In a move that has raised eyebrows and stirred controversy, Afghan President Mohammad Ashraf Ghani has ordered the termination of two major mining contracts: the Badakhshan gold mine and the Balkhab copper mine of Sar-e-Pul.
The directive emerged from last week’s high economic council meeting, chaired by President Ghani, and was confirmed by Abdul Qadeer Mutfi, the spokesperson for the Ministry of Mines and Petroleum.
The decision was reportedly made due to the contracting company’s alleged failure to meet its obligations as stipulated in the contract documents. This development has prompted the Afghanistan’s high economic council to initiate the process of contract termination.
The Turkish Afghan Mining Company (TAMC) and its local partner, Afghan Gold and Mineral Company (AGMC), however, maintain that they had successfully fulfilled four key obligations outlined in the contract ahead of the November 7, 2019 deadline. The only pending aspect was the provision of a performance bond. The delay in providing this bond was attributed to the uncertain political climate.
In a letter dated November 6th, 2019, addressed to Afghanistan’s Large-Scale Mining Committee, the contractor highlighted the following accomplished elements:
- A baseline environmental and social survey for the Badakhshan Gold project area.
- An exploration plan for Badakhshan Gold, including a detailed description of proposed activities, project schedule, budget, and justification.
- An environmental impact mitigation plan related to proposed exploration activities.
- An environmental remediation plan concerning proposed activities and their impacts.
The company emphasized its commitment to Afghanistan’s mining sector and expressed its willingness to work within a supportive environment to foster project development. Despite facing temporary obstacles, the company’s investors remain dedicated to realizing the project’s potential.
The contractor sought a six-month extension until May 2020 to address existing obstacles, including security concerns, and to stabilize the political situation. Granting this extension was viewed as a gesture of support from the Afghan government to sustain investor confidence.
Bradly Barnett, the CEO of the company, emphasized that such an extension would demonstrate the government’s backing of mining project development and affirm Afghanistan’s appeal as an investment destination.
However, a founding member and partner of the company criticized the decision made in the High Economic Council as politically motivated and inconsistent with their discussions with the Ministry of Mines and Petroleum and the Large-Scale Mining Committee.
The local Afghan partner involved in these contracts is Sadat Mansoor Naderi, the former Minister of Urban Development and Housing. Naderi, with ties to the political realm, had supported President Ghani in the 2014 elections. However, his allegiances shifted in the 2019 elections when his family and political party endorsed Abdullah Abdullah.
The terminated contracts had been signed in October 2018, marking the culmination of a six-year tendering process. Ian Hannam, former JPMorgan Chase & Co. banker and co-owner of Centar Ltd., signed these agreements with Afghan officials at the Embassy of Afghanistan in Washington on October 5th last year. The signing ceremony saw the attendance of Afghanistan’s acting finance minister, Mohammad Humayoun Qayoumi, and Minister of Mines and Petroleum, Nargis Nehan.
These contracts, valued at over 600 million dollars, were anticipated to commence with an initial investment of 78 million dollars by the extractors. The contracts encompassed extensive exploration efforts, with a planned coverage of a 500-square-kilometer area for copper exploration in the Balkhab region, situated in the north of Afghanistan.