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KAZMIN 2002 OVERVIEW KazMin 2002
KAZAKHSTAN MINING INDUSTRY OVERWIEW8th INTERNATIONAL KAZAKHSTAN MINING, EXPLORATION AND MINING EQUIPMENT EXHIBITION 5th - 7th September 2002, IEC Atakent, Almaty, Kazakhstan COMMERCIAL OPPORTUNITIES IN THE MINING, MINERALS AND METALLURGY SECTOR SUMMARY Kazakhstan has a colossal amount of natural and geographic promise. Kazakhstan today is one of the few nations on the planet to be provided with substantial deposits of minerals and raw materials. Ninety-nine elements have been recognized in the subsoil of Kazakhstan. Kazakhstan's mining industry comprised of ferrous metallurgy, non-ferrous metallurgy, and coal mining, presents considerable long-term opportunities for global mining and metallurgy equipment manufacturing companies. The development of Kazakhstan's mineral deposits is a priority of the Kazakhstan government and represents one of the best ways to attract foreign investment. OVERVIEW The country boasts one-third of the world's chromium and manganese deposits; 50 percent of the former Soviet Union's tungsten and lead; 40 percent of its zinc and copper; and 25 percent of its bauxite, silver and phosphorus. Kazakhstan is also the largest producer among the NIS of beryllium, tantalum, barite, uranium, cadmium, and arsenic. During the soviet period, 50 percent of Kazakhstan's hard currency export earnings came from rare earth metals. There are still many relatively large deposits of rare metals, copper and alloying elements such as chromium, beryllium, and manganese. Kazakhstan has one of the largest reserves of chromate in the world. Large iron mines are located in the North in Semipalatinsk Oblast. There are reserves of goethite and limonite, but these are generally considered to be low grade. The capacity of these mines has been listed as 25 million tons/year. Large reserves of coal are generally found in the central and northern parts of the country. Kazakhstan contains large reserves of phosphorus ores. Phosphate deposits largely appear in the Zhambyl region in the South. The government began to privatize state mining companies in 1994. According to the Statistic Agency, 85% of Kazakhstan's mines have been privatized. Many mining enterprises have only just begun to operate on a free-market basis. PRODUCTION Major Kazakhstan copper producer Kazakhmys Corporation boosted production output over the first 11 month of this year, when compared to last year's numbers. According to the company's press service chief, Kazakhmys increased last year's January-November output by 36,000 tons, turning out some 330,000 tons of refined copper. The enterprise also manufactured some 85,500 tons of zinc concentrate, improving upon last year's eleven-month results by 25,000 tons. Kazakhmys produced 2 tons of gold ingots and 370 tons of granule silver from January through November. Major steel producer JSC Ispat-Karmet saw an increase in its shipped production for November, reaching 300,000 tons for the first time in many years, according to the company's press service. A statement released by the enterprise revealed that it shipped 305,500 tons of rolled metal during the month. Ispat-Karmet is currently manufacturing 11-12,000 tons of hot-rolled metal per day and 5,000 tons of cold-rolled metal. Domestic aluminum producer OJSC Aluminum of Kazakhstan intends to increase its charter capital to KZT6 b (USD 42,9 million) from the current KZT 5.8 b (USD 41,4 million), according to the press. Kazzinc located in the East and partially owned (27.6%) by the government. The Swiss trading and metals firm Glencore owns a 62% stake in the company. Kazzinc expects to produce 245,000 tons of zinc in 1999, an increase of 2% over last years production of 240,000 tons. Total production includes both zinc alloys and ingots. According to press reports, the firm plans to boost output by three to five percent each year and plan to invest USD 191,5 million over the next five years, as compared to USD 110 million spent in 1997-1999. According to the Kazakhstan Statistics Agency, metals production in most major non-ferrous metals rose in Kazakhstan over the first ten months of 1999. The country produced 128,153 tons lead in the first 10 months of 1999, a significant increase of 31.8% over 1998. Kazakhstan's bauxite production increased by 6.8% from last year and reached 3,043.200 tons. Alumina rose by 7.7% and amounted to 959,063 tons. Kazakhstan saw an increase in gold and silver production in 1999, Interfax reported. Last year refined silver reached 645,606 kg, a 20% increase over 1998. In December refined silver production totaled 60,850 kg, an increase of 8% from November and up 28% from December, 1998. Refined gold output for 1999 totaled 9,604 kg, an 8% increase as compared to 1998. Gold output for 1999 totaled 9,604 kg, an 8% increase as compared to 1998. GOLD/PRECIOUS METALS MINING Despite the drop in global gold prices, strong opportunities exist for gold mining in northern Kazakhstan if production and transportation costs per ounce can be kept to a minimum. Gold is usually targeted for initial mining projects given that it can be easily transported. The majority of current gold and silver production comes as a by-product from base metal production, but there are also deposits which stand on their own. It has been estimated that there are 23 gold- bearing regions in Kazakhstan, and Vasilkovskoye in Northern Kazakhstan Oblast is considered to be the fourth largest gold mine in the world with 7,132,756 ounces (according to category c1) and 4,732,508 ounces (according to category c2). Over 60 elements are mined from the ores of metal minerals found in Kazakhstan. The total potential recoverable value of noble, non-ferrous and ferrous metals to be worked over the next 15-20 years is appraised at $245.7 billion, or $2.4 billion per year. Operating expenditures are evaluated at $160-180 billion, and the potential bulk profit is rated at $50-67 billion, provided that the mining sector attracts sufficient investment. Another opportunity for international investment lies in the processing of tailings or slag following the production of both base and precious metals. Previously, soviet industrial processing was such that the loss of precious metals was sometimes higher than expected. The processing of tailings for precious metal values can be especially attractive for international minerals and metals firms, since capital investment is much smaller than for opening an entire mining complex, thereby limiting risk. POTENTIAL FOREIGN INVESTMENT IN KAZAKHSTAN'S MINING INDUSTRY: GREAT POTENTIAL AS YET UNREALIZED While the development of Kazakhstan's mineral deposits has been given a high priority by the Kazakhstani government, overall foreign investment in this sector has been weak. According to the Agency for Investment, foreign direct investment in Kazakhstan fell last year to an estimated USD 960 million from the year of 1999 USD 1,132 billion. Total foreign investment, approximately 40% is in the oil and gas sector and 20% metals. Falling prices for precious metals, poor implementation of existing foreign investment legislation, difficulties faced by foreign investors in Kazakhstan, and the real and perceived risks of investing in this potentially-lucrative sector have kept the Kazakhstan mining industry from achieving its potential. Through the State Agency for Investment and the Ministry for Ecology and Natural Resources, the Government of Kazakhstan is working to improve the outlook for Kazakhstan mining industry. The mechanism for granting exploration licenses has been simplified, but implementation remains a problem. The procedure for obtaining environmental permits is being streamlined. EXPORT OPPORTUNITIES Kazakhstan does not have its own indigenous mining machinery industry, but relies on imports, mainly from Russia. Exporters of mining equipment might be interested in considering this procurement opportunity. |