Afghanistan's mines

Sept. 6 (Bloomberg) -- An Indian government-backed group, two Iranian contenders and Canada's Kilo Goldmines Ltd. are among six bidders seeking to mine Afghanistan's richest iron-ore deposit, an Afghan official said.

Afghanistan's mines ministry opened the bids today for the estimated 1.8 billion metric tons of ore at Hajigak, 100 kilometers (60 miles) west of Kabul, said Abdul Jalil Jumriany, a ministry director-general. The tender is the biggest on offer in a country that the U.S. government estimated last year holds $1 trillion in untapped minerals.

Seven Indian steel and mining companies, led by the state- owned Steel Authority of India Ltd. and NMDC Ltd., offered a bid that is part of an effort by the government of Prime Minister Manmohan Singh for a bigger role in a nearby country whose stability it describes as essential to India's interests. India's presence in Afghanistan, including a decade-old aid program of more than $1 billion, has raised tensions with Pakistan, where some officials say close Indian-Afghan ties may pose a threat.

The Indian group includes state-owned Rashtriya Ispat Nigam Ltd., and private-sector companies JSW Steel Ltd., Jindal Steel & Power Ltd., Monnet Ispat Ltd. and JSW Ispat Steel Ltd. A separate Indian contender is Corporate Ispat Alloys Ltd., said Jumriany in a text message listing the bidders.

Iranian Interest

Two Iranian bidders are Gol-e-Gohar Iron Ore Co., one of Iran's biggest iron ore producers, and Behin Sanate Diba Co., a privately run group of 10 investment, mining and industrial companies, some of which are partly state-owned, said Leyla Rashno, the group's director for tenders.

Rashno declined in a phone interview in Tehran to say whether the group's bid has been encouraged or backed by Iran's government.

Toronto-based Kilo Goldmines, which trades on Canada's TSX Venture Exchange, focuses mainly on gold mining in the Democratic Republic of Congo.

The other bidder for Hajigak is Acatco LLC, whose owner, Afghan-American businessman Nasir Shansab, lives near Washington and said in a phone interview he is ready to develop the mine at the head of a partnership that totals 30 employees.

Indian authorities decided to help organize their country's consortium because "it makes business and strategic sense to have a presence in mining in Afghanistan," Indian Mines Secretary S. Vijay Kumar said in January. Hajigak also offers India a chance for an investment foothold in Afghanistan to rival that of China's state-owned Metallurgical Corp. of China Ltd., which is developing the country's biggest copper deposit, at Aynak.

Treeless Ridge

Hajigak is a range of treeless mountain ridges with a thin population of villagers who graze animals and farm the valleys below. The costs of developing mines will be increased by the need to build paved roads or rail lines to connect the site to potential markets.

While the ultimate cost of mining Hajigak is unclear, Indian companies "should have every reason to go for the Hajigak mines" if the cost of acquisition is about $1 to $1.5 per ton, said Ravindra Deshpande, an analyst with Mumbai-based Elara Securities Ltd.

Taliban guerrillas based partly in Pakistan have claimed responsibility for attacks on Indians in Afghanistan, such as a February 2010 assault on guesthouses in Kabul and two suicide bombings of India's embassy in the city.

Canceled Tender

While the bidders did not include the world's biggest mining groups, which the government of President Hamid Karzai had hoped to attract, the six contenders represent progress for the government in attracting investors' interest. It canceled a previous tender last year when only one of seven initial competitors showed up to visit the Hajigak site.

The U.S. Defense Department has backed efforts to draw in international investors that it says are essential to stabilizing Afghanistan. Still, the decade-old war and corruption remain obstacles. Afghanistan tied with Myanmar for the second-worst ranking, behind Somalia, among 178 countries where perceived corruption was measured last year by the monitoring organization Transparency International.

--With assistance from Rajesh Kumar Singh in New Delhi and Ladane Nasseri in Tehran. Editors: Mark Williams, Indranil Ghosh