New Delhi, June 9: Afisco, the SAIL-led consortium that plans to mine iron ore at Hajigak in Afghanistan, is “on the verge of signing an agreement” to start the project, said C.S.Verma, chairman of the state-run steel behemoth.

“We have had four rounds of negotiations… and are close to signing,” Verma said in an interview with The Telegraph.

The $10.8-billion project, which aims to mine high-grade iron ore in a mountainous region near the Bamiyan valley, has been touted as the single-largest foreign investment project in Afghanistan.

The site has an estimated reserve of 1.8 billion tonnes of high-quality ore with 62-63 per cent iron content. The reserves are valued by analysts at $1 trillion.

Steel ministry sources said a meeting on the project with top Indian government officials was likely later this month where the possibility of a viability gap funding on soft terms by either the Exim bank or through an aid package routed through the external affairs ministry would be discussed.

SAIL, along with six other Indian firms, will set up an iron ore mine, a steel mill and a power plant and transport the ore through a yet-to-be-built railway line along the Taliban-hit Zaranj-Delaram highway to Iran and on to the Chabahar port on the Marakan coast.

The steel mill, which is likely to start as a 1.5-million-tonne (mt) per annum project, could be scaled up to 6mt and investments raised to $14 billion.

“The steel mill part is dependent on promises made by the Afghan government on giving us limestone, coal and dolomite mines or supplies,” Verma said.

However, there is a lurking fear that Pakistan-backed Taliban fighters, who view this deal as India’s bid to consolidate its diplomatic position in the war-torn mountainous nation, could target the investment and the evacuation route.

In the last few years, India has invested heavily in Afghanistan and Myanmar, partly to win back nations considered traditional friends and to counter the influence of Pakistan and China.

India has built a children’s hospital in Kabul and the Zaranj-Delaram Highway. It is building Afghanistan’s National Parliament, the Salma dam and power projects; setting up an agricultural university and a mining school; and repairing power lines and highways, besides restoring the historic Stor Palace. The country is also involved in training Afghan army officers and policemen.

Officials said the Indian government was looking at the soft loan for the project more as a strategic investment and, hence, “there was a good chance for it to come through”.

Besides SAIL, other members of the consortium are Rashtriya Ispat Nigam Ltd, NMDC, JSW, JSW Ispat, Jindal Steel and Power Ltd and Monnet Ispat.

For SAIL, Afghanistan is the only foreign investment project that seems to be taking off. Deals to set up facilities based on the supply of cheap gas and coking coal in Oman and Indonesia are still stuck. “We are still awaiting the allocation of a coal mine in Indonesia,” Verma said. The supply of gas to the Oman facility seems to have been caught in a logjam after gas prices went up.

Back home, SAIL is banking on a string of new blast furnaces and high-grade products for space, nuclear and naval facilities to shore up its margins.

The PSU has posted a 72 per cent fall in standalone net profit at Rs 446.53 crore for the fourth quarter ended March owing to the fall in sales and rise in cost.

Verma expects the cost of production to come down following the commissioning of two new blast furnaces in Rourkella and Burnpur this year. “Our profit per tonne will go up,” he had said.

The company will add over 6mt per annum capacity this fiscal to take the total to 19.5 mt per annum as part of its ongoing Rs 61,870 crore capex programme.