Saudi Arabia of lithium

The future of mining in Afghanistan and Pakistan

Afghanistan and Pakistan possess significant mineral resources that have attracted China’s interest. This fact has shaped what China does to grow its broader economic and geopolitical strategy in the region. This article provides a short survey, for both countries, of the mineral deposits, current mining production, and China’s efforts to increase its influence.

Afghanistan’s mineral resources

Afghanistan is estimated to have mineral deposits worth up to US$1 trillion, including vast reserves of copper, iron, gold, lithium, and rare earth elements. Some of the key mineral resources include the following:

Copper: The Mes Aynak copper deposit in Logar province is one of the world’s largest undeveloped copper reserves. In 2007, a Chinese consortium won a 30-year, US$3 billion contract to develop this site, though progress has been slow because of security concerns.

Iron: Afghanistan has an estimated 2.2 billion tonnes of iron ore reserves, placing it among the top 10 countries for extractable iron. The Hajigak mine in Bamyan province contains 1.7 billion tonnes of high-grade ore.

Rare earth elements: Afghanistan has significant deposits of rare earth elements, crucial for modern technologies. One of the largest deposits is located at Khanneshin in Helmand province.

Lithium: The country has substantial lithium reserves, often referred to as the “Saudi Arabia of lithium.” This metal is essential for batteries and renewable energy technologies.

Gold: Afghanistan has an estimated 2,698 kg of gold deposits along two main belts: from Badakhshan southwest to Takhar and from Ghazni southwest to Zabul.

Despite this potential, current production in Afghanistan remains limited because of security concerns, lack of infrastructure, and political instability. The Taliban’s takeover in 2021 has further complicated the situation, with mining now largely controlled by various factions within the group.

Pakistan’s mineral resources

Pakistan also possesses significant mineral wealth, though perhaps not as extensive as Afghanistan’s. Key resources include the following: Copper and gold: The Reko Diq mine in Balochistan province is one of the world’s largest undeveloped copper-gold deposits. After years of legal disputes, Pakistan recently reached an agreement with foreign investors to restart the project. Barrick Gold is targeting 2028 for its first production at Reko Diq copper-gold mine.

Coal: Pakistan has substantial coal reserves, particularly in the Thar Desert. These deposits are being developed with Chinese assistance to fuel power plants and reduce energy shortages.

Iron ore: Pakistan has iron ore deposits in various regions, including Punjab and Balochistan, though they are not as extensive as Afghanistan’s.

Gemstones: The country is known for its gemstone deposits, including rubies, emeralds, and topaz, particularly in the northern areas.

Current production in Pakistan is more established than in Afghanistan, with active mining operations in coal, copper, and various other minerals. However, the sector still faces challenges related to infrastructure, technology, and investment.

China’s influence and ties

China has been actively pursuing economic and strategic interests in both Afghanistan and Pakistan, with a particular focus on mineral resources and infrastructure development. Both countries are part of China’s infamous Belt and Road Initiative (BRI), which aims to create a network of trade routes and infrastructure projects across Eurasia. This provides a framework for Chinese investment in mining and related infrastructure. The China-Pakistan Economic Corridor (CPEC) flagship BRI project involves substantial Chinese investment in Pakistan’s infrastructure, including ports, roads, and energy projects. While primarily focused on transportation and energy, CPEC also facilitates access to Pakistan’s mineral resources.

Mining investments by Chinese entities have become widespread and numerous. In Afghanistan, China has shown interest in several mining projects, most notably the Mes Aynak copper mine. However, security concerns have limited any progress. In Pakistan, Chinese companies are involved in various mining projects, including coal extraction in Thar and potential involvement in the Reko Diq copper-gold project.

China has maintained diplomatic relations with the Taliban government in Afghanistan, positioning itself as a potential mediator and investor in the country’s reconstruction. This approach could give Chinese companies an advantage in accessing Afghanistan’s mineral wealth.

To help ensure the stability of their strategic position, China has increased security cooperation with Pakistan, including joint military exercises and arms sales. This strengthens China’s overall influence in the region and helps protect its economic interests, including mining investments.

China has provided technology and expertise for mineral exploration and extraction in both countries, helping to develop their mining sectors.

Since the very beginning of the relationship, China has offered financial assistance and loans to both countries, often tied to infrastructure projects that can facilitate mineral extraction and transportation.

Geopolitical implications

Despite China’s efforts, several challenges remain in fully exploiting the mineral resources of Afghanistan and Pakistan. Afghanistan, in particular, faces ongoing security issues that hinder large-scale mining operations. The Taliban’s control has added another layer of uncertainty for foreign investors. Both countries lack the necessary infrastructure for large-scale mineral extraction and transportation, requiring significant investment. Changes in government and policy can affect mining agreements and investments, as seen in both countries over the past decade. Additionally, large-scale mining projects often face opposition because of environmental concerns and impacts on local communities.

However, China’s increasing involvement also raises concerns among other regional and global powers about its growing influence in South Asia. This has led to increased competition and strategic maneuvering in the region. Other countries, including India, Russia, and some Western nations, also have interests in the region’s mineral resources, potentially complicating China’s efforts.

Focusing on Pakistan

China plays a significant and growing role in the development of Pakistan’s mining industry, as evidenced by the following recent agreements and initiatives between the two countries:

China and Pakistan have agreed to promote investment by Chinese firms in Pakistan’s mining industry. This influx of Chinese capital and expertise is expected to boost the development of Pakistan’s mineral resources.

The two countries are strengthening the planning of mining industry parks, including facilities for deep processing of ores. This initiative aims to create integrated mining and processing hubs, potentially increasing the value-added component of Pakistan’s mineral exports.

China and Pakistan have recently agreed to boost mining cooperation and promote the implementation of a pact on strengthening mining development and industrial cooperation. This agreement provides a framework for expanded collaboration in the sector.

The mining cooperation is part of the broader CPEC, a key component of China’s BRI. This strategic partnership facilitates Chinese investment in Pakistan’s infrastructure and industrial sectors, including mining.

Technology and expertise transfer is increasing at an unprecedented pace. Chinese firms are expected to bring advanced technology and expertise to Pakistan’s mining sector, potentially improving exploration, extraction, and processing capabilities.

Both countries now recognize mining as an important breakthrough area for industrial cooperation. This suggests that mining will be a priority sector for joint development efforts.

China has also expressed interest in strengthening cooperation with Pakistan in areas such as marine oil and gas resources and natural gas hydrates. This extends the collaboration beyond traditional land-based mining.

Pakistan’s government is actively encouraging Chinese investment in the mining sector. For instance, Prime Minister Shehbaz Sharif has invited Chinese firms to invest in Pakistan’s mining sector, promising full facilitation for the extraction, processing, and export of minerals.

The collaboration extends beyond just extraction, encompassing the entire value chain from exploration to processing and export. This holistic approach could help Pakistan develop a more robust and profitable mining industry.

The Chinese investment in Pakistan’s mining sector is seen as a potential boon for the country’s struggling economy, providing much-needed foreign investment and potentially boosting exports.

In conclusion, while Afghanistan and Pakistan possess substantial mineral wealth, realizing this potential remains challenging due to various factors. China’s active engagement in both countries reflects its strategic interests, but success in fully developing these resources will depend on overcoming significant obstacles related to security, infrastructure, and geopolitical complexities.