Risk management in Afghanistan

2 December 2006

How to you figure out whether opening a copper mine in Afghanistan is going to be profitable? The Aynak copper deposit is 30km south of Kabul, and is es­ti­mated to contain 240m tonnes of copper, putting its value at $30 billion. However: (a) de­vel­op­ing the mine would cost around $1bn and take at least 6 years (probably 10); (b) the se­cu­rity (and political) sit­u­a­tion in Afghanistan is uncertain; (c) as well as de­vel­op­ing the mine, you’d also need to run a power station–Kabul itself is sup­plied by a single 19-megawatt generator, and the mine would need 50; and (d) copper is now $7,000 per tonne, but five years ago it was $1,300.

(From an article in the Economist, “Copper bottomed?”, 2006-11-25. The piece also says that a whole lot of Afghan mines use ba­si­cally me­dieval technology: men work with pickaxes, and many are sup­ported by pine beams which must be re­placed every three days.)