A Chinese firm started work on a copper deposit in Afghanistan on Thursday, part of a multi-billion dollar project and the first major foreign investment of its kind in Afghan history, an official said.

As if to underscore the dangers of working in Afghanistan, just hours before work began at the Aynak mine in Logar province a powerful blast in another part of the province killed 25 people, including 15 school children.

State-owned China Metallurgical Group Corp (CMGC) and China's top integrated copper producer Jiangxi Copper Co won a 2008 tender to explore and develop the vast Aynak Copper Mine south of the capital Kabul.

Aynak is thought to contain up to 13 million tonnes of copper and is regarded as one of the major ore bodies in the world.

With Afghanistan facing a growing Taliban-led insurgency, security concerns had stopped CMGC from starting work on the project until Thursday.

The deposit was discovered in 1974 and surveyed by Soviet geologists in 1979 has never been developed until now.

Landmines in and around the site had to be removed, and a number of large craters, caused by U.S. bombs dropped on what was then a military training camp in late 2001, had to be filled, a Mines Ministry official said.

The minister has gone to inaugurate the start of the actual work of Aynak, the official told Reuters on condition of anonymity because he is not authorised to speak to the media.

The Chinese group will invest $2.898 billion on the project.

Construction work is due to finish in less than three years and the Chinese group will pay the Afghan government $400 million a year to operate the mine, which should provide jobs for thousands of Afghans.

It plans to extract some 200,000 tonnes of copper a year, according to previous ministry estimates. It will first build a power station to run to the mine and will seek coal deposits to fuel the station.

The project is the biggest foreign investment in Afghanistan's history.

Afghanistan currently relies on aid for about 90 percent of its budget, but its mines minister told Reuters in March the country was sitting on vast reserves of mineral wealth.

It was looking for mining firms to open up a huge iron deposit, holding an estimated 1.8 billion tonnes of high-quality ore, in the central part of the country.

A U.S. Geological Survey (USGS) shows Afghanistan may hold far higher amounts of minerals than previously thought, with iron deposits alone estimated at between five to six billion tonnes, Mines Minister Mohammad Ibrahim Adel said in March.

(Editing by Paul Tait and Jeremy Laurence)