Industry

Solid Sources

Mining

Known for its extensive mineral reserves, local companies and foreign players are targeting the mining industry as an investment and development hotspot.

THE RESERVES

Kazakhstan is home to one of the world’s major mining and metallurgical complexes, and with its vast world-class deposits the country has the potential to expand its mining industry significantly in the coming years. The country contains 76 elements of Mendeleev’s table and is home to major reserves of chromium, manganese, iron, uranium, copper, lead, zinc, and titanium, among others. Moreover, 4% of the world’s gold deposits are located in Kazakhstan.

The reserves of the major players—Vasilkovskoye Zoloto, the Bakyrchik mining company, Kazakhmys corporation, Kazzinc, and Kazakhaltyn—account for 52% of the country’s total reserves. In particular, the Vasilkovskoye Zoloto mine, which is located in the north of the country, is the fourth largest gold mine in the world. In addition, Kazakhstan boasts 5.5% of the world’s proven copper reserves, ranking fourth behind Chile, Indonesia, and the US. More than 90 deposits are registered, half of which are under development. Kazakhmys, Kazzinc, and Aktubinsk are the major operating companies in copper, taking advantage of the prediction that Kazakhstan’s reserves are expected to last up to 30 years. Almost 99% of the extraction investments in the sector were made during the past decade and total approximately $1.7 billion.

The sixth largest lead-zinc producer globally, Kazakhstan owns 9.5% and 10% of the world’s proven zinc and lead reserves, respectively. Currently, 85 lead deposits and 79 zinc deposits are registered, with reserves estimated to last for 25 years. Kazzinc is the main zinc company in the country, and Kazakhmys controls approximately one-third of total lead and zinc production. Close to 90% of the country’s production is exported to markets such as the Netherlands, Turkey, Italy, Ukraine, and China.

In terms of aluminum (bauxite), Kazakhstan is home to the 10 largest reserves in the world, with 20 registered mines sufficient for 50 years of extraction. The country enjoys an annual bauxite production of more than five tons. Major company Aluminum of Kazakhstan produces Kazakhstan’s entire bauxite and marketable aluminum output at its aluminum plants in Pavlodar and Krasnooktyabrski as well as the Torgay mines. Another local enterprise is Kazakhstan Aluminum Smelter (KAS) developed by the Eurasian Natural Resources Corporation (ENRC), which plays a significant role in enhancing the country’s aluminum output. The $900 million investment was inaugurated in 2007, and with the addition of the second production line it is set to process 250,000 tons of aluminum annually.

Two other important metal reserves in Kazakhstan are nickel and cobalt, of which the country has uncovered the 12th and seventh largest reserves, respectively. Of the more than $1 billion invested in these minerals, about 60% has been allocated toward extraction. The majority of the country’s nickel output is exported. For iron and manganese, the country ranks sixth and fourth in terms of reserves, as well as third for chromium, with enough deposits to last for over 90 years.

THE INDUSTRY

About 30% of Kazakhstan’s GDP is sourced from the mining industry, which also accounts for 35% of the republic’s entire manufacturing industry. Close to 90% of the production is exported to more than 30 international markets, making up 35% of the country’s total exports. Currently, Kazakhstan has more than 2,000 active mines, the majority of which are used for extraction (61%). Prospecting is carried out in 32% of the sites. Meanwhile, 25 different types of ferrous, non-ferrous, and precious metals are produced in Kazakhstan, with more than $55 billion invested in the mining sector over the past decade. Investments in the raw materials segment alone are expected to exceed $50 billion by 2015. The value of the mining and metallurgical market is estimated to be $31.5 billion by the end of 2012, which is double the size of the industry in 2009. With more than 160,000 people employed in the mining workforce, these growth trends are set to continue apace.

NEWCOMERS

There have been exciting developments in the mining sector concerning the entry of new players into the country’s mining scene. One company, Anglo-Australian mining giant Rio Tinto, is in the final stages of negotiations with state company Tau-Ken Samruk concerning the development of copper deposits in the Kostanai region. “Wherever possible, Rio Tinto seeks opportunities to work in partnership with host governments and as a National Company mandated to grow the mineral resources industry in Kazakhstan, Tau-Ken Samruk is a logical partner,” Chris Welton, General Manager for Exploration for Rio Tinto told TBY in an interview. Other state companies in the mining industry, such as Kazatomprom, are also open to mutually beneficial partnerships with foreign players, which will help Kazakhstan carry the mining industry forward. “Kazatomprom is interested in partners and co-investors that will bring their strength to the world uranium market and that will move us to the further stages of the nuclear fuel cycle,” Vladimir Shkolnik, President of Kazatomprom, told TBY in an interview. “However, to participate in the development of mineral resources of Kazakhstan, foreign partners must provide our country access to new markets and new technologies comparable to the projects’ economic parameters. The company is already working under these terms.”

At the same time, there is ample room for smaller mining companies in the realization of the country’s vast mining potential. In an interview with TBY, SRK Consulting’s General Director, Tony Thornton, explained “Kazakhstan has the mineral potential that offers plenty of options to larger operators as they meet thresholds of minimum capital, returns, and timelines. However, there are a myriad of smaller deposits for local exploitation, and these resources are open to all players as long as they have the means to exploit the minerals.”

By capitalizing on the natural resources the country has discovered and collaborating with foreign partners, Kazakhstan can expect to see great success in the mining industry over the coming decade. Solid policies and environmental safety will help the country as it follows of path of exploration, extraction, and revenue generation.

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