Clare Nuttall in Almaty -

The date for closing a long-delayed $3bn tender to develop Tajikistan's Kalon Konimansur silver-lead-zinc deposit has been tentatively set for summer 2012. Advisors suggest the government's ability to push through the deal could prove make or break for Tajikstan's investment case for decades to come.

Two years after the tender was initially announced, the bidders to develop Kalon Konimansur have been whittled down to just two. Australian mining giant BHP Billiton is now left competing with a consortium comprising Switzerland's Glencore International, two Kazakh companies - Kazzinc and Konimansur - and Tajikistan's Adrasman ore refinery.

The deal will be the largest ever signed in Tajikistan's mining sector, and Dushanbe had hoped to announce a decision to coincide with the country's 20 years of independence celebrations in August 2011. However, the process has been postponed several times. The government is now understood to be addressing several issues, including the tax regime for the developer, which will have to be resolved before the tender can close. Dushanbe is working with the International Finance Corporation (IFC), part of the World Bank group, on the process.

Tajikistan is desperate to increase revenues by exploiting its natural resources. While the country is well endowed with metals and minerals, as yet only a fraction of the potential is being developed. Kalon Konimansur was explored between the 1960s and 1980s while Tajikistan was still part of the Soviet Union, but plans to develop it were abandoned after independence when the new country descended into civil war. Although some Russian companies approached the Tajik government after the war, it was reluctant to sign over the asset unless it was sure it was getting the best possible deal.

According to the most recent assessment of the deposit, it contains around 1m tonnes of ore, and estimated silver reserves of around 70,000 tonnes, and developing it could transform the entire Tajik economy. Around 10,000 workers will be needed for the construction phase, and a further 2,000 permanent jobs created when the mine starts operation.

Nosy neighbours

"This is the first time an open competitive tender has been used for a mine development project of this scale and complexity - not just in Tajikistan but in the whole of Central Asia," a member of the IFC team advising the government told bne. "If successful, it will really put Tajikistan on the map for international mining companies, and Tajikistan's neighbours are watching with great interest."

The pool of potential bidders to develop the deposit was relatively small, since only a limited number of companies work on silver-lead-zinc deposits of this type. Fuyrther than that, the majority are based in the Americas, and Tajikistan is well outside their usual area of interest. Of an initial seven bidders, three failed to qualify and two Chinese bidders - Ziti Mining and Sichuan Group - later withdrew.

Investment of around $3bn is likely to be needed to develop the deposit itself, with an addition $500m earmarked for surrounding infrastructure. Around $100m of that will go on securing water supplies, $100m for road and railway rehabilitation, and a further $200-300m to build electricity generation capacity should the state or a private company be unable to guarantee sufficient supplies.

A further complication is that the deposit is situated directly beneath the town of Adrasmon, near Tajikistan's border with Kyrgyzstan. Since the mine will be open pit, the town's 13,000 people will have to be relocated. That operation will be one of the 10 largest resettlement projects in the world. The IFC says the investor will have to follow its "Equator Principles," which will ensure that the people of Adrasmon are not negatively affected, and will actually be better off than before.

Speaking to bne, an IFC official working with the government said the closing of the tender is vital for Tajikistan. The country's legacy of poverty and civil war have given it a poor reputation amongst those international investors who are aware of it at all. While the government has shown willing to make reforms, Tajikistan is still well off the investor map, although a handful of companies including Saddleback Corp and several Chinese mining companies are active in the country.

"A successful auction would really open Tajikistan up to international investors, as we saw with a similar project we worked on in Mozambique," he told bne. "If the tender is awarded to the Kazzinc/Glencore consortium or BHP Billiton, this will really open Tajikistan to foreign investors, but if the process fails, there will be negative consequences. Whichever way it goes, there will be important repercussions for Tajikistan."