About the Report

This report addresses resource exploitation in Afghanistan’s 

mining sector and its impact on the political economy and 

internal conflict. Funded by the United States Institute 

of Peace (USIP) with Integrity Watch Afghanistan (IWA), 

the report is drawn from detailed case studies of five 

ongoing mining operations. 

About the Author

Author Javed Noorani is an independent researcher and 

formerly a senior researcher at IWA. The views expressed in 

this report are his and do not necessarily reflect the views of 

USIP, which does not take policy positions, or those of IWA. 

Advice and support were provided by William Byrd, and 

comments from Scott Smith and other reviewers 

are gratefully acknowledged. 

2301 Constitution Ave., NW • Washington, DC 20037 • 202.457.1700 • fax 202.429.6063

Special Report 358 January 2015

© 2015 by the United States Institute of Peace. 

All rights reserved.

Contents

Methodology 2

Findings 4

Recommendations 9

Conclusions 11

Javed Noorani

Afghanistan’s Emerging 

Mining Oligarchy

Summary

• Afghanistan is rich in mineral resources, the value of which has been roughly estimated at 

as much as $1 trillion.

• The country may, however, be following a “paradox of plenty” path in tendering its mining 

sector to private investors. The risk is not insignificant.

• An unfortunate legacy of decades of internal conflict is the entrenchment and perpetuation of powerful political elites both in Kabul and in the provinces, which extends to the 

mining sector.

• The mining sector in Afghanistan today is characterized by irregularities and lack of transparency in the tender process, influence peddling, beneficial ownership of mining contracts 

by politically connected interests, unfulfilled legal and contractual requirements, and substantial loss of government revenue.

• Despite provisions in the Mineral Law of 2010 and its 2014 revision, responsible government entities have largely failed to effectively regulate and monitor the mining sector. 

• Companies have not been paying their financial dues for years and generally do not meet 

contractual provisions for either funding local development or responding to complaints and 

grievances from local communities, yet continue to operate with an absurd level of impunity.

• What is needed—in sum—is to develop a strategic long-term vision, including knowledge 

driven development of the mining sector, more mineral processing within Afghanistan, 

integration with other sectors of the economy, revised and expanded legislation, a recentralized licensing system, transparency in the tender process, due diligence, a mechanism 

for revenue and tax collection, NEPA review, and an involved and educated civil society.

Introduction

Afghanistan has an abundance and wide range of natural resources. In the north and south, 

for example, are several potential hydrocarbon sites. Ferrous and nonferrous metals and 

UNITED STATES INSTITUTE OF PEACE www.usip.org

SPECIAL REPORT
2 USIP.ORG • SPECIAL REPORT 358

strategic minerals may give Afghanistan a particular advantage in attracting international 

investment. Gold, platinum, silver, copper, iron, chromite, tantalum, lithium, uranium, and 

aluminum have serious potential for economic exploitation. The country also has massive 

deposits of dimension stone, including rare white, orange, and green onyx and more than 

sixty other varieties, as well as a rare blue stone called Afghanite, which was discovered 

in 1968 in Badakhshan by German geologists. Afghanistan’s emeralds, rubies, tourmaline, 

aquamarine, amethyst, some types of sapphires, turquoise, and lapis lazuli have long 

charmed gemstone markets and dealers alike. Overall, the value of the country’s underground 

resources has been roughly estimated at as much as $1 trillion, but their true extent is 

unknown because they remain largely unexplored.

However, Afghanistan may be taking a dangerous path in tendering its mining sector to 

private investors. There is substantial risk that the country may become yet another example 

of the resource curse that affects so many and especially low-income countries with sizable endowments of depletable natural resources.1 Of more than three hundred mining and 

hydrocarbon contracts, a great number may have been exploited by local strongmen under 

the protection of warlords or awarded through political influence in exchange for cash, election favors, or various other kinds of support.

Methodology

The five mines studied are Ghori Cement (cement, coal, and cement raw materials), Nuraba 

and Samti (gold), Qara Zaghan (gold), Kohi Safi (chromite), and Western Garmak (coal). These 

resources can be extracted without very large capital and highly advanced technological 

inputs, which would require involvement by international mining companies.2 The operations 

are at different stages in their life cycles, and contracts were awarded at various times between 

2007 and 2012. The five mines were selected to provide some variation in geographic location, 

minerals being extracted, timing within the period, and companies involved and their political 

connections and networks. Table 1 provides basic information on the case studies, and map 1 

shows their geographic locations in four provinces of Afghanistan.

The project entailed in-depth interviews with a diverse set of respondents as well as considerable desk research to understand the existing and applicable laws, regulations, policies, 

standards, the five contracts, and various reports on the mines. This approach was necessary 

to identify deviations and violations during the contracting phases as well as during project 

implementation. Seventy interviews were conducted with a diverse set of stakeholders and 

resource persons in Kabul, Parwan, Baghlan, Samangan, and Takhar provinces.3 The objective 

was multifaceted: to better understand the political connections and beneficial ownership 

of each of the mines, to highlight characteristics of the players in the sector, to determine 

how contracts were tendered and awarded, and to learn both how contract implementation 

and operations were occurring on the ground and the attitudes of local people toward the 

mines and perceived benefits and costs to them.4 Starting from a few interviews, snowball 

sampling was used to identify further key informants for interviewing.5 Some respondents 

were interviewed several times because they were in a position to clarify issues and provide additional information. The findings and information from each interview were crosschecked for verification and authentication.

The views expressed in this report do not necessarily 

reflect the views of the United States Institute of Peace, 

which does not advocate specific policy positions.

To request permission to photocopy or reprint materials, 

e-mail: permissions@usip.org

About the Institute

The United States Institute of Peace is an independent, 

nonpartisan institution established and funded by Congress. 

Its goals are to help prevent and resolve violent conflicts, 

promote postconflict peacebuilding, and increase conflict 

management tools, capacity, and intellectual capital 

worldwide. The Institute does this by empowering others 

with knowledge, skills, and resources, as well as by its direct 

involvement in conflict zones around the globe.

Board of Directors

Stephen J. Hadley, (Chair), Principal, RiceHadleyGates, LLC, 

Washington, DC • George E. Moose (Vice Chair), Adjunct 

Professor of Practice, The George Washington University, Washington, DC • Judy Ansley, Former Assistant to the President and 

Deputy National Security Advisor under George W. Bush, Washington, DC • Eric Edelman, Hertog Distinguished Practitioner 

in Residence, Johns Hopkins School of Advanced International 

Studies, Washington, DC • Joseph Eldridge, University Chaplain 

and Senior Adjunct Professorial Lecturer, School of International 

Service, American University, Washington, DC • Kerry Kennedy, 

President, Robert F. Kennedy Center for Justice and Human 

Rights, Washington, DC • Ikram U. Khan, President, Quality Care 

Consultants, LLC., Las Vegas, NV • Stephen D. Krasner, Graham 

H. Stuart Professor of International Relations at Stanford 

University, Palo Alto, CA • John A. Lancaster, Former Executive 

Director, International Council on Independent Living, Potsdam, 

NY • Jeremy A. Rabkin, Professor of Law, George Mason 

University, Fairfax, VA • J. Robinson West, Chairman, PFC 

Energy, Washington, DC • Nancy Zirkin, Executive Vice 

President, Leadership Conference on Civil and 

Human Rights, Washington, DC 

Members Ex Officio

John Kerry, Secretary of State • Chuck Hagel, Secretary of 

Defense • Gregg F. Martin, Major General, U.S. Army; President, 

National Defense University • William B. Taylor, Acting 

President, United States Institute of Peace (nonvoting) 
USIP.ORG • SPECIAL REPORT 358 3

Table 1. Basic Information on Five Mining Projects

Documentary evidence was carefully reviewed and incorporated in the analysis: contracts 

for all five mines, which are in the public domain; 6 relevant Afghan laws, regulations, policies, 

standards, and so on; 7 available reports on the mines by the government, companies, or others; and press and media accounts where relevant. Data analysis started early during the data 

collection process to inform the question guide for interviews as well as to investigate emerging themes. Analysis continued after data collection was completed. Triangulation was used 

to check and confirm accuracy of information. Evidence from different sources was carefully 

cross-checked and cross-confirmed to derive findings and conclusions.

Map 1. Afghanistan Mine Locations

Company Mine Product Province Year Area Deposit Royalty rate

Afghan Investment 

Company 

Ghori Cement 

(Karkar-Dodkash)

cement 

and coal

Baghlan 2007 216 hectares unknown $1.04 / ton of cement; 

$8 / ton of coal

Westland General 

Trading 

Nuraba and Samti gold Takhar 2008, 2012 1,400 hectares Nuraba: 

800 kilograms;

Samti: 

31 tons (impure)

20 percent of 

London Metal 

Exchange Price (LME)

Afghan Krystal 

Natural Resources

Qara Zaghan gold Baghlan 2011 1,257 hectares unknown 26 percent of LME

Hewad Brothers Kohi Safi chromite Parwan 2011 5,400 hectares unknown 26 percent based 

on $210 per ton 

Khoshak Brothers Western Garmak coal Samangan 2012 650 hectares unknown $21/ton

Source: Author’s compilation

Samangan

Baghlan

Kunduz

Takhar

Balkh

Bamyan

Parwan

Panjshir Kapisa

Wardak

Badakshan

Western Garmak coal

Nuraba and Samti

gold mine

Qara Zaghan gold mine;

Ghori cement

Kabul

Kohi Sa chromite mine

Sar-e Pul
4 USIP.ORG • SPECIAL REPORT 358

The case study approach yields in-depth insights into what has been happening on (and 

under) the ground. This study, however, also captures patterns and trends across the mining 

sector more generally. Separate studies on a number of other mines reinforce and confirm the 

generalizations drawn from the five case studies covered here. Amid the diversity that characterizes Afghanistan’s extractive industries sector, common features appear to characterize much if 

not most mining activity related to medium-sized and fairly easily extractable resources that the 

Ministry of Mines and Petroleum (MoMP) has contracted to Afghan companies.

Findings

The contracting process and the implementation of contracts as it has been unfolding provide 

a useful framework for categorizing the main findings of this research. Specific findings are 

organized under eight headings (corresponding to stages in the contracting process and in 

implementation). Some findings concern relationships with local communities and conflicts 

associated with the mines.

Tender documents

Tender documents for most of the case study mines were drafted in a way to give a certain 

edge to the winner.8 The one for Ghori Cement, for example, gave a big margin to Afghan 

Investment Company (AIC).9 Furthermore, in some respects certain contracts were in clear 

breach of Afghanistan’s Mineral Law. The documents for the Qara Zaghan gold mine, Kohi Safi 

chromite mine, Nuraba and Samti gold mine, and Western Garmak coal mine were drawn up by 

MoMP officials after meeting the heads of the winning companies.10 There are also other signs 

of influence peddling when tender documents were prepared. Government sources stated on 

condition of anonymity that the winners of the Qara Zaghan, Western Garmak, and Nuraba and 

Samti contracts were decided before the tender documents were released.11 The contest over 

the chromite mine in Kohi Safi, according to a senior MoMP member, was heated, involving two 

powerful individuals backed by strong networks. It led to an exchange of threats between the 

two networks before Hewad Brothers was declared the winner.12

Tender process

Exertion of political influence, which started before tender documents were issued, continued through the long-listing and short-listing period. Ghori Cement is a notable example of 

political interference because respective brothers of the former president and deceased first 

vice president of Afghanistan, along with other politically connected businessmen, united to 

win the contract.13 They influenced the process to the extent that the minister of mines at 

the time reportedly lost his position for refusing to make the process easy for the company. 

A report published by the Afghanistan Analysts Network in 2011 was explicit: 

Former AIC investor Dawi says the president himself was involved in the decision-making. 

“Mahmud Karzai talked to the president and they agreed to give this contract to the 

Afghan Investment Company,” Dawi says, adding that this was to ensure that it would 

go to an Afghan-owned company to support the private sector and economic growth in 

the country. According to him, competing companies like the firm Aria Zamin owned by 

the former minister of agriculture, Obaidullah Ramin, agreed to buy shares of AIC and 

withdraw their bids. In contrast to this, the then minister of mines Ibrahim Adel told 

media at the time that Aria Zamin had put in a bid but did not meet the criteria.14

In the other four cases, the winning company influenced the tendering process through 

political connections or cash. Qara Zaghan reportedly involved reciprocation for a favor 

extended during the 2009 presidential election.15 Kohi Safi reflected pressure from a major 

power-holder. Nuraba and Samti reportedly was awarded to a friend in return for a share in the 

Government sources stated on 

condition of anonymity that 

the winners of the Qara Zaghan, 

Western Garmak, and Nuraba 

and Samti contracts were decided 

before the tender documents 

were released.
USIP.ORG • SPECIAL REPORT 358 5

financial benefits from the mine. Western Garmak reportedly involved use of political power, 

pressure, and financial favors to a former minister of mines.16

Bids submission and evaluation

That information was shared with the winning companies before tendering is reflected in 

the proposal of each company. Promises of huge royalty payments, ambitious commitments 

for extraction of minerals sometimes in the absence of exploration data, and promises of 

employment opportunities for Afghans and other revenue generation seemingly trapped even 

noncorrupt state officials into selecting the winning bidder. Afghan Krystal Natural Resources 

(AKNR), which won the Qara Zaghan gold contract, promised to pay 26 percent royalty on gold 

to the government, taking the London Metal Exchange price as base. Hewad Brothers, winner 

of the Kohi Safi chromite contract, also promised to pay 26 percent. Westland General Trading 

committed to pay 20 percent for the Nuraba and Samti gold mine. Khoshak Brothers agreed 

to pay Afs 1,211 (approximately $21) per ton of coal. On the other hand, Ghori Cement was 

contracted to AIC for a royalty of $1.04 per ton of cement (to cover the exploitation of raw 

materials, such as limestone, clay, and gypsum).17 The coal AIC used for production of cement 

was to be charged $8 per ton of fixed royalty which is a highly favorable rate for the company.18

Other than for Ghori Cement, the royalties promised by the winning bidders were high and 

undoubtedly influenced the scoring behavior of the officials evaluating the bids for each mine. 

Promised royalties did not materialize, however.

Contracts and contradictions with the law

The Mineral Law of 2010 under its Eligibility Article prohibits politicians and senior government officials from acquiring any mining contract, yet in all five case studies there appear to 

be examples of beneficial ownership on the part of such persons or their close relatives, often 

hidden. As noted earlier, in the case of Ghori Cement, owners included the brothers of both 

the former president of Afghanistan and the deceased former first vice president. The company 

extracting chromite at the Kohi Safi mine reportedly belongs to a member of parliament. The 

Qara Zaghan gold mine is contracted to a family that has three elected representatives in the 

parliament. The Nuraba and Samti gold mining contract was awarded to a man who previously 

had a chromite contract in Khost and was reported officially for smuggling19 and reportedly is 

in partnership with the current head of the lower house of the parliament. Under the Mineral 

Law, his company would be ineligible for further contracts because his contract was terminated 

before the contract completion date.20 The Western Garmak coal mine is owned by a member 

of the Wolesi Jirga.21 These ownership relations are in serious contradiction to the Mineral Law, 

or—when close relatives are involved rather than politicians and officials themselves—may not 

be outright illegal but clearly reflect the high-level political connections and networks involved.

Meeting legal requirements

The Mineral Law and the Environment Law require mining companies to conduct a social 

and environment impact study before beginning extraction. All five contracts allowed each 

operator between one and three years for exploration, preparation of an Environmental 

and Social Impact Report (ESIR), feasibility study, and environment protection plan. Mine 

operators in all cases are required to submit their exploration plan to the MoMP first for 

approval and then are expected to submit their findings and the various studies before an 

exploitation license is granted. The ESIR is an important document that should be submitted 

before any extraction occurs. None of the five companies have fulfilled any of these legal 

and contractual requirements. 

The Qara Zaghan gold mine is 

contracted to a family that has 

three elected representatives in 

the parliament
6 USIP.ORG • SPECIAL REPORT 358

Mine safety also has been largely ignored by the companies, which tend to unfairly subject 

their employees to long working hours and low wages. AIC, for example, retired many of the 

employees of the Cement Ghori public sector enterprise it took over without paying their pensions.22 Three of the company’s workers died in the coal mine AIC is operating. Workers at the 

Western Garmak coal mine are paid Afs 400 (about $7) as daily wages while being exposed to 

fatal risks. Two workers were trapped in the mine, for example, and one died after a long wait 

for first aid because of the lack of adequate medical facilities at the site.

Contract implementation

The most serious contract breaches and violations have occurred at the implementation 

stage.23 In the case of Ghori Cement, AIC carried out exploration for neither the cement 

plant nor the coal mine but immediately began extracting coal for direct sale (rather than 

for cement production as called for in the original contract). A 2011 publication noted, “Five 

years ago, the Ghori cement factory in Baghlan turned into a symbol of corruption, when the 

lease for the formerly state-run enterprise was granted to the Afghan Investment Company 

(AIC) run by Mahmud Karzai, a brother of the president.” 24

At Qara Zaghan, even though the company promised to extract a sizable amount of gold 

in the first year and pay related royalties, AKNR was given three years for exploration, feasibility study, environmental and social impact study, and environment management plan. The 

company, however, started extracting resources immediately but did not pay any royalties 

and recently—four years later—applied for cancellation of the project on the grounds that 

the mine has no gold deposits.25 Senior officials of the MoMP stated that AKNR did not 

share its exploration plan and the MoMP did not approve it. Moreover, the exploration report 

presented to the MoMP in September 2012 was not a report of its activities but instead a 

translation of old Russian reports from the 1980s.26

The Westland General Trading Company is purportedly still engaged in exploration, many 

years after being awarded the concession for the Nuraba and Samti gold mines. It has failed 

to produce maps, ESIR, data, and estimates despite—contrary to the contract provisions—

confirmed reports of extraction occurring.27 Hewad Brothers, awarded three years for exploration, 

ESIR, feasibility study, and environment management plan, began extracting chromite ore in the 

first week after signing the contract, continued extracting for three years until it was stopped 

from doing so by armed groups, and has submitted no reports to the MoMP. Khoshak Brothers was 

given three years for exploration at the Western Garmak coal mine but has already been engaged 

in extraction for the past year in the absence of any map or exploration data presented to the 

MoMP. It has also not produced an ESIR or safety and security manual for the mine. 

In addition, companies have tended to use modes of extraction that can be expected to 

reduce the long-term revenue potential and overall development benefits for Afghanistan 

of the reserves contracted to them. As noted earlier, AIC has been selling Ghori Cement 

coal on the open market rather than investing in production of cement and using the coal 

as raw material for that effort. Hewad Brothers, contrary to the provisions of the Kohi Safi 

contract, has engaged in only minimal processing of mined chromite ores before selling 

them for processing in Pakistan.28 Westland General Trading Company has reportedly been 

extracting gold from the more easily and inexpensively exploitable part of the gold reserves 

at Nuraba and Samti rather than taking on the more difficult and costly gold ores, though 

the contract called for balanced mining of both.29 Given that their extraction activities 

in any case were contrary to contractual and legal stipulations, the companies apparently 

have been taking the easiest path to quick profits to the detriment of overall development 

benefits and longer-term revenue potential. 

Khoshak Brothers was given 

three years for exploration at 

the Western Garmak coal mine 

but has already been engaged in 

extraction for the past year in the 

absence of any map or exploration 

data presented to the MoMP.
USIP.ORG • SPECIAL REPORT 358 7

In sum, all five companies have been extracting resources to generate quick and easy 

profits while for the most part still purportedly engaged in exploration without providing 

necessary documentation to the MoMP, obtaining the ministry’s permission for exploitation, 

or paying required royalties and taxes. 

Changes in contracts

Changes have been made to signed contracts without following stipulated procedures or 

providing public transparency. This continues the exertion of political influence evident in 

earlier stages of the tendering and contracting process. AIC separated the coal mine contract 

from the main cement contract and assumed the right to sell the coal it extracts, on which 

the royalty rate is very low, on the open market. Moreover, AIC has been let off the hook on 

its commitment to build a third cement factory with three thousand ton per day capacity. 

AKNR promised in its tender bid to start production of gold within six months but got 

an exploration license for three years and then an extension for two additional years. In its 

proposal, the company had indicated that it would produce 1,628 kilograms of gold every 

year, whereas in the contract it secured a three-year exploration period without any immediate commitment to produce gold and pay royalties. The company has also transferred its 

rights over Qara Zaghan to Afghan Gold and Mineral Company without informing the public. 

Westland General Trading Company signed a new contract five years after extracting 

under a 2008 license, securing more time for exploration without providing data from the 

previous work as well as a reduced royalty rate. Hewad Brothers managed an extension for 

their exploration work and the base price for royalty reduced from $210 to $170.

Monitoring of operations and contract implementation

The MoMP and the National Environmental Protection Agency (NEPA), mandated to regulate 

and monitor mining operations, have largely failed in executing their responsibilities. NEPA 

to date has not received an ESIR from any of the five companies, which suggests that the 

agency has been rather passive. The companies continue to operate, however. The MoMP 

inspection department has not effectively inspected the operations to assess production 

levels or the installation of equipment and gear for safety conditions. Incidents have 

occured of explosions at AIC-run coal mines as well as at the Western Garmak coal mine, 

but the MoMP has neither reported them nor investigated the cases. The MoMP cadastre 

department has neither received the payments due from all five mines nor pursued them to 

make required payments.

Lack of accountability for contract requirements

The Mineral Law defines a few clear red lines in terms of violations but does not say much 

about penalties. Some contracts state that certain situations will incur penalties, but the 

penalties are not defined. The law and contracts mention circumstances for cancellation 

and ineligibility, but this has not yet happened. Most of the violators are operating mines 

with an absurd level of impunity. Companies have not been paying their financial dues 

for years, yet they are continuing to operate without any adverse consequences. Hewad 

Brothers has not yet paid any royalty.30 Westland General Trading under the Afghanistan 

Extractive Industries Transparency Initiative reporting requirements shows a payment of 

about $240,000 as nontax revenue payments for the year 2011–12,31 but no other. Ghori 

Cement has not paid $1 million in rent.32 Khoshak Brothers have been extracting coal but 

have avoided paying full dues.

Companies have not been paying 

their financial dues for years, yet 

they are continuing to operate 

without any adverse consequences. 

Hewad Brothers has not yet paid 

any royalty. Ghori Cement has not 

paid $1 million in rent.Khoshak 

Brothers have been extracting coal 

but have avoided paying full dues.
8 USIP.ORG • SPECIAL REPORT 358

Relationships and conflicts with local communities

Contractual provisions for funding local development in the areas around the mines and 

responding to complaints and grievances of local communities have generally not been followed. Some of the mine operators in their proposals have committed to providing tens of 

thousands of dollars for local development but have not delivered on those commitments. For 

example, Hewad Brothers committed to spend $20,000 for the development of local communities but so far has not spent anything for this purpose. AKNR committed to spend $50,000 but 

has spent the money on construction of housing for its security personnel instead. 

Sometimes conflicts have been precipitated or exacerbated by the mining activities. 

Despite instances of violence and deaths, the government has not reminded companies of 

their contractual obligations. Active conflict over the chromite mine in Kohi Safi has already 

resulted in nineteen deaths.33 Groups are maneuvering to counter each other, and weaker 

local communities have invited Taliban elements to protect them, strengthening the insurgency’s position close to Kabul. Intimidation has been exercised and violence has broken 

out related to Qara Zaghan and local opposition to that mine inflicted. Pressure has been 

applied on the Western Garmak coal mine and Nuraba and Samti gold mine to silence the 

local populations. Local artisanal miners who extracted coal before the contract was given 

to Khoshak Brothers protested against the company but were silenced through a combination 

of police pressure and local elders’ involvement.34 Local residents protested against Westland 

General Trading for not fulfilling its promises, but the government intervened and quieted 

the protesters.35

In some mines, the company or associated local power-holders have managed to get 

members of their militias recruited into the Afghan Public Protection Force (APPF) under the 

Ministry of Interior, which is responsible for providing security at mine sites. These forces 

have also been used, however, to suppress local communities’ efforts to air grievances and 

assert their rights. Sometimes who gets recruited into the APPF, with associated jobs and 

benefits, has become a trigger of violence, as in Kohi Safi.

Revenue losses to the state

Extractive industries are widely seen as a good source of revenue for the state, and the primary 

reason for awarding these five mining contracts—as well as many others throughout Afghanistan—was precisely that. Mining revenues will be particularly important in coming years, given 

the weakness of other revenues and that international aid will continue to decline. 

However, corruption and abuse of political connections in all five mines have led to sizable forgone revenues. Estimated total lost revenues from the five mines, compared with their 

revenue potential, are more than $50 million annually from just two revenue streams (royalty 

and surface rent). These estimates are based on production levels promised or estimated by the 

companies in their bids along with contractual royalty rates. The study could not fully capture 

the amounts of other taxes evaded by each company, but undoubtedly these losses were substantial as well.36 Table 2 presents the estimated royalty and surface rent payable by the five 

mines. Given the more than three hundred contracts awarded by the MoMP, and even more by 

provincial mining departments, the total loss of government revenue from royalty and surface 

rent easily could be hundreds of millions of dollars annually.

Estimated total lost revenues from 

the five mines, compared with 

their revenue potential, are more 

than $50 million annually from 

just two revenue streams 

(royalty and surface rent). 
USIP.ORG • SPECIAL REPORT 358 9

Recommendations

These recommendations are directed at the various key stakeholders engaged in, overseeing, or affected by exploitation of Afghanistan’s underground mineral resources in different 

ways. Ideally, the recommendations will help facilitate a constructive dialogue for making 

improvements in the regulation of the mining sector and in particular for ensuring that 

revenues due to the government are neither lost nor diverted into private pockets.

Ministry of Mines and Petroleum

The government should formulate a strategic vision for the development of the mining sector and avoid being trapped by a quest to generate quick revenues without putting effective 

institutions and proper regulations in place. The international community can be a supporting 

partner in this endeavor. The vision needs to be realistic, based on sound principles, and geared 

toward equitable, sustained long-term development, including more mineral processing within 

Afghanistan and integration with other sectors of the economy. 

The MoMP needs to amend the current revised Mineral Law of 2014, which was only recently 

approved by the Wolesi Jirga and signed by the president. The law lacks provisions necessary 

to guard against corruption and cannot bring stability to the currently chaotic mining sector in 

the country. The law and regulations should define more specific penalties for companies and 

individuals either deviating from the terms of contracts or resorting to illegal extraction and 

nonpayment of royalties and other dues. The revised law should undergo meaningful consultations before being finalized and sent to the cabinet and parliament for ratification.

The new Afghan administration needs to recentralize the licensing system for mines. The 

decentralization of licensing for smaller mines to provincial mining departments has led to 

even greater corruption and secrecy. Contracts for extraction have been awarded without 

any revenue coming to the government. In dozens of cases, contracts have been awarded to 

powerful members of parliament, warlords, and other politicians.37 The MoMP compiled a list 

of illegal extraction at 1,400 sites, and sources within the MoMP stated that the majority of 

them are being operated by powerful people.38 The government should declare the unlicensed 

extraction of chromite, coal, and both precious and semiprecious stones illegal and subject to 

penalty or punishment.

Tender documents must make it mandatory for bidders to disclose of the beneficial ownership of each company and the names of all its shareholders. Doing so is essential to avoiding 

the phenomenon of hidden owners, shareholders, and beneficiaries, including senior government officials and powerful political players, whose involvement in the companies concerned 

clearly gives an impression of unfair granting of favors and quid quo pros.

Table 2. Estimated Annual Royalty and Rent Due

Company Promised/Estimated Production Royalty Due in $ Surface Rent in $

Hewad Brothers (chromite) 130,000 tons 7,098,000 67,500

AIC (coal) 1,000,000 tons 8,000,000 300,000

AIC (cement) 438,000 tons 455,520 1,000,000

AKNR (gold) 1,628 kilograms 17,883,898 31,425

Khoshak Brothers (coal) 88,110 tons 1,894,365 16,250

Westland General Trading (gold) 1,700 kilograms 15,591,040 15,000

Total 53,663,572 1,430,175

Source: Author’s compilation based on information in each contract (including royalty rates in table 1), production 

levels promised or estimated in company bid proposals, and international websites. The price of gold for these 

calculations is taken as $45,856 per kilogram (based on www.usagold.com/dailyquotes.html). The price of coal used is 

$90 per ton (taken from traders involved in the coal trade). The production level for AKNR is taken from the website of 

the MoMP, where the bids of the three companies competing for the Qara Zaghan contract were shown.

The law and regulations should 

define more specific penalties 

for companies and individuals 

either deviating from the terms 

of contracts or resorting to illegal 

extraction and nonpayment of 

royalties and other dues.
10 USIP.ORG • SPECIAL REPORT 358

Serious due diligence must be carried out on each company bidding for mines in Afghanistan before it is considered technically qualified and is shortlisted for evaluation of bids for 

mining concessions. The experience of the company—especially in mining—its technical and 

financial capacity, mining expertise, shareholders’ profile, operation methods, and access to 

technology need to be studied. Mining investments by suspect entities, including domestic 

as well as foreign companies especially from Afghanistan’s neighborhood, cannot be allowed.

The tendering, shortlisting of each bid, bid evaluation, and negotiation should be carried 

out by a team that includes knowledgeable experts, has clear benchmarks and accountability, and is insulated from political interference. The final contract should reflect the commitments made in the proposal submitted in response to the tender document. The bidding 

process must be transparent, and all proposals as well as the contract itself should be made 

public after signing the final contract with the winning entity. Transparency is essential to 

safeguarding against political interference and ensuring that the best offer for the country 

is the one that is accepted.

Clear definitions of the various activities in the mining sector need to be established (for 

example, exploration versus exploitation), and companies need to be regularly monitored as to 

whether their activities conform to those stipulated in their contracts. Most important, when 

there is a shift from exploration to exploitation, it needs to be confirmed that the requirements 

for this change—stipulated in the law, regulations, and contract—have been met.

Ministry of Finance and MoMP

The MoMP and the Ministry of Finance (MoF) should develop a joint mechanism for collecting 

revenues on due dates from each company and share information on collections with the 

public. This would help in capturing the rent owed to the state, and the public would be 

informed as to how much revenue has been collected from the sector.

The MoMP and MoF should create a joint team to assess and monitor the revenue-generating activities of each company at each stage that revenue for the government is supposed to 

accrue. The MoMP should review the timeline for each company as specified in the contract, 

inspect their activities, and ascertain whether their activities correspond with the timeline. 

This would prevent overextraction or production occurring while taxes and other rents are 

being denied to the state.

The MoF’s Customs Department should be provided a copy of each mining contract and 

track the exports of each company so that these can be cross-checked against contractual 

and legal requirements. This would help to ascertain both who is exporting how much and 

the amount of Afghanistan’s annual export of minerals, which may help in reducing vulnerabilities to corruption.

The MoF and MoMP should work on developing a mechanism to project, based on the 

contract provisions, the revenue expected from each mine and to monitor the actual collection of revenue. In this way, shortfalls and delays in revenue collection can be identified and 

reviewed, and the reasons for them assessed and remedies devised depending on the cause.

National Environment Protection Agency

NEPA should independently require companies to turn over to it the required ESIR and should 

review the ESIR before issuing an exploitation permit. The decision in each case should be 

published on NEPA’s website, which will increase access to information and awareness of 

citizens, in particular those living in communities around mines.

The inspection department of NEPA should clearly define the processes involved in mining 

operations and regularly monitor and inspect adherence to the same by mining operators. This 

would help encourage companies to follow standard procedures and reduce the risk of inciThe bidding process must be 

transparent, and all proposals as 

well as the contract itself should 

be made public after signing 

the final contract with 

the winning entity.
USIP.ORG • SPECIAL REPORT 358 11

dents. Inspections should be standardized for mining processes and for equipment for mine 

operation, and NEPA needs to inspect mines regularly and share its reports with the public.

NEPA should also carry out thorough environmental baseline studies of the environment 

in areas where mines are located. This will enable NEPA to assess the environment management plans of mine operators in an informed manner. 

Ministry of Interior

The APPF should protect mining sites from subversive elements but not interfere in disputes 

between communities and companies over rights-based issues. Recruitment into APPF units 

protecting mines must not be from militias associated with the mining company or related 

power-holders. APPF personnel guarding mining sites need to be trained in human rights 

issues and other international standards before deployment.

Afghan Civil Society

Civil society needs to educate itself more on natural resource governance, revenue management, and social and environmental impacts associated with mining to be effective in 

related advocacy, monitoring, and mobilization work. Achieving change in the sector will 

require consistent and synergistic efforts. Civil society should carry out more research, both 

on individual mines and on broader patterns of tendering and contract implementation, 

revenue collection, and management to more soundly base its advocacy efforts on solid 

evidence. Such efforts may help bring about policy changes, inform citizens, and improve 

revenue management in the sector. 

International Partners

The international donor community needs to provide targeted funding to the MoMP. For 

example, some focus needs to be on the exploration of unexplored mineral reserves to confirm their size and potential exploitability. Selective upstream exploration sponsored by the 

public sector may also be helpful in curbing tendencies of mining companies to engage in 

exploitation under the guise of exploration. This may also help less corrupt mining companies to invest more in the midstream mining activities which involve development of a mine 

site for exploitation, leading to higher production and revenues for the state.

The international community should help the government develop the sector rather than 

push for overly rapid extraction in the short run. Nurturing good governance needs to play 

an important role in this regard. Moreover, international partners may help both in developing a good strategy for governance of the sector and in providing technical and financial 

support for capacity building and implementation of the strategy. Last but not least, 

international partners can play an important role in helping ensure sound environmental 

management and mitigation of adverse environmental impacts of mining activities.

Conclusions

The legacy of the past several decades of Afghanistan’s conflict and the associated war 

economy has been the entrenchment and perpetuation of powerful political elites both in 

Kabul and in the provinces. The power configuration in the center and provinces shows the 

footprints of these political and armed forces at the helm of governance. The availability of 

easily exploitable mineral resources and prospects for easy money and windfall rents from 

the sector have led political elites to exploit weak and corrupt government institutions. 

These elites appear to be increasingly using state institutions to distribute resource rents 

among themselves and their clients, and sometimes contest over them as well. In a worstThe international community 

should help the government 

develop the sector rather than 

push for overly rapid extraction 

in the short run.
12 USIP.ORG • SPECIAL REPORT 358

case scenario, elites may mobilize their armed groups to capture and exploit mines and thus 

promote a kind of balkanization of parts of the country in the wake of the withdrawal of 

international troops. 

The development discourse within Afghanistan around the mining sector has sometimes 

been imbued with intense nationalistic rhetoric, ostensibly to discourage the takeover of the 

country’s rich resources by foreign private investors and instead to provide opportunities for 

Afghan businesses. This rhetoric, however, may just pave the way for the capture of resources 

by Afghan elites and their cronies, preventing more responsible exploitation by companies that 

have greater technical expertise and are subject to more stringent financial, environmental, 

and labor regulations in their home countries. As a result, political elites may become further 

entrenched and be in an even better position to perpetuate themselves using the gains from 

lucrative mining resources. This situation has adverse political economy implications as well as 

conflict risks. Moreover, these trends, if they take root, may lead to serious questions about 

the resulting, highly unequal distribution of wealth in the country as well.

Finally, exploiting mineral resources without paying associated taxes and royalties has 

major adverse consequences for Afghanistan’s budget revenues. This study estimates the revenue loss compared with potential revenues at more than $50 million annually for the five case 

study mines from only two revenue sources (royalties and surface rent). The total loss from all 

revenue sources for the three hundred plus mines contracted by the MoMP easily could be hundreds of millions of dollars per year. The country can ill afford such revenue losses, particularly 

when the need for budget revenues is greater as international aid declines.
USIP.ORG • SPECIAL REPORT 358 13

Notes

1. The resource curse refers to the common pattern whereby countries with large endowments of natural resources, 

in particular those that develop such resources in the absence of strong institutions for management and 

accountability, suffer from slower economic growth, worse governance, sometimes problematic politics, and 

higher conflict risks than would otherwise be the case. Academic debate about the resource curse and its 

causes and manifestations is considerable, and the adverse effects on governance ad politics appear to be more 

important than the macroeconomic distortions induced by large natural resource exports (the so-called Dutch 

disease problem). For a thorough discussion, see Paul Collier, The Plundered Planet: Why We Must—and How We 

Can—Manage Nature for Global Prosperity (New York: Oxford University Press, 2010). On Afghanistan, see William 

Byrd, “Political Economy and Conflict Dimensions of Afghanistan’s Mineral Resources: A Preliminary Exploration,” 

U.S. Institute of Peace, Peace Brief no. 137, December 17, 2012, www.usip.org/publications/political-economyand-conflict-dimensions-afghanistan-s-mineral-resources-preliminary.

2. Examples of much larger mineral resources that have been contracted to foreign companies include the Aynak 

copper and Hajigak iron mines. However, these mines have been the subject of other major reports, and 

furthermore mining activities have not begun at either. This study instead focuses on mining operations already 

under way, so as to ascertain what is happening in terms of actual experience with such operations.

3. Given the sensitivity of the topics discussed, most interviewees understandably preferred to retain anonymity and 

therefore are not cited by name.

4. Beneficial ownership refers to parties who reap a share of the financial benefits of a company or venture, even if 

they may not be listed as formal shareholders or officers of the company.

5. Snowball sampling is a nonprobability sampling method, whereby the next subject is identified through the 

current interviewees. The sample group grows like a snowball as one moves ahead in identifying more informants 

for research.

6. Ghori cement contract, http://mom.gov.af/Content/files/Mineral%20Contracts/new_MX-2301N_20121013

_183416_lr.pdf; Qara Zaghan gold, http://mom.gov.af/Content/files/Mineral%20Contracts/File_211_QaraZaghan_

Contract-English.pdf; Kohi Safi chromite, http://mom.gov.af/Content/files/Mineral%20Contracts/File_206_

Gada_Khail_Chromite.pdf; Nuraba and Samti gold, http://mom.gov.af/Content/files/Mineral%20Contracts/

new_Noraba_%20Samti_Gold_lr.pdf; Nuraba and Samti second contract, http://mom.gov.af/Content/files/

Gold%20of%20Takhar%20Pronice.pdf; and Western Garmak coal, http://mom.gov.af/Content/files/Mineral%20

Contracts/File_209_West_Garmak_Coal_Contract-English.pdf. 

7. See Mineral Law of Afghanistan, http://publicintelligence.info/AfghanMineralLaw.pdf; and Mining Regulation 

of Afghanistan 2010, http://mom.gov.af/Content/files/Mining%20regulations%281%29.pdf. See also various 

reports on Afghanistan’s participation in the Extractive Industries Transparency Initiative(EITI), https://eiti.

org/Afghanistan. 

8. The tender documents for some of the contracts were for a time available on the MoMP website.

9. Interview with senior MoMP official involved in proposal evaluation, January 20, 2014.

10. Interview with senior MoMP officials, January 15, 2012. 

11. Based on interviews with senior MoMP officials.

12. Based on an interview with MoMP official overseeing mine evaluation process, December 12, 2013. 

13. In addition to interviews, press reports document the high-level political influence over the Ghori Cement contract. See 

Jonathan S. Landay, “Factory, Coal Mine Show Connections Matter Most in Afghan Business,” McClatchy Newspapers, 

November 14, 2010, www.mcclatchydc.com/2010/11/14/103393_afghan-business-model-connections.html?rh=1. 

14. Mir Sediq Zaliq, “Ghori Cement—A Loss-Making Goldmine,” Afghanistan Analysts Network, July 7, 2011, www.

afghanistan-analysts.org/guest-blog-ghori-cement-a-loss-making-goldmine/. 

15. “It [Qara Zaghan] was a political trade for the vote the president got in the 2009 presidential election” (Interview 

with senior government official, September 7, 2011).

16. Interview with a former MoMP policy manager, January 15, 2012. 

17. Ghori Cement contract, p. 6. 

18. In the case of Ghori Cement, a blank contract was provided to AIC, which then could fill in provisions as it saw 

fit. This was confirmed in multiple interviews, and the author has seen a copy of the signed blank contract.

19. Evidence of smuggling was sufficient to declare the company ineligible for future contracts. 

20. Mineral Law of Afghanistan 2010, Article 14, Section (2)5.

21. The member of the Wolesi Jirga identifies himself on his business card as the president of Khoshak Brothers 

Company, which he represents at various forums. Several MoMP officials confirm both roles. 

22. A report prepared by MoMP officials noted that more than a thousand older employees of the former public 

enterprise were fired and not paid their pensions. The employees protested for several months before members of 

the provincial council intervened and forced the company to pay. A senior official of the mining department in 

Baghlan said in an interview that Rasool Khan, a member of the provincial council, pressured AIC to pay pension 

to the retired employees, and they were finally paid after many protests and complaints (December 23, 2013). 

23. Except where otherwise cited, the findings with regard to implementation of contracts that are summarized here 

are based on extensive interview responses from government officials, staff of the mining companies concerned, 

and knowledgeable local people, as well as the author’s own observations during field work.

24. Zaliq, “Ghori Cement.”

25. Interview with senior Afghanistan Geological Survey official, August 12, 2014.

26. Interview with senior MoMP official who read the exploration report, July 14, 2014.

27. See the Government of Germany’s Progress Report on Afghanistan, December 2011, p. 60, www.auswaertiges-amt.

de/cae/servlet/contentblob/611546/publicationFile/165674/111214-Fortschrittsbericht2011.pdf. 

28. Interview with senior Afghan Geological Survey geologists, January 27, 2014.

29. Interview with MoMP official, August 20, 2014.

30. Ibid., February 15, 2014.
14 USIP.ORG • SPECIAL REPORT 358

31. AEITI, Afghanistan Third EITI Reconciliation Report 1390 (2011–2012), September 2014, p. 23, https://eiti.org/

files/Afghanistan_2011_EITI_Report.pdf.

32. AEITI shows that AIC has paid nontax revenue of $31,000. Ibid.

33. One violent incident in particular was reported in local and international media. See Afghan Voice Agency, 

“Roadside Bomb Kills 8 Afghan Mining Company Workers in Parwan,” September 1, 2013, http://www.ava.af/

vdcaumn0.49neu1gtk4.html; also Ana Komnenic, “Eight Mining Workers Killed in Afghan Bomb Blast,” Mining.

com, September 1, 2013, www.mining.com/eight-Mining-Workers-Killed-in-afghan-bomb-blast-72823/. 

34. Interview with local resident near Western Garmak coal mine, July 18, 2014.

35. Interview with official of Baghlan Province mining department, November 17, 2013.

36. For example, these companies should have paid corporate income tax on the profits from their mining activities, 

but because they did not report extraction of minerals or pay royalties, no taxable profits would have been 

reported either.

37. Mehwar Daily, a Pashto newspaper, reported on November 2, 2014, that forty members of parliament are either 

directly or indirectly involved in mineral extraction. 

38. The list of illegal mines as compiled by MoMP was available on the Dari website of MoMP but has been removed 

recently (copy in the author’s possession). 

ISBN: 978-1-60127-279-9

An online edition of this and related 

reports can be found on our website 

(www.usip.org), together with additional 

information on the subject.

United States 

Institute of Peace

2301 Constitution Ave., NW

Washington, DC 20037

www.usip.org

@usip

Of Related Interest

• Exploitation of Mineral Resources in Afghanistan Without Government Revenues or Development 

Benefits by William Byrd and Javed Noorani (Peace Brief, November 2014)

• Extractive Industries and Peacebuilding in Afghanistan: The Role of Social Accountability by Sadaf 

Lakhani (Special Report, November 2013)

• Political Economy and Conflict Dimensions of Afghanistan’s Mineral Resources: A Preliminary Exploration by William Byrd (Peace Brief, December 2012)