UPDATE 2-Kazakh leader calls for end to mineral licence ban

Wed Nov 28, 2012 9:13am EST

* President instructs government to lift 4-year moratorium

* New mineral licences should spur investment in regions

* President warns local governors against complacency (Adds details, quotes, background)

By Raushan Nurshayeva

ASTANA, Nov 28 (Reuters) - Kazakhstan's president has instructed his government to remove a four-year moratorium on issuing new mineral exploration licences in a bid to spur investment in the outlying regions of the resource-rich Central Asian state.

By ending the ban on new licences, President Nursultan Nazarbayev also said he hoped to shake up some of the "princelings" who govern the distant regions of the vast former Soviet republic.

"We need now to remove the moratorium on subsoil use," Nazarbayev, a 72-year-old former steelworker, told a meeting of regional governors at his residence on Wednesday.

"I instruct the government to examine this issue and to deliver a proposal, together with the regional governments, that will generate interest and attract investment to the regions."

Kazakhstan, the largest economy in Central Asia, holds uranium reserves second only to Australia's. Five times the size of France, the country also has the world's largest chromium reserves and substantial copper, iron ore and zinc deposits.

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.

Despite its prospectivity, Kazakhstan receives less than 1 percent of global investment in metals exploration. Miners have no guarantee that they will have be able to develop any reserves that they might uncover.

Companies including global miner Rio Tinto and London-listed ENRC have grown frustrated at the red tape encountered while trying to explore and develop new reserves in Kazakhstan.

Kazakhstan introduced the moratorium on issuing new mineral exploration licences in 2008 pending a restructuring of the tax code and subsoil law, which came into force within a year.

Since then, new mining exploration licences have been available only to companies partnered with state-owned Tau-Ken Samruk, a unit of the sovereign wealth fund, or SPK, a quasi-governmental body focused on developing regional deposits.

Nazarbayev's Nur Otan party has a huge majority in parliament and his instructions are routinely followed by compliant officials.

'PRINCELINGS MUST GO'

Nazarbayev has tolerated little dissent in more than two decades as president, during which foreign investment has topped $160 billion. He warned regional governors - known as akims in Kazakh - that he would not tolerate economic stagnation.

"We have several akims and mayors who have been in the job for 10 years. There's nothing wrong with that, as long as work is progressing, as long as there's no stagnation," he said.

"But with no visible results, some akims have turned into princelings. We must get rid of them. They should understand that they need to switch jobs or leave. Only the most deserving should remain in state service."

Kazakhstan's carefully cultivated image of stability was dented last year by a labour dispute in the western oil-producing region of Mangistau, which erupted into deadly riots last December.

Authorities are at pains to ensure no repeat. State-run and private companies have acquiesced this year to the wage demands of miners and metal workers.

Should the moratorium be lifted, Nazarbayev said local governments should retain some of the profits. "If we attract investment to these deposits, part of the profits should remain in the regions," he said. (Writing by Robin Paxton; Editing by Mark Potter)