Miners urge Kazakhstan to remove investment barriers

Thu Apr 19, 2012 12:30pm EDT

* Miners deterred by bureaucracy, lack of clarity

* Exploration required to replace depleted reserves

* Kazakhstan highly prospective in copper, gold, zinc

By Robin Paxton

ASTANA, April 19 (Reuters) - Mining companies active in Kazakhstan urged authorities on Thursday to remove bureaucratic hurdles to investment in order to encourage overdue exploration of prospective metals deposits in the Central Asian state.

Though extensively mapped by Soviet geologists, Kazakhstan must act quickly to uncover new deposits of copper, gold and other metals that will replace fast-depleting existing reserves, several mining executives and consultants told a conference.

"Exploration is a thriving business around the world, but it is not thriving in this region," said David Pearce, general director of SRK Consulting. "Companies need to have the confidence that, if they do the exploration, they can develop the mine and achieve the economic reward."

Kazakhstan's uranium reserves are second only to Australia's. The former Soviet republic, Central Asia's biggest economy, also holds the world's largest chromium reserves and substantial copper, zinc, iron ore and bauxite deposits.

Despite its prospectivity, Kazakhstan receives less than 1 percent of global investment in metals exploration, several officials at the 3rd annual MINEX Central Asia forum said.

Companies including global mining giant Rio Tinto and London-listed ENRC have grown frustrated at red tape encountered by miners seeking to establish a presence in the vast steppe nation of 16.7 million people.

"A lack of transparency in the tender process means that foreign investors do not feel confident they can get a fair hearing," said Chris Welton, Rio Tinto's general manager for exploration in Central Asia.

"The decision on awarding tenders is driven solely on the signing bonus and the social contribution, with no consideration of the technical competence of the winner or the winner's ability to develop that project," he said.

"Investors are reticent to present their ideas as the chance of them winning the subsequent tender are slim."

First Deputy Prime Minister Serik Akhmetov said the government had begun work to simplify the procedure of granting mining exploration licences.

"It's important to create the optimum conditions for attracting investment, technology and opening up new mineral deposits that can help replenish depleting reserves and create the economic stimulus for development," he told the forum.

JUNIOR MINERS

Central Asia Metals is one of relatively few junior miners in Kazakhstan to have taken a project through to production. The company is producing copper extracted from waste dumps from a Soviet-era mine near the central city of Balkhash.

"I built a project in 18 months," said Chief Executive Nick Clarke. "It can be done, but it wasn't done without a lot of heartache and a lot of bureaucracy. We've achieved an awful lot, but we could do with more help."

Central Asia Metals built its Kounrad project within budget of $47 million and is ramping up copper cathode output to 10,000 tonnes per year. The company has plans to expand output further.

"There has to be, from our perspective, less bureaucracy," said Clarke. "Time costs money and, in terms of companies like ours, that's investors' money. It's inefficient for us to spend too much time on lengthy bureaucratic delays."

Another London-listed miner, Frontier Mining, aims to be producing 30,000 tonnes a year of copper from three Kazakh deposits by 2016, company president Yerlan Sagadiyev said.

But less than 15 percent of Kazakhstan's explored metals reserves are currently in production, official data show, with only 75 of 282 identified gold deposits and 19 of 55 iron ore deposits in operation.

An official from ENRC, which has most of its assets in Kazakhstan, said it had been easier for the company to secure licences in Brazil and the Democratic Republic of Congo than in its home country.

"It takes three months, without any problems, to receive state permission to open up new deposits in Brazil or the (Democratic Republic of) Congo," said Nariman Aripov, director of ENRC Kazakhstan's mining department.

"In Kazakhstan, where we have been working for many years, there's a moratorium and we are not permitted to do this."

As the national mining champion and a unit of the sovereign wealth fund, state-owned Tau-Ken Samruk is exempt from the current moratorium on new licences.

Rio Tinto, its potential partner in a copper exploration project in northern Kazakhstan, hopes an imminent deal with the state company could prove the catalyst for foreign investment in Kazakhstan.

Aibek Izhanov, chief geologist for Tau-Ken Samruk, told reporters initial investment in the proposed project to explore for copper in Kostanai region, near the Russian border, could total about $100 million.

"I strongly believe that foreign investors will be key in developing the mining sector in Kazakhstan," Rio Tinto's Welton said. "A few simple changes can be implemented to make this one of the leading mining centres in the world."

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