Mineral Production in 1996–2010. Reserves, Production and Investment
This information was prepared by Elvira Djanturaeva, PhD, Head of Mineral Production Results Analysis, RCGI Kazgeoinform Geology and Subsurface Use Committee under the RK Ministry of Industry and New Technologies.
Kazakhstan’s mineral industry continues to be the most attractive area for both national and foreign investors. Over the recent fifteen years, the yearly capital investments in production of various minerals have increased by more than thirteen-fold. At the same time, there are currently some problems facing the mineral industry and how these are going to be solved will affect not only the dynamics of development of extracting industries in Kazakhstan but the Kazakh economy in whole.
At present, companies from 45 countries, including the USA, Great Britain, France, Italy, Switzerland, Germany, Canada, Russia, Japan, China, Indonesia and others invest money in Kazakhstan’s mineral industry. It is large international corporations involved in investment projects that make possible the introduction of international production and management practices, transfer of up-to-date technologies, modernization of mining and smelting facilities and oil refineries, and creation of joint undertakings to manufacture modern mining equipment. Also, the investment activities of foreign investors have a positive effect on the development of social spheres and infrastructures in Kazakhstan’s regions.
As for the country mineral resource base, today the Kazakh State Register of Reserves has a record of more than 5,000 deposits of minerals found in Kazakhstan. By its reserves of a wide range of minerals Kazakhstan establishes itself as a leader. Most deposits of prioritized minerals including hydrocarbons, coal, uranium, gold, copper, polymetals, nickel, cobalt, bauxites, chromites, iron, manganese, rare and rare-earth metals, have been operated on a contractual basis.
As of 1 January 2011, Kazakhstan had a record of 2 642 operating facilities related to the mineral industry. Among them, 870 facilities are at the republican level including 263 ones engaged in hydrocarbon production, 400 in solid minerals production, and 207 in production of underground waters. The number of facilities engaged in production of common minerals is 1 746 and in other operations not related to production – 26.
Over the last 15 years, since the introduction of the monitoring of mineral production based on the original reports on mineral production under licenses/contracts, the total amount of investment in the mineral industry has exceeded $152.4 billion. Of this amount, $14.4 billion was assigned for geological explorations (Table 1).
Compared to 1996, the annual capital investments increased by more than thirteen-fold and, based on the last year results, amounted to $22 billion with $1.7 billion or 8 % of the total amount being directed for geological exploration operations (Chart 1). It should be noted that while 15 years ago foreign plus joint investments in the mineral production sector accounted for about 20 % of the total investment, currently this key figure exceeds 70 %.
In 2010, the investors continued to give priority to hydrocarbon production facilities accounting for $16.7 billion (75 %) of investment. $5.3 billion was invested in solid mineral production (23 %) and only 1 % in production of underground water and common minerals each.
The investment activities of the companies engaged in the mineral production sector have a positive effect on the socio-economic performance of the country. Thus, over the recent decade, the mineral producers have allocated more than $2 billion for social projects and local infrastructures (including $287 million in 2010), $750 million for training of specialists ($130 million in 2010) and about $300 million for buying technologies ($14 million in 2010) (Chart 2). During this period, about $76 billion was paid to the Kazakhstan budget as taxes and payments from mineral producers including $16 billion paid last year.
Gold. Kazakhstan holds 3 % of the world’s gold reserves. Gold fields are located in 16 mining regions. The most important of them are the Kolbinsky and Rudno-Altaisky regions in Eastern Kazakhstan (with the fields Bakyrchik, Bolshevik, Ridder-Sokolnoe and others), the Kokshetau and Zholymbet-Bestobinsky regions in North Kazakhstan (with the fields Vasilkovskoe, Zholymbet, et al), Shu-Iliisky and Dzhungarsky regions in South Kazakhstan (Akbatai, Beskempir, Arkharly, et al), Maikainsky and North-Balkhashsky regions in Central Kazakhstan (Maikain, Boschekul, Sayak et al) and also Zhetygarinsky and Mugodzharsky regions in Western Kazakhstan (Komarovskoe, Varvarinskoe, Yubileinoe et al).
The State Register of Reserves has records of gold reserves held at 298 fields of which most are primary deposits. Complex (polymetallic) deposits from which the gold is recovered as an associated component played an essential role, both in term of reserves and production. The prognostic resources are 3–4 times bigger than the proven reserves. The economic life of the reserves is 25 to 30 years.
Today, subsurface development of gold is being carried out at 124 fields. This includes gold production at 38 fields, exploration at 29 fields and combined exploration and production at 57 fields. Over the last 15 years Kazakhstan has produced 410 tonnes of gold. At the same time, the growth of reserves has reached 745 tonnes. The total investment over the same period amounted to $3.8 billion (sevenfold increase), including $0.4 billion invested in geological exploration (Table 1). Such companies as Kazzinc Ltd, JSC GMK Kazakhaltyn, JSC Varvarinskoe, JSC Financial Investment Corporation Alel, Metal Trading Ltd, Bakyrchik Ltd., Yubileinoe Ltd., Limited Partnership JV Saga Crick Gold Company, Andas-Altyn Limited Partnership, and JSC Maikainzoloto account jointly for about 85 % of the total investment.
Copper. Kazakhstan accounts for 6 % of the world’s copper reserves. The main balance reserves and deposits are located in Eastern and Central Kazakhstan. Several sulphide polymetallic deposits in Eastern Kazakhstan (Artemievskoe, Kosmurun, Akbastau, et al) serve as a backup to the mineral resources base. Also prepared for operation are the copper porphyritic deposit Nurkazgan in Central Kazakhstan holding high quality ores, Shatyrkol in Sothern Kazakhstan and also Zhaman-Aibat, one of the county’s largest deposits, in the Zhezkazgan mining area. Aktogai, Aidarly, Koksai, and Bozshakol are copper porphyritic deposits with considerable potentials.
The economic life of the copper reserves is 25 to 30 years. Currently the subsurface development of copper is being conducted at 39 deposits. This includes copper production at 15 deposits, exploration at 6 deposits, and combined exploration and production at 18 deposits. In 1996–2010, Kazakhstan produced 7 million tonnes of copper while the growth of the reserves only reached 5 million tonnes. The aggregate investment in this period increased thrice and reached $4.7 billion, including $0.09 billion invested in geological exploration (Table 1). It was Kazakhmys Corporation Ltd, Copper Technology Ltd, Kazcopper, Uly Tau K Ltd, GRK MLD Ltd, KazGeorud Ltd, Koksai-Muzbel Ltd, Bast Ltd, PromSnab Ltd, and Sary Kazna Ltd that supplied this capital investment.
Polymetals (lead, zinc). Kazakhstan holds 10 % and 8 % of the world’sreserves of lead and zinc, respectively. The economic life of the reserves does not exceed 25–30 years. With the objective of enhancing the mineral resource base in the near future, a development plan has been worked out for the large deposit Shalkia in South Kazakhstan. On the base of this deposit, a new zinc plant will be constructed. Also it is planned to put into operation the Shaymerden karstic deposit, North Kazakhstan, which is uncommon for our country and unique in terms of zinc content, and construct mines on the base of the Novoleninogorskoe, Dolinnoe, and Obruchevskoe deposits (East Kazakhstan). WestKazakhstan also suggests tangible conditions for the development of the copperand zinc industry. Here, mining and smelting works are planned to be established on the base of the discovered copper-sulphide deposits, such as 50 Let Oktyabrya, Kundyzdy, Priorskoe and others.
Currently, the subsurface development of polymetals is carried out at 32 deposits including the production at 17 deposits, exploration at 2 deposit, and combined production and exploration at 13 deposits. Over the last 15 years, Kazakhstan has produced 1.4 million tonnes of lead and 6.9 million tonnes of zinc with a growth in the reserves of 0.6 million tonnes and 1.9 million tonnes, respectively. The total investment over this time has increased fourfold and reached $6.3 billion including $0.09 billion invested in geological explorations (Table 1). The companies that provided this total investment include: Kazzinc Ltd, Kazakhmys Corporation Ltd, JSC Shaymerden, Nova-Zinc Ltd, ER-TAI Ltd, Oral Elektro Service Ltd, Multiplex Resources, Shalkia Zinc Ltd, Tau-Ken Ltd, GMK Ltd, VK Argonavt Ltd, and Geoinforminvest Ltd.
Bauxites. Kazakhstan has 1 % of the world’s bauxite reserves. It is the reserves of intractable bauxites of the East-Torgai bauxite region that contribute to the mineral resource base of the Kazakhstan aluminium industry (the deposits include Krasnooktyabrskoe, Ayatskoe and others). Formerly they were considered to be unsuitable for alumina production. However, the introduction of the new technology developed at the Pavlodar Aluminium Plant made it possible to produce alumina from poor quality bauxites. Today the prospects of the mineral resource base are seen primarily in connection with unconventional types of raw material for alumina production. Nepheline leucitic and nephelinic rocks common throughout the country as well as alunite secondary quartzite may be of practical interest.
At present, the subsurface development of bauxites is carried out at 5 deposits, with production being carried out at 4 of the deposits and exploration at 1 deposit. Since 1996 Kazakhstan has produced 63 million tonnes of bauxites, while the growth of reserves has reached 0.7 million tonnes. Theeconomic life of the reserves is 50 years. Over the last 15 years the total investment has increased fourfold and reached $1billion, including $0.01 billion invested in geological explorations (Table 1). The entire amount of investments has been provided by subdivisions of JSC Aluminium of Kazakhstan, the industry’s monopoly.
Iron, Manganese. Kazakhstan holds 6 % of the total world’s reserves of iron and 18 % of manganese. On the base of its iron ore deposits, Kazakhstan operates 6 large integrated plants comprising of 10 mines with a rated capacity of about 80 million tonnes of ore per year. All of the commercial reserves of manganese are located in Central Kazakhstan and presented by oxide ores and carbonate silicate oxide ores (such as the Ushkatyn III deposit, West Karazhal deposit and others). The manganese ore industry operates 5 mining companies located in the Karaganda area.
Altogether the subsurface development is carried out at 44 deposits, including production at 18 of the deposits, exploration at 4 deposits, and combined exploration and production at 22 deposits. The economic life of the reserves is 50 years for manganese and 100 years for iron. In 1996–2010 Kazakhstan produced 517 million tonnes of iron and 30 million tonnes of manganese with a growth in the reserves reaching 1 634 million tonnes and 40 million tonnes, respectively.
The total investment over this period reached $5.2 billion (increased fourfold), including $0.06 billion spent for geological explorations (Table 1). Almost the entire amount of investments were supplied by the major players, such as JSC SSGPO, JSC Zhayrem GOK, Orken Ltd, JSC TNC Kazchrome, Bapy Mining Ltd, Vertex Holding Ltd, JSC Temirtau Electric Metallurgic Integrated Plant, Aktobe-Temir-VS Ltd., Arman-100 Ltd and Saryarka Mining Ltd.
Chromites. Kazakhstan is the world’s leader by the chromite reserves. The reserves are presented by high quality ores (chrome oxide: 45–50 %) and located in a relatively small area within the Kempirsai dunite peridotite massive in Western Kazakhstan (Millionnoe, Almaz-Zhemchuzhina and other deposits). Chromite ore production and concentration is carried out by the Kazchrome transnational company which comprises ferro-alloy production. The economic life of the chromite reserves is more than 80 years. Subsurface development is carried out at 9 deposits including production at 8 of the deposits and exploration at 1 deposit.
Over the last 15 years Kazakhstan has produced 53 million tonnes of chromites. In the meantime the growth in these reserves reached 1 million tonnes. The total investment over this period has reached $2 billion (three-fold increase), including $0.02 billion invested in geological exploration work (Table 1). Along with JSC TNC Kazchrome, Voskhod-Oriel Ltd is another large investor in this sector.
Raw Hydrocarbons. By its hydrocarbon reserves Kazakhstan is among the top ten countries in the world with its share in the world’s proven reserves amounting to 3.2 % for petroleum (about 5 billion tonnes) and 1.5 % for natural gas (about 2 trillion m3). As for the Kazakhstan share in the forecast resources, it reaches 8 % (17 billion tonnes) and 3.4 % (146.4 trillion m3), respectively.
The State Register of Reserves has records of the reserves for 256 hydrocarbon deposits, including 223 for oil, 57 for condensate, and 201 for non-associated gas. Currently, raw hydrocarbon development is being carried out by 161 companies at 263 facilities, including geological explorations being performed at 67 facilities, production at 84 facilities, and combined exploration and production at 112 facilities.
During 1996–2010 Kazakhstan produced more than 700 million tonnes of oil, more than 270 billion m3 of gas, and 54 million tonnes of condensate. Over this period, the petroleum reserves increased by approximately 2 billion tonnes, gas reserves by 130 billion m3, and condensate reserves by 170 million tonnes. For the time being, the economic life of the hydrocarbon reserves is about 75 years. It should be noted that during this period the reserves considerably increased owing to the investments by large foreign companies. The giant Kashagan oilfield was discovered in Kazakhstan’s sector of the Caspian Sea that doubled the oil reserves in our country. This was followed by Korolevskoe, Akshabulak, Alibek Yuznyi, Kenlyk, Karamandybas, Karakuduk, Tolkyn, Chinarevskoe, Alibekmola and other oilfields.
Altogether, there are 15 sedimentary basins identified across Kazakhstan’s area. While commercial production is being carried out at only 5 of them including the Caspian Sea, South Mangyshlak, Ustyurt-Byzashinsky, South-Torgai, and Shu-Sarysuisky basins. Most reserves (more than 90 %) are being developed in Western and Southern regions of Kazakhstan while the East, North and Central regions do not have hydrocarbon potential resources.
In 1996–2010, $113.2 billion (a 18 times growth) was invested in the oil & gas sector, including $13.2 billion invested in geological exploration (Table 1). Among the largest investors accounting jointly for 80 % of the capital investment are NCOC, Uzenmunaygas Production Branch of JSC KazMunayGas, Karachaganak Petroleum Operating B.V., JSC Mangistaumunaygas, JSC SNPC-Aktobemunaygas, Embamunaygas Production Branch, LLC Tengizchevroil, JSC Turgai-Petroleum, Kazgermunay Ltd, and others.
Uranium. By proven reserves of uranium, our country ranks second in the world (31 % of the world’s resources). The main reserves are held in hydrogenous deposits of South Kazakhstan (Mynkuduk, Karamurun and others). The State Reserve Register has records for 54 deposits, 40 % of which have already been operated. The forecast resources of uranium are comparable to those in place and located mainly in the uranium provinces of South Kazakhstan. The economic life of the reserves is 100 years.
As of January 1, 2011, the subsurface development of uranium was carried out at 26 facilities, including production at 12 facilities, exploration at 2 facilities, and combined exploration and production at 12 facilities. Over the last 15 years Kazakhstan produced 70,000 tonnes of uranium and the growth of reserves reached 90,000 tonnes. The total investment reached $4.4 billion (a 25-fold increase), including $0.3 billion invested in geological exploration (Table 1). All of the uranium upstream and downstream enterprises are parts of Kazatomprom, National Joint Stock Company, comprising a metallurgic plant for advanced processing of raw uranium.
Coal. Major coal reserves are associated with the five largest coal basins in Central and North Kazakhstan (Karagandinsky, Ekibastuzsky and others) that include over 300 coal deposits and occurrences of various ages and grade compositions. By its coal reserves, our country ranks eighth in the world with the forecast resources of coal exceeding its proven reserves several times. The State Reserve Register has records for 49 deposits of coal. The economic life of the reserves is 100 years. The subsurface development of coal is carried out at 40 facilities including coal production at 30 facilities and combined exploration and production at 10 facilities.
In 1996–2010 Kazakhstan produced over 1,100 million tonnes of coal while the growth in the reserves was 240 million tonnes. Over that time the aggregate amount of investments increased thrice and amounted to $113.2 billion, including $6.7 billion invested in geological explorations (Table 1). The largest industry players account for about 93 % of the total investment. Among them are Coal Administration of JSC ArcelorMittal Тemirtau, LLC Bogatyr Komir, JSC Euroasian Energy Corporation, LLC Angrensor, LLC Kazakhmys Corporation, JSC Shubarkol Komir, LLC Karazhyra Ltd, LLC Maikuben-West, LLC Saryarka-ENERGY, and LLC Edelveis +.
The long-term development of extracting industries is not possible without large-scale geologic explorations. Over the last 15 years the growths in many types of mineral reserves do not replenish their depletion through production. There is an acute deficiency of deposits prepared for exploration and the number of mineral producers that carry out geologic explorations is incomparable with the huge potential of Kazakhstan’s mineral resource base.
It is almost unlikely that new large and unique deposits may be discovered close to the surface. This is because the aerial geologic surveying, geophysical and geochemical studies and exploration works carried out over the last 50 years have resulted in discoveries of almost all near-surface deposits of solid minerals. Given that it takes a minimum 15 years, starting from the prospecting stage, to get a deposit prepared for development, there is a possibility of crisis in the mining industry in the near future. Therefore, it is necessary to carry out prospecting and geologic exploration work across the areas covered with loose sediments, deep works, and works on unconventional raw materials.
Earlier, in the Soviet time, the state geologic exploration used to be funded in the form of reimbursement rates for geologic exploration works calculated from the tax on the extraction of commercial minerals to be paid by producers to the state budget. With the introduction of the contractual system of mineral production, the Extraction tax had to be paid in the form of royalty (and after the introduction of the new Tax Code – in the form of the mineral replacement tax). With that, the amounts of MRT payments to the budget over the last 15 years have increased more than eighty-fold while the budget financing of state geological study, for example, of raw hydrocarbons makes up only 1 % of the total MRT. Thus, the total MRT paid to the state budget in 2010 reached KZT933.9 billion whereas only KZT2.4 billion was assigned for geologic exploration works in the hydrocarbon sector. The budget financing of geologic explorations was limited to KZT1.4 billion of which more than 80 % was budgeted for prospecting and evaluation works.
The predicted growth in the world’s consumption of mineral resources requires that a new policy be elaborated in this sphere. One of the main tasks is to provide a consistently high level of financing of geologic exploration, restructure and strengthen the existing geologic organizations and also build an efficient and competitive scientific and production potential of the geologic sector.
Establishing a national company will provide an efficient management system of geologic exploration at the initial stage of restructuring. This structure shall integrate all of the enterprises in the geologic sector on the principle of the state private partnership. Also some of the state companies engaged in geologic explorations and research institutions with 100 % state interest shall become part of this structure.
In order to provide effective, high-quality and practical activities in subsurface studies and reproduction of the mineral resource base, it is necessary to reconstruct the system of subsurface studies based on strong research establishments in the mineral producing regions, make use of the existing geologic organizations to develop scientifically proven exploration activities and implement specific tasks.
It is suggested to maintain an efficient intercommunication between the industry and science. This means assistance in issuing methodological, regulatory and training literatures, facilitation of the interexchange of scientific research results, information, consultations, best practices of certain geologic organizations to improve geologic exploration and research works as well as carrying out the relevant market studies. Special attention should be given to the training delivered in geologic universities of the country and during upgrading courses.
At present, training of specialists for the geologic industry is provided by universities in such disciplines as the geology of mineral resources, geophysics, geological engineering, and hydrogeology and also petroleum geology. To provide a good pool of professional geologists, it is necessary to enhance field practices, develop national programs aiming at further training of graduates and providing opportunities for them in obtaining science degrees.
Presently, the new law On Subsurface and Subsurface Use provides for attraction of financial resources of mineral producers for research and development works which should be stipulated in terms and conditions of contracts. The law also defines the priority ranking when acquiring the state interests in shares of mineral producers. Besides, the contractual obligations establish maximum acceptable shares of Kazakhstan in enlisted jobs and services, goods and equipment as well as operating personnel during construction works, etc. Accordingly, competent and authorized state and local executive agencies shall conduct monitoring and exercise control over the implementation of the contract terms and conditions on Kazakhstan participation.