Kazakhstan Mining Industry Attracting Investment, Despite Risks
The slow recovery of the global mining industry is motivating companies to look for better opportunities and to take new risks. The inclination is different for both large and small-scale mining companies to work in either relatively risk-free countries or in developing markets with uncertain regulatory environment. Countries such as Australia, Canada and Chile usually have high operating cost with relatively low chances of exploring a major new deposit. But Kazakhstan, a major producer of zinc, copper and other minerals, holds golden opportunities for investors as much of the country has immense potential for future development.
Kazakhstan is the world’s largest producer of uranium, second in chromium and highly prospective for other metals. The country also has the advantage of proximity to export directly to neighbouring China, and access Europe through rail links with Russia. The Astana Mining and Metallurgy Forum took place in May 2017,aimed at showing the country’s mineral potential and the government initiatives designed to attract investment. Mining authorities are planning to introduce a mining code similar to that in Western Australia – one of the world’s top destinations for mining investment.
Before moving ahead, the country needs to address numerous issues and create a comfortable environment for mining companies. The country ranks poorly on the Corruption Perceptions Index (CPI), published by Transparency International (TI), with 29 out of 100 points in 2016 and the scores are in the range of 26-29 since 2010. By comparison, Australia scores 79 points, Canada 82, Chile 66 and South Africa 45. Other countries including, Russia, the Democratic Republic of Congo and Zimbabwe score 29, 21 and 22 respectively. Despite this, Kazakhstan attracted record level of Foreign Direct Investment (FDI) in 2016, worth US$20.6 billion and up by 40% over 2015. The inflow of FDI has grown steadily since 2007, but declined by 17% in 2013. In 2014, the decrease slowed by 2% and in 2015 it fell by 38%. The mining industry accounted for 5.7 billion or 28% of the total share followed by processing industry US$3 billion or 14.7%.
Australian companies are keen to get involved in Kazakhstan, transferring skills and technology. Perth-based minerals miner Iluka Resources Ltd commenced geological exploration in three areas in the Kostanai region of North Kazakhstan and Akmola regions of Kazakhstan. Mining services provider Aurora Minerals Group is also actively involved in mining support services and explosives manufacturer Orica Ltd operates two manufacturing facilities in the country.
Kazakhstan has to improve the regulatory environment so that there are less operational and political challenges before attracting further investment. But it the availability of mineral reserves can be coupled with safe regulatory environment and scarcity of projects, Kazakhstan would ultimately attract miners.