The New York Times recently ran a story claiming that $1 trillion worth of mineral wealth lay under the soils of Afghanistan, and this war-ravaged country could become “one of the most important mining centers in the world.”
It’s an interesting thought, but let’s slow down a bit.
We often refer to “delays and disappointments” when discussing new discoveries of gold, copper, oil, etc. It’s easy to announce a big new discovery, but incredibly hard to turn it into actual production.
After discovery comes a lengthy period of additional exploration and other geological work to determine the size of the prospect. Then there’s engineering, a sequence of feasibility studies, budgeting, permitting, capital expenditure on roads, power and other infrastructure, and much more.
For this reason, most discoveries never even get close to reaching the development stage. And this is in countries with stable political systems, solid property rights, an experienced work force and no bullets flying. Imagine the additional complications in a war zone like Afghanistan.
Afghanistan could defy the odds, and its subsurface riches could put it on a successful social and economic path similar to that of Chile. Or it could devolve into a warlord-driven situation akin to the Democratic Republic of the Congo.
Much work still has to be done before anyone starts throwing around 13-digit numbers.
Louis James from Casey Research wrote a very good commentary that goes into more detail on the challenges ahead. Louis spends a lot of time out kicking rocks in the field, so his perspective is a knowledgeable one. Click here to read his thoughts on the discovery.