Digging Deeper

Rio Tinto signed two agreements of cooperation with KazGeology to implement the exploration in Balkhash-Saryshagan and Korgantas areas. Could you share with us the nature of this collaboration, and how this partnership will support your operations in the country?

These agreements, once executed, will be joint ventures; 75% Rio Tinto and 25% KazGeology. The objective of the agreements is to discover new world-class mineral deposits in the area and, importantly, to serve as a mechanism for the capacity building of staff and the transfer of exploration technologies to KazGeology. We hope that we will find some quality deposits in those areas. However, we understand that the probability of finding a world-class deposit is very low. Statistically, in the industry the global average indicates that only one in 1,000 projects actually delivers a world class mining opportunity. Rio Tinto Exploration has a very strong track record of finding world class deposits that is well above the global average, however it still means that there are many projects that one would have to look at in order to deliver one quality mining project. This is also a long process and can take anywhere between five and 15 years to reach the stage where a decision could be taken to move a project towards mine development.

How is Rio Tinto implementing world-class equipment and technology to increase its exploration activity in the country and allow for knowledge transfer?

There are two things that we have to be clear on when we talk about transfer of technology. The first is the technology itself, which is the modern equipment, modern data processing techniques and interpretation tools, and high quality laboratories. This is important, as those are the tools of the trade. Secondly, but far more importantly, is the capacity of the people that are going to be utilizing the technology. There is no point in providing technology if it is not clearly linked with the capacity building of local staff. Therefore, our focus is to ensure that we provide that capacity building alongside the transfer of these technologies.

The government has declared that it will invest more than $600 million for the 2015-19 exploration plan. How do you assess the future program of the government?

This is a lot of money, and it will have a massive impact on the future exploration of Kazakhstan and the value that can add in improving attractiveness for foreign investors. A $100 million investment per year of grassroots basic regional exploration can be fantastic. The problem is when you look at the details in that proposal, there is significant ambiguity. One example is that the overall program contains not just grassroots exploration, but also the rehabilitation of oil and gas wells. The proposal is unclear on how it is broken down in terms of costing; $600 million is not a significant amount for the rehabilitation of oil and gas wells. Although it sounds good from a high level, when you look at the detail, how does that break down? If most of these funds go into the rehabilitation the remaining allocation may not have a significant impact on the key aspects that will provide value to the exploration and mining industry. Unless there is absolute clarity in how that money is going to be spent it is difficult to understand if the 2015-19 exploration plan is going to have a positive impact on the sector and attract more foreign direct investment.