An Afghan miner works in a makeshift emerald mine in The Panjshir Valley in July, 2010. Reports sugest that Afghanistan is sitting on significant deposits of oil, gas, Copper, iron, gold and coal as well as a range of precious gems like emeralds and rubies. Currently these minerals are largely untapped.
Credit: Majid Saeedi

Ever since the U.S. invaded in 2001, officials have hoped that natural resource extraction could breathe life into Afghanistan’s moribund economy and help reform this warlord-run, opium-dependent nation.

Last year, the NY Times reported (somewhat breathlessly): "The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials."

The problem, of course, is that minerals in the ground are worthless unless you can get them to market. And who on earth would want to risk money or lives trying to do that in a country that's hostile, war-ravaged, landlocked, underdeveloped, poverty stricken, and treacherously rugged?

J.P. Morgan gets credit for taking the lead, according to the May 23 edition of Fortune.

The Fortune article follows Ian Hannam, chairman of J.P. Morgan Capital Markets, to a future gold mine site. Hannam has raised $40 million from investors in Europe, Asia and the U.S. to harvest the ore. Investors hope to extract 5 metric tons of gold — over $200 million worth, once the long process of refining and shipping it to market is completed.

J.P. Morgan isn’t putting up any of its own money, but Hannam appears to have dedicated substantial sweat-equity to the effort. He has moral support from General David Petraeus, who appears to have put Blackhawk helicopters at his disposal, at least for the article's opening scene.

The U.S. is hoping that Hannam is successful, and other investors follow. After all, the Taliban’s ability to pay locals a small fee to fight for them is one of its strongest recruiting tools. In Afghanistan, $40 million is a mighty sum. But it’s a small deal for Wall Street; each year, J.P. Morgan's 25,000 bankers collect bonuses worth more than half of the $17 billion that Afghanistan's 30 million people produce.

Despite the piddling investment size and the out-of-way location, Hannam shows up for a ribbon cutting ceremony at the future mine, 50 miles from Kabul. Writer James Bandler (whose harrowing experience traveling Afghan roads encapsulates how tough this project will be) says Hannam, "personifies the soft side of Western power." The banker "has described his work on the mine as a charitable endeavor, [although] he expects a big payoff down the road for clients who invest in it."

Elsewhere, Bandler notes that Hannan is a former British special forces soldier. Sources describe him as a "bit of a barbarian [who] bragged about his wealth. He had appalling table manners." And indeed, as the ribbon-cutting ceremony approaches, the quest for profit overshadows any charitable instincts in negotiations with the Afghan government.

The article is an interesting yarn. But will a foreign gold mine in the rugged outback really be a net gain for the Afghanis? Often these projects raise enormous expectations among locals, expectations that foreign miners simply can't satisfy. That raises tension and conflict.

Mining gold in the midst of a struggling populace is like opening a Tiffanies in Mogadishu: you're bound to attract attention from people looking to cash in.

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