Gold of Kazakhstan: Brief Overview
Adil Bekzatov, Industry Analyst of OJSC Kazkommerts Securities
Resource base of the gold mining industry in Kazakhstan is mainly represented by the small (up to 25 tonnes) and medium (25-100 tonnes) size fields. About 70 percent of gold is mined at these fields. Total gold reserves in Kazakhstan are estimated at about 800 metric tonnes of gold with average grade of 6.3 grams per tonne. Among the gold deposits under development now the average grade equals 9 grams per tonne. East, North, and Central Kazakhstan regions possess the largest reserves of discovered gold. The most important and perspective gold fields are shown in Table 1.
There are 237 gold ore areas registered with the Kazakhstan State Reserve, out of which 122 are thorough deposits, 81 complex ones, and 34 gravel ones. There are just a few large deposits developed. The rest are multiple small gold deposits mainly located in the uninhabited areas of the country. The general distribution of gold fields typified by geological characteristics is shown in Table 2.
In general Kazakhstan gold fields are characterized by the low grade gold with significant share of difficult for concentration ores. However relatively good mining and geological conditions compared to the neighboring countries allow keeping the productions costs at the world average levels.
Largest Gold Deposits and Mining Companies
The main producers of gold in Kazakhstan are specialized gold mining companies and nonferrous metals factories, where gold comes as a by-product of the base metal production. Perhaps, the largest producer of gold in Kazakhstan is Kazzink with average annual production of 5.5-6 tonnes. The second largest producer is Kazakhmys Corporation that made (as co-element in the copper production) more than 4 tonnes of gold in 2001. In 2003, Kazakhmys produced a little less than 3 tonnes of this metal.
There are approximately one hundred gold mining licenses awarded to different companies in Kazakhstan. But only about 35 companies are actually developing gold fields now. Among the largest gold mining companies that account for 90% of total investment are AltynAlmas, Maikainzoloto, Bakyrchikskoye GDP, CharaAltyn, ABS Balkhash, GMP Pustynnoye, Altyn Tobe, Ken, Alel, Andas Altyn, Kazakhaltyn, Altyn Aimak (Table 3).
The largest by reserves gold field in Kazakhstan is Vasilkovskoye field located in the Akmolinsk region, 17 km northwest from the city of Kokshetau. The field proven reserves are estimated at 370 tonnes with average grade at 2.8 gram/tonne. It is developed by JV Vasilkovskoe Zoloto (VasGold), a joint venture of the Fooldgate Holding (Netherlands), and the Government of Kazakhstan. The geology and ore recovery quality of the field is well studied. Mining and geological conditions of ore body allow conducting open pit mining up to 300 meters depth.
The field has been developed since 1979. As of now, about 10 percent of the deposit has been mined. The company uses heap-leaching extraction process. Production capacity of heap leaching plant is 1 million tonnes of ore and 600-900 kg of gold per year. The company has initiated a new project that will increase the current production capacity. The company is planning to increase production capacity up to 7.4 million tonnes of ore by constructing a new gold extracting plant.
Bakyrchik gold mine situated in northeastern Kazakhstan (approximately 100 km from the city of Semipalatinsk) is the second largest by reserves. The estimated reserves of the field are 326 tonnes with average grade of 6.9 grams per tonne. Development of the field is hampered by metallurgical problems due to high carbon content in the ore, as well as environmental problems due to high concentration of toxic arsenic. The problems can be resolved by the increased capital expenditures justified by the higher gold price. The gold may also be recovered using the bacterial leaching method.
Next largest by reserves and industrial importance the fields developed by Kazakhaltyn company: Aksu, Kvarcitovye Gorki, Bestube, and Zholymbet. They are developed by underground mining and consist of quarts vein and mineral ore. Their development started in the 1930s. Now shafts were brought down to 700 m. The extracted ore is refined on Aksu, Bestobe, and Zholymbet concentrating plants using gravity floatation method and recovering gold and silver concentrates. The average recovery rate varies from 71.3% to 91.8%. During the last three years Kazakhaltyn produced about a tonne of gold p.a. from these fields.
Among the prospective fields are those of Akbakay group: Akbakay, Beskempir, Aksakal, Karyernoe. The gold fields are located in Zhambyl region, 90 km away from the Furmanovka village. The fields are developed by underground mining. Total proven reserves are estimated at 95 tonnes with average grade of 11 grams per tonne. The ore contains detrimental impurities like arsenium (0.1-0.76%) and stibium (0.001-0.05%) making it difficult to use cyanide for recovery of gold.
ABS Balkhash develops a number of small gold fields in the Central and Southern Kazakhstan. At present the extracting operations are focused on the fields Ushhoky, Pustynnoye and Mynaral. The company includes concentrating plants in the village Shahybai and Priozersk city with the combined capacity of 350 tonnes of ore a year. In 2002, the group of companies ABS Balkhash produced 1.5 tonne of metal, in 2003 - already around 2.5 tonnes. Production growth has been achieved on account of the new production horizons at the mines Enbekshi and Mynaral in Karaganda region and at the major field Yubileinoye in the west of Kazakhstan.
GRK Altyn Tobe develops the field Zhanan in the Eastern Kazakhstan region 140 km away from Semipalatinsk. The reserves of oxidized ores at the fields are extracted by an open-pit mining method. Gold production in 2001 and 2002 was around 1,065 kg a year. In 2003, gold production was abruptly reduced to 650 kg due to exhaustion of oxidized ore reserves. Gold is extracted using the method of heap leaching.
A combination of high production costs and poor management constrained the gold production in Kazakhstan in the last decade. As a consequence, refined gold production fluctuated from 8.8 tonnes in 1998 to 16.5 tonnes in 2001.
It is seen from the chart 1 that in the last eight years gold production in Kazakhstan hovered around 10 tonnes a year (with an exception of 2001). Several factors account for that:
• prevalence of small and medium fields;
• old equipment and obsolete technologies used by the majority of extracting and refining enterprises;
• absence of sufficient working capital and limited fundraising capabilities of many domestic enterprises;
• poor management and ineffective ownership structure preventing participation of outside direct and portfolio investors;
• unavailability of sound and environment friendly technologies for processing carbonic and arsenic ores;
• fbsence of domestic mining machinery and reliance on foreign imports leading to increasing production costs;
• high transportation costs.
By all accounts, there is no competitor in the gold market of Kazakhstan to the larger regional producers like China, Russia and Uzbekistan (Table 4). However, rising gold prices and heightened international instability over the last two years have made gold an attractive asset again (Chart 2). With gold prices averaging $330 per oz many small and medium size deposits may become attractive to the outside investors provided they possess the necessary technology and capital. In addition, country investment risks are lower than elsewhere in the region. The degree of state regulation in the sector is lower than in the neighboring countries, and the economy itself is more liberalized and stable. If gold prices remain at their present levels for the next several years or even rise further we expect the renewed interest to many potentially attractive and undeveloped gold deposits in Kazakhstan from local and international investors.
OJSC Kazkommerts Securities is the first brokerage firm in the Republic of Kazakhstan, operating since 1997. The company is one of the leading professional participants of the financial domestic market and it has high prestige on the local and international capital markets. Since 2002 Kazkommerts Securities with renewed team positions itself as an investment company. Non-ordinary approach to task solutions of the clients, qualified personnel and working experience allow the Company to realize precisely set goals in rendering broad spectrum of financial services with high quality and efficiency to its clients. Main types of activities of Kazkommerts Securities are corporate finance, structured finance, trading and investments, research and assignment of internal credit ratings.
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