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Commodities Corner: How China may benefit from Afghanistan’s estimated $3 trillion mineral reserves following the Taliban takeover

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The fall of Afghanistan to the Taliban has led to grave concerns about the safety of Afghan citizens and foreigners alike, but also raised questions about the future of the nation’s vast mineral reserves, once valued at as much as $3 trillion.

The chaos may offer China, which dominates the world market for rare earths, widely used in technology, to step in to develop the mineral reserves, which also include lithium, used in the manufacture of batteries.

“Chinese dealmakers have their bags packed, and will arrive on the first flights after the airports open,” said Byron King, geologist and mining and energy writer for Agora Financial.

“People who understand exploration have long looked at Afghanistan with desire,” he told MarketWatch, adding that Afghanistan has routinely sent representatives to international mining conferences in the past 20 years to “give talks about the mineral endowment.”

Data from the U.S. Geological Survey indicates that Afghanistan may hold unexplored mineral reserves worth as much as $1 trillion, and the government of Afghanistan estimated the figure at as high as $3 trillion, according to an article posted in 2012 by the Embassy of Afghanistan, Washington D.C.

Afghanistan may become the “Saudi Arabia of lithium,” the New York Times in 2010 quoted an internal Pentagon memo as saying.

The country already has “an extensive, small-scale mining industry,” with countless mines pulling out gemstones and other mineral specimens, said King. However, “big mining is near non-existent.”

Afghanistan has “abundant” mineral resources, but most have “not been successfully developed, nor have the resources been systematically explored since the 1970s using modern methods,” according to a report summarizing the results of joint geologic activities from 2009 to 2011 between the USGS, U.S. Department of Defense Task Force for Business and Stability Operations and the Ministry of Mines’ Afghanistan Geological Survey.

“The operating environment in Afghanistan may be challenging and expensive,” the report said. “Many of the areas of mineral opportunity are in remote, rugged mountains that lack infrastructure, power, and a proximal trained workforce.” Challenges also include “security, tribal conflicts, and local politics…that need to be overcome in order to develop mineral properties.”

Still, among the candidates for mine development in Afghanistan long term is China, said King. Representatives from China have routinely visited and toured Afghanistan over the past two decades, so China likely has a “superb handle on mineral deposits.”

However, King emphasized the challenges of developing these resources. “Mineral development requires legal titles, permits and physical security,” he said. “To the extent that the Taliban can provide security in these areas, exploration and exploitation can progress,” he said, though keep in mind that mining is a 10-, 20-, 30-year long progress.

The Taliban takeover of Afghanistan will not bring more lithium or rare earths or much else in the way of minerals onto the world markets anytime soon, King said. “Not in the next year or two. Perhaps some minor production in years three to five.”

“Afghanistan is a long-term play on the best of days and now that the Taliban have ‘won’, it’s more of a long-term play for Chinese interests,” he said.


“Afghanistan is a long-term play on the best of days and now that the Taliban have ‘won’, it’s more of a long-term play for Chinese interests.”


— Byron King, Agora Financial

And beyond five years, “there’s a likelihood that Afghanistan will become a mineral exporter, but even that is problematic, considering the chronic political and social turmoil in the region,” said King.

All in all, the “Afghan fiasco is a global turning point — the end of a 20-year effort and the outcome of a complete debacle — [and] it’s not just the minerals,” he said. He expects that “historians will look back at Aug. 15 as a Western/American/NATO geopolitical tsunami.”

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