INCREASING ROLE OF MINING IN KAZAKHSTAN – UK COOPERATION AGENDA

23 February 2015, London

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Kazakhstan is known to have significant untapped resource wealth within the mining sector.Successful development of this resource can provide base for country’s sustainable economic growth, technological upgrade and inflow of Foreign Direct Investment.

  Since the visit of UK Prime Minister to Kazakhstan in 2013, the UK and Kazakhstan have intensified joint efforts to align Kazakhstan’s subsoil legislation with the international standards with the view to attracting more FDI into the country’s mining potential. Important steps have been made to develop stronger business engagement brining the UK expertise, technologies and finance to Kazakhstan’s mining projects. The mining sub-group of the Inter-Governmental Commission (IGC) which presently includes over 70 member-companies jointly with the UKTI’s Mining Sector team plays the key role in this transformation process. MINEX Central Asia Forum has recently joined the IGC Mining Group and took part in its meeting on Monday 23 February 2015 hosted by the European Bank for Reconstruction & Development in London.

The meeting coincided with the visit of the EBRD’s Headquarters of Prime Minister of Kazakhstan, Karim Massimov. The Kazakhstani delegation also included the Minister of Economy – Yerbolat Dossayev, the Minister of Investment and Development – Asset Issekeshev, Chairman of the Board of the Samruk-Kazyna National Welfare Fund – Umirzak Shukeyev, Chairman of the Board of the National Management Holding Baiterek – Kuandyk Bishimbayev and many other senior officials.

The EBRD in conjunction with the Government aim to provide grants to be used to co-finance projects that may not be otherwise possible. To date, the EBRD has invested about US$ 7 billion dollars into various sectors of the economy of Kazakhstan. During the Prime Minister’s visit, EBRD and UniCredit  Group have signed a US$ 250 mln cross-border investment loan facility for Kazakhstan’s Voskhod Chromium, a subsidiary of Turkey’s Yildirim Group. The investment is expected to have a transformational effect on the operations of the mine by introducing new technologies and practices into Kazakhstan for the first time.

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 Photo – MINEX Forum

Opening the meeting of the Mining Subgroup of the UK-Kazakhstan Intergovernmental Commission, Aset Isekeshev, Minister of Investment and Development informed the investors about the landmark event which took place at the end of the 2014. The president of Kazakhstan signed the Law “On Amendments and Additions to Certain Legislative Acts of the Country on Mineral Resources”. The new Law is expected to remove barriers and stimulate inflow of foreign direct investment in exploration.Australian model “first comes, first receives” will be used for granting mining rights. New geological information systems are being developed to provide easier and quicker access to the geological information. The next step of the subsoil regulation reform will be the adaption of the Sub-soil and Subsoil Use Code which will provide a tool for the transition to the Western Australian model of granting rights, accessing geological information and introduction of the international standards for the calculation of mineral reserves and resources – JORC. Minister promised that every British businessmen investing in the mineral sector would feel at home in Kazakhstan.

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Photo – MINEX Forum

Further details of the Subsoil use reform were presented by Timur Toktobaev, the Head of the Subsoil Use department of the Ministry of Investment and Development. The Western Australian mining model was selected by Kazakhstan because it is considered to be the most advanced and investor friendly said Mr Toktobaev. Western Australia annually brings to the global markets 10 or more new mining projects with the average capitalisation of 500 mln USD.  Western Australia’s size approximately matches the territory of Kazakhstan. About 27% of the Western Australia’s territory is licensed by exploration companies. Comparing to Kazakhstan, Western Australia’s exploration expenditures are more than 10 times higher. In Kazakhstan over 90% of the mineral resources remain underexplored. Many local companies are using outdated technologies developed over 30-40 years ago. Some of the major international mining companies are seriously considering projects in Kazakhstan. According to Mr Toktobaev, one of these companies is Rio Tinto which has recently signed an agreement to restart exploration of a 17 000 sq. kilometres area using modern technologies. Previously this area was explored using the outdated methods and was considered unpromising.   Both the company and the Ministry expect to make several world-class discoveries in this area. Further implementation of the modern technologies and advanced exploration methods will play the key role in untapping Kazakhstan’s resource wealth, believes Mr Toktobaev.

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Photo – MINEX Forum

Finance will be a key factor in developing Kazakhstan’s mining potential. The UK Government, through the UK Export Finance, have offered significant potential funds approaching $2bn to hopefully realise this ambition. Speaking at the conference David Tang of UK Export Finance presented on potential opportunities for UK government support on projects / investments in Kazakhstan. UK Export Finance (UKEF) is the operating name of Export Credits Guarantee Department (ECGD) – the UK’s official Export Credit Agency. The organisation is able to assist overseas buyers of UK goods and service by providing loan guarantees to lending banks. Recently, UKEF also became a direct lender in its own right. The loans UKEF guarantees are usually repayable over 2 to 10 years. The terms of support include a minimum of 20% UK content in the contract value. UKEF is also able to offer support on contracts where local costs, from the buyer’s market, form up to 30% of the contract value. To qualify, the projects need to satisfy the IFC (World Bank) standards on environmental assessment as well as certain UK Bribery and Corruption legislation. To illustrate the UK Export Finance funding Mr Tang presented two case studies.  Between 2011-2013 the UK Export Finance provided funding to Joy Global for the amount of US $78.4m to supply of longwall mining equipment to Siberian Coal & Energy Co. (SUEK) in Russia. Another example was a provision of US$870m loan for the US $19bn Sadara petrochemical project in Saudi Arabia.

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Photo – MINEX Forum

In December 2014 Kazakhstan was accepted in the Mining High Value Opportunities Program (HVO) run by the UK Trade & Investment. Mark Smith, Head of Mining UKTI, presented some of the important steps taken by his team to identify large scale mining projects in Kazakhstan. Mining HVO is designed to identify overseas large-scale capital expenditure projects and to attract the UK capability in a specific sector.  Following IGC Mining Sub-Group initiation in 2013, scoping study conducted in May 2014 and inward mission and meetings with Vice-Minister of Investment and Development Mr Erlan Sagadiev and Tau-Ken Samruk National Mining Company in June 2014, the UKTI Mining Team obtained expression of Interest from UK Export Finance totalling some 1.75 bln USD.  The OEI have been provided for the following companies: Samruk Kazyna – 500 mln USD, Ministry of Investment and Development – 500 mln USD, Tau-Ken Samruk – 500 mln USD, Kazgeology – 250 mln USD.

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Photo – MINEX Forum

The meeting of the IGC mining sub-group was concluded by the presentations from the EBRD’s Kazakhstan team. Agris Preimanis, Lead Economist, EBRD presented  economic update on Kazakhstan. In 2015 the country is facing difficult external environment due to significant deterioration of 2015 economic outlook in Russia whose negative GDP growth is currently projected at – 4.8%. Other external pressures are plunging Oil & Gas prices, change in terms of trade with and, to lesser extent, slowdown in Russia as well as divergent growth of largest economies globally (mounting challenges in China and the US to remain the only global  growth engine). Due to these factors, EBRD has reduced Kazakhstan’s Economic Growth forecast from 5% in 2014 to 1.5% in 2015.

Kazakhstan’s New Economic Policy (Nyrly Zhol) announced in November 2014 and other fiscal stimulus programs are key for growth in the short- and medium-term.  To get Kazakhstan back in 5% GDP growth the Government will need to keep up reform momentum, increase and target its infrastructure spending, increase the role of equity and risk taking and stimulate innovation in high-tech and low-tech sector development. Attracting FDI in extractive and non-extractive sectors will remain on the top of Prime Minister’s and his Government’s agenda.

To receive more detailed information about the UK-Kazakhstan mining sub-group of the Inter-Governmental Commission (IGC) and conference presentations, please contact Arthur Poliakov, Head of MINEX Forum Management Committee.

Tel: +44 207 520 9341 Fax: +44 207 520 9342 or Email:  admin@minexforum.com

 

MINEX Central Asia – the 6th Mining and Exploration Forum

Mining growth and exploration prospects in Kazakhstan, Kyrgyzstan and Tajikistan will be showcased at the 6thMINEX Central Asia Forum organised on 17-19 March 2015 in Astana, Republic of Kazakhstan.

The high-level official delegations from Kazakhstan, Kyrgyzstan and Tajikistan will attend the Forum and present on the key regulatory developments and FDI prospects emerging in the mining sector.

Growth, diversification and optimisation strategies will be presented at the Forum by the leaders and senior executives fromPolymetal International Plc, KAZ Minerals Bozshakol LLC, Tau-Ken Samruk National Mining Company, JSC NAC Kazatomprom, Ortalyk Mining Company, JSC “Kazgeology” national exploration company”, Rio Tinto Mining and Exploration, Inc., Iluka Resources Limited, Raygorodok LLP, KazGeoTech and JSC “Rusburmash”.

Securing of funding for mining projects in Central Asia will be addressed by the experts from the International Finance Corporation (IFC), The World Bank Group, European Bank for Reconstruction and Development, Development Bank of Kazakhstan, London Stock Exchange Group, Bryan Cave LLP, Kairat Karmanov, Deputy Chairman, National Export and Investment Agency “KAZNEX INVEST” JSC  and ScholzvonGleich.

The advanced Mining and Exploration technologies & practices will be showcased by the leading consulting and mining engineering companies including SRK Consulting, Wardell Armstrong Int., IMC Montan, DMT Consulting, Central-Asian Mining Union, Aranz Geo Limited, KPMG, McKinsey & Company, Fugro Consult GmbH, SGS Minerals Services, Outotec Kazakhstan, “Metso (Kazakhstan)” LLP, Modular Mining Systems EurAsia, “VNII Galurgy” – Research and Development institute, RJC, GEM Systems Inc., SkyTEM Airborne Surveys, Doppelmayr Transport Technology GmbH, Sprung Instant Structures and many others.

Master-classes organised prior to the main Forum in 17 March will provide platform for acquiring technical knowledge and skills development in the following areas:

  • JORC – a New approach to estimating Kazakhstan Mineral Reserves
  • Architecture of Financing Mining Projects: Technical and Nontechnical Criteria of a Successful Business Plan
  • Five Tips for effective management of mining projects
  • 3D geological modelling solutions for the mining, hydrogeology and geothermal energy industries

Business networking program of the forumwill include ice-breaker party on 17 March, Evening Drinks on 18 March and Mining Photo Awards Galan Dinner on 19 March.

Russian and English simultaneous translation will be provided at all sessions of the Forum.

The Forum is endorsed by the Ministry of Investment and Development of Kazakhstan.

For more information about the Forum’s agenda and also to book exhibition stands and delegate passes, visit forum website: www.minexasia.com/2015

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call MINEX Central London representative office on Tel +44 207 520 9341 or send email enquiry to admin@minexforum.com

 

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