Gold standards

By bne IntelliNews April 28, 2011

Christopher Pala in Washington -

Most of the minerals in the periodic table are to be found in Kazakhstan, with plenty left in the ground for entrepreneurial smaller mining companies such as Frontier Mining and phosphates miner Sunkar Resources, as well as big players like Glencore International and Ivanhoe Mines.

Mining gold is a particular area of growth for Kazakhstan. President Nursultan Nazarbayev has set a goal of more than tripling gold production to 70 tonnes a year by 2015. There are technical challenges, however: most of the Kazakhstani gold is in poly-metallic ore that requires complex processes, mostly refractory, to isolate. But gold, which since 2000 has quintupled in price to $1,400 per ounce, is in tantalizingly abundant supply: the US geological survey estimates there are 1,900 tonnes of gold in the country. This makes it the world's ninth country in terms of reserves, yet in production terms its 20 tonnes a year (t/y) puts it down at number 20. Of those reserves, about a third are held by two companies.

Big and small

Some 360 tonnes are believed to be in the Vassilkovskoye deposit located in northern Kazakhstan. This deposit is owned by Kazzinc, in which Glencore announced on April 15 it will increase its ownership to 93.0% from 50.7% by paying up to $3.2bn, consisting of $2.2bn in cash and $1bn in new shares from an ongoing IPO. The company plans to float a stake of up to 20% in London and Hong Kong, which analysts say could raise around $6.8bn-8.8bn in new capital and up to $2.2bn in existing shares. Glencore is planning on doubling the Vassilkovskoye deposit's output to 15 t/y.

Another 277 tonnes of gold reserves are in the Kyzyl Gold Project's Bakyrchik mine, located in the industrial center of the country. It is operated by Altynalmas Gold, in which Vancouver-based Ivanhoe recently raised its interest from 49% to a majority 50%. Ivanhoe is controlled by billionaire Robert Friedland. The rest of the stake is owned by a group of investors headed by Goga Ashkenazi, the London-based, Kazakh-born socialite and businesswoman.

In addition to Bakyrchik, the Kyzyl Gold Project contains the Bolshevik gold deposits and several satellite deposits. After a pre-feasibility study gave the green light, a definitive feasibility study on the Bakyrchik Deposit began in September and is expected to be completed by this summer. Requests for tenders have been circulated for the fabrication of long-lead items, including an oxygen plant and dry-grinding mill.

Altynalmas expects to begin construction of a 1.5m t/y fluidized-bed roasting plant to process the project's refractory ores in 2011. Targets are 12.5 tonnes for 2014, the first year of full production, 15 tonnes by 2015 and, after developing a second mining front, 20 t/y. The company is investigating financing options that include an IPO, strategic investors, project financing or continued financing from existing shareholders.

UK-based Hambledon Mining, the dean of the junior internationals, has been operating in Kazakhstan since 1998. Its main focus is the Sekisovskoye gold deposit, an open-pit mine and underground development with a multi-functional processing plant located near Ursk Kamenogorsk. It currently produces 0.85 t/y, but the company expects this to reach 2.8 t/y by 2013 when the company plans to process ore from underground, which has a grade that is around three times higher. "We have capacity to process up to 1m t/y of ore depending on its hardness," Hambledon Director Nick Bridgen told the Journal of Engineering and Mining.

Since this is more than its mines can produce, Hambledon plans to process other companies' ore at plants at Sekisovskoye and possibly at another plant called Ognevka. In addition, Bridgen said the company is looking to buy other deposits. In March, the company announced its intention to raise £8.52m net of expenses through a new share offering.

London-registered phosphate producer Sunkar, located near Aktobe in Western Kazakhstan, near the Russian border, was born out of the takeover of Temir Services in 2006. The 836-square-kilometer Chilisai phosphate deposit is one of the largest in the former Soviet Union, with a resource of some 800m tonnes of ore. It extracted 1m tonnes last year. It was developed during the Soviet era and it closed for several years when demand for fertilizers collapsed in the early 1990s. In March, Sunkar reached agreement with Gazprom's Meleuzovskiye Mineralniye Udobreniya to supply 5,000 tonnes of phosphoric concentrate.

Frontier Mining, incorporated in the Cayman Islands, mines gold and copper deposits and is expected to produce 3,000 tonnes of copper from the Benkala mine by the end of 2011. Frontier owns half of Benkala and is in the process of acquiring the other half from Coville Intercorp, a private Kazakhstani mining group. Frontier also has one producing gold mine, Koskuduk.

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