Kazakhstan Mining Report 2010

Kazakhstan Mining Report 2010Without doubt, the mining industry in Kazakhstan is finding its way out of the economic downturn it faced last year. There are once again increasing demands for raw materials from countries whose economies are beginning to recover and there is likely to be a rise across the board. One of the most significant factors in Kazakhstan’s recovery is the worldwide demand for uranium. Kazakhstan is the world’s number one uranium producer, achieving production results of 13,900 tonnes in 2009; 27% of the world’s output. With a recent deal with India signed and a rumor of a deal with Iran, Kazakhstan’s production is set to further increase y-o-y. Chrome production is also set to increase as the worldwide demand for steel continues to rise.

Approximately one- third of the world’s uranium supplies used for nuclear power comes from decommissioned nuclear weapons in the ex-Soviet Union. These supplies are expected to run out within the next few years and Kazakhstan’s uranium producers are aiming to fill the gap. However, Kazakhstan’s increased output of uranium has caused a decrease in the current market price. Uranium has fallen from US$140 per pound in 2007 to just US$40 today and as a result, the world’s main nuclear energy companies have been increasing their stored supply. This could lead to a decrease in demand midterm as immediate requirements will be secured.

Copper output levels are also expected to increase over the next four years. In March 2010, UK-registered copper mining company Kazakhmys agreed to sell China’s Jinchuan Group Ltd a 49% share of its Aktogay project. This will improve trade relations and also increase copper production by 100,000 tonnes annually. Kazakhstan is now the world’s 10th largest producers of copper and as figures continue to rise, they could soon move further up the rankings.

Gold continues to remain a popular source with investors. It is still seen as a safe investment and therefore, gold production will continue to increase y-o-y. Kazakhstan plans to increase its output levels by up to 11% in 2011, it was announced by President Nursultan Nazarbayev in May. This is due to the launch of a new plant at the Vasilkovka mining complex.

Meanwhile, in the hope of attracting more foreign investment and sales, Kazakhstan is offering tax incentives to foreign developers and together with Australia’s proposed ‘super profit’ tax bill, they could see a considerable increase in foreign investment. Kazakhstan will not be following Australia’s lead and therefore plans to draw increased investment and development into the country. As a result of this new tax law, investors are looking more carefully at holdings in Australia and as a result, Kazakhstan may hold new attraction. However, the possibility of tax exemptions being cut for major oil and gas projects could significantly affect certain foreign investors.