Mining in Kazakhstan
The Results of a Decade and Forecasts for the Future
Bolat Uzhkenov, Doctor of Geological and Mineralogical Sciences; Chairman of the Geology and Mining Committee of the Kazakh Energy and Mineral Resources Ministry
The President’s 1 March 2006 state-of-the-nation address defined our country’s successful integration in the global economy as the main condition for achieving a breakthrough in socioeconomic development. A component of this process is pursuing an open policy to develop natural resources and ensuring transparency in cooperation with multinational companies and neighbouring states.
Political and economic stability, the investment laws that are constantly being improved, natural riches and qualified specialists are key factors that help to attract major foreign investment in the Kazakh raw material sector. Companies from over 40 countries are currently operating in the country.
In general, about $55bn has been invested in the mining sector over the past decade, of which 15% was in prospecting. The annual volume of investment grew seven-fold over this period and totalled $12.6bn in 2005. The bulk of this was spent on developing natural resources. According to forecasts for 2006-2010, investment in the raw material sector is expected to exceed $48bn, and reach about $52bn in 2010-2015.
Mining activities are currently being carried out at 2,000 mines in Kazakhstan, which consists of prospecting at 132 mines (7%), extraction at 1,213 (61%) and both activities at 641 (32%).
Fuel and Energy Resources
Hydrocarbons. The proven large reserves of oil and gas (about 3% and 1% respectively of the world’s total) and significant forecast reserves (13-18 billion tonnes of standard fuel) in Kazakhstan, the existing and proposed routes to export hydrocarbons and the growing global demand for energy make investing in the fuel and energy sector a priority.
At the moment, hydrocarbons are being developed at 241 fields, consisting of extraction being carried out at 74 fields (31%), extraction and prospecting at 106 (44%), prospecting at 59 (24%) and operations unrelated to extraction at two (1%). A total of 142 companies are operating in the sector: 20 joint ventures, 48 foreign companies and 74 local companies.
In total, $40.6bn in investment was attracted to the sector between 1996 and 2005. The annual volume of investment grew 11-fold in this period to over $10bn in 2005. Most of the investment was in extracting hydrocarbons; as a result, output doubled and exceeded 60 million tonnes of oil and gas condensate and 27 billion cu.m. of gas. And the limit has not yet been reached: according to forecasts, the country will extract up to 100 million tonnes of oil by 2010 and about 150 million tonnes of oil by 2015.
It should be noted that Kazakhstan occupies the eighth place in terms of proven oil reserves in the world and second place in the CIS. In addition, the proven reserves will ensure extraction for 50 years for oil and 75 years for gas which is in line with the world average figure for oil-extracting countries. The future development of the domestic oil sector mainly depends on developing the Kazakh sector of the Caspian Sea, whose forecast reserves are quite promising.
Coal. The coal sector is also a priority investment area. Kazakhstan is among the world’s top 10 coal-rich countries, after the USA, Russia, China, Australia, India, South Africa and Ukraine. The state register records 49 mines with 197 structures that are defined as separate facilities, which consists of 142 are closed mines and 55 are open-pit mines. Most mines are located in central Kazakhstan (the Karaganda and Ekibastuz coal basins and the Shubarkol mine) and north Kazakhstan (the Torgay coal basin). Recoverable reserves account for 45% and unrecoverable for 55%.
Mining is carried out at 53 mines, including 15 in the Karaganda coal basin, by 34 companies (one joint venture, five foreign and 28 local companies). The major companies are: Bogatyr Access Komir, Shubarkol Komir, Mittal Steel Temirtau, the Eurasian Energy Corporation, Maykuben West, Karazhira Ltd, the Kazakhmys Corporation and Gamma. These companies invested over $3bn in mining coal (however, only 1% of it was spent on prospecting). The annual volume of investment grew 10-fold in 2005 from 1996 volumes and totalled $375m; output reached about 80 million tonnes. This figure is expected to grow to 90 million tonnes by 2010 and 95 million tonnes by 2015.
The sector has enough reserves to last over 100 years. In future, the development of the raw materials base will be achieved through enriching and improving the quality of the coal and the deep processing of coal to obtain fluid fuel and synthetic substances. Developing shale is also topical. As an alternative source of energy, methane from coal mines in the Karaganda basin can be used. The high concentration of methane in coal layers and the existence of a well-developed infrastructure and major gas consumers make it possible to extract it and utilise it on a large scale. This will also increase central Kazakhstan’s energy potential and provide gas not only to enterprises in Karaganda, Ekibastuz and Pavlodar districts but also to the country’s capital.
Uranium. The world’s major uranium producers are Australia, Kazakhstan (occupying second place in reserves) and Canada. They are followed by South Africa, Brazil, Namibia, Uzbekistan, the USA, Niger and Russia. These 10 countries account for 96% of the world’s total uranium reserves. Our country has 55 uranium deposits, 70% of which are feasible for development using the underground leaching method. The Kazatomprom national atomic company, the Inkay and Katko joint ventures and the Stepnogorsk Mining and Chemical Combine are involved in uranium extraction. They are now extracting over 4,000 tonnes of uranium, 85% of which is extracted by Kazatomprom.
Over $551m was invested in the sector in a decade, and 98% of this in extraction. The annual volume of investment grew eight-fold to $169.1m in 2005. Uranium output is expected to reach 10,000 tonnes by 2010 and 15,000 tonnes by 2015.
The sector has enough of a raw material base to last it 100 years. Taking into account the growing capacities of nuclear power engineering and shortages of uranium, joint investment projects in Kazakhstan have already generated great interest among companies from the USA, Europe, Russia, Japan and China.
Gold. Kazakhstan's territory is a major auriferous province. In terms of gold reserves, the country occupies eighth place after South Africa, the USA, Australia, China, Russia, Canada and Indonesia, whereas in terms of output Kazakhstan is only among the top 20 countries. Gold reserves are concentrated in 260 deposits in our country (40% in sulphide ore and 60% in gold ore). The Vasilkovskoye Zoloto joint venture, the Bakyrchik mining enterprise, the Kazakhmys Corporation, Kazzinc and the Kazakhaltyn mining company have large gold reserves (together accounting for 52% of the country's total reserves). Gold is being mined at 105 deposits, with extraction being carried out at 37 (35%), prospecting at 12 (12%) and both activities at 56 (53%).
A total of 71 companies are operating in the sector: 48 local, 18 foreign and five joint ventures. These companies have invested about $1bn over the past decade (82% in extraction), including $213.5m in 2005 alone.
Most extraction (about a half) comes from composite sulphide deposits developed by Kazzinc and the Kazakhmys Corporation. A further 40% is extracted by Vasilkovskoye Zoloto, Altynalmas, Kazakhaltyn, Yubileynoye, Andas-Altyn, Altyn-Tobe and Dank companies which are developing their own gold deposits.
These companies have gold reserves that will last between 10 and 80 years. These resources can be increased through placer deposits, mineralised formations and secondary quartzite that have a quite high concentration of gold in ore. Developing hard and complex ore will also increase the ore base. As a result, according to forecasts, Kazakhstan will become a leading gold producer by 2015.
Copper. In terms of proven copper reserves Kazakhstan occupies fourth place in the world’s reserves, behind Chile, Indonesia and the USA. The state register records 93 copper deposits, half of which are being developed. The major enterprises operating in the sector are the Kazakhmys Corporation and Kazzinc (in total, there are nine companies, including two foreign).
During the past decade, over $1.7bn was invested in the sector; 99% of this was into extraction. Investment doubled to $483.3m in 2005 alone, 90% of which came from Kazakhmys.
Kazakhstan will be among the world’s top 10 copper producers by 2015. The sector has reserves to last from 20 to 30 years. An additional source that will strengthen the raw material base are a number of sulphide, polymetal and copper disseminated deposits and cupriferous sandstone.
Lead, zinc. In terms of proven zinc and lead reserves Kazakhstan occupies fourth place (behind Australia, the USA and Russia) and sixth place (behind Russia, Australia, Canada, the USA and China), respectively. The state register records 85 lead deposits and 79 zinc deposits. The mining of polymetals is being carried out at 32 deposits, consisting of extraction at twenty (63%), prospecting and extraction at nine (28%) and prospecting at three (9%). The main raw material base is composite sulphide and polymetal deposits in Rudnyy Altay, which produces over two-thirds of the country’s total lead and zinc outputs. Deposits are developed using underground methods. The main enterprise in the sector is Kazzinc. Kazakhmys is involved in collateral production and accounts for a third of the total lead and zinc ore outputs. In total, there are 14 enterprises operating in this sector (11 local, 2 foreign and 1 joint venture) and they enable Kazakhstan to occupy sixth place in the world in terms of lead and zinc production.
Over the past decade, about $2.5bn was invested in the sector. Investment grew three-fold to $463m in 2005 from 1996 volumes. Almost 100% of this was spent on extraction. Kazzinc accounted for 62% of the total investment and Kazakhmys accounted for 25%.
The sector has reserves to last about 25 years. Replenishing reserves is a topical issue at the moment. The prospects for developing the raw material base in this sector depend on discovering new high-quality deposits, developing major deposits with complex and poor ores and reprocessing scrap metal.
Aluminium (bauxite). In terms of proven bauxite reserves, Kazakhstan occupies tenth place behind Guinea, Australia, Jamaica, Brazil, India, China, Guyana, Suriname and Venezuela. The state register lists 28 bauxite mines. Aluminium of Kazakhstan, which includes the Pavlodar Aluminium Plant and the Krasnooktyabrskoye and Torgay bauxite mining departments, accounts for the entire bauxite and marketable aluminium outputs.
Investment in mining bauxite totalled $394m in the past decade. Investment doubled to $63.7m in 2005 from 1996 (98% of this was spent on extraction). Almost all the funds came from Aluminium of Kazakhstan.
Kazakhstan is currently producing 4.5 million tonnes of bauxite a year, and this figure is expected to grow to 5 million tonnes by 2010.
The sector has sufficient reserves to last about 50 years. Adopting a new technological line at the Pavlodar Aluminium Plant has created conditions to produce alumina from low-quality bauxite which makes it possible to increase the raw material base of the sector from the existing deposits. Technology to extract gallium, aluminium sulphate and sodium-sulphate mixture has been improved to boost the deposits’ productivity.
Kazakhstan does not yet produce metallic aluminium because the main consumers of our raw material are Russian enterprises. However, our country has already started to build its own plant to produce primary aluminium.
Nickel, cobalt. In terms of nickel and cobalt reserves Kazakhstan occupies twelfth and seventh places in the world, respectively. The state register records 39 nickel deposits and 55 cobalt deposits. Kazakhstanskiy Nikel, Kyzyl Kain Mamyt and the Sokolov-Sarbay Ore-enrichment Production Association own major deposits. Five companies, two foreign and three local, are operating in the sector.
They invested over $1bn in the sector during the past decade, 63% in extraction. The annual volume of investment grew four-fold over this period and totalled $8.6m in 2005.
Almost the entire Kazakh nickel output is exported. Taking into account that the sector has reserves for many years and the growing world demand for nickel, intensifying extraction and enriching and processing nickel ore are topical issues for Kazakhstan.
Iron, manganese. In terms of proven iron reserves Kazakhstan occupies sixth place in the world (behind Russia, Australia, Ukraine, China and Brazil) and fourth place (behind South Africa, Ukraine and Gabon) in terms of manganese. The iron and manganese sector is a major sector in the country’s raw material industry. The state register records 47 iron deposits and 31 manganese deposits. Orken, the Sokolov-Sarbay Ore-enrichment Production Association, the Zhayrem Ore-enrichment Combine and the Kazkhrom transnational company have largest raw material bases (accounting for 98% of the entire industrial reserves). Mining iron and manganese is being carried out at 32 deposits, with prospecting at seven (22%), extraction at 10 (31%) and both activities at 15 (47%). There are 23 companies operating in the sector, of which 3 are foreign and 20 are local.
They invested $1.7bn in the sector over the past decade – almost all of it went to extraction. In 2005 alone, investment totalled $411.6m (100% more than in 1996), 99% of which came from major companies (including 60% from the Sokolov-Sarbay Ore-enrichment Production Association). Output grew by 200% between 1996 and 2005 to about 40 million tonnes of iron ore and 3 million tonnes of manganese ore in 2005. Kazakhstan is expected to produce 55-60 million tonnes of iron ore and 4-5 million tonnes of manganese ore in 2010 and 80 million tonnes and 7 million tonnes, respectively, in 2015.
The current output levels provide the enterprises with reserves for over 80 years in terms of iron ore and over 100 years in terms of manganese ore. This is enough not only to fully satisfy the demands of domestic ferrous metallurgy, but also to allow for efficient export activities.
Chromium. In terms of proven chromium reserves our country is an unconditional leader – Kazakhstan has a third of the world’s chromium reserves. The raw material base of the local chromium sector is the most qualitative and competitive sector. The state register lists 23 deposits with almost all industrial reserves owned by the transnational company, Kazkhrom. Mining is being carried out at nine deposits owned by Kazkhrom and one by Voskhod-Oriel. The sector attracted investments totalling $1,092.7m in the past decade. The annual volume of investment grew six-fold to $105.9m in 2005 against 1996, 98% of which came from Kazkhrom. Our country is currently producing about 4 million tonnes of chromium ore and this figure is expected to grow to 7 million tonnes in 2010 and 9 million tonnes by 2015.
The chromium reserves are enough to last for over 90 years. The raw material base covers both domestic consumption and the country’s export potential.
In addition to investing in developing fuel and energy resources, precious, non-ferrous and ferrous metals, investment is being made in mining precious stones (diamonds and emeralds), rare metals (for example, tungsten and molybdenum) and other natural resources (including widespread ones), underground waters and mud used in medical treatment.
The Socioeconomic Impact
The investment activities of mining companies have had and are continuing to have a positive impact on the country’s socioeconomic development. For example, in the past decade the number of employed in the raw material sector has grown, reaching 200,000 people in 2005. Mining companies spent $63.4m on training and education and $195.8m on the social sphere. The share of companies with foreign involvement in the total amount of investment was 16% a decade ago, whereas this figure stood at 76% last year.
Subcontracting was worth $7,731.4m in 2005 and grew almost 30-fold from 1997. Subcontracting accounted for only 9% of the total investment in 1997, whereas this figure was 61% in 2005. In addition, the share of services and goods supplied by Kazakh companies has also grown by type of activity: to 34% in supplying services, to 56% in supplying goods, to 29% in supplying equipment, to 35% in construction services and to 23% in other types of activities,
Between 1996 and 2005, the country’s budget received over $16.5bn in taxes and payments by mining companies, including over $3.5bn in royalties. The budget payments grew by 19-fold to $5.8bn in 2005 from 1996, including royalties to $1.3bn.
Step on the Gas! Prospects for the Kazakh Gas Sector Sergey Smirnov
Rules vs. Regulations.Petroleum Industry Procurement Requirements Joel Benjamin, Raushan? Chaltabayeva
Astrum Is a New Instrument for Your Business Sergey Shvalov
FantASIA Engineering: High-level Integrated Engineering Vyacheslav Medvedev
Kazpolimerizolyator: Made in Kazakhstan Lyubov Makarova
Sun, Air and Water…Alternatives to Traditional Power-engineering in Kazakhstan Gennady Doroshin, Peter Dixon
Copyright Protection:Why Kazakhstan is no longer included in List 301 Gulmira Arbabaeva
Intellectual Property: What You Need to Know Aizhan Yessergepova