A Gold Mine in Afghanistan? Wait About 10 Years: Gartman

Investors shouldn't get too excited about the trove of mineral treasures found in Afghanistan. Experts say it could take at least a decade before the discovery yields anything in the marketplace.

Cityscape at sunrise, Kabul, Afghanistan
Stephane Victor | Getty Images
Cityscape at sunrise, Kabul, Afghanistan

Though the future potential is extreme, the immediate impact of the mother lode in iron, copper, gold, cobalt, niobium and lithium likely will be nil.

A host of logistical, political and and geographical barriers must be dealt with first.

"This is huge news. It's the kind of thing that can have an impact on psychology today and may have an impact on psychology tomorrow," says Dennis Gartman, who manages a hedge fund and edits the daily Gartman Letter. "But it's a mining project. That's 10 years in the future."

Early estimates for the discovery, disclosed by the New York Times, are about $1 trillion.

Such a level surely would be enough to impact world markets and set off geopolitical battles over who will get to mine the rich deposits. But the extent to which it actually impacts prices and the broader Afghanistan economy isn't even close to being determined.

"The United States and China will find themselves butting heads their often," Gartman says. "They're both going to try to influence any government that exists there."

Indeed, there's also the complicated governing structure in the country, in which President Hamid Karzai's government holds a tenuous grip over national affairs while the Taliban is a continuous disruptive force.

"There are some pretty big issues given Afghanistan's land and infrastructure," says Philip Silverman, managing partner and chief trader at Kingsview Management, a commodities trading advisory firm in New York. "It's certainly going to complicate the situation in Afghanistan, with the Taliban and the world."

Investors should watch how the contracts are awarded and any signs of development in Afghanistan that could accompany the find.

Getting the goods to market while overcoming the country's primitive mining system will be among the key challenges, Silverman says.

"We would be looking to see when they start talking to some of the private industries and seeing how they would be looking to bring them in, and closely looking at what's going on in the military conflict," he adds. "One trillion dollars worth of minerals below the ground could certainly embolden the Taliban to a place where it might not calm things down. It might layer a whole new set of problems on the situation."

At the same time, investors have to be careful not to try to look too far ahead.

Using out-month or forward-futures contracts to try to predict what will happen years ahead is generally a losing game as they generally only reflect the cost it takes to carry the contract and do not paint a true picture of future costs, Gartman says.

Investors, he adds, would do better to wait and see how the mining operations will be conducted before making any big bets.

"There has been nothing in Afghanistan worth anything for centuries, other than the middle of trade routes from Europe to the (Asian) continent," Gartman says. "Now all of a sudden it may have value. But it's years into the future."