Set your stop (common sense) watches!
I’ll bet that there is an Afghan Minerals, Inc (or Ltd) or an Afghan Minerals Fund (or ‘Trust’) by the end of the week, if not sooner, listed on an American secondary exchange and surely in Toronto, Vancouver, Sydney, and Frankfurt…
The New York Times has today, June 14, 2010 (Flag Day here in the USA) delivered a pieces of first-class political theater.
We are supposed to believe that one of the most primitive societies in the world – the cash crop of which is opium, and the actual government of which is tribal, fragmented, religiously fundamentalist, and hostile to Western values in general – is going to suddenly realize that the very little value its people get by being at the bottom of both the supply and value chain for narcotics, is going to be now supplanted by the very little value they will get from being at the very bottom of the supply and value chains for minerals needed by every other culture but the Afghan. Even the warlords (read ‘local officials’) would get less from mining companies than they get today from illegal drug distributors, so they’ll sign on, of course.
The New York Times is either acting as the agent of the US Department of State or just as the agent of the absurd.
Afghanistan is not the Saudi Arabia of lithium; it is the Saudi Arabia of ladies’ fashion. Afghans know as much about the one as the Saudis know about the other.
The development of natural resources requires that there is in place:
- Logistics, i.e., roads, vehicles, vehicle fueling and repair stations, railroads, railroad fueling, repair, and maintenance services, etc.;
- Huge quantities of flowing or pumpable water and systems to clean it, before returning it to any other use or even to the aquifer, and
- Enormous quantities of reliable electricity
Mining ventures in remote places usually fail, no matter how good their resource, due to the fact that they cannot afford to have the above necessary and critical resources put in place. In developed countries they can share the resources of logistics, water, and energy already in place, the costs for which are distributed among the population (i.e., government) and local industries of a similar type.
China’s national government recognizes this full well; the US Government, for one, does not.
China will ‘gift’ the Afghan people with roads, railroads (coincidentally just a part of a larger network for which China happens to be trying to get the right of way), power plants, and water resource development. Then, and only then, will a Chinese miner begin to develop an Afghan resource, the ore concentrates from which, dug most likely by contract workers from China, will go by Chinese-built trains to Chinese smelters in (you guessed it!) China.
The US Government wishes to slap Bolivia’s socialist ruler, Evo Morales, in the face, so just coincidentally there is a story in its current house organ, the New York Times, about the fact that some day no one will even need Bolivia for any lithium.
The US Government wishes its people to have a reason for losing American lives in Afghanistan other than protecting the poppy growers, so it invents Afghanistan as a mineral treasure trove (for the 22nd Century?).
North America probably has tens of trillions of dollars of undeveloped natural resources, and it has the world’s premier developed infrastructure, flowing water resources, and produces 25% of the world’s electricity. Environmentalists however will not allow the development of North American resources.
So, of course, these same environmentalists will simply roll over and pant for the destruction of the Afghan way of life so that their Blackberrys, lights, TVs and cars can keep running and keep coming off of the assembly lines on the backs of injured, disabled, and dead Afghans working in primitive conditions for low wages.
I wondered when the rare earth playlet of the current political theater was going to end. Now I know. It is now. The Times is onto natural resources, Act II, ‘The Quest for Lithium’, starring a heroic Hollywood hunk as either an evil American ‘developer’ of natural resources or, in makeup, as a noble Afghan warlord with a heart of lithium only wanting the best for his exploited people. This role seems made for Kevin Costner, doesn’t it?
By the way did you know that if a material is produced so that its supply exceeds its demand, then the price falls? So, if the minerals in Afghanistan were all in production now their net value would be in the low hundreds of millions at best, not a trillion or more.
Do any of the economic pundits at the New York Times (or in Washington) care that such development would cost a trillion dollars – but, of course they don’t, because they don’t know that or anything else about real world costs.
There is no present demand for lithium that cannot be met by present supply and then some, and no foreseeable demand that cannot be met by increasing the production of lithium from existing, already capitalized, sources such as those in Chile, the USA, China, and Argentina. Such increases would be the most economical way to deploy capital. That is how the free market will do it.
I’m already bored by this ‘play.’ Is Act III worth waiting for? I don’t know, but I’ll bet it’s going to be copper…