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 KAZAKHSTAN International Business Magazine №3, 2012
 Miners and metallurgists set high rates
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Miners and metallurgists set high rates

 

Mr. Nikolay Radostovets, Executive Director of Association of Mining and Metallurgical Enterprises (AMME)

 
In 2011 the mining industry of Kazakhstan showed a positive dynamics in almost all the indicators. Compared with the previous year, the total production volume increased by 1.3% to $10,056 billion tenge, from which 798.3 billion tenge represent the extraction of metal ores. Metallurgy also showed steady growth with its present share of over 42.4% from the total volume of processing industry in our country.
 
Growth continues
 
I have to say that the construction of new factories, increasing capacity of existing enterprises and their modernization promote the output growth of mining complex of Kazakhstan. For example, as recent as in last year the volume of investments in fixed assets of the mining industry enterprises was 1,560.2 billion tenge, and in metallurgy – 243.1 billion tenge. During this time 11 major projects, were completed and 2.7 thousand permanent jobs created in the sector. Implemented projects include – the commissioning of blast furnace No. 2 and continuous casting machine No. 3 at the plant of JSC ArselorMittal Temirtau, as well as the completion of the project on the bringing of JSC Aluminium of Kazakhstan at the new production capacity of 1.7 million tons of aluminum oxide per year.
 
The industry has actively proceeding organization of high added value productions on basis of the base metals. This direction is implemented in the framework of the Roadmap of business in partnership with small and medium enterprises that concentrate around large companies. Thus, as of today 37 projects in metallurgy and metal working $27,648.6 million tenge have been approved.
 
It is planned to increase the output volumes of industrial products in the domestic mining complex by 423 billion tenge before 2015. This will take place through the development of more than 20 new types of the range of products with high added value in such enterprises as Kazphosphate LLP (production of hexametaphosphate, phosphorus trichloride, and food grade phosphates), JSC Sokolov-Sarbay Mining Production Association (production of metallised product), Kazakhmys Inc. LLP (refined selenium) and others.
 
A significant number of mining and metallurgical projects are now underway. For example, currently at the Aktobe ferroalloys plant TNC Kazchrome carries out construction of new production facilities to produce 440 thousand tons of ferrochrome per year. It is planned to mount four unique furnace units that have no counterparts in the world. Total project cost – $750 million. Construction completion date is scheduled for 2013. It is notable that today two similar furnaces exist only at the one of the metallurgical enterprises of South Africa, but their capacity is only 60 MW against 72 MW at the Atyrau refinery.
 
Another example is the operations on increase of production facilities and construction of a plant for production of baked anodes with an annual capacity of 136 thousand tons are proceeding at a full speed at JSC Kazakhstan Aluminium Smelter (KAS). The project is scheduled for completion by December 2012. Putting it into operation will reduce the cost of production of KAS, improve the quality of primary aluminum and create additionally about 500 jobs.
 
In 2010 was put into operation rolling mill on the base of the JSC Sokolov-Sarbay Mining Production Association. After have come out to a new process stage, the company rose to the next phase of its evolution – transformed from the enterprise of mining division to metal works. The plant with an annual capacity of 75 thousand tons provided JSC Sokolov-Sarbay Mining Production Association and other enterprises of ENRC with grinding bodies and various types of rolled metal products. At present time other large and important projects involving release of new products and expansion of sales area are implemented in JSC Sokolov-Sarbay Mining Production Association. One of them is a construction of a plant for the production of hot briquetted iron. This product has many advantages, first of all it is a logistics supply chain, due to which the boundaries of the sales market for finished products significantly expand. Completion of construction of the plant with an annual capacity of 1.8 million tons of metallised briquettes is planned for 2014.
 
In addition to expansion of production potential, mining complex enterprises today are constantly increasing proportion of local content, thus directing their efforts at creating the conditions for the development of competitive production of goods and services by maximum use of the opportunities of the domestic market. As an example, I like to note the experience of Kazakhmys PLC. In the past few years this company carried out a huge work: established new joint ventures, gave a financial support to small and medium-sized businesses, compiled a list of goods for the development by Kazakhstan’s producers and actively implement measures on import substitution.

If we talk about the current situation in the mining complex, then 2012 is marked by a number of important events both for the further development of the complex and for the economy of Kazakhstan in general. Thus, from January 1 in Russia, Belarus and Kazakhstan came to operation the Common Economic Space. Though the full integration agreements will start working from July of this year, today we see the positive results of the formation first of the Customs Union and then the Common Economic Space.

Over the past two years the presence of Russian capital in the domestic mining and metals production sector has significantly increased. In particular, RUSAL successfully operates (coal assets) in Pavlodar region, the project of the Russian Copper Company is developing in the Aktobe region, the construction of mill for rolling sections production in partnership with Evraz Group is implemented in Kostanay region, and Voskhod mining-and-processing integrated works, which is a part of the Oriel Resources Limited, which consolidated all the ferroalloy assets of OJSC Mechel, operates in Khromtau. In turn, Kazakhstan companies increasingly actively enter the markets of Russia and Belarus, that is why I am sure that in the next few years the level of integration of the mining industries of the three countries will increase significantly.

We should also note that, since the completion of the Kazakhstan's accession to the WTO is planned for 2012, today the Government is taking a number of important steps to improve the investment attractiveness of the country. In his address to the people, announced in January this year, the President noted that “the protection of the rights and support for domestic and foreign investors, the predictability of law and transparency shall become the basis of the business investment climate in Kazakhstan”.

The formation of the Common Economic Space and accession to the WTO pose to mining complex new challenges that shall be solved, including by improving the institutional regulation of the industry. In particular, to create a favourable investment climate, ensuring a stable flow of direct foreign investment in the mining industry, it is extremely important to change the status and importance of mining legislation.
 
Basis for development

Today there is a need of a new sector-specific legislation because the existing regulatory and legal framework does not cover the full range of legal relations in this area. Thus, the Law “Subsoil and subsoil use law” is the result of the merger of the law on subsoil use and oil law, and in the latest edition represents a kind of symbiosis of regulation, both the sphere of production of hydrocarbons and solid minerals. 

Meanwhile, oil and gas industry and mining industry differ significantly from each other in the structure of costs, the capital- and labour intensity of the production process. In this regard, the Association of mining and metallurgical enterprises insists on the necessity of introducing a separate legal regulation of these economy sectors. The adoption of the Mining Code, which would combine all the important regulatory standards for mining complex: from exploration to production and processing might be discussed as a scenario for the development of this situation.

All countries with the developed mining complex have a separate “mining” legislation. Even neighbouring Mongolia has its Mining Code. Therefore for Kazakhstan it is essential that this document shall be considered by the Government as a matter of priority and adopted by Parliament in the soonest possible time. No provisions that are important for the development of industry should be taken without it.

Mining complex also needs a long-term development strategy. Currently the Association of mining and metallurgical enterprises together with JSC Kazakhstan industry development institute, Republican State Enterprise National Centre on complex processing of mineral raw materials of the Republic of Kazakhstan and the British company Chris Morgan Associates Ltd. elaborate a master plan for the development of mining complex until 2030. It is based on a single strategy of modernization of the industry within the framework of socio-economic and industrial-innovative development of Kazakhstan till 2030 and combines all the major long-term priorities of the state in this area.

Another one most important document for mining complex, in my opinion is a geology development program. At the time when almost the entire surface of Kazakhstan was studied and commercial development has been long and successfully carried out at more than 80% of deposits of solid mineral, a number of our enterprises faced the challenge of depletion of raw materials source. That is why we need to mobilize all efforts of geologists to further exploration of available “white spots”, re-assessment of reserves of existing fields and the transition to new methods of deep investigations.
 
Human resources and social partnership

Personnel affairs also remain relevant to the industry In a situation of changing economic conditions, one of the most important conditions for the increase of the competitiveness of mining complex is to increase the effectiveness of training system and continuous improvement of qualification human resources skills.

To solve this problem the Sectoral Council on Human Resources in Mining and Metal Production Complex of the RoK (SCHR MMPC) which was created in accordance with the British model of the Councils on development of sectoral qualifications started full-scale work since the beginning of 2012 on the base of the Association of mining and metallurgical enterprises. It is a “think tank”, which will be directly involved in the development and review of professional standards, developing recommendations for improving the system of vocational training, development of regulatory and legal framework in this field, summarizing the positive experience of training and translating it to the entire industry.

In the President's Message in January in the framework of seventh priority the Government was instructed to “create in the current year in a pilot mode, a number of independent centres of certification of qualification on the basis of industry associations in one or two areas”. As one of the largest organizations of industry business, our association in partnership with the employers offered to organize a number of centres for certification of qualifications in the developed industrial regions. At the same time we need assistance from the Government, the Ministry of Education and Science, the Ministry of Industry and New technologies, regional and municipal akimats.

It should be emphasized that in many developed countries independent certification is performed in particular by business associations and is an essential attribute of self-regulatory organizations. For example, in Germany trade chambers, consisting of employers, who are responsible for a specific area of the country's economy are responsible for the certification of graduates of technical and vocational education.

The issue of further development of social partnership is also fundamental for the functioning of the mining complex. And here we have something to be proud of. Strengthening of social partnership in the enterprises of mining complex is carried out under a system approach rather than depending on situation – from conflict to conflict, that is why our experience in this field have been more than once recognized as the most advanced in the Republic.

As a signatory to the General Agreement between the Government, republican associations of workers and republican associations of employers for 2011–2013, the Association of mining and metallurgical enterprises not only constantly works on the maintaining the dialogue with the trade unions, but also maintains the image of enterprises of mining and metallurgical industry who recognize their social responsibility. Collective agreement are in force in all enterprises of the industry and it should be noted that miners and steelworkers were the first in the history of independent Kazakhstan, who began to enter into sectoral agreements providing for the multiplying factors for working in hazardous conditions. And if the first such agreement was signed in 2006, then today the social partners are already working on the conclusion of the third agreement regulating the obligations of the parties in labour relations. At the April meeting of the Republican Trilateral Commission the status of social partnership in our industry was highly appreciated, and the experience of mining complex in this area recommended to extent in other sectors of the economy.
 
The Association of mining and metallurgical enterprises was established in 2005 by the initiative of the mining companies in order to support the industry ministry. The Association of mining and metallurgical enterprises represents mining and metallurgical industry in National economic chamber of Kazakhstan Atameken Union.

The Association is the largest industry association in Kazakhstan, which involves more than 80 companies of ferrous and nonferrous metallurgy, uranium and coal industries. Among them are the enterprises of ENRC Kazakhstan Group, JSC ArselorMittal Temirtau, Kazakhmys Inc. LLP, JSC Ust-Kamenogorsk titanium and magnesium plant, JSC NC Kazatomprom, KSP Steel LLP and others. 

The Association of mining and metallurgical enterprises is a member of the Republican tripartite commission on social partnership and regulation of social-labour relations. As a signatory to the General Agreement, it concludes Industry agreement defining the general principles of regulating of socio-economic and labour relations in the enterprises of the sector.

In accordance with the law “On private entrepreneurship” the Association of mining and metallurgical enterprises is accredited in 13 ministries and departments, and its representatives actively participate in working groups of the Government and Parliament in the development of regulatory legal acts.
 


Table of contents
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 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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