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Asia Crisis

Afghanistan opens giant iron ore deposit to tender

KABUL, April 4 (Reuters) - Afghanistan is looking for mining firms to open up a huge iron deposit, holding an estimated 1.8 billion tonnes of high quality ore, but potential bidders face a volatile security situation in a remote, mountainous region.

The Ministry of Mines is offering mineral rights to the Hajigak iron deposit and surrounding areas through a tender process expected to end in a mining contract, it said in an undated statement posted on its website (www.mom.gov.af).

The ore has a high iron content of 62 percent, and the deposits are suitable for open pit mining, ministry documents said. There are 16 ore bodies, extending for as much as 5 km (3 miles) and to depths of over 550 metres (1,800 ft).

The deposits are only 130 km (80 miles) west of the capital Kabul, but the terrain is remote and mountainous.

It is also situated on the edge of an area which has seen a sharp rise in insurgent activity over the last two years, as the government struggles to fight a growing Taliban offensive.

Maps in a prospectus for potential bidders showed veins of ore reaching down the side of a hill and there is potential for more deposits in the surrounding area, although there is also some room for the mine's prospects to disappoint.

Measured, proven, indicated and probable reserves are only 111 million tonnes. The remainder of the advertised deposit, identified by Afghan-Soviet exploration teams in the 1960s, is inferred, possible and hypothetical reserves, a brochure said.

Nearby seams of coking coal would make it possible to set up an integrated iron and steel complex with a blast furnace.

MINERAL WEALTH

Afghanistan currently relies on aid for around 90 percent of its budget, but its mines minister told Reuters last month the country is sitting on vast reserves of mineral wealth.

A U.S. Geological Survey (USGS) had shown the war-torn nation may hold far higher amounts of minerals than previously thought, with iron deposits alone estimated at between five to six billion tonnes, minister Mohammad Ibrahim Adel said.

He urged foreign firms to invest in the sector, and said he did not think the security situation would deter them.

China's top integrated copper producer, Jiangxi Copper Co

0358.HK

, and China Metallurgical Group Corp, are going ahead with exploration of the vast Aynak Copper Mine, south of Kabul, after they won the contract to develop it last year.

Potential bidders for the Hajigak project must have evidence of successful investment and technical management of iron ore exploration and development, and of operating in a socially and environmentally friendly way, the ministry said.

Expressions of interest must arrive by the end of April, the document said, and Kabul is keen to speed development.

"Given that natural resources are a priority for the economic development of Afghanistan, the ministry is interested in those companies that will commit to development of the Hajigak deposit on an accelerated basis," the statement said.

Editing by Dean Yates

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