelter and industrial park, and in the construction of a railroad to transport the copper. The investment, which had the potential to be the second-largest open copper pit in the world, also provoked protests related to the forced displacement of local villagers, heavy reliance on Chinese labor, and potential damage to cultural heritage and the local environment. Chinese companies reportedly abandoned the project in 2014 because of ongoing violence in the area. However, the fall of 2021, just a few months after the establishment of the Islamic Emirate in Afghanistan (IEA), the Taliban-led government urged the Afghan Minister for Mining and Petroleum to re-engage with Chinese state-run companies to resume negotiations. The parties allegedly held two virtual meetings where they discussed the terms of the 2008 contract. In November 2021, it was reported that representatives of several Chinese companies had arrived in Afghanistan on special visas and were conducting on-the-ground inspections, this time also of potential lithium sites estimated to be worth as much as $1 trillion. In December 2021, it was estimated that, should the terms of the agreement remain unchanged, Mes Aynak could generate $250-300 million per year in revenues, as well as $800 millions in fees over the contract’s length. Then, on March 24, 2022, First Deputy Prime Minister, Mullah Abdul Ghani Beradar Akhund and his accompanying delegation met with Chinese Foreign Minister, Wang Yi and an accompanying delegation at Chahar Chenar Palace. They announced at the meeting that the Mes Aynak Copper Mine Project would recommence. Then, in August 2022, the Afghan Deputy Minister of Culture announced that a group of Afghan and Chinese archaeologists had completed research on the Mes Aynak copper mine.

Additional details

1. The Chinese project title is 阿富汗艾娜克铜矿 or 阿中铜矿项目 or 艾娜克铜矿项目 or 阿富汗中冶－江铜艾娜克铜矿项目 or 阿富汗艾娜克铜矿.

Number of official sources

16

Number of total sources

31