September 17, 2021

The international outrage over the Taliban’s takeover in Afghanistan still hasn’t subsided. But another issue is rising to prominence: the troubled country’s mineral wealth—mineral wealth that could lead Afghanistan to much greater international prominence.

A CNN article summed things up rather nicely—if not bluntly—last week under the headline “The Taliban are sitting on $1 trillion worth of minerals the world desperately needs”. The mountainous country is home to large deposits of copper, lithium, uranium, rare earths, and other metals and minerals. It is also home to substantial coal, oil, and gas reserves.

The CNN’s estimate of $1 trillion is an old one, made by geologists and U.S. military officials a decade ago. Another decade-old estimate, made by Afghanistan’s mining minister at the time, put the country’s mineral wealth value at up to $3 trillion. If we adjust for inflation and, more importantly, growing demand for some of these minerals, the numbers would go further up.

Take lithium, for example. It is the ultimate battery metal, even if only tiny amounts of it are actually used in batteries. Lithium demand, driven by the wider adoption of electric vehicles, is seen rising so fast that production needs to increase fourfold over the current decade to meet fast-rising demand. That’s according to one forecast by Fastmarkets. Another, by Benchmark Minerals, sees the lithium market swinging into deficit as early as next year.

Lithium is not a rare metal. But its production is concentrated in just a handful of countries, including China and Chile. Yet a 2010 report by the New York Times quoted U.S. military officials as saying that Afghanistan could be “the Saudi Arabia of lithium”.

“The previously unknown deposits including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world,” the NYT’s James Risen wrote back then, citing U.S. officials.

Calling a country “the Saudi Arabia of” anything is impressive enough, but calling it the Saudi Arabia of a metal considered essential for the energy transition is even more impressive. And lithium seems to be just the start.

Afghanistan appears to be quite rich in copper, too. According to an official Afghan estimate cited by Reuters in a roundup of the country’s mineral resources, Afghanistan has some 30 million tons in copper reserves. Copper is arguably more important for the energy transition than lithium because electrification demands copper. Batteries, on the other hand, do not necessarily demand lithium even if lithium-ion technology continues to be the dominant battery technology.

Wind turbines need between 2.5 and 6.4 tons of copper per MW of capacity for the generator, the cables, and the transformers needed in the installation, according to data from the Copper Alliance. For solar farms, copper demand stands at an average of 5.5 tons per MW of capacity. At the same time, supply is becoming tighter due to mine disruptions and the costs associated with building new mines.

A shortage is looming on the horizon for copper, too, then. According to analysts quoted by Bloomberg, this shortage could hit in the next four years. The mining industry would need to invest more than $100 billion to boost production by at least 4.7 million tons by 2030—the size of the annual shortfall estimated by analysts.

But even copper is not the end of the minerals. Afghanistan has many other crucial elements—or rather a group of elements—that are vital for the electrification of everything. The country has about a million tons of rare earths, according to a U.S. Geological Survey estimate from 2011. On the demand side, rare earths have doubled to 125,000 tons annually over the last 15 years, according to data cited by The Conversation, and will continue to grow further to 315,000 tons annually by 2030.

Besides this treasure trove of metals and minerals, Afghanistan is also home to close to 2 billion estimated barrels of crude and more than a trillion cu ft of natural gas. Oil and gas are not as exciting as battery minerals and copper these days. But the fact these resources are not being exploited hints at the trouble of exploiting the metal and mineral wealth of Afghanistan, too.

E&E News recalls that the U.S. invested close to $500 million in helping Afghanistan develop a regulatory framework for its mining industry. Sadly, the investment has not paid off, not least because the Afghan government was reluctant to make any serious commitments. And the reason for this reluctance is that for all its mineral wealth, Afghanistan is a conflict-ridden, troubled state.

Relative political stability is essential for the development of any resource industry. The easy takeover of the Taliban suggests that moral considerations aside, they could improve stability in the country. This would ensure the political stability needed to develop Afghanistan’s mineral wealth. But it would likely mean that the nations that condemned the Islamist armed group might not get a seat at the resource table at a time when they are the hungriest for these resources.

By Irina Slav for Oilprice.com

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