Mineral Production in 2000–2012: Reserves, Production and Investment
Elvira Dzhantureyeva, Head of the Service for Analyzing the Mineral Production Sector of the Republican Center for Geological Information Kazgeoinform udner the Committee of Geology and Mineral Production of the Ministry of Industry and New Technologies of Kazakhstan, PhD in Technical Sciences.
The mineral resources sector in Kazakhstan has always been one of the most attractive areas for domestic and foreign investment. In the last thirteen years alone, annual investment in extraction of various minerals has increased more than 5 times. Along with that, mineral resources are facing a lack of replenishment for a number of minerals, and this threatens the stable development of the extractive industries of the national economy.
It is known that by reserves of minerals of the priority types, Kazakhstan is among the top ten countries in the world (Figure 1). The country is richly endowed with various minerals: the probable reserves of crude oil are 17 billion tonnes, iron ore 148 billion tonnes, manganese ore 4.7 billion tonnes, chromite ore about 3 billion tonnes, copper 182 million tonnes, lead 108 million tonnes, zinc 220 million tonnes, bauxite 1.2 billion tonnes, tungsten 4.8 million tonnes, molybdenum 6.2 million tonnes, gold 15 thousand tonnes, nickel 4.8 million tonnes, titanium 291 million tonnes, tin 1.7 million tonnes, uranium 600 thousand tons, and coal 90 billion tonnes.
The powerful oil and gas, uranium and coal industries were established and are developing as part of the mineral resources base in Kazakhstan; also, operations on mining and processing of ferrous, non-ferrous and precious metals and of various types of non-metallic minerals are in progress. Commodity products are supplied for export to Europe, USA, China, South Korea, Singapore, Malaysia, and other countries. Today, companies from 50 countries of the world invest in the mineral resources sector of Kazakhstan. Many of them, owing to the access to Kazakhstan's mineral resources, have been able to significantly strengthen their positions in the external mineral commodity markets.
Speaking about the quantitative indices of the mineral resources sector of Kazakhstan, we should note that some 5 million of deposits, of which over 80% are under development on a contract basis, are registered in the balance sheets of the country. As of January 1, 2013 the total number of sites in operation, covered by monitoring of mineral producers, were 2,516. This included 820 sites of the national level, including 253 sites for hydrocarbon production, 374 for solid minerals production and 193 for groundwater production. Production of common minerals is carried out at 1,669 sites.
In 2000–2012 the total volume of investment in mineral production reached $183.3 billion. Of this amount, $18.2 billion, or 10% was directed for geological exploration. Compared with the year 2000, the annual volume of investment increased more than 5 times and at the end of 2012 amounted to $21.6 billion (Table 1). Of the given amount, $1.3 billion, or 6% of the total investment in the mineral resources sector was allocated for exploration. It is expected that this year the figures will be $23.8 billion and $1.4 billion, respectively.
Speaking about the structure of investment by the types of minerals, in the last year the oil and gas industry had the leading position: $13.8 billion, or 64% of all investment in the mineral resources sector, was invested in it. $7.4 billion, or 24%, was invested in production of solid minerals, $349.5 million, or 2%, in production of common minerals, and $61.2 million, or less than 1%, in groundwater production (Figure 2).
In the mining sector, the priority areas for investment were the production of copper with the amount of investment of $1,454.6 million, coal ($1,230.6 million), uranium ($1,157.7 million), polymetallic ores ($ 1,087.1 million), iron and manganese ($996.6 million), and gold ($337.4 million). With this, the investment in geological exploration in 2012 accounted for only 2.8% of the total investment in solid minerals production (Figure 2).
It should be noted that the investment activities of mineral producers make significant contribution to the socio-economic and industrial development of the country (Figure 3). In the past 13 years, the mineral producers allocated more than $2,867.9 million for social projects and development of local infrastructure against $203 million in 2012, $1,038.5 million for training of specialists against $109.1 million in 2012), and about $869.3 million for purchase of technologies, versus $23.4 million in 2012. However, last year saw a decline in the number of personal employed in the mineral resources sector: 172 thousand people against 175 thousand in 2000.
Gold ore and gold-bearing deposits are localized in 16 mining areas in Kazakhstan, the major of them are the Kalbinsky and Rudno-Altaisky areas (the deposits Bakyrchik, Bolshevik, Ridder-Sokolnoye, etc.) in East Kazakhstan, the Kokshetausky and Zholymbet-Bestobinsky areas (the deposits Vasilkovskoe, Zholymbet, etc.) in North Kazakhstan, the Shu-Iliysky and Junggarsky areas (the deposits Akbakai, Beskempir, Arkharly, etc.) in South Kazakhstan, the Maykainsky and North Balkhashsky areas (the deposits Maykain, Boschekul, Sayak, etc.) in Central Kazakhstan, and the Zhetygarinsky and Mugodzharsky (the deposits Komarovskoye, Varvarinskoye, Yubileinoye, etc.) in West Kazakhstan.
As of January 1, 2012 the major gold reserves (the categories A+B+C1) are concentrated in large companies such as Kazzinc (32%), Kazakhmys Corporation (19%), Bakyrchinskoye mining venture (18%), MMC Kazakhaltyn (5%), Maikainzoloto, and Koksai Muzbel (3% each), and others.
Today, the mining of gold is carried out on 107 sites. Of them, mining operations are carried out on 37 sites, exploration on 27 sites, and combined mining and exploration on 43 sites. 468 tonnes of gold was produced in Kazakhstan in 2000–2012; the increase in the reserves was 617 tonnes. Total investment over this period reached $5.1 billion that is a 14 times increase. Of this amount, $424 million was directed to exploration. 88% of all output was produce by gold mining companies such as Kazzinc (35% of investment in gold mining in 2012), MMC Kazakhaltyn (15%), Varvarinskoye (10%), FIC Alel (9%), Orion Minerals (6%), Yubileinoye (4%), SE Sekisovskoe (3%), Altynalmas (3%) and Maikainzoloto (2%). As for predictions for 2013, the investment in the sector is seen to reach $902.8 million, including $53.6 million in geological exploration.
The bulk of the reserves and deposits of copper recorded in the balance sheets are located in East and Central Kazakhstan. The reserves for recovery of the depleting mineral resource base are a series of pyrite-polymetallic deposits in the east of the country (Artemyevskoye, Kosmurun, Akbastau, etc.). In addition, the porphyry copper deposit Nurkazgan with high quality ores is prepared for operation in Central Kazakhstan, Shatyrkol in South Kazakhstan, and Zhaman-Aibat, one of the country's largest deposits, in the Zhezkazgan mining district. Porphyry copper-type deposits such as Aktogai, Aidarly, Koksai and Bozshakolskoye also have significant potential.
The lion's share of copper reserves (categories A+B+C1) is shared by Kazakhmys Corporation (79%), Koksai-Muzbel (6.4%), Kazzinc (3.8%), and Copper Technology (3%).
Currently, copper production is being carried out at 39 sites. Of them, extraction operations are in progress at 13 sites, exploration at 8 sites and combined exploration and extraction at 18 sites. Over the past 13 years, 6.6 million tons of copper was produced in Kazakhstan; the increase in the copper reserves was 4.6 million tons. Total investment over this period increased by more than 3-fold, reaching $6.2 billion, including $147.6 million allocated for geological exploration. In the past year, the greater part of capital investment, namely $1,454.6 million, was contributed by the three companies: Kazakhmys Corporation (90%), Copper Technology (8.3%), and Kazcooper (0.4%). A little more than 1% in aggregate was provided by the Aktobe Copper Company, GRK MLD, KazGeorud and Fonet Er-Tai AK Mining. According to the forecasts for the current year, the amount of investment in the industry will likely reach $1.603 billion, including $41 million in geological exploration.
In the coming years, the development of the polymetallic ore resource sector will be associated with development of the large deposit Shalkiya in South Kazakhstan, where the construction of a new zinc plant is planned. Moreover, the deposit Shaimerden of the karst type in North Kazakhstan – the type which is considered non-traditional for our country and unique by the content of zinc, will be put into service as scheduled; also, pits will be constructed on the sites of the deposits Novoleninogorskoe, Dolinnoye and Obruchevskoe in East Kazakhstan. Good conditions for development of the copper-zinc industry are created in West Kazakhstan, where on the basis of proven deposits of copper pyrite (50 year Anniversary of October, Kundyzdy, Priorskoye, etc.) the organization of domestic mining and smelting production is planned.
Today, the main reserves of polymetallic ores (A+B+C1) are concentrated in Zhairemski GOK (34% for lead and 22% for zinc), Kazzinc (16% and 25%), Kazakhmys Corporation (14% for each), Shalkiya Zinc (12% and 19%), and NC SEC Saryarka (9% and 4%).
Mineral production operations on polymetallic ores are carried out on 30 sites. Of them, mining is carried out on 19 sites, exploration on 2 sites and combined exploration and mining on 9 sites. In 2000–2012, 1.4 million tonnes of lead and 7.8 million tonnes of zinc were produced in the country. The increase in the reserves on them amounted to 1 million tonnes and 1.9 million tonnes, respectively. Over this period, more than $7.7 billion was invested. Of them, only $118 million was directed to exploration. Last year, capital investment increased 6-fold, reaching $1,087 million. Among the largest investors are Kazzinc (65%), Kazakhmys Corporation (29%), Nova-Zinc (4%) and Shaimerden (1%). About 1% in aggregate is the share of ER-TAI, Multiplex Resources, Shalkiya Zinc and Zhairemski GOK. At the end of this year, capital investment in mineral production of lead and zinc is expected to increase to $1,197.9 million, including $22.6 million in exploration.
All industrial reserves of manganese are concentrated in Central Kazakhstan and represented by oxide and carbonate-silicate-oxide ores (the deposits Ushkatyn-3, West Karazhal, etc.). Five mining enterprises, based in the Karaganda region, operate in the manganese ore mining industry.
The country has enormous resources of iron ore, about 90% of which are concentrated in the Torgai region of North Kazakhstan. The extraction of this metal is performed mainly in the Sokolovskoye, Sarbaiskoye, Kacharskoye and other deposits of skarn-magnetite ores, and in the Lisakovskoye bog iron ore deposit.
The main reserves of iron (A+B+C1) are shared by JSC SSGPO (50%) and LLP Orken (26%). GRK Kazakhstan's mineral resources, Aktobe-Temir-VS and Masalskiy GOK, each account for 5% of the reserves. The National Company SEC Tobol accounts for another 4% of the reserves. As for the manganese reserves, here the leaders are Orken (72%) and Zhairem (24%).
At present, the mineral production of iron and manganese is carried out on 40 sites. Of them, mining operations are carried out on 17 sites, exploration on other 9 sites, and combined exploration and mining on the other 14 sites. Over a 13 year period, 549.3 million tonnes of iron and 32.8 million tonnes of manganese were produced in Kazakhstan. The increase in the reserves was 1.7 billion tonnes and 76.3 million tonnes, respectively. Investments over this period reached nearly $6.1 billion, including $60 million directed for exploration. Speaking of the last year’s results, of the total amount of capital investment of $996 million, the greater part was contributed by major companies such as SSGPO (70%), Zhairem (12%), Orken (10%), TNK Kazchrome (3%), and Arman-100 (1%). Bapy Mining, Metalterminalservice, Temirtau Electric Steel Works, Aktobe-Temir-VS and Pavlodar Vtorchermet invested less than 1%. In 2013 the volume of capital investment in mineral production of iron and manganese is expected to reach $1,098.2 million, including $8.9 million in geological exploration.
The reserves of difficult-to-process bauxite from the East Torgai bauxite-bearing area (the deposits Krasnooktyabrskoye, Ayatskoe, etc.) make the basis for the aluminum industry of Kazakhstan. The conditions for production of alumina from low-grade bauxite extracted from the said deposits were created owing to the introduction of a new technological scheme developed by the Pavlodar aluminum plant. The prospects of future development of the raw material base for the domestic aluminum industry are, first of all, associated today with the non-traditional types of alumina raw material, nepheline-leucite and nepheline rocks and alunite secondary quartzites, widely spread on the territory of the country, can raise the most practical interest.
The lion's share of bauxite reserves, namely 93%, is developed today by KBRU, a division of JSC Aluminum of Kazakhstan. The remaining 7% are shared by Didar and the second division of Aluminum of Kazakhstan – TBRU.
Currently, mineral production of bauxite is being carried out on 5 sites. Of them, mining operations are in progress on 4 sites and exploration on the fifth site. In 2000–2012, 62 million tonnes of bauxite was produced in the country. The increase in the bauxite reserves amounted to 1 million tonnes. Investment for this period totaled almost $1.2 billion, including $17.8 million directed in exploration. Last year, JSC Aluminum of Kazakhstan invested $168 million in mineral production of bauxite (86.5% was the percentage of investment by KBRU and 13.5% by TBRU) that is more than four times more than in 2000. In the current year, capital investment is expected to increase to $185 million, including $4.1 million in exploration.
Kazakhstan is the world leader in terms of reserves of chromite, whichare characterized by high quality ores (45%–50% chromium oxide). They are located in West Kazakhstan on a relatively small area within the borders of the Kempirsaiski dunite and periodite massif (the deposits Millionnoye, Almaz-Zhemchuzhina, etc.). TNK Kazchrome, which has the production of ferroalloy, engages in mining and dressing of chromite ore. This company accounts for 94% of all reserves of Kazakhstani chromium, and the other 6% are licensed for production by Voskhod-Oriel.
Mineral production of chromite is carried out on 9 sites, which are all now at the stage of production. Over the past 13 years, Kazakhstan produced 50.6 million tonnes of chromite. The increase in the reserves amounted to almost 1 million tonnes. Over this period, the industry invested $2.5 billion, including $25.5 million in exploration. Last year, capital investment exceeded $337 million that is a two-fold rise compared to 2000. Along with TNK Kazchrome (79%), a major investor in the industry is Voskhod-Oriel (21%). According to predictions for the current year, these companies are expected to allocate $317.9 million for mineral production of chromites, including $0.3 million for geological exploration.
At the moment, the reserves of 47 coalfields, coal-bearing areas, deposits and separate independent sites, as well as the off-balance sheet reserves are recorded in the balance sheets of the government. Five coal fields and 14 deposits are involved in operation. 72% of the total coal production is concentrated in the three giant open cuts of Ekibastuz, as well as in the four other open cuts – Borly, Shubarkol, Kushoky, and Saryadyr, and in coal mines in the Karaganda region. To meet the regional demand for coal, mining is under development in open cuts in the Aktobe region, Almaty region, East Kazakhstan region (Karazhyra coal mine) and South Kazakhstan region. In general, the mineral production of coal is carried out on 42 sites. Of them, coal mining operations are carried out on 33 sites are combined exploration and production on the other 9 sites.
The largest reserves of coal in Kazakhstan are shared by the companies Bogatyr Coal (8%), ArcelorMittal Temirtau and Shubarkol Komir (5% each), Maikuben West (4%), and ENRC (3%), etc.
In 2000–2012 the increase in the coal reserves amounted to only 114.1 million tonnes, at the accumulated production of 1,129.4 million tonnes. Although today the replenishment of the reserves lags behind production, given the current figures, Kazakhstan has sufficient reserves for many years ahead.
As for investments, over the thirteen-year period $7.9 billion was directed in the coal-mining industry of the country, including $ 32 million for geological exploration. In 2012 the volume of capital investment exceeded $1.2 billion that is more than five-fold more than in 2000. Among the major investors one can call CD JSC ArcelorMittal Temirtau (33%), Bogatyr Komir (18%), Eurasian Energy Corporation (16%), Shubarkol Komir (7%), Angrensor Energo (3%), Kazakhmys Corporation (5%), Karazhyra (3.8%), Maikuben West (2.5%), Saryarka-ENERGY (2.8%) and Gamma (2.7%). It is expected that in the current year more than $1.356 billion will be allocated for mineral production of coal, including $0.6 million for geological exploration.
Kazakhstan ranks second in the world in terms of proven reserves and resources of uranium. The uranium deposits discovered in the country are different both in terms of formation, and their practical significance. The major reserves are concentrated in the hydrogenic deposits of South Kazakhstan – Mynkuduk, Karamurun, etc. Projected reserves of uranium are comparable with the balance reserves and are also concentrated mainly in the uranium-bearing provinces of South Kazakhstan.
As of January 1, 2013, the mineral production of uranium was carried out on 25 sites. Of them, production operations were carried out on 12 sites, exploration on one site, and combined exploration and production on the other 12 sites. In 2000–2012 Kazakhstan produced 113.7 thousand tonnes of uranium; the increase in reserves was recorded at 113.5 tonnes Total investment over this period reached nearly $6.6 billion, including $ 397 million in geological exploration. As for the last year’s performance indicators, the amount of investment reached $1,157.6 million, while the forecast for 2013 predict investment to reach $1,275.8 million, including $82.5 million in geological exploration. It should be noted that all of the uranium mining and processing enterprises form the structure of NAC Kazatomprom. The latter is the national operator for import and export of uranium, rare metals, and nuclear fuel for nuclear power plants, special equipment, technologies and dual-purpose materials.
With the introduction of a contract system into the mineral production sector, budget allocations for exploration of mineral resources dramatically decreased. As a result, the increase in reserves for the main types of mineral raw materials in recent years was provided, mainly due to private investment in geological exploration. However, today, there is a lack of replenishment of mineral reserves of the priority types. This considerably reduces the time of provision of the extractive industries with mineral reserves.
Overall, in 2003–2012, to finance geological exploration the government allocated about 17 billion tenge from the state budget that is less than 1% of the total financing of exploration. Of this amount, the greater part was directed to conduct exploration of hydrocarbons (53%, or 9 billion tenge) and groundwater (28%, or 4.8 billion tenge). The percentage of funds allocate for exploration of solid minerals was just 18%, or 3.1 billion tenge.
It should be noted that earlier the extracting companies paid to the state budget the reimbursement rates, the money that were used to replenish the mineral reserves; these funds were almost entirely directed to geological exploration of subsoil for mineral resources in order to get the increase in mineral reserves. With the introduction of the contract system, the mineral producers had to pay a mineral extraction tax to the budget. Of the totaI amount of the receipts from the mineral extraction tax, only about 1-2% is allocated as public funding of exploration. Today, the government funds the early stages of exploration in promising areas and sites. However, according to the approved Concept, the volume of public financing of exploration has to constantly grow, and the emphasis will be made on replenishment of the reserves of gold and nonferrous metals, as well as new types of raw materials such as gas methane and shale gas.
To implement the existing potential for discovery of new deposits of various minerals, it is necessary to intensify geologic exploration through the attraction of research institutes. This will make it possible to carry out comprehensive geological studies and to identify competitive and profitable fields. Besides, the application of advanced technologies requires considerable financial investment in training of highly skilled specialists.
Under the Law "On Mineral Resources and Mineral Production" separate contracts for exploration and production of minerals are required in Kazakhstan, except for those fields that are of strategic importance or have complex geological structure. The list of sites and deposits that are of strategic importance is approved by the Government. The procedure for granting the right of mineral production represents direct negotiations with national companies, such as NAC Kazatomprom (for uranium), Kazgeologiya and the National mining company Tau-Ken Samruk (for solid minerals), as well as socio-entrepreneurial corporations (for common minerals). This excludes any bids and the selection criteria, which turns out to be positive for investors.
The Public and Private Partnership (PPP) Program "The development of deposits in exchange for technology" provides for the signing of agreements and memorandums on cooperation in the area of exploration and production of mineral resources with foreign governments and leading international companies. The PPP mechanism is a good tool in the mineral production sector, since it provides stability and government support for joint investment projects.
To date, agreements and memorandums with the governments of China, Japan, Germany, Turkey, Malaysia and South Korea, as well as with companies such as RioTinto, KORES, MTA, Rosgeologiya and others have been concluded.