Tajik mine tender close to collapse as BHP Billington pulls out

By bne IntelliNews July 16, 2012

Clare Nuttall in Almaty -

BHP Billiton, one of just two companies still in the running to develop Tajikistan's largest silver deposit, has pulled out, leaving the future of the country's first open international tender process in doubt.

Reports in the Tajik press say that the Anglo-Australian mining company has informed the tender commission that it is withdrawing its bid to develop the Konimansur Kalon silver-lead-zinc deposit in north Tajikistan. This leaves only one bidder, a consortium led by Kazakhstan's Kazzinc which includes Kazzinc's parent company Glencore International, as well as Konimansur and Adrasman.

The consortium may now win by default, a Tajik official has indicated. A decision on the tender was due to be made in September, but after BHP Billiton's withdrawal it may be brought forward, an official at Tajikistan's Main Geology Directorate told Asia Plus.

BHP Billiton's decision to withdraw is clearly a blow for the government, which had hoped that the competition would help put the country on the map for international investors. It is the first time an open competitive tender has been used for a mine development project of this scale and complexity in the entire Central Asian region. Reflecting the ambition, Dushanbe had been working with the IFC to ensure the process was fair and transparent.

Bidders for the deposit have been gradually whittled down, with three initial bidders failing to qualify and two Chinese bidders - Ziti Mining and Sichuan Group - later withdrawing. The reason for BHP Billiton following suit is not known, and the mining company has not confirmed the report.

The tender has already been delayed several times, as the Tajik government addresses issues such as the tax regime for the eventual developer. Substantial infrastructure development will also be needed, with total investment of around $3bn likely, an IFC source told bne earlier this year. Another issue is that the deposit is situated directly under the town of Adrasmon, near Tajikistans border with Kyrgyzstan - requiring the relocation of some 13,000 people.

However, should development of the deposit go ahead, it could transform the economy of Central Asia's poorest country. Konimansur Kalon contains around 1m tonnes of ore, and estimated silver reserves of around 70,000 tonnes. Some 10,000 people will be employed during the construction phase.

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