COUNTRY FOCUS – Kazakhstan

KAZAKHSTAN:
a ‘market economy’
With a Standard and Poor’s ‘investment grade’
credit rating, Kazakhstan is considered a model
transition economy, in overcoming the legacy
of the Soviet centralised command economy.
John Chadwick reports on the significant
achievements of its mining sector

Hambledon Mining operates the

Sekisovskoye open-pit gold mine and a
850,000 t/y plant, and owns the Ognevka
processing plant, both of which are close to
Ust Kamenogorsk in East Kazakhstan

T
he US Department of Commerce world and the second largest country in the industrial sector, and more than a quarter of
graduated Kazakhstan to market former Soviet Union. Its location, between total exports.
economy status in recognition of its Russia and China, and its low-risk status as a Kazakhstan possesses enormous oil and gas
economic reforms and openness to foreign stable and economically developed state in reserves as well as plentiful supplies of other
investment, etc. In September 2002, it the Central Asian region mean that it is well minerals and metals, including chrome, iron-
became the first country in the former Soviet situated to develop the rich natural resources ore, alumina, lead, zinc, copper and
Union to receive an investment-grade credit of the region and serve the growing Chinese manganese and precious metals. The country
rating from a major international credit rating market. It is developing into prosperous and is also a major producer of coal. The
agency. modern Eurasian nation. The country is a extraction and production of oil and gas and
Kazakhstan is a constitutional republic in significant metal producer with metals the extraction and processing of minerals are
Central Asia – the ninth largest country in the accounting for 20% of jobs in Kazakhstan's the most significant industries in the
 COUNTRY FOCUS – Kazakhstan

Kazakhstan economy. Kazakhmys Gold: the

Foreign direct gold-copper sulphide
investment, which ore deposits of Mizek
reached 7.7% of GDP in and Bozymchak, and
2004, remains the silver sulphide
overwhelmingly deposit, Akjilga. At the
concentrated in these end of 2008, total
sectors. Measured and
Precious metals Indicated gold
production is increasing resources accounted
significantly with 5,975 for 2.36 Moz. Total
kg of refined gold and Measured and
387,660 kg of refined Indicated resources of
silver produced in the gold, copper and silver
January to July period of were 4.02 Moz gold
this year2009, 26.9% equivalent.
and 5.8% respectively The Mizek deposit is
more than for the same situated in northeast
period of last year, the Kazakhstan,
National Statistics approximately 340 km
Agency told Interfax. The principal Kazakhmys operations are in southwest of Semey. Studies on the best gold-
Last year the Kazakhstan Government Kazakhstan, but with precious metal mine/projects in copper sulphide ore processing technology are
became a major shareholder in Kazakhmys, Tajikistan and Kyrgyzstan. This map shows the in progress. To exploit the sulphide ore, a new
the world's No.10 copper producer, through principal mining areas open pit and underground mine will be
an exchange of shares. The government required together with a concentrator to
transferred to Kazakhmys a part of the state’s No. 1 and No. 2 and Satpaev concentrators. process the ore on-site. Upgrades are planned
stake in Eurasian Natural Resources Corp There is also a smelting/refining operation - for the power and water infrastructure.
(ENRC), one of the world’s top ferrochrome producing copper cathode and silver in slimes, The Bozymchak deposit is located in
producers, in return for an additional issue of which is sent to Balkhash for recovery into southwestern Kyrgyzstan, 185 km from the
Kazakhmys shares. Thus, the state became a silver granules – and a continuous-casting nearest rail link. Kazakhmys Gold has the
major shareholder in both the largest copper rod plant. license to develop the central part of the
Kazakhstan-based mining companies listed on The major copper expansion projects, at deposit from September 2008 to December
the London Stock Exchange. It holds 11.65% Aktogay and Boschekul, made good progress 2027. In December 2008 Kazakhmys Gold
of ENRC and 15% in Kazakhmys. last year, supported by Fluor as consulting extended its exploration license from January
The copper division of Kazakhmys consists engineers. Prefeasibility studies have been 2009 to December 2013. A definitive feasibility
of 20 mines - 14 underground and 6 open completed on both projects confirming their study was completed in November 2008.
pits. The mineral reserves and resources of potential as large, low cost and long life Kazakhmys reports “the results of the study
these mines are sufficient to support projected assets. are positive with robust economics. The next
production for at least 20 years. The ore mined The Aktogay deposit includes both oxide step is to construct the processing plant with
is processed in 10 concentrators and thence and sulphide ore. The prefeasibility study for further development of infrastructure including
two smelters. This division is divided into four the sulphide project has been completed, the improving the road links and installing power
administrative areas, Zhezkazgan complex, results of which are being assessed together lines.”
Balkhash complex, Karaganda region and East with the feasibility study for the oxide project The Akjilga deposit is situated in the
region. In addition to producing copper, the (completed in late 2008). Financing options for southeast of Tajikistan (South Pamir), 258 km
division produces significant quantities of zinc, Aktogay are being considered prior to the from the regional centre, Khorugh. Kazakhmys
silver and gold, which are sold as by-products. project moving to the feasibility stage. Gold has the exploration license and contract
Zhezkazgan is the biggest operation – a fully The Boschekul sulphide ore prefeasibility with the Government of Tajikistan from
integrated facility, including mining, study was successfully completed in April September 2006 to September 2016.
processing, smelting and refining. At one time 2009. Additional work is being conducted to In May 2008 Kazakhmys completed the
it was the largest mining and processing identify options to further improve the acquisition of the Ekibastuz coal-fired power
complex in the Soviet Union and today it is economics. Financing options for the project plant, the largest source of power in
one of the most technically advanced are being assessed after which the project is Kazakhstan and the Maikuben West coal mine
complexes in the CIS. In 2008, Zhezkazgan expected to progress to the feasibility stage. which now form Kazakhmys Power. Combined
was responsible for 68% of Group mined ore In July 2007 the Group acquired Eurasia with the Group’s three existing power plants,
output and 48% of Group's cathode output. Gold, currently named Kazakhmys Gold, which Kazakhmys is now the largest power supplier
There are six underground mines (primarily has two operating oxide open-pit mines (heap in Kazakhstan.
room and pillar) – South, Stepnoy, East, West, leach) in Kazakhstan: Mizek and Central Maikuben West is an open-pit mine,
Annensky and Zhomart (formerly Zhaman- Mukur. In 2008 the total output of gold was situated 160 km to the southwest part of
Aybat) and the North open pit. To extract 179,000 oz. Pavlodar City and 110 km from the power
copper concentrate there are the Zhezkazgan The three major expansion projects within plant. Maikuben has an estimated mine life

OCTOBER 2009 International Mining 00

 COUNTRY FOCUS – Kazakhstan

proposed transaction is in keeping with our

intention at the time of purchase, to seek a
strategic partner to assist in the development
and investment of Ekibastuz GRES-1. Ekibastuz
GRES-1 is the largest power station in
Kazakhstan, with a capacity of 2,250 MW, but
with the potential to increase to its original
nameplate capacity of 4,000 MW. This
substantial increase in capacity will require
total investment of around $1 billion, across
the five producing turbines and the three
dormant turbines. Given the capital commitment
needed to deliver this increase in capacity and
the potential output of Ekibastuz GRES-1,
which is substantially above our own needs,
we may consider reducing our holding further.
Kazakhmys operates 20 copper
“A key issue for Kazakhstan has been the
mines - 14 underground and
6 open pits need to increase tariffs, thereby improving
investment returns and encouraging
investment in the sector. Without this action,
greater than 30 years providing a secure base mining company, listed in London, but Kazakhstan will suffer increasingly severe
of raw material supply with current output of operating in Kazakhstan. They have a different power shortages and economic growth will be
3.6 Mt/y of coal. The brown coal mined is suite of metals from us, producing iron ore, delayed. The average tariff for the first six
supplied to Ekibastuz as well as other heat and aluminium and ferrochrome. Longer term, we months of the year was KZT2.84/kWh, but the
power stations, industrial enterprises and the believe that this holding diversifies our regulated ceiling for 2009 is now KZT3.6/kWh.
domestic sector in Kazakhstan and other earnings and presents us with strategic These prices remain considerably below most
countries. As well as being the largest power options.” Its 2008 revenue was dominated by international prices, but compare to
plant in Kazakhstan, Ekibastuz is one of the ferroalloys 61% followed by iron ore 22%, KZT2.35/kWh, when we bought Ekibastuz
largest coal power plants in the world, with alumina 13% and energy 3%. GRES-1 in May 2008. The increase in tariffs
installed capacity of 4,000 MW. In the first half of 2009, Kazakhmys seen already, and the expectation for future
Total copper cathode produced in 2008 production was 170,000 t of copper cathode increases, starts to justify the investment
from Kazakhmys ore was 343,000 t. First half equivalent from its own material, an increase required to increase capacity. The Government
2009 production of 170,000 t of copper of 8% on first half 2008. Production benefited has also made good progress in improving the
cathode equivalent showed an 8% increase on from more efficient management of national grid, which will assist sales in the
the previous period, assisted by use of production facilities and processing of domestic market.”
stockpiled ore and productivity improvements. materials, including processing of stockpiled
Sales of 200,000 t of copper cathode ore, raised output at two mines (South and World ferrochrome leader
equivalent, benefitted from reductions in Nurkazgan West) and improvements made in ENRC is the world’s largest ferrochrome
inventory. equipment availability and recovery rates. producer (by chrome content). In 2008 it
First half 2009 cash costs were significantly Byproduct output also benefited from a mined 3.55 Mt of chrome ore and just over 1
lower than 2008 with net cash costs of reduction of work in progress and increased Mt of manganese ore. The current known
$0.76/lb, compared to $1.16/lb for the full recovery rates at concentrators. Gold chrome ore mine life is 44 years. It is also one
year 2008. Cost reductions, lower input prices, production was 67,900 oz, an 8% increase of the world’s significant exporters of iron ore
currency devaluation and higher volumes in compared to first half 2008, silver production by volume, with a known iron ore mining life
copper and by-products all contributed to this. increased 10% to 9.145 Moz and zinc in of 38 years. Output is around 40 Mt/y.
However, the average realised copper price of concentrate output increased 15% to 76,000 t. For the first half of 2009, production
$4,024/t in first half 2009 was 51% below the Kazakhmys owns the Ekibastuz GRES-1 volumes remained below the comparable
average realised copper price for first half. The power plant, where power generation was period of 2008. The respective decreases were
price at the time of reporting was $6,305/t, 32% lower in the first half of this year 17.2% for saleable chrome ore, 29.2% for
recovering from $2,902/t at the end of 2008. compared to the previous period, at 3,761 saleable manganese concentrate and 17.9%
Kazakhmys Copper produces significant GWh, as economic conditions in Kazakhstan for total ferroalloys, with silicomanganese
volumes of other metals, including zinc, silver reduced demand. The company says it has production broadly steady. Ferrochrome
and gold. In 2008, it produced 48,000 t of “started to see some recovery in power production decreased by 10.6%, reflecting
zinc metal and 137,000 t of zinc concentrate. consumption and believes that the outlook is previously announced production cutbacks for
Kazakhmys is the fourth largest silver producer improving, particularly as other commodity the division, but increased 35.8% from first
in the world (17 Moz produced in 2008). producers in Kazakhstan recover and start quarter 2009. Serov added saleable chrome
In 2008 Kazakhmys increased its holding in absorbing more of their own power output. ore production of 11,000 t and total
ENRC and became the largest shareholder with “The negotiations to sell 25% of Ekibastuz ferroalloys production of 25,000 t. Tuoli's
a 26% stake. Vladimir Kim, Chairman of GRES-1 to Samruk-Kazyna, retaining a 75% output was minimal in second quarter 2009,
Kazakhmys, explained: “ENRC is a major equity interest, are at an advanced stage. The with one furnace restarted at the end of June.

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

ENRC's operations around the country

During the quarter ended June 30, Iron Ore

Division production decreased compared to Q2
2008, reflecting previously announced
cutbacks of 22.0% for iron ore extraction,
19.7% for primary concentrate and 17.6% for
saleable ore. In Q2 2009, compared to Q2
2008, there was a change in the saleable mix
with an increased proportion of saleable
concentrate. Pellet production declined 36.5%
whilst saleable concentrate production was
broadly steady. Against Q1 2009, pellet
production increased 63.5% and saleable
concentrate production rose 22.0%.
KAS represents the largest private capital
investment in the metals and mining industry
ENRC is the world’s ninth largest supplier of operating company, SSGPO, is one of the in the Republic to date, at a total construction
traded alumina, by volume. Bauxite production largest companies in Kazakhstan and employs cost of $900 million. It is a key element of a
in 2008 was 5.16 Mt and 1.6 Mt of alumina some 18,000 people. SSGPO is a vertically significant future aluminium cluster being
were produced. The known bauxite mine life integrated business. It comprises: primary developed by ENRC within the country, in
of the company is 37 years. In the first half of mining operations that produce iron ore; keeping with the government’s ambitions to
2009, bauxite extraction and production ancillary mining operations that produce promote further domestic processing activity
volumes of saleable alumina remained stable, limestone, dolomite and bentonite-clay; an and the production of higher value added
with an increase of 0.3% compared to the iron ore processing plant; and a power plant products.
second quarter of 2008. The division produced that supplies it with the majority of its energy Kazzinc is a major fully integrated zinc
30,000 t of aluminium, in line with the Phase needs. The operations are centred around the producer with considerable copper, precious
1 run rate capacity. town of Rudni, which was established to metals and lead credits. Most of its operations
Its current capital expenditure projects in support the iron ore operations, which in turn are in east Kazakhstan. The company was
progress in the ferroalloys sector include a is located some 45 km southwest of the city of established in 1997 through the merger of
700,000 t/y chrome pelletiser, expected to cost Kostanai in the north. Eastern Kazakhstan's three main non-ferrous
$110 million and be completed this year. There In May 2008 the Group completed the metals companies - "Ust-Kamenogorsk Lead
is also a $590 million, 440,000 t/y replacement acquisition of a 50% interest in Bahia and Zinc Combinate", "Leninogorsk
and expansion of Aktobe’s smelting capacity to Mineracao, which is involved in the Polymetallic Combinate" and "Zyrianovsk Lead
be completed in 2012. development of an iron ore deposit in Brazil. Combinate". All three producers were
Phase 2 of a 125,000 t/y aluminium smelter, majority-owned by the Government of
costing some $305 million, is due for Kazakhstan, which also included the
completion in 2010. Also a $200 million anode Bukhtarma Hydroelectric Power Station into
plant should be completed in 2011. While in the new company under a long-term
the power sector, ENRC is spending some $85 concession to improve its appeal to potential
million on overburden stripping equipment for investors. The controlling block of shares in
its coal mines. Kazzinc has since been sold off by the state to
In June this year KAS Ingot became the first the private sector, with Glencore International
Kazakhstani Primary Aluminium available via becoming the company's main investor.
the LME London. The London Metal Exchange In the years since its creation, Kazzinc has
(LME) approved with immediate effect the significantly increased production capacity and
listing of primary aluminium ingots produced output on all fronts. The company continues to
at ENRC's aluminium smelter, Kazakhstan develop seeking to have its stable position
Aluminium Smelter (KAS), located in Pavlodar. among the world’s five lowest cost producers
The construction of KAS, the first state-of-the- in its industry.
art aluminium smelter in the Republi, started in The Maleevsky mine is Kazzinc's largest
May 2005 and was completed within just 27 underground operation, commissioned by the
months, in December 2007, on budget and company in June 2000. By the end of 2001
ahead of schedule. The smelter reached its full the mine had been expanded, bringing
Phase 1 annual production capacity of 125,000 t production up to 2.25 Mt/y of ore. Average
in the first half of 2008, well ahead of its 2008 ore grades are Zn 7.5%, Cu 2.3%, Pb 1.3%,
year end deadline, and in Phase 2 its capacity Au 0.75 g/t and Ag 75 g/t, with proven
is set to double to 250,000 t in 2010. reserves sufficient to sustain production at
The Group's Iron Ore Division is one of the Knelson concentrator at the Maleevsky mine, current rates for the next 18 years. It is a
world's significant exporters of iron ore and its Kazzinc's largest underground operation trackless mine employing sublevel stoping with

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

backfill. It accounts for the refinery. The production site

majority of Kazzinc's zinc and is located at Kazzinc's
copper concentrate production, headquarters, on the edge
the former supplying the entire of the city of Ust-
smelter feed at the Ust- Kamenogorsk, with the three
Kamenogorsk zinc plant, and the plants sharing a common
latter supplying 85% of the infrastructure. The precious
company's total copper metals refinery produces
concentrate production. around 7 t/y of gold and 350
Maleevsky lies 18 km east of the t/y of silver.
town of Zyrianovsk.
The Zyrianovsk concentrator, Varvarinskoye
located on the eastern outskirts sale
of the town, primarily treats Located in northwest
Maleevsky ore. The different ore Kazakhstan, Orsu Metal’s
types are treated in separate 100% owned Varvarinskoye
sections. The concentrator mine commenced
incorporates a heavy media production of gold doré in
section to deal with the dilution December 2007 and copper-
inherent in large-scale mining, as gold concentrate in March
well as crushing, grinding, flotation, thickening Belaz trucks are widely used throughout Kazakhstan's 2008. During the year ended 31 December
and filtering sections. Free gold is recovered mines 2008, the mine produced a total of 40,629 oz
using gravity tables and centrifugal of gold and 4,494 t of copper recovered to
concentrators. The flotation and filtering and gold-bearing tailings, the concentrator has concentrate. Production during the first
sections, together with the loading station, a number of distinct treatment circuits. Zinc quarter of 2009 was reported as 13,599 oz of
were revised and expanded in conjunction with concentrate is treated at the Ridder refinery, gold and 1,743 t of copper.
the construction of the Maleevsky mine, in copper concentrate is sold to third parties, In mid-June this year Orsu signed a definitive
order to provide the necessary capacity for the while lead and gold concentrates are shipped sale and purchase agreement (SPA) to sell
treatment of high grade ores. to the Ust-Kamenogorsk lead smelter for Varvarinskoye to OJSC Polymetal. The total
The Tishinsky mine is located 15 km south treatment. consideration for the sale of the Varvarinskoye
of the town of Ridder, adjacent to the Ust- The Ridder Metallurgical Complex produces is about $235 million, comprising $8 million in
Kamenogorsk to Ridder road. It is an electrolytic zinc using virtually the same cash payable on closing plus deferred
underground operation, producing 1.4 Mt/y of hydrometallurgical technology as the Ust- consideration of up to a maximum of $12
polymetallic ores grading on average 5.3% Zn Kamenogorsk plant, i.e, standard fluid-bed million in cash which is contingent on and
and around 1% combined Cu+Pb. It too is a roasting, two-stage leaching with spent calculable by reference to the future price of
trackless, sublevel stoping with backfill mine. A electrolyte followed by hydrolytic and both gold and copper plus the assumption of
heavy media plant is located on the surface, cementation solution purification/EW. The over $215 million in debt and hedging
removing up to 20% waste from the run of main difference is that the zinc ferrite residues obligations related to the financing of the
mine. Ore is then railed to the Ridder from Ridder are treated exclusively in coke- project. The company anticipated completing
concentrator. The float from the heavy media fired Waelz furnaces, while in Ust- the sale during the third quarter of 2009.
separation is used in backfill preparation. Kamenogorsk some residues are processed Upon completion Orsu will have no
Proven and probable ore reserves are sufficient through the lead smelter. The plant produces outstanding long-term debt and intends to use
to sustain current production levels for another 110,000 t/y high grade zinc metal and alloys. the proceeds from the sale to fund operating
20 years. Sulphuric acid produced at the plant is sold to costs and to fund ongoing exploration
The Ridder-Sokolny gold mine is on the third parties. activities on its existing properties, as well as
outskirts of Ridder, around 3 km from the city In 2004 Kazzinc acquired the mining rights any new properties acquired.
centre and adjacent to the concentrator. The to the Shaimerden deposit in the Kostanai Commenting, Dr Sergey V Kurzin, Executive
mine produces 2 Mt/y of ore with an average region of Kazakhstan. Shaimerden's proven Chairman of Orsu said: "Proceeds from this
gold content of 4 g/t. This yields gravity and reserves amount to 910,000 t of zinc at an sale will allow Orsu to focus on developing its
flotation gold concentrates primarily, with average Zn grade of 21%. Since it is an oxide exploration and growth assets with renewed
some side credits in the form of zinc and orebody and as such not amenable to the vigour with a substantially stronger balance
copper concentrates. Various mining concentration process, Kazzinc treats the ore sheet. After extended negotiations with the
techniques are applied across the mine, with directly through Waelz kilns at the Ridder banks to refinance the Varvarinskoye debt and
sublevel stoping and block caving dominating. metallurgical complex. Some 30% of the hedging facilities, the Board believes that the
All ores from the Tishinsky, Ridder-Sokolny Waelz capacity expansion allows for the sale will release the company from its current
and Shubinsky (a small polymetallic operation) production of up to 60,000 t/y of zinc metal financial and legal burdens."
mines, and gold-bearing tailings are treated in from Shaimerden ore. One of the projects that Orsu intends this
separate sections of the Ridder concentrator. The Ust-Kamenogorsk metallurgical complex money to help advance is the Karchiga copper
Given the wide variety of ore types ranging consists of a 190,000 t/y zinc refinery, a deposit in Kazakhstan. The 47.3 km2 Karchiga
from sulphide zinc/lead/copper to silicate gold 180,000 t/y lead smelter and a precious metals exploration and mining licence contains the

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

Frontier Mining has copper and gold projects in the

country

commence in third quarter 2009.

A report on Benkala completed by Wardell
Armstrong International in March 2007
estimates 47.75 Mt at an average grade of
0.36% Cu for the oxide mineralisation, and
873.75 Mt at an average grade of 0.30% Cu for
the sulphide mineralisation, representing some
2.8 Mt of contained copper. At a 10% discount
rate and a $1.5/lb Cu price, the project has an
NPV approaching $500 million. Development of
this project is being fast tracked forward towards
a prefeasibility study, with a view to beginning
production at the end of 2010.
At its Naimanjal Complex, following the
announcement in June 2009 of the extension
of the pilot production license, the company
commenced 2009 gold production. On June
Karchiga VMS deposit. This copper-gold an additional 20 holes totalling 2,500 m were 23 FML Kazakhstan shipped dore containing
deposit is located in the extreme northeast of expected to have been drilled. 153.5 oz gold and 172.5 oz silver to Metalor
the Republic, within 40 km of the Chinese The strategic focus of the infill drilling has in Switzerland. FMLK expects to make
border and within the Rudny Altai belt which been revised in order to achieve earlier shipments on a fortnightly basis from
is ranked in the top four VMS belts in the production and cash flows from the Naimanjal. Naimanjal is expected to produce
world. In April 2008, the Company released an oxide/supergene zone. This requires closer 6,000 oz gold and 60,000 oz silver in 2009.
NI 43-101 mineral resource estimate. At a spaced infill drilling to depths of 150 m across Frontier expects to receive commercial
0.50% copper cutoff, the Indicated mineral the deposit. In addition, KazCopper has also production approvals in third quarter 2009 and
resource is 4.75 Mt @ 2.46% Cu while the drilled several infill drill holes to depths of 300 forecasts commercial production of 15,000 oz
Inferred mineral resources total 2.81Mt @ and 500 m. This revised program for 2009 is gold and 150,000 oz silver for 2010.
1.81% Cu. The primary scope of the on-going expected to see KazCopper progress towards full In addition to these projects, Frontier also
2008 to 2009 exploration programe is feasibility, production and near term-cash flow has a potential copper porphyry deposit with
designed to upgrade the previously reported on the oxide/supergene and mixed sulphide ores associated gold and molybdenum, Baitimir;
mineral resource estimate to Measured and at Benkala early 2011 subject to further and several copper/gold prospects along a 25-
Indicated categories under NI 43-101. regulatory, permitting and production approvals. km trend including both VMS and porphyry
Frontier Mining owns two licenses in The Benkala project has received technical types. Metallurgical tests on its Beschoku and
Kazakhstan. They are the Naimanjal and regional authority approval to connect Yubileiny copper projects confirm the oxide
exploration and mining licence, held by wholly- electricity to the Benkala site. Construction copper ore is amenable to extraction using low
owned subsidiary FML Kazakhstan, and 50% work for this and other site infrastructure and cost SX-EW technology.
of U.S. Megatech BVI which holds the Benkala the foundation works for a 20,000 t/y SX-EW Alhambra Resources, through its wholly
licence. Frontier has one producing gold mine, cathode copper plant are planned to owned subsidiary, Saga Creek Gold, is in its
Naimanjal; one prefeasibility stage gold
project, Koskuduk; and the recently acquired
50% interest in the Benkala copper mine.
The Benkala copper porphyry project,
located in the northwest is a potentially
worldclass copper project. It is a 50-50 Joint
Venture between Frontier and Coville
Intercorp, operated through KazCopper and at
present, a drilling programme is underway
with a JORC compliant resources statement for
the oxide/supergene zone expected to be
completed by first quarter 2010.
A total of 29 holes have been drilled under
the infill drilling program since fourth quarter
2008, with over 5,000 m drilled, the majority
in the oxide/supergene zone, to an average
depth of 115 m. The program for the
oxide/supergene zone was expected to be
completed in September 2009 by which time

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

sixth year of operations in the country. Saga the gold reserves/resources were reported to
Creek holds the rights to two licenses that be:
have an initial term of 25 years granted by the ■ Category C2: 4.5 t (145,000 oz)
Republic of Kazakhstan in 1997. These are the ■ Category P1 (prognosticated): 7.5 t
subject of an exploration and exploitation (241,000 oz)
contract between Saga Creek and the ■ Total C2 + P1: 12 t (386,000 oz)
Republic. The initial term of these licenses Kentor Gold entered into a Memorandum
expires in the year 2022, but pursuant to the of Understanding (MOU) to form a Joint
country’s Subsoil Use laws, the terms of these Venture (JV) to earn 51% equity in the
licenses can be extended for up to an Khantau Project (copper, gold, and magnetite)
additional 20 years. in southern Kazakhstan. But, in September
The main asset is its 100% working interest 2008, Kentor announced that the “issues
in the 1,093,000 ha Uzboy project located in a uncovered in the technical and corporate due
prolific gold belt of north central Kazakhstan diligence were significant and coupled with the
which hosts numerous worldclass gold current turmoil in capital markets, convinced
deposits. It lies in the Charsk belt between the the Board that entering a capital intensive
Vasilkovoskoe gold deposit on the northwest project would not be a prudent at this time.”
and the Asku gold deposits on the southeast. It terminated the MOU that it had entered into
Saga Creek commenced commercial with Arya Overseas Ltd.
operations at its 100% owned of Uzboy heap Hambledon mine geologist supervising ore mining Khantau hosts a cluster of high magnetic
leach mine effective May 1, 2006. Current intensity geophysical anomalies with spatially
mining operations are being conducted on the requirements and equipment.. associated geochemical haloes (Au, Ag, Cu,
oxide portions of the East zone of the Uzboy It is anticipated that underground mining Mo, Pb) over a 40 km strike length. It includes
gold deposit that extends to a depth of will start at a low level and build up to a rate the Khantau, Dalnyee, Oreol and Promez
approximately 50 m below surface. The oxide of some 500,000 t/y. The start-up of prospects where drilling has identified IOCG
layer is underlain by sulphide gold underground mining will greatly increase the mineralisation.
mineralisation. gold production rate and significantly lower As of August 2008, Kentor had been
Since 2005, Alhambra has been the cash cost of production. planning a scoping study within the first six
systematically exploring the 125 exploration The Ognevka plant has many potential uses months of its ownership of the project and
targets located within the project that have for treating primary base and precious metal envisaged, the project would comprise a
been identified to date. These are the Uzboy ores. The plant is currently on care and modern bulk underground mine feeding a
gold deposit, two past-producing gold mines maintenance until production can be processing plant consisting of crushing, milling,
(Dombraly and Stepnyak) and 122 other economically restarted. The facility has two flotation and magnetic separation to produce a
significant gold showings. main production lines. The first is a 350,000 t/y magnetite concentrate and a separate copper-
Hambledon Mining operates the crushing, grinding and flotation circuit which gold concentrate for sale to third party
Sekisovskoye open-pit gold mine and a has been adapted to treat residues from zinc smelters.
850,000 t/y plant, and owns the Ognevka smelters (‘clinkers’), which contain high values Khantau is very well serviced by existing
processing plant, both of which are close to of copper, gold, silver, iron and carbon. The infrastructure with sealed roads, power and
Ust Kamenogorsk in East Kazakhstan. second production line is a 200,000 t/y gravity water on site and in close proximity to a rail
Production over the life of the open pit will concentrator formerly used to treat tantalum road. It is also in close proximity to the markets
average over 40,000 oz/y. As soon as steady ore from a now-closed mine which used to for the concentrates with steel works and
production has been achieved, Hambledon operate at the site. copper smelters located both within
plans to develop the much larger underground Tserkovka is immediately adjacent to Kazakhstan and over the Chinese and Russian
resource that is expected to lead to a combined Sekisovskoye and contains the four known borders.
production rate of around 100,000 oz/y. mineralised deposits of Tserkovka, Feodulikha, Central Asia Resources (CVR) has an
As a part of the permitting of the open pit and two areas designated only as Area 4 and interest in gold exploration projects which have
operation, an initial assessment of the Area 5. All these areas are ostensibly similar to both Russian and historical unclassified
underground operation was carried out. the Sekisovskoye deposit, indicating that any resource estimates. Central Asia's has
Preliminary access layouts and detailed stope ore from them is likely to be free-milling and subsequently developed JORC compliant
layouts of the known resource were treatable in the same plant as Sekisovskoye. resource statements for most of the prospects
developed. This planning work envisaged that Each of the deposits lies within a maximum within the portfolio. The company has
access to the western orebodies would be distance of 4 km from Sekisovskoye, close to sustained an intensive drilling campaign across
developed via a spiral ramp commenced from the main road between Ust Kamenogorsk and many sites throughout 2008 and the 2009
surface to the south of the open-pit Ridder, so infrastructure requirements for any drilling campaign is focussing on developing
operations, with mining by long-hole open future development should be relatively low. two sites of most interest and potential. The
stoping in the larger orebodies and overhand Historically, at Tserkovka, nine mineralised 2009-2010 strategic plan involves the
cut and fill mining in the smaller and narrower bodies were delineated by mapping, drilling, investigations into developing a low capex,
orebodies. AMC consultants prepared a study trenching, pitting and underground exploration quick to production opportunity and
of the underground operations including from over a kilometre of underground tunnels. concurrently investigating a larger project to
conceptual mine design, infrastructure At the conclusion of initial exploration in 1980 produce a BFS for funding in late 2010.

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 COUNTRY FOCUS – Kazakhstan

Dalabai is a gold prospect 150 km north of prospect area to generate the current total that “Kazakh output will run into
Almaty. The 8 km2 licence contains an area Indicated and Inferred resource (at a 0.7 g/t Au infrastructure (road, rail, drill rigs, electricity)
that has been mined by several small open pits cutoff) of just over 6.9 Mt grading 2.27 g/t Au. and as the base of production increases
with heap leach processing on site. Operations Some A$1 million has been budgeted for (dramatically). Current credit/capital market
ceased in 2000, primarily due to a low gold further exploration of Altyntas over the next conditions also indicate that investment in new
price. In addition to being a previously 18 months and the company expects “the mines and mine ramp-up is unlikely to proceed
operating mine the prospect contains areas resource will improve significantly over this at prior rapid rates over the medium term.”
that have been authorised for immediate time period.” CVR is targeting production at Kazakhstan hosts a fifth of the known
mining, functioning infrastructure and is 12 km Altyntas in 2012. global uranium reserves and state-owned
from a large town and rail hub. It is likely that some of the major capital Kazatomprom is on track to become the
The company is progressing towards items required for Dalabai are compatible with world's top producer this year. However in
relatively quick production via a conventional, the Altyntas process flow and as such some of May its head, Mukhtar Dzhakishev, was
low capex heap leach operation with the Dalabai infrastructure has been designed dismissed and arrested. He was accused of
preliminary development in 2009 and with Altyntas parameters in mind. For illegally taking over state-owned uranium
production in 2010. Recent drilling has example: the crushing circuit at Dalabai will deposits and selling them to foreign
identified mineralisation in four zones. Plant have a capacity of 1 Mt/y, twice the size of companies, a charge he has denied.
detailed engineering is nearing completion; what is required at Dalabai, but an appropriate Nevertheless, Kazatomprom has since said that
column tests produced recoveries of 77% gold size for production operations at Altyntas. The it would honour all existing agreements with
at 12.5 mm crush size. Environmental base line integrated Dalabai/Altyntas production strategy foreign firms.
studies are complete leveraging common equipment not only From Canada, the CEO of the world’s
The company recently signed an MOU with reduces the upfront capital demand for premier uranium producer, Cameco, Gerald
Steelstruct Engineering to design, fabricate, Altyntas but also reduces construction time Grandey, said the arrests of Dzhakishev and
construct and commission a 0.5 Mt/y heap and risk and therefore potentially positively other senior Kazatomprom officials were a
leach facility at Dalabai. The work will be impacts project economic metrics such as NPV worry to foreign investors. “The arrests have
undertaken by Weldtronics International, an and payback. added more uncertainty to doing business in
associated company based in Thailand. The Dala Mining is a Kazakh mining company Kazakhstan,” Grandey told a metals and
formal contract, which is being drafted, will be developing the Koktenkol molybdenum and mining conference in Kazakhstan's commercial
between Weldtronics and CVR and will be tungsten deposit. It also has the Verkhniy hub, Almaty. “It affects our customers, the
finalised before the end of August. Kayrakty tungsten and molybdenum deposit. way they look at supplies.”
Jason Stirbinskis, Managing Director, Central Koktenkol is in the Shetsky area of the Dzhakishev has been credited with turning
Asia Resources said: “The Company is on Karaganda administrative district, one of the Kazatomprom into one of the world’s largest
target to commence development this year, be largest and most developed administrative uranium producers, mostly through
mining early next year and pouring gold in less districts in the country, close to transport and establishing joint ventures with foreign
than 12 months. This will make CVR the only energy infrastructure. The large industrial city companies.
Australian company producing gold in of Karaganda is situated 120 km to the In June, Uranium One signed a definitive
Kazakhstan”. northeast. purchase agreement to acquire a 50% interest
CVR has incorporated risk mitigation Ore reserves amount to 509.1 Mt averaging in the Karatau uranium mine from JSC
strategies into its production strategy, these 0.073% Mo. It is planned to be mined by an Atomredmetzoloto (ARMZ), the Russian state-
include open pit with a known life of 26 years at an owned uranium mining company. It will be
■ Engaging Weldtronics as experienced quality annual ore production of 20 Mt. Molybdenum paid form by the issuance of 117 million
providers or high-end processing equipment recovery is projected to be 85%, producing a common shares of Uranium One and a cash
to reduce technical or process risk concentrate grade of 51% Mo. The capital payment of $90 million. The purchase
■ Developing Dalabai – a low capex costs for the project are estimated at $725 agreement also provides for a contingent
opportunity that has a history of production, million, and operating cost $5.4/lb. payment to ARMZ of up to $60 million,
existing infrastructure and is ideally located payable in three equal tranches over the period
near major transport, a town and similar Mastery in uranium between 2010 and 2012 subject to certain
infrastructure to minimise total capital According to Macquarie Research, Kazakh post-closing tax related adjustments.
requirements and construction complexity uranium production was 8,500 t U in 2008, up The acquisition of a 50% interest in Karatau
■ Transferring funding requirements and a from 6,637 t in 2007. Macquarie notes that enhances Uranium One's position as one of
large portion of capital risk to Weldtronics “Kazakhstan has been the driver of global the world's leading uranium suppliers.
and tying their reward entirely to efficient uranium production over the past five years – Following the acquisition, Uranium One is
production of gold production has risen by ~5,200 t (from 3,300 t expected to have:
■ Developing Dalabai ahead of the Altyntas to 8,500 t) over the period, taking the Kazakh ■ Attributable 2010 production guidance of
project, which is a much larger project share of global production from 9% (of 7.5 Mlb, an approximate 35% increase over
requiring significantly greater upfront capital 35,600 t U) in 2003 to 19% (of 44,500 t U) in its previous 2010 production guidance of
commitment. 2008.” 5.6 Mlb
Altyntas is CVR’s second intended Macquarie currently expects Kazakh output ■ 2010 weighted average cash operating
production site; a much larger project 360 km to rise to 9,700 t in 2009 and 11,000 t U in costs of less than $20/lb sold.
northwest of Kazakhstan’s largest city, Almaty. 2010. This implies a forecast decline in Jean Nortier, President and Chief Executive
To-date it has focussed on 10% of the production growth due to Macquarie’s view Officer of Uranium One said: "The acquisition

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

recovery projects in the Suzak region of the

Wellfield, South-Inkai, which is owned 100% by the South Kazakhstan Oblast, some 450 km
Betpak-Dala Joint Venture, in which Uranium One has a
70% interest. The balance of the interest in the JV is northwest of Shymkent. South Inkai is owned
owned by KazAtomProm, the Kazakh State uranium 100% by the Betpak-Dala Joint Venture, in
company which Uranium One has a 70% interest. The
balance of the interest in the Betpak-Dala Joint
Venture is owned by KazAtomProm, the
Kazakh State uranium company. Kharasan is
owned 100% by the Kyzylkum Joint Venture,
in which Uranium One has a 30% interest. The
balance of the interest in Kyzylkum is owned
by KazAtomProm (30%) and a Japanese
consortium (40%).
The 2009 attributable production (to
Uranium One) guidance is 1.5 Mlb and it is
ramping up to an attributable
production rate of 3.6 Mlb/y in 2011.
Kharasan recorded production of 7,600 lb
attributable to Uranium One in the first quarter
of 2009. It is ramping up to a production rate
of 1.6 Mlb/y for 2012.
Close by, Akdala is an operating acid in situ
adds another long-life, large scale and high Karatau is expected to reach steady state recovery uranium mine located in the Suzak
margin asset to our portfolio and will production of 5.2 Mlb/y of U3O8 by 2011. region, approximately 470 km north of
significantly enhance Uranium One’s The other 50% interest in Karatau is held by Shymkent. Commercial operations at
production profile and cement its position of JSC Kazatomprom, the Kazakh-stated owned commenced in January 2004, following a 2.25
leadership in the Kazakh uranium mining uranium mining company which also holds year pilot-plant testing program. Owned by the
industry. The completion of this transaction, as joint venture interests in Uranium One's other same Betpak-Dala Joint Venture, Akdala is
well as our previously announced private Kazakh mines and projects. According to an NI currently producing at a rate of 1,000 t/y
placement with the TEPCO/Toshiba/JBIC 43-101 Independent Technical Report prepared uranium (2.6 Mlb/y U3O8). Akdala is on track
consortium, will give us long-term partnerships by Scott Wilson Roscoe Postle Associates for a to achieve 2009 attributable production
with the governments of Russia, Japan and wholly owned subsidiary of ARMZ, as at guidance of 1.8 Mlb. The precipitation and
Kazakhstan, as well as some of the most November 2007 Karatau had indicated filtration circuit installed last year is helping to
influential customers and suppliers in the resources totalling 9.8 Mt, at a grade of contain costs.
global nuclear industry.” 0.115% U, containing 11,273 t of uranium
Concurrently with the purchase agreement, (29.3 Mlb U3O8), and inferred resources Major coal mines
Uranium One has also entered into a long- totalling 0.9 Mt, at a grade of 0.088% U The Kazakhstan Karaganda coal basin, the
term offtake agreement and a framework containing 771 t of uranium (2.0 Mlb U3O8). development of which started as far back as
agreement with ARMZ, both of which will The resource estimate is based on 1930, has long been the country’s main coal
become effective upon closing of the Karatau parameters (e.g. cutoff grade, grade-thickness, supplier. It still produces up to 50 Mt/y of coal.
acquisition. internal waste, mineralisation to waste ratio, To the northeast, 200 km from Karaganda, not
The framework agreement provides Uranium block size, permeability and density) used for far from the city of Pavlodar on the River
One with an exclusive right to negotiate the the South Inkai deposit and originally approved Irtysh, are the Ekibastuz coalfields, which are
acquisition of ARMZ's 50% interest in the by the Ministry of Geology and the Ministry of among the largest in Kazakhstan.
Akbastau uranium project, which is currently in Atomic Energy and Industry of the USSR. The Kazakhstan contains Central Asia's largest
pilot production and is located adjacent to the modelling methodology applied considered known recoverable coal reserves, with 37,500
Karatau mine. In addition, Uranium One has similar structural and tectonic characteristics, Mt of mostly anthracitic and bituminous coal.
been granted a right of first offer on ARMZ's lithological and facies types and Russia is the largest importer of Kazakh coal,
assets outside the Russian Federation in the hydrogeological and geotechnical features. The followed by Ukraine.
event ARMZ determines to offer any of these 2007 resource estimate is based on Bogatyr Coal, is the largest company in
for sale in the future. information from approximately 59,000 m of Kazakh open pit coal mining. It mines 70% of
Karatau is part of the Budenovskoye drilling. The Indicated resources have been the coal from the Ekibastuz coal basin,
complex and is located in close proximity to drilled on fences 200 m apart, with holes producing some 42 Mt/y. It exports about half
the Akdala and South Inkai mines of Uranium spaced at 50 m. The Inferred resources have of what it produces each year. Bogatyr is
One's 70% owned Betpak Dala joint venture. been drilled on fences 400 m apart, with holes divided into two complexes administratively:
Karatau commenced commercial production in spaced at 50 to 200 m apart. Gamma ray Bogatyrskey (Bogatyr mine itself) and Severny
2008 and produced 1.7 Mlb U3O8 in that year. logging is used in conjunction with the created on the basis of Severny mine – the
For 2009, Uranium One expects Karatau to geological interpretations to determine the oldest mine of the coalfield.
produce approximately 3.3 Mlb U3O8, at a uranium content. After the temporary suspension of the
total cash cost sold of approximately $15/lb. South Inkai and Kharasan are in situ mining operations Bogatyr Coal, LLP, a joint

00 International Mining OCTOBER 2009

 COUNTRY FOCUS – Kazakhstan

venture of the Kazakh Samruk-Energo and

RUSAL, fully resumed coal mining and
shipment to the power stations of Kazakhstan
and Russia.
In June the miners performed all the
planned repairs of the mining machinery,
equipment, energy supply units. The repairs of
two bucket wheels have been accomplished;
together with German specialists of the
TAKRAF firm the reconstruction and
modernization of another excavator is going
on. In the total volume the railroad track
facilities of Bogatyr mine have been repaired;
the reconstruction of railroad stations and the
major overhaul of the overhead system have
been fulfilled. The repairs and adjustment of
power substations have been accomplished.
All of that has allowed Bogatyr Komyr to
gain the necessary tempo in the operations
already on the first day and ship as much as 95
thousand tonnes of fuel to the customers. provides for the further strategic development The Karaganda coal basin has long been the
Totally in July the miners will ship as much as 2 of the Group in the region. In addition, [the country's main coal supplier. It still produces up to 50
million 840 thousand tonnes of coal: 1 million acquisition] strengthens the integrated Mt/y of coal. To the northeast, 200 km away, not far
616 thousand tonnes to the energy units of business model of ENRC through securing a from the city of Pavlodar on the River Irtysh, are the
Kazakhstan and 1 million 224 thousand tonnes reliable and cost effective supply of relatively Ekibastuz coalfields, which are among the largest in
to the Russian Federation. high quality thermal coal and semi-coke, Kazakhstan
Temporary suspension of Bogatyr mine in thereby further enhancing the Group's position
June did not affect the operations of the as a low cost producer." contribute to improving the safety of
power stations of the Republic of Kazakhstan, ENRC is another of Kazakhstan’s largest employees.
which had been provided with the fuel stocks electricity providers. Coal mined in 2008 Kazakhstan aims to be producing 100-105
having been prepared during the previous amounted to 19.8 Mt and it has known Mt/y of coal by 2015. IM
months. From July the power engineers are mineable reserves for 37 years. In the June
commencing the preparation of the power 2009 quarter, coal production volumes
stations for the work within the winter period decreased 6.6% compared to Q2 2008, in
and the creation of new fuel stocks. response to a milder winter. Electricity
In the first half of the year the Partnership generation increased 17.5% compared to Q2
has sold as much as 14.4 million tonnes of 2008, reflecting increased available capacity.
coal; the program of the second six months Internal sales rose 29.4% against Q1 2009 to
will be much more intensive. The miners will support higher production levels, with overall
have to mine and ship their customers over 20 generation broadly steady.
million tonnes of coal. Arcelor Mittal operates underground coal
ENRC has a 25% interest in Shubarkol mines that in 2008 produced 4.11 Mt. Their
Komir, a major thermal coal producer. It one published resources total 1,384 Mt. The
of Kazakhstan's largest thermal coal producers, company is working with the Government to
producing some 6.1 Mt f coal in 2007 and improve and modernise these coal mines. Part
accounting for over 6% of Kazakhstan's total of the investment program provides the latest
coal production that year. Shubarkol is also a mine environmental monitoring system and is
local producer of semi-coke. As at July 1, 2008 now installed at two of the mines,
and based on JORC guidelines, SRK reported Kazakhstanskaya and Shaktinkskaya, providing
that Shubarkol had 1,419 Mt of Measured and real time monitoring of the mine atmosphere.
Indicated coal resources within its coal leases A new technique designed to improve the
of which there were 365 Mt of Probable capture of the methane released during mining
reserves. has recently been implemented at Kuzembaev
Shubarkol is majority owned by Eurasian mine. The company is also working with
Finance-Industrial Co (EFIC), a private company international experts reviewing recognised
beneficially wholly owned by the three ‘world best’ techniques in degassing to
Founder Shareholders of ENRC who together develop and apply the projects in Arcelor
hold 43.77% of ENRC's issued share capital. Mittal’s coal mines.
At the time of the acquisition, Dr. Johannes New coal production equipment is being
Sittard, CEO of ENRC, said “Shubarkol installed at the Kostenko mine which will

00 International Mining OCTOBER 2009