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 KAZAKHSTAN International Business Magazine №4, 2011
 Foreigners will help us with money and technology

Foreigners will help us with money and technology

Kazakhstan wishes to reach a new level of cooperation with German companies in the area of mining and treatment of nickel, chromium, tungsten, molybdenum, coking coal and to organize the modern enterprise producing products with high added value, creating a hundred new jobs.

National Export and Investment Agency KAZNEX INVEST in cooperation with the German Embassy in Kazakhstan, organized the official visit of the representatives of top-management of the German ThyssenKrupp headed by board member Edwin Eichler June 18, 2011. In the framework of the visit top-managers of ThyssenKrupp, one of the world's leading manufacturers of steel and engineering products, conducted negotiations with Asset Issekeshev, Minister of Industry and Trade (MIT), Albert Rau, first vice-minister of the MIT, as well as Askar Mamin, chairman of the national company "Kazakhstan Temir Zholy" (KTZh).

During the negotiations, ThyssenKrupp announced that the company intends to intensify the cooperation with Kazakhstan to develop the common projects in mining, treatment and processing of nickel, molybdenum, tungsten, coking coal and chrome. Cooperation in the field of ferrosilikoaluminum and silicon production was also discussed as a perspective one.

In addition, ThyssenKrupp and KTZ executives agreed to establish a joint working group to identify the potential opportunities for their cooperation. As a next step in this direction a visit of specialists and experts of “Kazahstan Temir Zholy " to Germany is scheduled in order to negotiate and to review the activities of ThyssenKrupp companies.

However, the Kazakhstani party proposed to German party an idea of developing a program to increase the cooperation and to sign a memorandum of partnership between ThyssenKrupp and the Ministry of Industry and Trade of RoK on this basis. As the Regional Director for Europe of Kaznex Invest Marhabbat Balgabay stated, "the interest of the parties is clear: ThyssenKrupp needs raw materials, Kazakhstan – investment and advanced technology of the group for the industrialization of the economy, creating new competitive industries and jobs. In this regard, we consider ThyssenKrupp one of the most important investors in non-energy sectors of the economy. 

Kazakh-German partnership is already being implemented in practice. Thus, with the assistance of Kaznex Invest in cooperation with the German company Atlanta Group ThyssenKrupp and Megaloy (Switzerland) were involved as investors of RSE "The National Center on Complex Processing of Mineral Raw Materials" for the production and promotion of new kazakhstani ferrosilikoaluminum alloy on global market. For this aim a joint venture ICMD-holding company was found, it plans to build four plants to produce this alloy, including the plant in Karaganda. The negotiations with akimat of Karaganda oblast about the possibilities of placing the future plant in the industrial zone have already been held. Similar companies will work in Kyrgyzstan, Iceland and Canada. The estimated total investment is about $2 billion.

At the same time ThyssenKrupp has already invested in the project for the production of metallurgical grade silicon produced at the Karaganda plant “Kazakhstan Silisium”, in which the concern owns 16 %. And also it has attracted 100 % of technology investments in the project for the production of crushed stone in Astana.

For information: ThyssenKrupp AG – is one of the largest German industrial corporations, which is divided into business segments such as steel, stainless steel, elevators and escalators, automotive components, technologies, materials and service. Concern has around 170,000 employees in over 80 countries. In fiscal year 2009–2010 ThyssenKrupp generated sales of more than €40 billion. From 2005, the concern has invested more than $16 billion worldwide.

Government consolidates its mining assets

Transfer the government's shares in Kazakhmys and ENRC to National Welfare Fund "Samruk-Kazyna" may be completed by the end of this year. The director of the mining assets of the fund Zhandos Abishev informed about it on the sidelines of Central Asia Mining Congress 2011. Recalling that the relevant resolution was carried over two years ago, he supposed that in future the state-owned share holding of Kazakmys and ENRC could be transferred for management to "Tau-Ken Samruk". At the moment, NWF "SK" already owns 11 % of the shares in the corporation Kazakhmys. Another 15 % belong to the Committee on State Property and Privatization Ministry of Finance, which also owns 11.65 % in the group ENRC.

"ArcelorMittal Temirtau" increased the production of steel and cast iron

During the first half of 2011 the metallurgical complex JSC "Mittal Steel Temirtau" produced 1,936.6 thousand tons of steel, which is 22 % higher than in the corresponding period of 2010. And output of cast iron increased by 21 % – up to 1,645.7 thousand tons, steel – 19 % – up to 1,624 thousand tons, agglomerate – 21% – up to 2,962.7 thousand tons. Coal production, by contrast, fell by 4 % – 5,193.1 thousand tons. In total in 2011 "ArcelorMittal Temirtau" plans to produce 4 million tons of steel (compared to 3.339 million tons in 2010) and 3.5 million tons of cast iron (2.984 million tons).

The company has continued work on the reconstruction of blast furnace № 3. Expected completion date is the II quarter of 2013. The project worth $150 million includes an increase in the furnace at 14 % – up to 3,935 m3, as well as improved product quality. At the same time daily increase of the furnace productivity will rise by 70 % – up to 6,300 tons of cast iron, and the turnaround time will reach 15 years. The consumption of industrial water for 1 ton of cast iron will be reduced by 35 %, electricity – by 8 %, and coke – by 2 %.

In the frames of the project the gas treatment system will be upgraded, and the new system of aspiration of cast house and bin premises will be installed. Tubular cleaning technology will significantly reduce emissions from these two sites and reduce the concentration of pollutants up to European standards. Reconstruction of the blast furnace № 3 is conducted in the frames a program to modernize and expand the annual production, which by 2015 will reach 6 million tons of steel.

Plans of "Kazakhmys"

In 2011, in order to increase the production "Kazakhmys" corporation is investing $70 million in exploration. According to the company, the launch of production at Bozshakol field, where the drilling is currently ongoing, is scheduled for 2015.

It is known, Bozshakol and Aktogai are the major development projects of "Kazakhmys". The combined annual production of copper concentrate there is estimated at 200 thousand tons, which would increase the current output of copper by more than 60 %.

Along with the development of large deposits of the corporation is implementing a number of promising medium-sized projects. One of them is "Zhomart" mine in Karaganda region. In the period from 2012 to 2017 the construction of second phase of mining production with the beginning in 2018 is planned. The volume of ore output since 2020 could reach 8 million tons per year.

Another significant event in July 2011 was the listing of Kazakhmys Plc on the Hong Kong Stock Exchange. While listing was made without additional issue or sale of shares, in the future the group is considering issuing new shares on the Hong Kong market to maintain liquidity. An additional issue of shares will depend on their market value and capital requirements while development of Aktogai and Bozshakol.

As the general managing director of Kazakhmys Plc Oleg Novachuk noted, the secondary listing in Hong Kong is important for the strategic development of the corporation. Asia, particularly China, is of great interest for it in terms of customer base and finance. "The listing will strengthen the company's image in the main financial center of the region and will support the future growth of our business, providing access to a wider range of investors", – he said.

"Aluminium of Kazakhstan" modernizes the production

The project on modernization of the furnace for processing bauxite was completed at JSC "Aluminium of Kazakhstan". In the course of its implementation old equipment has been changed for new one. At the same time the fully automated the furnace process control system was implemented, it eliminates the human factor and ensures the security of alumina production processes associated with causing harm to human health. The volume of investments in the modernization of sinter furnace number 8 was 9.1 bln tenge.

Along with this "Aluminium of Kazakhstan" has increased its production capacity by 13.3 % – up to 1.7 million tons of alumina per year. The attainment of new production level will allow satisfying the demand of Kazakhstan electrolysis plant, to ensure the growth of local content, as well as increase the export potential of Pavlodar region.

Work on expanding capacities of JSC " Aluminium of Kazakhstan " began in 2007 and took place in two stages. During the first one the installation of new equipment in the workshop of raw materials preparation and hydrometallurgical plant took place. During the second stage new equipment was installed in the baking workshop and five major facilities were built. Their phased commissioning began in December 2010. Also, the fourth smokestack and a new substation, which would ensure the smooth operation of all furnaces to increase capacity and reliability of new equipment, were commissioned. Total investment in the project amounted to about $305 million.

In the nearest plans of JSC "Aluminium of Kazakhstan" is a pilot project, "Beyer – hydro-chemical processing of red mud" worth $11.4 million. This will increase the output of traded alumina and reduce the cost of soda ash, coal and limestone. At the same time the emissions of oxides of carbon and nitrogen will be reduced. If today the company uses 180,000 tons of soda ash, the new technology will reduce its consumption by about 60 %.

The Slovaks are willing to invest in development of Alaygyra

National Mining Company "Tau-Ken Samruk" and a Slovak company Radington Industrial Consulting signed an agreement on principles of cooperation to jointly implement the project in the Karaganda region for the development of lead ore of Alaygyr field with estimated reserves of more than 50 million tons. The estimated cost of the project is $50 mln. It includes the construction of the plant for the production of lead concentrate, annual capacity is 1 million tons of ore processed per year. End-consumers of the production will be companies from Slovakia and Germany, as well as local enterprises.

Kazakhstan to build a new steel plant

The agreement establishing the joint venture was signed by the joint-stock company "Kazelektromontazh" and the Polish company EL-IN, providing electricity service. The new joint venture will build in Kazakhstan the plant of steel constructions with a capacity of 40–50 thousand tons per year. The planned volume of investments will be $10–12 million. The corresponding arrangements have been made in the third session of the Kazakh-Polish intergovernmental commission on economic cooperation, held June 20–22, 2011 in Warsaw.

Reference: JSC "Kazelektromontazh" was established in 1994 and is the successor of "Kazelektromontazh" trust, found in 1956. The company performs the full range of wiring and commissioning works for electrical systems, networks, and objects of industrial and residential use.

Varvarinskoye passed the audit

The reserves of gold and copper deposit Varvarinskoye according to the results of audit of resource base, conducted by Snowden Mining Industry Consultants, were estimated according the JORC Code in 878 thousand troy ounces (27.3 tons) of gold and 57.5 thousand tons of copper. And the total ore reserves of the deposit, being developed by the Russian JSC "Polymetal", amount to 30.6 million tons at an average grade of gold in ore in 0.9 grams per ton, and copper – 0.5 %. Estimation was made on the assumption that the gold price is $900 per ounce, and copper – $6 500 per ton.

Ore reserves will provide operation of the company for 7 years on a chain of cyanide and for 12 years on a chain of flotation. In the case of full inclusion the resources of measured and indicated categories in the plan of mining, the life of the field may be extended for five years on a chain of cyanide and for 6 years on a chain of flotation. It will be economically feasible in case of preservation of gold and copper prices at the current level in the long run.

Total resources of Varvarinskoye (not including converted to ore reserves) are 1.1 million ounces (34.2 tons) of gold at an average grade of 0.8 grams per ton and 76 thousand tons of copper with an average grade of 0.44 % to 42.4 million tons of mineralized rock. The estimation is based on the gold price at $1 150 per ounce, copper – $ 8 400 per ton.

New mine works in Priorskoe

"The Russian Copper Company" has launched a mine in the copper-zinc deposit "Priorskoe" in Aktobe region. 16 645 500 000 tenge were invested to the project, implemented in 2007. Production capacity of the mine is 1.5 million tons of ore per year. The mine is developed by open-cut method, while currently its depth is 40 meters. In future the development of deposit by underground methods is planning. Ore mined will be delivered to the processing plant "Aktobe Copper Company" LLP, also owned by "Russian Copper Company". The reserves of "Priorskoe" deposit are estimated at 36.8 million tons of copper-zinc ore, 376,900 tons of copper and 1,427 tons of zinc.

The world market of metals: zinc prospects

Rising of stock prices on the world market of zinc in June and July of this year, in the first half of August gave way to fall. The average value of existential zinc (with immediate payment and delivery) on the London Metal Exchange (LME) has fallen from $2 390.55 per ton to $2 369. In this case, according to the LME, zinc stores in warehouses over the past two months has increased from 865.8 to 887.4 thousand tons.

Despite this, the bank Goldman Sachs predicts a resumption of growth of quotations by the end of 2011 due to strong demand from the Asian region. Manufacturers also are betting on higher prices by the end of this year. At the same time, zinc reserves in China already around 1.3–1.5 million tons, while world production of refined zinc in 2011 could exceed demand by almost 200 000 t. It is also important to note that after record low of 60 000 m recorded in October 2007, stocks of zinc in warehouses (monitored by exchanges LME and ShFE) increased steadily and are now at a very high level.

Further growth of zinc consumption in China so far is estimated at 5 %, in addition, improvement in demand in Japan is being expected. Market players believe that the demand for zinc in Asia in the coming year will grow, but not very optimistic about the potential of the United States, as many U.S. steel mills have closed in the summer for repairs and maintenance.

In turn, the investment bank BNP Paribas believes that by the end of this year, the excess of zinc in the world market will reach 450 000 tons. In the opinion of analysts of the bank, now there is a very high ratio of exchange reserves to a level of consumption of zinc – a 15-year high, and the buildup of unregistered stocks of this metal. At the same time, according to BNP Paribas, the upcoming closure of some mines will reduce the supply of this metal in 2013.

According to the Regional Director of CRU Strategies in Australia Alan Trench, zinc market will decrease in 2015 when, after the closure of some mines, including Century in Australia, 1.3 million tons of zinc leave the market.

The main factor of pricing in the global market of zinc is China. The agency Dow Jones Newswires has cited the Chinese National Statistics Bureau (China's National Bureau of Statistics, NBS) that China's zinc production in January–June 2011 increased by 6.1 % – up to 2.574 million tons. And the output of zinc in concentrates rose by 10.3 % – up to 1.891 million tons. The left amount of zinc is imported to China. Thus, in the first half of the year imports of refined zinc increased by 15.7 % – to 167.4 thousand tons, while imports of zinc concentrates, by contrast, declined by 8.5 % – up to 1.374 million tons.

According to the forecast of Metal Bulletin, in the second half of 2011 imports of zinc in China may rise. Although the Chinese reserves of the metal is too large, but demand is also growing.

The main exporters of refined zinc in 2010 were: Canada – 12 %, Netherlands – 9 %, Spain – 8 %, Australia – 6 %, South Korea – 6 %, etc. According to analysts of Metalresearch, in 2012 world production of zinc will increase by 6.8 %, while the volume of consumption – by 9.3 % compared to 2010. Thus, in 2012, output of zinc in the world market will be reduced to 7 000 tons.

However, according to The MarketPublishers, China remains a major area of growth of world production of zinc. In 2011, China and India, Mexico, Portugal and the United States will be the main driving forces that determine the anticipated increase in world production of zinc by 6.6 % or up to 13.33 million tons. As for Kazakhstan, as reported by Dow Jones Newswires, zinc production in our country for the first half of 2011 amounted to 158.373 thousand tons, which is 0.1 % lower than in the same period last year.

The situation in Japan can lend some support to zinc quotes. According to Nobuyuki Nakamoto, general manager of the zinc department of Mitsui Mining & Smelting, due to the earthquake in March for Japan this year is marked by at least 9 %-s decline in production of zinc and an increase in its imports. "Most likely, the production of zinc will be about 542 thousand tons compared with projections before the disaster in 597 thousand tons," – said Mr. Nakamoto. According to him, "perhaps 80 thousand tons of zinc will be imported to the country this year". As is generally known, 574 000 t of zinc were produced in Japan in 2010. This year, the land of the rising sun can increase the volume of zinc imports twice – to the maximum of the past 11 years.

Against this background, an investment company "Grandis Capital," predicts that the recent decline in stock prices of zinc on the LME is only temporary, because the increase in demand will return prices to the level of $2 400 – 2 500 per ton. According to estimates by Michael Widmer, head of metals research at Bank of America Merrill Lynch, in 2011 the average price of zinc will be $2 475, and in 2012 – $2 500 per ton. In turn, the brokerage firm MF Global, participating in the auction on the LME, raised the level of price support for zinc to $2 440 per ton, and the level of price resistance – up to $2 560 per ton.

Production statistics: results of six months

In January–June in Kazakhstan 2 495.349 thousand tons of crude steel were produced (by 23.3 % more than in the same period of 2010). With that the output of flat-rolled products reached 1 644.716 thousand tons (20.4 %), galvanized steel – 309.837 thousand tons (+8.4 %), tinplate and tinned flat steel – 117.470 thousand tons (+6.3 %).

Volume of ferroalloys production during this time almost has not changed –842.329 thousand tons (+0.2 %), and mining of aluminum ore (bauxite) increased to 2 688.4 thousand tons (+1.6 %). In addition, 25 500.5 thousand of iron ore (+1.8 %), 16 503.3 thousand tons of copper (+8.1 %), 2 294.1 thousand tons of copper-zinc (-9.8%), 3 577.3 thousand tons of lead and zinc (+17.9%), 1 413.8 thousand tons of manganese (-1.2 %), and 2 659.2 thousand tons of chrome ore (+6.2 %) were produced.

Output of copper in concentrate amounted to 169.6 thousand tons (-12.1 %), lead concentrate – 18,2 thousand tons (23.8 %), zinc concentrate – 177.6 thousand tons (-3,3 %), and iron-ore pellets – 4 422 thousand tons (+4 %). In addition, 936 724 tons (+2.1 %) of raw aluminum, 158,373 tons (+0.1 %) of raw zinc and 166,330 tons (-3.5 %) of crude refined copper were produced.

During the first half of the year the volume of production of high karat gold has grown dramatically – by 60 % to 8 485 kg. With it the output of semi-finished and raw gold has increased by 57.9 % – up to 18 832 kg, and raw and semi-finished silver by 20.5 % – up to 312 978 kg.

As for coal mining, in comparison with January–June last year, its figures have increased by 3.4 % – up to 49 709 tons.

Table of contents
Kaznet as a growth driver  Alexander Vassilyev 
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· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3

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