LATELY — 2 December 2006

Risk management in Afghanistan

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.)