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Kyrgyzstan: Mining Industry
Overview
May, 2007
Author: Artyom Zozulinsky, BISNIS Representative in Bishkek, Kyrgyz
Republic.
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN
COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED FOR
USE OUTSIDE OF THE UNITED STATES.
Note: 1 metric
ton ≈ 35 274 oz.
Background and current state of the mining
industry
The development of the
mining industry in the Kyrgyz Republic has started back in the beginning of the
20th century. Primary production at that time was coal, oil, copper,
lead and mercury. During World War II, most operations in mining were
concentrated around lead, mercury, antimony, gold, tungsten, coal and arsenic.
Consequently, Kyrgyzstan became an important contributor to USSR production of
certain minerals. Its shares in total production of minerals in USSR amounted
to 100% in antimony, 40-100% in mercury, 30% in rare-earth materials, and 15%
in uranium.
Some of the formerly
state-owned Soviet companies are still operational. Among them are Kara-Balta
Mining Enterprise, which is refining up to 25 tons of gold and silver per year.
It used to process uranium but stopped doing it after the collapse of the
Soviet Union.
Makmal Gold-Mining
Enterprise is run by Kyrgyz Altyn Company that is wholly owned by the Kyrgyz
Government. Kyrgyz Gold production started in 1986 with this enterprise and
still operates but at a very poor level, primarily due to ore depletion.
Nevertheless, it manages to produce around 1.1 tons of Gold per year.
Kadamjay Antimony
Enterprise used to produce 15% of world’s antimony. In 1990, Kyrgyzstan
produced 17,608 tons of antimony becoming the third largest producer of
antimony in the world after China and Bolivia. Currently Kadamjay Antimony
Enterprise has exhausted its own deposits and is now operating with imported raw
material.
Kyrgyz
Mining-Metallurgical Enterprise or what it is called today Kyrgyz
Chemical-Metallurgical Plant, was founded in 1940s and produced rare earth
metals. Its capacity is 600-800 tons per year. Rare earth materials are not
processed anymore.
Khaydarkan Mercury
Enterprise has been operating for more than 70 years. It had reached 793 tons
of processed mercury in 1989 comprising a quarter of the world production, and
now producing at moderate level of around 450 tons per year.
Although Kyrgyzstan
cannot boast extensive oil and gas reserves as do some of its neighbors, it
does produce some oil. In 2004 Kyrgyzstan produced 73.3 thousand tons that
comprised around 3.7% of the total demand. Oil exploration in Kyrgyzstan
started back in 1900 and extraction reached 3000 tons by 1913.
Coal industry was
rapidly developing in the early 1900s, and by 1913 Kyrgyzstan provided coal for
the whole Central Asian region. By 1979 the coal production reached 4.9 million
tons per year but decreased dramatically in 2004 amounting to only 0.5 million
tons with a demand of 1.9 million tons per year.
Production of raw
construction materials in 1980s successfully met the demand of both the country
itself and the neighboring states. Cement, bricks, stone casting and facing materials
are all examples of construction materials.
Right before the
collapse of the Soviet Union, Kyrgyzstan was a sole producer of antimony in the
whole USSR, produced 64% of rare earth products and 15% of uranium. Soviet
Government was spending up 50 million rubles a year on exploration of new
mines. Around 61 thousand people were involved in the exploration and operation
of the mining industry of Kyrgyzstan.
After gaining
independence in 1991, foreign investments started to flow into Kyrgyz gold-mining
industry. In 1996 the biggest gold mine in Kyrgyzstan, Kumtor, with gold
deposits of more than 300 tons started operating with an annual production of
500 to 750 thousand ounces (15 – 23 tons) of gold per year.
Many companies
involved in extraction and bottling of the mineral water emerged during the
1990s. Some of them became quite successful in this business.
As of 2007, Kyrgyzstan
has considerable natural reserves as well as human resources to further develop
the mining industry.
Production, Exploration & Potential
Gold
Though Kyrgyzstan has
lots of mineral resources like coal, iron, mercury, copper and others, the
primary attraction for foreign investors remains gold. Since there are only 2
gold mines operating in the Kyrgyz Republic (Kumtor & Makmal), there is a
huge potential for further exploration and development of existing and
unexplored deposits. Many of them are being further explored by foreign
investors. Several new gold deposits have been discovered for the past 10
years. Currently operating gold mines constitute 90% of production volume in
the mining industry.
Minerals |
Measurement |
Number of deposits |
Confirmed |
Fuel and energy
resources |
|||
Oil |
tons |
11 |
12,925 |
Gas |
000 m3 |
11 |
7,312 |
Coal |
tons |
49 |
1,316,918
|
|
|
|
|
Precious metals |
|
|
|
Hard rock gold |
tons |
24 |
348 |
Placer gold |
tons |
24 |
6 |
Silver |
tons |
12 |
326 |
|
|
|
|
Base and rare metals |
|
|
|
Mercury |
tons |
4 |
40,335 |
Antimony |
tons |
7 |
265,444 |
Tin |
tons |
2 |
209,221 |
Tungsten |
tons |
2 |
124,943 |
Copper |
tons |
7 |
140,500 |
Lead |
tons |
3 |
27,400 |
Zink |
tons |
2 |
17,600 |
Rare earth metals |
tons |
1 |
51,500 |
Source: Mining Industry as a source
of economic growth in Kyrgyzstan, Bishkek 2005
Table 1. State
balance of major minerals
Canadian Kumtor
Operating Company, being the largest gold producer in the Kyrgyz Republic,
produces 15 – 23 tons of gold per year. It has been operating since 1996, and
so far produced over 180 tons of gold with estimated proven reserves of 363
tons of gold. Kyrgyzstan owns some 16% of shares in CenterraGold that owns
Kumtor Operating Company. In the end of December, 2006 Kumtor has announced
that it has discovered a high-grade deposit of additional 43.5 tons with an
average gold grade of 20.3 g/t. Further construction for this new high-grade
deposit should have started in the second quarter of 2007. Current average gold
grade is 4.1 g/t. The macroeconomic impact of Kumtor Operating Company is quite
substantial. Kumtor contributes 6% of Kyrgyz GDP, 37% of Kyrgyz export, and
Kyrgyzstan takes the 3rd place in production volume of gold in the
whole NIS. Kumtor project comprises 38% of the Kyrgyz Industrial Sector.
Makmal, operated by
KyrgyzAltyn - wholly owned by Kyrgyz Government produces on average 1.15 tons
of gold per year. It has almost depleted its gold reserves. KyrgyzAltyn has a
stake in each foreign investment project aimed at development of gold deposits.
Source: State Agency for
Geology and Mineral Resources
Figure 1. Mineral
Resources of the Kyrgyz Republic
There are many other
companies exploring the deposits, but none of the gold mines has actually
started to operate so far. Andash Mining Company, a joint venture between
Kyrgyzstan and the British Aurum Mining company is extensively exploring and
has discovered gold and copper deposits at Andash (# 25 in Figure 1.)
Talas Gold Mining
Company exploring the third largest gold deposit in Kyrgyzstan, Jerooy, was one
another company involved in gold exploration. It used to be a British-Kyrgyz
JV, where around 60% of shares belonged to Oxus Gold plc. Their license was
annulled by the new government in November 2005. The license for Jerooy deposit
was sold out to Global G.O.L.D. Holding Gmbh, an Austrian company with 60%
shares. Jerooy deposit is estimated to have 74.7 tons of gold with an average
gold grade of 6.3 g/t. Oxus Gold plc did not admit their fault, but sold out
their shares to KazakhAltyn – one of the biggest Kazakh gold mining companies.
The second largest
gold deposit Taldybulak Levoberezhniy (#3 in Figure 1.) with proven reserves of
129 tons of gold, has already had two licenses annulled by May 2007, one from
an Australian Central Asia Gold Limited and one from Kazakh Altynken. The last
one did not fulfill the obligations on the contract on time.
Other Minerals
Minerals |
Measurement |
Production |
Price per unit of product in USD |
Estimated income |
Actual employment |
Number of working |
Oil |
tons |
73293 |
145 |
$ 10,627,485.00 |
1439 |
2 |
Gas |
000 m3 |
28169 |
60 |
$ 1,690,140.00 |
600 |
2 |
Coal |
tons |
495000 |
10 |
$ 4,950,000.00 |
2600 |
37 |
|
|
|
|
|
|
|
Mineral water for medical |
m3 |
1715007 |
0.001 |
$ 1,715.01
|
|
16 |
Mineral water for dinking |
m3 |
11675 |
0.15 |
$ 1,751.31
|
|
26 |
|
|
|
|
|
|
|
Bed rock gold |
kg |
21999 |
13000 |
$ 285,987,000.00 |
3011 |
7 |
Placer gold |
kg |
13 |
13000 |
$ 163,800.00 |
15 |
1 |
Artisanal gold |
kg |
250 |
13000 |
$ 3,250,000.00 |
1250 |
|
Silver |
kg |
11700 |
230 |
$ 2,691,000.00 |
|
4 |
Mercury |
tons |
459 |
9321 |
$ 4,280,203.20 |
803 |
1 |
Antimony |
tons |
1112 |
750 |
$ 834,000.00 |
1227 |
3 |
Fluorspar |
tons |
3038 |
90 |
$ 273,429.00 |
150 |
1 |
Gypsum |
tons |
14000 |
100 |
$ 1,400,000.00 |
242 |
3 |
Cement Materials |
tons |
87000 |
5 |
$ 435,000.00 |
307 |
2 |
Facing stone |
m3 |
10000 |
10 |
$ 100,000.00 |
547 |
8 |
Silica raw materials |
tons |
15000 |
20 |
$ 300,000.00 |
50 |
1 |
Construction materials |
|
|
|
|
|
|
Clay |
m3 |
966600 |
4 |
$ 3,866,400.00 |
952 |
16 |
Sand-gravel aggregate |
m3 |
491300 |
4 |
$ 1,965,200.00 |
1474 |
6 |
Limestone |
tons |
445050 |
5 |
$ 2,225,250.00 |
15 |
2 |
Building stone |
tons |
40000 |
3 |
$ 120,000.00 |
150 |
6 |
Sands |
m3 |
485600 |
5 |
$ 2,428,000.00 |
142 |
2 |
Expanded clay and |
m3 |
2000 |
5 |
$ 10,000.00 |
19 |
1 |
Total |
|
|
|
$
327,600,373.52 |
14993 |
147 |
Source: Mining Industry as a
source of economic growth in Kyrgyzstan, Bishkek 2005
Table 2. Production
of Minerals in Kyrgyzstan, 2004
Table 2 shows that
though gold comprises almost 90% of the total minerals produced, there are
still some other natural resources that have a significant value. Development
of oil & gas sector, which comprises 3.7% of the total mining production,
is getting more interest from foreign investors. Russian Gazprom Neft Asia has
recently signed an agreement with Kyrgyz Government for further exploration in
the South of Kyrgyzstan. Kyrgyzstan still remains heavily dependant on imported
oil and gas, since the locally produced products cover only 3% of demand.
Coal mining is an
important industry, which needs foreign investments. Lots of coalmines that
once operated under the Soviet Union are standing without any operation. Between
1992 and 2003 coal output dropped from about 2.4 million tons to 411,000 tons
per year. Kyrgyzstan’s remaining considerable reserves are estimated at 2.5
billion tons. The biggest coal deposit
Kara-Keche in the Northern Kyrgyzstan is very promising with a capability of
producing 500,000 to 1 million tons per year.
Government Initiatives
In 2005 the newly
established government started to pay more attention on who the licenses for
exploration are given to and whether those that have acquired these licenses
are fulfilling their obligations on the contract.
On one side, it may
seem that government is becoming more corrupted and has more intervention, but
on the other side, the system becomes more transparent. Before the revolution
in 2005, people didn’t know how the licenses are issued to different companies.
Right now mass media fully covers such sensitive topics. Government is working
on allocating the mineral deposits through open tender system.
According to World
Bank study, with significant legislative reform, Government can attract over
USD 1 billion in foreign investment.
Challenges for Business
Gold mining industry
is very attractive in Kyrgyzstan, but it bears some risks. Since March 2005
Government has been having political unrest, and that created an unstable
situation for potential investors.
Government is trying
to negotiate better now and have more favorable conditions for Kyrgyzstan when
issuing licenses, which creates some uncertainty among the present investors.
Several gold mining
licenses have been annulled on the two major gold deposits – Jerooy and
Taldybulak Levoberezhny and given to different investors.
The laws on licensing,
subsoil use, and other laws related to mining industry are complicated and
often have contradicting points between each other.
The existing
exploration data that Government inherited from the Soviet times is very
difficult to access and is all in paper archives. Very small amount of
exploration data is available electronically.
Road blockings have
been another problem for existing and developing gold mines. Though the
Government issued a law prohibiting road blockings to major industrial sites,
this law is not enforced accordingly.
Many foreign investors attract international firms to conduct the
feasibility study for their project, as well as to further explore the
reserves.
Currently working Kumtor gold mine has extensively been using the
Caterpillar equipment for their operation. Such opportunities will come once
the construction of the new mines begins
Gold, Silver, Tin, Copper, Tungsten, Coal, Oil & Gas, Antimony, mercury
and others have great potential for further development.
BISNIS Representative in Kyrgyzstan
Artyom Zozulinsky
171 Prospect Mira
Bishkek, 720016
Tel. +996 312 55 12 41, ext. 4403
Fax. +996 312 55 12 64
Email. ZozulinskyA@state.gov
State Agency for Geology & Mineral Resources
Vladimir Zubkov – Director
2 Erkindik, Bishkek 720739
Tel. +996 312 66 49 01, 62 06 32
Fax. +996 312 66 03 91
Email. mail@geoagency.bishkek.gov.kg
Web. http://www.kgs.bishkek.gov.kg/
For more information on Kyrgyzstan, visit BISNIS online
at http://bisnis.doc.gov/bisnis/country/kyrgyzstan.cfm
BISNIS
(www.bisnis.doc.gov) is part of the
U.S. Commercial Service (www.export.gov)
BISNIS Representatives in Kyrgyzstan: Artyom Zozulinsky (ZozulinskyA@state.gov)