Energy & Mining

Looking For A Glow

Mining

The country's mining sector is in its infancy as a commercial enterprise; however, a new exploration program is likely to locate new highly-desired resources, while its current flagship, uranium, battles a temporary slump in prices.

Kazakhstan’s mining sector holds great potential and both the public and private sector are now looking more closely at possible valuable opportunities awaiting underground. The government is currently examining its mining laws to help make it easier for foreign companies to explore and exploit the nation’s minerals. This should be announced in the middle of 2015 along with the planned launch of 50 to 100 exploration licenses. These reforms and new explorations projects are in line with market predictions that the sector will reach a value of $30 billion by 2017. To achieve this, the sector will likely rely on its already powerful uranium sector while also boosting its copper, iron ore, and coal sectors. A systematic and extensive exploration is needed now to map out all of the country’s resources, which is exactly what the government has planned.

DISCOVERY

The government is keen to take full advantage of the country’s natural resources; hence, its decision to invest over $600 million in the Geological Exploration Program for 2015-2019. Current predictions estimate the country has enough coal and iron for between 300 and 500 years; however, the new exploration plan aims to find the country’s precious metals, especially gold, rare earth metals, and copper. Deposits discovered during the Soviet Era have been extensively exploited; however, since the country’s independence, little has been done to develop and find promising new opportunities. Funding for exploration has been growing. Between 2009 and 2014, the government spent $219.8 million on exploration, while in the next five years $884.6 million has been allocated to the exploration budget, with $653.8 million going into the exploration program and $230.8 million for the Ak Bulak program, which aims to provide clean drinking water to rural towns and villages by 2020. In addition to this, the private sector and Kazakhstan’s major public companies are expected to invest $4.9 billion in finding out what lies beneath the surface. The national exploration company, KazGeology, is planning to team up with some local companies, one of them being Kazakhmys, the country’s largest copper producer and one of the largest in the world, in an effort to get a better idea of what is out there. KazaGeology will also be enlisting the help of international mining corporations, which will bring the latest high-tech equipment and technology to the country to explore the ground. Rio Tinto, the major international mining and metal company, announced it was spending $13 million in its initial exploration activities in Kazakhstan. A largely geologically unexplored country is one problem that Kazakhstan faces and one that is being addressed; the lack of geological laboratories is another. Due to the lack of internationally certified laboratories, some core samples are sent abroad for testing, which slows down the exploration process as well as the control over information. This lack of control has led some researchers to conceal parts of the samples to stop foreign competitors gaining full access to sensitive geological information. However, the situation is likely to change with the establishment of a geological exploration center at the Nazarbayev University. The center is in partnership with KazGeology, and construction on the center will begin later in 2015. The center will host 7 hectares of laboratories, core sample storage, and other essential testing facilities. The total investment required is still being calculated, but early estimates put it around $4.4 million. The university will oversee the project, while KazGeology will supply the equipment as well as some of the funding.

URANIUM

While much of the mining sector in Kazakhstan is still in its infancy, uranium has been leading the way in showing what the sector is capable of doing. In 2009, the country took the title of the world’s leading producer with almost 28% of total production. This number has continued to rise when in 2010, it increased to 33%, and to 36% in 2011, 36.5% in 2012, and then 38% in 2013. The country’s production increased 10 fold between 2001 and 2013 from 2,022 tons to 22,550 tons U per year. Continued mining developments look set to further increase production of uranium to 25,000 tons U per year. The main player in the uranium sector is the state-owned national atomic company, Kazatomprom, which was established in 1997. Of the 17 mines in the Kazakhstan, Kazatomprom wholly owns five and has a joint venture partnership in the other 12. In 2013, Kazaatomprom alone accounted for 16% of the world’s production of uranium at 9,402 tons U. This actually put it ahead of the world’s second largest uranium producer Canada, which produced 9,331 tons U. In 2008, the company set the target of producing 30% of the world’s total uranium production by itself; however, the goal is unlikely to be reached as in November 2014. Kazatomprom announced it would be halting its production expansion due to falling uranium prices. The main reason for the fall has been attributed to the Fukushima nuclear disaster and its aftermath. The disasters eroded demand for uranium and confidence in nuclear waned, and some countries turned away completely from the energy source, such as Germany. In August 2014, the price of uranium had fallen by 23% compared to its peak in 2013 to $34 a pound, the lowest since 2005. The average price forecast by JPMorgan slashed their prediction for the yearly average by 22% to $45, while Morgan Stanley predicted a lower $42 a pound. Kazatomprom has confirmed that it will only increase production for the foreseeable future for concrete contracts or projects of an attractive price. Vladimir Shkolnik, CEO of Kazatomprom, said in an interview with the press that unless prices begin to increase soon, many companies will start to operate at a loss. Companies with lower margins are likely to halt production. However, it is likely that this is only going to be bump in the road as the World Nuclear Association forecast that world demand for uranium will increase by 48% over the next decade.

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