mining

Could Afghanistan become the Saudi Arabia of lithium?

Although Afghanistan is currently in the throes of a regime change with the Taliban rising to power in August, observers are hoping that the country could become the Saudi Arabia of lithium, as one mining analyst described. Afghanistan has long been known to hold vast quantities of precious metals such as gold, platinum, silver, uranium and lithium. Lithium, in particular, could potentially transform Afghanistan, one of the world's poorest countries, into a relatively wealthy nation. A transformation driven by commodities and with the potential to change society as much as oil did  Saudi Arabia in the 20th century. 
 
It is hard to precisely know how much total value is locked away in Afghanistan's quarries and mines, but estimates move between $1 trillion and $3 trillion. If those figures are accurate, Afghanistan could be transformed in the years to come and growing into a thriving, developed nation. 
 
Most of the value for Afghanistan is held in rare earth elements (REE) that are highly sought after in all sorts of modern technology. Rare earth elements are essential in manufacturing and producing a considerable number of items necessary to functioning a modern economy, including electric vehicles, smartphones, and even missile guidance systems. REEs are also hard to come by – the clue, perhaps,  is in the name.  Afghanistan could look to make substantial profits from their reserves of REEs - if they can take them to market.

The landscape of REEs

The current landscape of REE's is very one-sided, with China holding all of the cards. Mountain Mine Pass is the USA's only REE mining facility, supplying 15.8 % of the world's REEs. Essentially every other REE resource on the market is controlled by China. And this is starting to become of concern to geopolitical analysts and western governments.  
 
China is looking to absorb even more of the market and has shown its willingness to work with the Taliban in Afghanistan. Only hours after the Taliban took over, the spokesperson for the Chinese foreign ministry outlined that China was ready for 'friendly co-operation with Afghanistan'. 
 
It is clear that REEs are a scarce, crucial resource in modern technology development - and China is looking to corner this market entirely. This includes working alongside the Taliban to tap into their hoard of REEs. 

REEs could reshape Afghanistan

Given the confused and concerning circumstances surrounding Afghanistan's current political framework, the hope is that an economic boon could help the nation's citizens. REEs could elevate a struggling economy and help Afghanistan prosper. 
 
Before the Taliban takeover, Afghanistan was in poor shape economically. According to statistics from the U.S Congressional Research Service, some 90 % of all Afghans were living on less than $2 per day. REEs could turn this all around - but it is quite a big 'if'. 

The resource curse

The reality for most developing countries that are resource-rich is that they are quickly exploited. A mixture of weak government and ethical grey areas often allows the 'resource curse' to take effect - where the exploitation of natural resources provides no direct benefit to the people living there. Instead, the profits are siphoned off to large companiesother countries and to corrupt elites and middlemen in the country itself. With its long history of weak central government and endemic corruption, Afghanistan may not be a source of optimism on this front.  
 
Fear of the resource curse does not slow down the demand for REEs, however Looking at historical  Afghan governance, it is likely that Afghanistan will suffer a similar fate to countries like Zimbabwe or Angola. Developed nations are pushing for innovations like electric vehicles, and they will only work with precious earth elements like lithium and cobalt. 
 
According to the International Energy Agency (IEA), an electric car uses up to six times more rare earth minerals than a standard car during production. This push for eco-friendly vehicles is driving demand for REEs like never before. If the resource curse is to hit Afghanistan, it will hit it dramatically. 

Locked away wealth

Currently, Afghanistan's vast fortune of REEs is safely stored away in the ground, but how much longer remains to be seen. The IEA expects the process to take at least 16 years to start production in Afghanistan. They will need to perform adequate discovery before mining can begin and the necessary political and military stabilisation to occur.

The future of Afghanistan is still unknown, but it is hoped that if the Taliban stay in power, they might use that power effectively. This could start with developing a thriving mining sector that boosts Afghanistan's fragile economy. And it looks very likely that China will be the primary beneficiary of this. 

China seems prepared to work with Afghanistan and the Taliban; indeed, it is currently building communication links from China into Afghanistan. However, if instability in the region worsens, then that could slow progress significantly. The people of Afghanistan, maybe more than any other, could do with good luck and the financial and societal benefits of a mining revolution. 

Only time, the Taliban and the pragmatic Chinese will tell.  

 

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