Tuesday, February 14, 2012

Massive Chinese-funded project to extract copper beneath Mes-Aynak Afghanistan....

Massive Chinese-funded project to extract copper beneath Mes-Aynak Afghanistan....
China Is Hoarding Copper... Why?

Aynak ore creates dilemma for treasure....
By Frud Bezhan

Flanked by waves of mountains and gray desert, the road leading from the Afghan capital to the ancient ruins of Mes Aynak ends abruptly at the foot of a dusty hilltop. From that vantage point, 40 kilometers from Kabul, one can get a clear picture of Afghanistan's rich cultural past, and its efforts to generate wealth in the future.

The grounds of Mes Aynak in Logar province are a sprawling 9,800-acre (4,000-hectare) trove of Buddhist monastery ruins, statues and tombs that sit largely preserved under layers of unexcavated earth. It is also the site of a massive Chinese-funded project to extract an increasingly valuable regional commodity - copper.

Mes Aynak, meaning "little copper well", was the center of a Buddhist kingdom before Islam came to Afghanistan. It is thought that monks settled here for its ample supply of copper, which brought them great wealth and allowed them to build a grand monastery.

But if copper led to the creation of the settlement, it appears now that it will also lead to its destruction.

Crucial for economic future
The Chinese-government-backed China Metallurgical Group Corporation made a successful bid of US$3 billion for mineral rights to the site in 2008, making the project the largest foreign investment project in the country at the time.

With geologists estimating that 2 billion tons of copper lie beneath Mes Aynak, the development of the site is key to Afghanistan's economic future.

The Mes Aynak archaeological site in Afghanistan.

The deal also includes infrastructure development, including the construction of a power plant at the site, a village for workers, and a railway line from western China through Tajikistan and Afghanistan to Pakistan. And it means that Mes Aynak, which sits on the second-largest known unexploited copper deposits in the world, is slated for destruction to make way for a massive open-cast copper mine.

Repeated attempts to reach China Metallurgical Group Corporation for comment on the company's plans were unsuccessful. But what is known is that the company first intended to start mining in 2009, but agreed to a three-year delay for a basic excavation of the site.

Race against time
That deadline, which was set to expire this year, was prolonged again to 2014. Now dozens of Afghan and international archaeologists, who began excavating the site in 2009, are in a race against time to save what they can.

Haji Akbar, who heads a local committee in Logar for Mes Aynak, says efforts to unearth the historical artifacts have been intensified, with hundreds of local laborers being hired to help with the digging.

Mes Aynak holds remains of civilizations going as far back as the 3rd century BC. Akbar maintains that only a small portion of the huge site has so far been fully excavated. And, according to him, what has been unearthed so far is nothing short of incredible.

"The excavation in the region is going at a tremendous pace," he says. "We have even uncovered a whole city underneath the site. We have found ancient Buddha statues and jewelry."

Akbar, who heads the local committee that supervises all the excavation activities at Mes Aynak, says he is cautiously optimistic that the intensified efforts of the excavation teams can save most of the artifacts at the site before the deadline in 2014.

So far, most of the unearthed relics have been transferred to the National Museum of Afghanistan in Kabul, while other larger artifacts are being stored at a makeshift museum in Mes Aynak.

The Afghan government plans to eventually build a museum in the area to accommodate the vast collection of artifacts after the excavation ends.

Lightning rod for criticism
The project does have the support of some Afghan archaeologists and historians. But the mining project is also a lightning rod for criticism, with opponents saying the Afghan government is sacrificing Afghanistan's rich cultural heritage in favor of economic development.

The numbers of the potential wealth are staggering. If the predictions are correct, mining the site could generate more than $1 billion a year for the Afghan government. That would account for about one-tenth of Afghanistan's current GDP.

Some of the artifacts found at the Mes Ainak site.

Omara Khan Massoudi, director of the National Museum of Afghanistan in Kabul, has indicated that he is concerned about the destruction of Mes Aynak, but he remains supportive of the project, which he hopes will help the country’s dire economy and its poverty-stricken people.

"Afghanistan’s mineral wealth has yet to be fully utilized," he says. "In the face of poverty and continuing economic problems, it’s important for the Mining Ministry to sign contracts with the leading international companies to effectively use these minerals. Exploring these mines will have a huge economic benefit."

Afghanistan's untapped mineral wealth has been estimated by US geologists to amount to nearly $1 trillion. Reserves include large amounts of copper, gold, cobalt, and lithium.

Years of destruction and looting
Massoudi, who has worked at the national museum for the past 27 years, believes mining projects like Mes Aynak will create jobs as well as generate money that can be used by the Afghan government to fund other important sectors such as health and education.

He maintains that money generated by mining is becoming increasingly important as international forces leave Afghanistan and financial aid from the international community decreases.

"We will need this as it will create jobs and play a big role in the country's economy," he says. "It will also pave the road toward peace and security and trickle more money toward other sectors such as education."

The Mes Aynak site has many historical monuments.

Massoudi adds that the battle to rescue the ancient relics in Mes Aynak is just the latest in a long line of ordeals that Afghan historians and archaeologists have had to face in the country. He cites decades of civil war and foreign invasions that have plagued the country's recent history. In that time, Afghanistan's antiquities and historical sites have suffered years of destruction and looting.

For Massoudi, historical and cultural preservation is one of the biggest issues facing Afghanistan. But he says that battle has only just begun as the country continues to grapple with poverty, war, and extremism....
China Is Hoarding Copper... Why?

In January, China imported 413,964 tons of copper, up 13.6% from the same month in 2011. The increase is even more impressive when you correct for the Lunar New Year. Due to the holiday, there were four fewer working days in China last month as compared to January 2011. Copper imports, in any event, exceeded consensus estimates.

December was also good for copper bulls. That month, China imported a record high 508,942 tons, an astounding 47.7% increase from the previous year.

China is hoarding copper. The country in Q4 added about 300,000 tons to its already impressive stockpile.

China’s purchases are far in excess of anticipated need. Estimates for growth in refined copper consumption this year are generally in the 6.0-6.6% range, well below 2011’s 8.5% increase and the 11.5% jump in 2010.

And these estimates for 2012 could end up on the high side. Construction in China faces troubling prospects this year as prices across the country moderate, decline, or plunge, depending on the specific sector. And appliances manufacturers, the second-largest users of the metal in China, face a tough year as Beijing ended its two-year-old appliance-purchase subsidy on December 31. These factors, plus a slowing economy, have led researcher Shen Xiaoqiang to predict that the percentage growth in copper demand in China will fall by half this year to the weakest level since 2006.

So why are Chinese enterprises buying copper like there’s no tomorrow? Some maintain Beijing sees shortages of the metal while others think the Chinese are just trying to take advantage of recent price declines. Then there are those who believe that central bank officials are tired of holding U.S. government paper and would like to get their hands on hard assets.

Yet there is another reason, this one buried in the January trade numbers released Friday by the General Administration of Customs. Year-on-year, China’s exports were down 0.5%. The month-on-month figure was even worse. It was off 14.2%. Despite the decline, the trade surplus came in at $27.3 billion, up from $16.5 billion in December and $6.5 billion from a year earlier.

Beijing racked up the outsized surplus because imports plummeted in January. They were off 15.3% year-to-year and 22.4% month-to-month. The size of these declines especially surprised China watchers.

The official Xinhua News Agency said trade “slumped” in January. Obviously, the early Lunar New Year had some adverse effect on the numbers, and analysts are continuing to argue over the primary cause, but it is indisputable that the big trade surplus comes at the wrong moment for Xi Jinping. China’s vice president, expected to be named the country’s supreme leader this fall, will visit Washington, D.C. on Tuesday. The Obama administration, not surprisingly, is expected to put trade issues at the top of the list of matters to raise with Mr. Xi.

Those discussions would be more troublesome for Xi if it were not for China’s large copper purchases, because then its trade surplus would have been even more off-the-charts. And so it’s no surprise that, at the moment, Chinese enterprises are on buying sprees for other commodities, especially crude oil...

So what does Beijing’s politically motivated copper purchases mean for future demand? On the one hand, they suggest that Chinese enterprises will continue buying the metal to dress up trade numbers in succeeding months. At some point, however, Beijing will put an end to the years of stockpiling. My guess is that will happen in the middle of this year, perhaps early fall.

Why? First, by then the slowdown in the economy will become evident, and stockpiling will no longer be able to mask the fact that imports, a proxy for domestic consumption and growth, are tumbling. Second, Chinese enterprises will run out of money to buy unneeded metal. Soon, China, which accounts for about 40% of global demand for copper, will not be able to support world prices by adding to its hoard.

“Underestimating China is the last thing any copper market participant should ever do,” writes the Wall Street Journal’s Andrea Hotter. That was certainly true in October when she wrote this, but now, with a troubling falloff in growth at home and severe problems in China’s largest export markets, it looks like the real risks, come summer, will be on the long side of the copper market....

No comments:

Post a Comment