As the U.S. dollar continues to weaken against local currencies around the world, and the level of political and investment risks increase, investor’s trust in gold is stably growing. What will the gold mining industry of Kazakhstan gain from this, and what prospects lay ahead? Exclusive asks these and other questions of Ross Thomas Kalnan, general director of JSC ALEL, financial and investment corporation.
-Judging by the fact that gold prices have been on the rise this year, gold mining companies should feel quite confident. Can you say the same about your company?
- Indeed, starting from 2000 worldwide gold prices have grown by an average of 13% on average annually. Quite probably, this process will continue. This is because, on the one hand, an increase in global demand for gold has been predicted, based on dynamically developing India and China, while on the other, as per information from the World Gold Council, a decrease in the number of gold mines is expected. All of this means that the profitability of producing mines should go up. Our company is staking itself on this trend. The company operates on the Suzdal deposit, about 60 kilometers outside of Semipalatinsk, located in eastern Kazakhstan. In order to speak concretely, I shall provide hard numbers. During Soviet times, over a ten-year period about 5 tons of gold were produced at this deposit, which is comprised of oxidized ore. While ALEL has produced the same volume in just over four years. At the same time, using our own know-how we have achieved a very high level of gold extraction – about 90%. As it turns out, success is not only based on a favorable situation in the market price, but also in having the correct business strategy.
- You made mention of your own know-how. What did you mean?
- We are not resting on our laurels. One may say that our business strategy is in harmony with the policy of the government authorities of the Republic of Kazakhstan on the introduction of innovative technologies within the framework of the industrial-innovation program. We are the only gold mining company in Kazakhstan that has successfully applied such an environmentally friendly and more profitable technology for gold production. For this purpose, we purchased from South Africa’s Gold Fields company a unique technology, BIOX, which utilizes bacteria breaks up the gold-containing ore. On May 27, 2005, we received the first bar of Dore alloy. For your information, we implemented the project together with KazKommertsBank, which made a US$26 mln credit line available to us. Because of this loan, a new sulfide plant was opened in Kazakhstan – the only one in the world to operate in such a cold climate.
- Do you want to say that cooperation with local financial institutions significantly increases the investment potential of Kazakhstan?
- Certainly. We need to give thanks to the authorities of Kazakhstan, who have created the most favorable conditions for foreign investors out of all the former Soviet republics. That more than US$40 bln of foreign investment that has entered your republic since 1993 is proof of the above. One of the reasons we chose Kazakhstan for gold mining is that here we were able to find domestic financing for project construction.
- How do you see the current condition and prospects of the gold mining industry of Kazakhstan in general? According to the latest statistical data, in the first six months of 2006 Kazakhstan decreased production of affined gold by 6.3%.
- I believe that this only gores to prove my words that the reserves of oxidized ore are being depleted. Consequently, other companies will have to do we have been doing for several years already. We work with difficult [to process] sulfide ore, which accounts for 65% of all gold-bearing ore in Kazakhstan. We are sure that the usage of biotechnology will significantly increase gold production in Kazakhstan. Besides, its is necessary to understand that gold production does not just mean large profits, but also significant outlay in technology, training of local personnel, and investment into the future of the country in which one is operating. Kazakhstan has a huge potential for geological exploration and mining in comparison with other countries. The fact that our technology for processing sulfide ores allows exploitation of a number of deposits is quite important, and means that breakthroughs can be made not only for the economy of this region, but for the entire republic as a whole. The state policy for the development of the petroleum and mining industries will permit the opening of hundreds of highly profitable enterprises, creating tens of thousands of jobs, and will finally help increase budget revenue up to US$200 mln per year. I believe that then Kazakhstan shall indeed enter a “golden” age.