The Light at the End of the Tunnel

Material collected and presented by JSC Alel Financial and Investment Group

Lately, those countries comprising the post-Soviet space have collectively outperformed South Africa in the overall production of gold, thus, as a group, ranking first worldwide. Several factors have contributed to this state, the principal one being the transfer from a planned economy to a market one, with a resulting integration of the gold mining industry into the global system.

Lately, those countries comprising the post-Soviet space have collectively outperformed South Africa in the overall production of gold, thus, as a group, ranking first worldwide. Several factors have contributed to this state, the principal one being the transfer from a planned economy to a market one, with a resulting integration of the gold mining industry into the global system.
Russia takes the leading position among the post-Soviet republics as regards gold reserves. Its resource potential, amounting to approximately 20% of the world’s recoverable reserves, accounts for the large extraction volume of around 300 tons per year. According to forecasts by experts, in the forthcoming years, a growth in gold extraction is expected. Restructuring of the economy and investment inflow in the gold mining industry contribute in many ways to such a situation. Although, the specific gravity of foreign companies in the gold industry of Russia is insignificant compared to other republics of the former USSR. The primary barrier to foreign investment into the sector remains the position of the government, which considers gold and diamonds as strategic resources.
Following independence, Uzbekistan entered the list of the world’s top ten gold producers, taking ninth place. As per current estimates, the republic has reserves of 4,000 tons of this precious metal, placing the country in the top spot within the Central Asian region. At the moment, only nine deposits in Uzbekistan are being actively exploited. The entry of Tashkent into the Collective Security Treaty Organization (CSTO) and the Eurasian Economic Community (ECC) has led to the reorientation of the government toward investors from the post-Soviet region. If in recent years American investment dominated in the mining industry, then now this share is being eroded. Russian and Kazakhstani enterprises promise to become the largest portion of new applicants. Particularly, the Uzbek market may draw the attention of Norilsky Nickel.
Kyrgyzstan is also one of those CIS countries having gold production at the level of industrial volumes. The republic earns nearly 10% of state budget from gold mining. Kyrgyzstan is currently exploring Kumtor, its largest deposit, which contributes 40% of the nation’s export. The state owns two-thirds of the deposit, while a third belongs to Cameco, a Canadian-based mining company, which is also the leading producer of uranium worldwide. According to estimates by specialists in the industry, by 2009 gold production will become unprofitable due to the application of outdated methods. As a result of this, those enterprises operating deposits having ore with low gold content will be forced to adopt more expensive, but highly efficient, techniques for further extraction of the precious metal.
As regards explored gold reserves, Kazakhstan takes third place among the post-Soviet republics, following Russia and Uzbekistan. However, the country ranks only fourth in production volume, after the abovementioned republics and Kyrgyzstan. On average, Kazakhstan manages to extract 9-10 tons of gold annually, with 2001 being an exception, during which 16 tons of the metal were produced. Nevertheless, Kazakhstan cannot hope to return to the past production levels of the Soviet era, and, according to statistical data, in the first half of 2006 the volume dropped by 6.3%. This means that the industry needs investment into more efficient methods of extraction, as has been demonstrated by JSC Alel Financial and Investment Group, which operates the Suzdal deposit in eastern Kazakhstan. It is the first company in the republic to implement BIOX, an advanced method for gold extraction that utilizes biological leaching. The technology permits the oxidation of sulfide ore with the use of microorganisms, allowing efficiency gains during the extraction process. A modern complex for applying this technology in gold processing has been constructed in Kazakhstan at a cost of US$50 mln. The projected capacity of the facility is 315,000 tons of ore per year, out of which an expected 3 tons of pure gold will be extracted. A metallurgical laboratory for modernizing and improving the applied technology has been created at the plant. Another prospect exists, in which ALEL will be able to process ore extracted by other companies at their own deposits, which will enable the complex to become one of the largest gold-producing centers in Kazakhstan.