Afghan gold mine deal brings foreign investment

KABUL, Jan 10 (Reuters) - Afghanistan signed a deal on Monday with a local company backed by foreign investors to develop the country's second gold mine, a project the government hopes will attract more money to the war-torn region.

Afghan Krystal Natural Resources will invest up to $50 million in Qara Zaghan mine in northern Baghlan province and plans to begin production by 2013, said the company's president and prominent Afghan entrepreneur, Sadat Mansoor Naderi.

Investors from the United States, Britain, Turkey and Indonesia are backing the project through a deal facilitated by JPMorgan Chase & Co , Naderi said, adding it was not yet known what the mine's gold reserves were, but the firm intends to spend the next two years exploring the site.

Afghanistan is counting on huge mineral deposits, including some of the biggest unexploited copper and iron reserves in Asia, to wean it off its dependency on foreign aid. Copper production is also due to start in 2013.

"(We hope this will) encourage other investors to realise the opportunities and potential in Afghanistan," Minister of Mines Wahidullah Shahrani said. "We hope this initiative will help the government of Afghanistan attract more international investment."

Shahrani said the government would earn 26 percent royalties plus more in taxes from the Qara Zaghan mine. He said Afghanistan has estimated gold reserves worth between $20-25 billion.

Westland General Trading, owned by Haji Abdul Kabir, an ethnic Uzbek, is already developing the Nor Aaba gold mine near the Tajik border in northern Takhar province. [ID:nSGE6AP0C3]

Obstacles to developing Afghanistan's mineral deposits include a raging insurgency that makes transit and security big headaches, weak infrastructure that hinders shipments and massive corruption in both the private sector and government.

(Reporting by Michelle Nichols, editing by Daniel Magnowski)