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
graduated Kazakhstan to market
economy status in recognition of its
economic reforms and openness to foreign
investment, etc. In September 2002, it
became the first country in the former Soviet
Union to receive an investment-grade credit
rating from a major international credit rating
agency.
Kazakhstan is a constitutional republic in
Central Asia – the ninth largest country in the
world and the second largest country in the
former Soviet Union. Its location, between
Russia and China, and its low-risk status as a
stable and economically developed state in
the Central Asian region mean that it is well
situated to develop the rich natural resources
of the region and serve the growing Chinese
market. It is developing into prosperous and
modern Eurasian nation. The country is a
significant metal producer with metals
accounting for 20% of jobs in Kazakhstan's
industrial sector, and more than a quarter of
total exports.
Kazakhstan possesses enormous oil and gas
reserves as well as plentiful supplies of other
minerals and metals, including chrome, iron-
ore, alumina, lead, zinc, copper and
manganese and precious metals. The country
is also a major producer of coal. The
extraction and production of oil and gas and
the extraction and processing of minerals are
the most significant industries in the

Kazakhstan economy.
Foreign direct
investment, which
reached 7.7% of GDP in
2004, remains
overwhelmingly
concentrated in these
sectors.
Precious metals
production is increasing
significantly with 5,975
kg of refined gold and
387,660 kg of refined
silver produced in the
January to July period of
this year2009, 26.9%
and 5.8% respectively
more than for the same
period of last year, the
National Statistics
Agency told Interfax.
Last year the Kazakhstan Government
became a major shareholder in Kazakhmys,
the world's No.10 copper producer, through
an exchange of shares. The government
transferred to Kazakhmys a part of the state’s
stake in Eurasian Natural Resources Corp
(ENRC), one of the world’s top ferrochrome
producers, in return for an additional issue of
Kazakhmys shares. Thus, the state became a
major shareholder in both the largest
Kazakhstan-based mining companies listed on
the London Stock Exchange. It holds 11.65%
of ENRC and 15% in Kazakhmys.
The copper division of Kazakhmys consists
of 20 mines - 14 underground and 6 open
pits. The mineral reserves and resources of
these mines are sufficient to support projected
production for at least 20 years. The ore mined
is processed in 10 concentrators and thence
two smelters. This division is divided into four
administrative areas, Zhezkazgan complex,
Balkhash complex, Karaganda region and East
region. In addition to producing copper, the
division produces significant quantities of zinc,
silver and gold, which are sold as by-products.
Zhezkazgan is the biggest operation – a fully
integrated facility, including mining,
processing, smelting and refining. At one time
it was the largest mining and processing
complex in the Soviet Union and today it is
one of the most technically advanced
complexes in the CIS. In 2008, Zhezkazgan
was responsible for 68% of Group mined ore
output and 48% of Group's cathode output.
There are six underground mines (primarily
room and pillar) – South, Stepnoy, East, West,
Annensky and Zhomart (formerly Zhaman-
Aybat) and the North open pit. To extract
copper concentrate there are the Zhezkazgan
COUNTRY FOCUS – Kazakhstan
The principal Kazakhmys operations are in
Kazakhstan, but with precious metal mine/projects in
Tajikistan and Kyrgyzstan. This map shows the
principal mining areas
No. 1 and No. 2 and Satpaev concentrators.
There is also a smelting/refining operation -
producing copper cathode and silver in slimes,
which is sent to Balkhash for recovery into
silver granules – and a continuous-casting
copper rod plant.
The major copper expansion projects, at
Aktogay and Boschekul, made good progress
last year, supported by Fluor as consulting
engineers. Prefeasibility studies have been
completed on both projects confirming their
potential as large, low cost and long life
assets.
The Aktogay deposit includes both oxide
and sulphide ore. The prefeasibility study for
the sulphide project has been completed, the
results of which are being assessed together
with the feasibility study for the oxide project
(completed in late 2008). Financing options for
Aktogay are being considered prior to the
project moving to the feasibility stage.
The Boschekul sulphide ore prefeasibility
study was successfully completed in April
2009. Additional work is being conducted to
identify options to further improve the
economics. Financing options for the project
are being assessed after which the project is
expected to progress to the feasibility stage.
In July 2007 the Group acquired Eurasia
Gold, currently named Kazakhmys Gold, which
has two operating oxide open-pit mines (heap
leach) in Kazakhstan: Mizek and Central
Mukur. In 2008 the total output of gold was
179,000 oz.
The three major expansion projects within
Kazakhmys Gold: the
gold-copper sulphide
ore deposits of Mizek
and Bozymchak, and
the silver sulphide
deposit, Akjilga. At the
end of 2008, total
Measured and
Indicated gold
resources accounted
for 2.36 Moz. Total
Measured and
Indicated resources of
gold, copper and silver
were 4.02 Moz gold
equivalent.
The Mizek deposit is
situated in northeast
Kazakhstan,
approximately 340 km
southwest of Semey. Studies on the best gold-
copper sulphide ore processing technology are
in progress. To exploit the sulphide ore, a new
open pit and underground mine will be
required together with a concentrator to
process the ore on-site. Upgrades are planned
for the power and water infrastructure.
The Bozymchak deposit is located in
southwestern Kyrgyzstan, 185 km from the
nearest rail link. Kazakhmys Gold has the
license to develop the central part of the
deposit from September 2008 to December
2027. In December 2008 Kazakhmys Gold
extended its exploration license from January
2009 to December 2013. A definitive feasibility
study was completed in November 2008.
Kazakhmys reports “the results of the study
are positive with robust economics. The next
step is to construct the processing plant with
further development of infrastructure including
improving the road links and installing power
lines.”
The Akjilga deposit is situated in the
southeast of Tajikistan (South Pamir), 258 km
from the regional centre, Khorugh. Kazakhmys
Gold has the exploration license and contract
with the Government of Tajikistan from
September 2006 to September 2016.
In May 2008 Kazakhmys completed the
acquisition of the Ekibastuz coal-fired power
plant, the largest source of power in
Kazakhstan and the Maikuben West coal mine
which now form Kazakhmys Power. Combined
with the Group’s three existing power plants,
Kazakhmys is now the largest power supplier
in Kazakhstan.
Maikuben West is an open-pit mine,
situated 160 km to the southwest part of
Pavlodar City and 110 km from the power
plant. Maikuben has an estimated mine life
OCTOBER 2009 International Mining 00
 COUNTRY FOCUS – Kazakhstan
Kazakhmys operates 20 copper
mines - 14 underground and
6 open pits
greater than 30 years providing a secure base
of raw material supply with current output of
3.6 Mt/y of coal. The brown coal mined is
supplied to Ekibastuz as well as other heat and
power stations, industrial enterprises and the
domestic sector in Kazakhstan and other
countries. As well as being the largest power
plant in Kazakhstan, Ekibastuz is one of the
largest coal power plants in the world, with
installed capacity of 4,000 MW.
Total copper cathode produced in 2008
from Kazakhmys ore was 343,000 t. First half
2009 production of 170,000 t of copper
cathode equivalent showed an 8% increase on
the previous period, assisted by use of
stockpiled ore and productivity improvements.
Sales of 200,000 t of copper cathode
equivalent, benefitted from reductions in
inventory.
First half 2009 cash costs were significantly
lower than 2008 with net cash costs of
$0.76/lb, compared to $1.16/lb for the full
year 2008. Cost reductions, lower input prices,
currency devaluation and higher volumes in
copper and by-products all contributed to this.
However, the average realised copper price of
$4,024/t in first half 2009 was 51% below the
average realised copper price for first half. The
price at the time of reporting was $6,305/t,
recovering from $2,902/t at the end of 2008.
Kazakhmys Copper produces significant
volumes of other metals, including zinc, silver
and gold. In 2008, it produced 48,000 t of
zinc metal and 137,000 t of zinc concentrate.
Kazakhmys is the fourth largest silver producer
in the world (17 Moz produced in 2008).
In 2008 Kazakhmys increased its holding in
ENRC and became the largest shareholder with
a 26% stake. Vladimir Kim, Chairman of
Kazakhmys, explained: “ENRC is a major
00 International Mining OCTOBER 2009
mining company, listed in London, but
operating in Kazakhstan. They have a different
suite of metals from us, producing iron ore,
aluminium and ferrochrome. Longer term, we
believe that this holding diversifies our
earnings and presents us with strategic
options.” Its 2008 revenue was dominated by
ferroalloys 61% followed by iron ore 22%,
alumina 13% and energy 3%.
In the first half of 2009, Kazakhmys
production was 170,000 t of copper cathode
equivalent from its own material, an increase
of 8% on first half 2008. Production benefited
from more efficient management of
production facilities and processing of
materials, including processing of stockpiled
ore, raised output at two mines (South and
Nurkazgan West) and improvements made in
equipment availability and recovery rates.
Byproduct output also benefited from a
reduction of work in progress and increased
recovery rates at concentrators. Gold
production was 67,900 oz, an 8% increase
compared to first half 2008, silver production
increased 10% to 9.145 Moz and zinc in
concentrate output increased 15% to 76,000 t.
Kazakhmys owns the Ekibastuz GRES-1
power plant, where power generation was
32% lower in the first half of this year
compared to the previous period, at 3,761
GWh, as economic conditions in Kazakhstan
reduced demand. The company says it has
“started to see some recovery in power
consumption and believes that the outlook is
improving, particularly as other commodity
producers in Kazakhstan recover and start
absorbing more of their own power output.
“The negotiations to sell 25% of Ekibastuz
GRES-1 to Samruk-Kazyna, retaining a 75%
equity interest, are at an advanced stage. The
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.
“A key issue for Kazakhstan has been the
need to increase tariffs, thereby improving
investment returns and encouraging
investment in the sector. Without this action,
Kazakhstan will suffer increasingly severe
power shortages and economic growth will be
delayed. The average tariff for the first six
months of the year was KZT2.84/kWh, but the
regulated ceiling for 2009 is now KZT3.6/kWh.
These prices remain considerably below most
international prices, but compare to
KZT2.35/kWh, when we bought Ekibastuz
GRES-1 in May 2008. The increase in tariffs
seen already, and the expectation for future
increases, starts to justify the investment
required to increase capacity. The Government
has also made good progress in improving the
national grid, which will assist sales in the
domestic market.”
World ferrochrome leader
ENRC is the world’s largest ferrochrome
producer (by chrome content). In 2008 it
mined 3.55 Mt of chrome ore and just over 1
Mt of manganese ore. The current known
chrome ore mine life is 44 years. It is also one
of the world’s significant exporters of iron ore
by volume, with a known iron ore mining life
of 38 years. Output is around 40 Mt/y.
For the first half of 2009, production
volumes remained below the comparable
period of 2008. The respective decreases were
17.2% for saleable chrome ore, 29.2% for
saleable manganese concentrate and 17.9%
for total ferroalloys, with silicomanganese
production broadly steady. Ferrochrome
production decreased by 10.6%, reflecting
previously announced production cutbacks for
the division, but increased 35.8% from first
quarter 2009. Serov added saleable chrome
ore production of 11,000 t and total
ferroalloys production of 25,000 t. Tuoli's
output was minimal in second quarter 2009,
with one furnace restarted at the end of June.
 COUNTRY FOCUS – Kazakhstan
ENRC is the world’s ninth largest supplier of
traded alumina, by volume. Bauxite production
in 2008 was 5.16 Mt and 1.6 Mt of alumina
were produced. The known bauxite mine life
of the company is 37 years. In the first half of
2009, bauxite extraction and production
volumes of saleable alumina remained stable,
with an increase of 0.3% compared to the
second quarter of 2008. The division produced
30,000 t of aluminium, in line with the Phase
1 run rate capacity.
Its current capital expenditure projects in
progress in the ferroalloys sector include a
700,000 t/y chrome pelletiser, expected to cost
$110 million and be completed this year. There
is also a $590 million, 440,000 t/y replacement
and expansion of Aktobe’s smelting capacity to
be completed in 2012.
Phase 2 of a 125,000 t/y aluminium smelter,
costing some $305 million, is due for
completion in 2010. Also a $200 million anode
plant should be completed in 2011. While in
the power sector, ENRC is spending some $85
million on overburden stripping equipment for
its coal mines.
In June this year KAS Ingot became the first
Kazakhstani Primary Aluminium available via
the LME London. The London Metal Exchange
(LME) approved with immediate effect the
listing of primary aluminium ingots produced
at ENRC's aluminium smelter, Kazakhstan
Aluminium Smelter (KAS), located in Pavlodar.
The construction of KAS, the first state-of-the-
art aluminium smelter in the Republi, started in
May 2005 and was completed within just 27
months, in December 2007, on budget and
ahead of schedule. The smelter reached its full
Phase 1 annual production capacity of 125,000 t
in the first half of 2008, well ahead of its 2008
year end deadline, and in Phase 2 its capacity
is set to double to 250,000 t in 2010.
The Group's Iron Ore Division is one of the
world's significant exporters of iron ore and its
00 International Mining OCTOBER 2009
operating company, SSGPO, is one of the
largest companies in Kazakhstan and employs
some 18,000 people. SSGPO is a vertically
integrated business. It comprises: primary
mining operations that produce iron ore;
ancillary mining operations that produce
limestone, dolomite and bentonite-clay; an
iron ore processing plant; and a power plant
that supplies it with the majority of its energy
needs. The operations are centred around the
town of Rudni, which was established to
support the iron ore operations, which in turn
is located some 45 km southwest of the city of
Kostanai in the north.
In May 2008 the Group completed the
acquisition of a 50% interest in Bahia
Mineracao, which is involved in the
development of an iron ore deposit in Brazil.
Knelson concentrator at the Maleevsky mine,
Kazzinc's largest underground operation
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
in the Republic to date, at a total construction
cost of $900 million. It is a key element of a
significant future aluminium cluster being
developed by ENRC within the country, in
keeping with the government’s ambitions to
promote further domestic processing activity
and the production of higher value added
products.
Kazzinc is a major fully integrated zinc
producer with considerable copper, precious
metals and lead credits. Most of its operations
are in east Kazakhstan. The company was
established in 1997 through the merger of
Eastern Kazakhstan's three main non-ferrous
metals companies - "Ust-Kamenogorsk Lead
and Zinc Combinate", "Leninogorsk
Polymetallic Combinate" and "Zyrianovsk Lead
Combinate". All three producers were
majority-owned by the Government of
Kazakhstan, which also included the
Bukhtarma Hydroelectric Power Station into
the new company under a long-term
concession to improve its appeal to potential
investors. The controlling block of shares in
Kazzinc has since been sold off by the state to
the private sector, with Glencore International
becoming the company's main investor.
In the years since its creation, Kazzinc has
significantly increased production capacity and
output on all fronts. The company continues to
develop seeking to have its stable position
among the world’s five lowest cost producers
in its industry.
The Maleevsky mine is Kazzinc's largest
underground operation, commissioned by the
company in June 2000. By the end of 2001
the mine had been expanded, bringing
production up to 2.25 Mt/y of ore. Average
ore grades are Zn 7.5%, Cu 2.3%, Pb 1.3%,
Au 0.75 g/t and Ag 75 g/t, with proven
reserves sufficient to sustain production at
current rates for the next 18 years. It is a
trackless mine employing sublevel stoping with
 COUNTRY FOCUS – Kazakhstan
backfill. It accounts for the
majority of Kazzinc's zinc and
copper concentrate production,
the former supplying the entire
smelter feed at the Ust-
Kamenogorsk zinc plant, and the
latter supplying 85% of the
company's total copper
concentrate production.
Maleevsky lies 18 km east of the
town of Zyrianovsk.
The Zyrianovsk concentrator,
located on the eastern outskirts
of the town, primarily treats
Maleevsky ore. The different ore
types are treated in separate
sections. The concentrator
incorporates a heavy media
section to deal with the dilution
inherent in large-scale mining, as
well as crushing, grinding, flotation, thickening
and filtering sections. Free gold is recovered
using gravity tables and centrifugal
concentrators. The flotation and filtering
sections, together with the loading station,
were revised and expanded in conjunction with
the construction of the Maleevsky mine, in
order to provide the necessary capacity for the
treatment of high grade ores.
The Tishinsky mine is located 15 km south
of the town of Ridder, adjacent to the Ust-
Kamenogorsk to Ridder road. It is an
underground operation, producing 1.4 Mt/y of
polymetallic ores grading on average 5.3% Zn
and around 1% combined Cu+Pb. It too is a
trackless, sublevel stoping with backfill mine. A
heavy media plant is located on the surface,
removing up to 20% waste from the run of
mine. Ore is then railed to the Ridder
concentrator. The float from the heavy media
separation is used in backfill preparation.
Proven and probable ore reserves are sufficient
to sustain current production levels for another
20 years.
The Ridder-Sokolny gold mine is on the
outskirts of Ridder, around 3 km from the city
centre and adjacent to the concentrator. The
mine produces 2 Mt/y of ore with an average
gold content of 4 g/t. This yields gravity and
flotation gold concentrates primarily, with
some side credits in the form of zinc and
copper concentrates. Various mining
techniques are applied across the mine, with
sublevel stoping and block caving dominating.
All ores from the Tishinsky, Ridder-Sokolny
and Shubinsky (a small polymetallic operation)
mines, and gold-bearing tailings are treated in
separate sections of the Ridder concentrator.
Given the wide variety of ore types ranging
from sulphide zinc/lead/copper to silicate gold
00 International Mining OCTOBER 2009
Belaz trucks are widely used throughout Kazakhstan's
mines
and gold-bearing tailings, the concentrator has
a number of distinct treatment circuits. Zinc
concentrate is treated at the Ridder refinery,
copper concentrate is sold to third parties,
while lead and gold concentrates are shipped
to the Ust-Kamenogorsk lead smelter for
treatment.
The Ridder Metallurgical Complex produces
electrolytic zinc using virtually the same
hydrometallurgical technology as the Ust-
Kamenogorsk plant, i.e, standard fluid-bed
roasting, two-stage leaching with spent
electrolyte followed by hydrolytic and
cementation solution purification/EW. The
main difference is that the zinc ferrite residues
from Ridder are treated exclusively in coke-
fired Waelz furnaces, while in Ust-
Kamenogorsk some residues are processed
through the lead smelter. The plant produces
110,000 t/y high grade zinc metal and alloys.
Sulphuric acid produced at the plant is sold to
third parties.
In 2004 Kazzinc acquired the mining rights
to the Shaimerden deposit in the Kostanai
region of Kazakhstan. Shaimerden's proven
reserves amount to 910,000 t of zinc at an
average Zn grade of 21%. Since it is an oxide
orebody and as such not amenable to the
concentration process, Kazzinc treats the ore
directly through Waelz kilns at the Ridder
metallurgical complex. Some 30% of the
Waelz capacity expansion allows for the
production of up to 60,000 t/y of zinc metal
from Shaimerden ore.
The Ust-Kamenogorsk metallurgical complex
consists of a 190,000 t/y zinc refinery, a
180,000 t/y lead smelter and a precious metals
refinery. The production site
is located at Kazzinc's
headquarters, on the edge
of the city of Ust-
Kamenogorsk, with the three
plants sharing a common
infrastructure. The precious
metals refinery produces
around 7 t/y of gold and 350
t/y of silver.
Varvarinskoye
sale
Located in northwest
Kazakhstan, Orsu Metal’s
100% owned Varvarinskoye
mine commenced
production of gold doré in
December 2007 and copper-
gold concentrate in March
2008. During the year ended 31 December
2008, the mine produced a total of 40,629 oz
of gold and 4,494 t of copper recovered to
concentrate. Production during the first
quarter of 2009 was reported as 13,599 oz of
gold and 1,743 t of copper.
In mid-June this year Orsu signed a definitive
sale and purchase agreement (SPA) to sell
Varvarinskoye to OJSC Polymetal. The total
consideration for the sale of the Varvarinskoye
is about $235 million, comprising $8 million in
cash payable on closing plus deferred
consideration of up to a maximum of $12
million in cash which is contingent on and
calculable by reference to the future price of
both gold and copper plus the assumption of
over $215 million in debt and hedging
obligations related to the financing of the
project. The company anticipated completing
the sale during the third quarter of 2009.
Upon completion Orsu will have no
outstanding long-term debt and intends to use
the proceeds from the sale to fund operating
costs and to fund ongoing exploration
activities on its existing properties, as well as
any new properties acquired.
Commenting, Dr Sergey V Kurzin, Executive
Chairman of Orsu said: "Proceeds from this
sale will allow Orsu to focus on developing its
exploration and growth assets with renewed
vigour with a substantially stronger balance
sheet. After extended negotiations with the
banks to refinance the Varvarinskoye debt and
hedging facilities, the Board believes that the
sale will release the company from its current
financial and legal burdens."
One of the projects that Orsu intends this
money to help advance is the Karchiga copper
deposit in Kazakhstan. The 47.3 km2 Karchiga
exploration and mining licence contains the
 COUNTRY FOCUS – Kazakhstan
Karchiga VMS deposit. This copper-gold
deposit is located in the extreme northeast of
the Republic, within 40 km of the Chinese
border and within the Rudny Altai belt which
is ranked in the top four VMS belts in the
world. In April 2008, the Company released an
NI 43-101 mineral resource estimate. At a
0.50% copper cutoff, the Indicated mineral
resource is 4.75 Mt @ 2.46% Cu while the
Inferred mineral resources total 2.81Mt @
1.81% Cu. The primary scope of the on-going
2008 to 2009 exploration programe is
designed to upgrade the previously reported
mineral resource estimate to Measured and
Indicated categories under NI 43-101.
Frontier Mining owns two licenses in
Kazakhstan. They are the Naimanjal
exploration and mining licence, held by wholly-
owned subsidiary FML Kazakhstan, and 50%
of U.S. Megatech BVI which holds the Benkala
licence. Frontier has one producing gold mine,
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
an additional 20 holes totalling 2,500 m were
expected to have been drilled.
The strategic focus of the infill drilling has
been revised in order to achieve earlier
production and cash flows from the
oxide/supergene zone. This requires closer
spaced infill drilling to depths of 150 m across
the deposit. In addition, KazCopper has also
drilled several infill drill holes to depths of 300
and 500 m. This revised program for 2009 is
expected to see KazCopper progress towards full
feasibility, production and near term-cash flow
on the oxide/supergene and mixed sulphide ores
at Benkala early 2011 subject to further
regulatory, permitting and production approvals.
The Benkala project has received technical
and regional authority approval to connect
electricity to the Benkala site. Construction
work for this and other site infrastructure and
the foundation works for a 20,000 t/y SX-EW
cathode copper plant are planned to
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
23 FML Kazakhstan shipped dore containing
153.5 oz gold and 172.5 oz silver to Metalor
in Switzerland. FMLK expects to make
shipments on a fortnightly basis from
Naimanjal. Naimanjal is expected to produce
6,000 oz gold and 60,000 oz silver in 2009.
Frontier expects to receive commercial
production approvals in third quarter 2009 and
forecasts commercial production of 15,000 oz
gold and 150,000 oz silver for 2010.
In addition to these projects, Frontier also
has a potential copper porphyry deposit with
associated gold and molybdenum, Baitimir;
and several copper/gold prospects along a 25-
km trend including both VMS and porphyry
types. Metallurgical tests on its Beschoku and
Yubileiny copper projects confirm the oxide
copper ore is amenable to extraction using low
cost SX-EW technology.
Alhambra Resources, through its wholly
owned subsidiary, Saga Creek Gold, is in its
 COUNTRY FOCUS – Kazakhstan
sixth year of operations in the country. Saga
Creek holds the rights to two licenses that
have an initial term of 25 years granted by the
Republic of Kazakhstan in 1997. These are the
subject of an exploration and exploitation
contract between Saga Creek and the
Republic. The initial term of these licenses
expires in the year 2022, but pursuant to the
country’s Subsoil Use laws, the terms of these
licenses can be extended for up to an
additional 20 years.
The main asset is its 100% working interest
in the 1,093,000 ha Uzboy project located in a
prolific gold belt of north central Kazakhstan
which hosts numerous worldclass gold
deposits. It lies in the Charsk belt between the
Vasilkovoskoe gold deposit on the northwest
and the Asku gold deposits on the southeast.
Saga Creek commenced commercial
operations at its 100% owned of Uzboy heap
leach mine effective May 1, 2006. Current
mining operations are being conducted on the
oxide portions of the East zone of the Uzboy
gold deposit that extends to a depth of
approximately 50 m below surface. The oxide
layer is underlain by sulphide gold
mineralisation.
Since 2005, Alhambra has been
systematically exploring the 125 exploration
targets located within the project that have
been identified to date. These are the Uzboy
gold deposit, two past-producing gold mines
(Dombraly and Stepnyak) and 122 other
significant gold showings.
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.
Production over the life of the open pit will
average over 40,000 oz/y. As soon as steady
production has been achieved, Hambledon
plans to develop the much larger underground
resource that is expected to lead to a combined
production rate of around 100,000 oz/y.
As a part of the permitting of the open pit
operation, an initial assessment of the
underground operation was carried out.
Preliminary access layouts and detailed stope
layouts of the known resource were
developed. This planning work envisaged that
access to the western orebodies would be
developed via a spiral ramp commenced from
surface to the south of the open-pit
operations, with mining by long-hole open
stoping in the larger orebodies and overhand
cut and fill mining in the smaller and narrower
orebodies. AMC consultants prepared a study
of the underground operations including
conceptual mine design, infrastructure
00 International Mining OCTOBER 2009
Hambledon mine geologist supervising ore mining
requirements and equipment..
It is anticipated that underground mining
will start at a low level and build up to a rate
of some 500,000 t/y. The start-up of
underground mining will greatly increase the
gold production rate and significantly lower
the cash cost of production.
The Ognevka plant has many potential uses
for treating primary base and precious metal
ores. The plant is currently on care and
maintenance until production can be
economically restarted. The facility has two
main production lines. The first is a 350,000 t/y
crushing, grinding and flotation circuit which
has been adapted to treat residues from zinc
smelters (‘clinkers’), which contain high values
of copper, gold, silver, iron and carbon. The
second production line is a 200,000 t/y gravity
concentrator formerly used to treat tantalum
ore from a now-closed mine which used to
operate at the site.
Tserkovka is immediately adjacent to
Sekisovskoye and contains the four known
mineralised deposits of Tserkovka, Feodulikha,
and two areas designated only as Area 4 and
Area 5. All these areas are ostensibly similar to
the Sekisovskoye deposit, indicating that any
ore from them is likely to be free-milling and
treatable in the same plant as Sekisovskoye.
Each of the deposits lies within a maximum
distance of 4 km from Sekisovskoye, close to
the main road between Ust Kamenogorsk and
Ridder, so infrastructure requirements for any
future development should be relatively low.
Historically, at Tserkovka, nine mineralised
bodies were delineated by mapping, drilling,
trenching, pitting and underground exploration
from over a kilometre of underground tunnels.
At the conclusion of initial exploration in 1980
the gold reserves/resources were reported to
be:
■ Category C2: 4.5 t (145,000 oz)
■ Category P1 (prognosticated): 7.5 t
(241,000 oz)
■ Total C2 + P1: 12 t (386,000 oz)
Kentor Gold entered into a Memorandum
of Understanding (MOU) to form a Joint
Venture (JV) to earn 51% equity in the
Khantau Project (copper, gold, and magnetite)
in southern Kazakhstan. But, in September
2008, Kentor announced that the “issues
uncovered in the technical and corporate due
diligence were significant and coupled with the
current turmoil in capital markets, convinced
the Board that entering a capital intensive
project would not be a prudent at this time.”
It terminated the MOU that it had entered into
with Arya Overseas Ltd.
Khantau hosts a cluster of high magnetic
intensity geophysical anomalies with spatially
associated geochemical haloes (Au, Ag, Cu,
Mo, Pb) over a 40 km strike length. It includes
the Khantau, Dalnyee, Oreol and Promez
prospects where drilling has identified IOCG
mineralisation.
As of August 2008, Kentor had been
planning a scoping study within the first six
months of its ownership of the project and
envisaged, the project would comprise a
modern bulk underground mine feeding a
processing plant consisting of crushing, milling,
flotation and magnetic separation to produce a
magnetite concentrate and a separate copper-
gold concentrate for sale to third party
smelters.
Khantau is very well serviced by existing
infrastructure with sealed roads, power and
water on site and in close proximity to a rail
road. It is also in close proximity to the markets
for the concentrates with steel works and
copper smelters located both within
Kazakhstan and over the Chinese and Russian
borders.
Central Asia Resources (CVR) has an
interest in gold exploration projects which have
both Russian and historical unclassified
resource estimates. Central Asia's has
subsequently developed JORC compliant
resource statements for most of the prospects
within the portfolio. The company has
sustained an intensive drilling campaign across
many sites throughout 2008 and the 2009
drilling campaign is focussing on developing
two sites of most interest and potential. The
2009-2010 strategic plan involves the
investigations into developing a low capex,
quick to production opportunity and
concurrently investigating a larger project to
produce a BFS for funding in late 2010.
 COUNTRY FOCUS – Kazakhstan
Dalabai is a gold prospect 150 km north of
Almaty. The 8 km2 licence contains an area
that has been mined by several small open pits
with heap leach processing on site. Operations
ceased in 2000, primarily due to a low gold
price. In addition to being a previously
operating mine the prospect contains areas
that have been authorised for immediate
mining, functioning infrastructure and is 12 km
from a large town and rail hub.
The company is progressing towards
relatively quick production via a conventional,
low capex heap leach operation with
preliminary development in 2009 and
production in 2010. Recent drilling has
identified mineralisation in four zones. Plant
detailed engineering is nearing completion;
column tests produced recoveries of 77% gold
at 12.5 mm crush size. Environmental base line
studies are complete
The company recently signed an MOU with
Steelstruct Engineering to design, fabricate,
construct and commission a 0.5 Mt/y heap
leach facility at Dalabai. The work will be
undertaken by Weldtronics International, an
associated company based in Thailand. The
formal contract, which is being drafted, will be
between Weldtronics and CVR and will be
finalised before the end of August.
Jason Stirbinskis, Managing Director, Central
Asia Resources said: “The Company is on
target to commence development this year, be
mining early next year and pouring gold in less
than 12 months. This will make CVR the only
Australian company producing gold in
Kazakhstan”.
CVR has incorporated risk mitigation
strategies into its production strategy, these
include
■ Engaging Weldtronics as experienced quality
providers or high-end processing equipment
to reduce technical or process risk
■ Developing Dalabai – a low capex
opportunity that has a history of production,
existing infrastructure and is ideally located
near major transport, a town and similar
infrastructure to minimise total capital
requirements and construction complexity
■ Transferring funding requirements and a
large portion of capital risk to Weldtronics
and tying their reward entirely to efficient
production of gold
■ Developing Dalabai ahead of the Altyntas
project, which is a much larger project
requiring significantly greater upfront capital
commitment.
Altyntas is CVR’s second intended
production site; a much larger project 360 km
northwest of Kazakhstan’s largest city, Almaty.
To-date it has focussed on 10% of the
00 International Mining OCTOBER 2009
prospect area to generate the current total
Indicated and Inferred resource (at a 0.7 g/t Au
cutoff) of just over 6.9 Mt grading 2.27 g/t Au.
Some A$1 million has been budgeted for
further exploration of Altyntas over the next
18 months and the company expects “the
resource will improve significantly over this
time period.” CVR is targeting production at
Altyntas in 2012.
It is likely that some of the major capital
items required for Dalabai are compatible with
the Altyntas process flow and as such some of
the Dalabai infrastructure has been designed
with Altyntas parameters in mind. For
example: the crushing circuit at Dalabai will
have a capacity of 1 Mt/y, twice the size of
what is required at Dalabai, but an appropriate
size for production operations at Altyntas. The
integrated Dalabai/Altyntas production strategy
leveraging common equipment not only
reduces the upfront capital demand for
Altyntas but also reduces construction time
and risk and therefore potentially positively
impacts project economic metrics such as NPV
and payback.
Dala Mining is a Kazakh mining company
developing the Koktenkol molybdenum and
tungsten deposit. It also has the Verkhniy
Kayrakty tungsten and molybdenum deposit.
Koktenkol is in the Shetsky area of the
Karaganda administrative district, one of the
largest and most developed administrative
districts in the country, close to transport and
energy infrastructure. The large industrial city
of Karaganda is situated 120 km to the
northeast.
Ore reserves amount to 509.1 Mt averaging
0.073% Mo. It is planned to be mined by an
open pit with a known life of 26 years at an
annual ore production of 20 Mt. Molybdenum
recovery is projected to be 85%, producing a
concentrate grade of 51% Mo. The capital
costs for the project are estimated at $725
million, and operating cost $5.4/lb.
Mastery in uranium
According to Macquarie Research, Kazakh
uranium production was 8,500 t U in 2008, up
from 6,637 t in 2007. Macquarie notes that
“Kazakhstan has been the driver of global
uranium production over the past five years –
production has risen by ~5,200 t (from 3,300 t
to 8,500 t) over the period, taking the Kazakh
share of global production from 9% (of
35,600 t U) in 2003 to 19% (of 44,500 t U) in
2008.”
Macquarie currently expects Kazakh output
to rise to 9,700 t in 2009 and 11,000 t U in
2010. This implies a forecast decline in
production growth due to Macquarie’s view
that “Kazakh output will run into
infrastructure (road, rail, drill rigs, electricity)
and as the base of production increases
(dramatically). Current credit/capital market
conditions also indicate that investment in new
mines and mine ramp-up is unlikely to proceed
at prior rapid rates over the medium term.”
Kazakhstan hosts a fifth of the known
global uranium reserves and state-owned
Kazatomprom is on track to become the
world's top producer this year. However in
May its head, Mukhtar Dzhakishev, was
dismissed and arrested. He was accused of
illegally taking over state-owned uranium
deposits and selling them to foreign
companies, a charge he has denied.
Nevertheless, Kazatomprom has since said that
it would honour all existing agreements with
foreign firms.
From Canada, the CEO of the world’s
premier uranium producer, Cameco, Gerald
Grandey, said the arrests of Dzhakishev and
other senior Kazatomprom officials were a
worry to foreign investors. “The arrests have
added more uncertainty to doing business in
Kazakhstan,” Grandey told a metals and
mining conference in Kazakhstan's commercial
hub, Almaty. “It affects our customers, the
way they look at supplies.”
Dzhakishev has been credited with turning
Kazatomprom into one of the world’s largest
uranium producers, mostly through
establishing joint ventures with foreign
companies.
In June, Uranium One signed a definitive
purchase agreement to acquire a 50% interest
in the Karatau uranium mine from JSC
Atomredmetzoloto (ARMZ), the Russian state-
owned uranium mining company. It will be
paid form by the issuance of 117 million
common shares of Uranium One and a cash
payment of $90 million. The purchase
agreement also provides for a contingent
payment to ARMZ of up to $60 million,
payable in three equal tranches over the period
between 2010 and 2012 subject to certain
post-closing tax related adjustments.
The acquisition of a 50% interest in Karatau
enhances Uranium One's position as one of
the world's leading uranium suppliers.
Following the acquisition, Uranium One is
expected to have:
■ Attributable 2010 production guidance of
7.5 Mlb, an approximate 35% increase over
its previous 2010 production guidance of
5.6 Mlb
■ 2010 weighted average cash operating
costs of less than $20/lb sold.
Jean Nortier, President and Chief Executive
Officer of Uranium One said: "The acquisition
 COUNTRY FOCUS – Kazakhstan
Wellfield, South-Inkai, which is owned 100% by the
Betpak-Dala Joint Venture, in which Uranium One has a
70% interest. The balance of the interest in the JV is
owned by KazAtomProm, the Kazakh State uranium
company
adds another long-life, large scale and high
margin asset to our portfolio and will
significantly enhance Uranium One’s
production profile and cement its position of
leadership in the Kazakh uranium mining
industry. The completion of this transaction, as
well as our previously announced private
placement with the TEPCO/Toshiba/JBIC
consortium, will give us long-term partnerships
with the governments of Russia, Japan and
Kazakhstan, as well as some of the most
influential customers and suppliers in the
global nuclear industry.”
Concurrently with the purchase agreement,
Uranium One has also entered into a long-
term offtake agreement and a framework
agreement with ARMZ, both of which will
become effective upon closing of the Karatau
acquisition.
The framework agreement provides Uranium
One with an exclusive right to negotiate the
acquisition of ARMZ's 50% interest in the
Akbastau uranium project, which is currently in
pilot production and is located adjacent to the
Karatau mine. In addition, Uranium One has
been granted a right of first offer on ARMZ's
assets outside the Russian Federation in the
event ARMZ determines to offer any of these
for sale in the future.
Karatau is part of the Budenovskoye
complex and is located in close proximity to
the Akdala and South Inkai mines of Uranium
One's 70% owned Betpak Dala joint venture.
Karatau commenced commercial production in
2008 and produced 1.7 Mlb U3O8 in that year.
For 2009, Uranium One expects Karatau to
produce approximately 3.3 Mlb U3O8, at a
total cash cost sold of approximately $15/lb.
00 International Mining OCTOBER 2009
Karatau is expected to reach steady state
production of 5.2 Mlb/y of U3O8 by 2011.
The other 50% interest in Karatau is held by
JSC Kazatomprom, the Kazakh-stated owned
uranium mining company which also holds
joint venture interests in Uranium One's other
Kazakh mines and projects. According to an NI
43-101 Independent Technical Report prepared
by Scott Wilson Roscoe Postle Associates for a
wholly owned subsidiary of ARMZ, as at
November 2007 Karatau had indicated
resources totalling 9.8 Mt, at a grade of
0.115% U, containing 11,273 t of uranium
(29.3 Mlb U3O8), and inferred resources
totalling 0.9 Mt, at a grade of 0.088% U
containing 771 t of uranium (2.0 Mlb U3O8).
The resource estimate is based on
parameters (e.g. cutoff grade, grade-thickness,
internal waste, mineralisation to waste ratio,
block size, permeability and density) used for
the South Inkai deposit and originally approved
by the Ministry of Geology and the Ministry of
Atomic Energy and Industry of the USSR. The
modelling methodology applied considered
similar structural and tectonic characteristics,
lithological and facies types and
hydrogeological and geotechnical features. The
2007 resource estimate is based on
information from approximately 59,000 m of
drilling. The Indicated resources have been
drilled on fences 200 m apart, with holes
spaced at 50 m. The Inferred resources have
been drilled on fences 400 m apart, with holes
spaced at 50 to 200 m apart. Gamma ray
logging is used in conjunction with the
geological interpretations to determine the
uranium content.
South Inkai and Kharasan are in situ
recovery projects in the Suzak region of the
South Kazakhstan Oblast, some 450 km
northwest of Shymkent. South Inkai is owned
100% by the Betpak-Dala Joint Venture, in
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
recovery uranium mine located in the Suzak
region, approximately 470 km north of
Shymkent. Commercial operations at
commenced in January 2004, following a 2.25
year pilot-plant testing program. Owned by the
same Betpak-Dala Joint Venture, Akdala is
currently producing at a rate of 1,000 t/y
uranium (2.6 Mlb/y U3O8). Akdala is on track
to achieve 2009 attributable production
guidance of 1.8 Mlb. The precipitation and
filtration circuit installed last year is helping to
contain costs.
Major coal mines
The Kazakhstan Karaganda coal basin, the
development of which started as far back as
1930, has long been the country’s main coal
supplier. It still produces up to 50 Mt/y of coal.
To the northeast, 200 km from Karaganda, not
far from the city of Pavlodar on the River
Irtysh, are the Ekibastuz coalfields, which are
among the largest in Kazakhstan.
Kazakhstan contains Central Asia's largest
known recoverable coal reserves, with 37,500
Mt of mostly anthracitic and bituminous coal.
Russia is the largest importer of Kazakh coal,
followed by Ukraine.
Bogatyr Coal, is the largest company in
Kazakh open pit coal mining. It mines 70% of
the coal from the Ekibastuz coal basin,
producing some 42 Mt/y. It exports about half
of what it produces each year. Bogatyr is
divided into two complexes administratively:
Bogatyrskey (Bogatyr mine itself) and Severny
created on the basis of Severny mine – the
oldest mine of the coalfield.
After the temporary suspension of the
mining operations Bogatyr Coal, LLP, a joint
 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.
Totally in July the miners will ship as much as 2
million 840 thousand tonnes of coal: 1 million
616 thousand tonnes to the energy units of
Kazakhstan and 1 million 224 thousand tonnes
to the Russian Federation.
Temporary suspension of Bogatyr mine in
June did not affect the operations of the
power stations of the Republic of Kazakhstan,
which had been provided with the fuel stocks
having been prepared during the previous
months. From July the power engineers are
commencing the preparation of the power
stations for the work within the winter period
and the creation of new fuel stocks.
In the first half of the year the Partnership
has sold as much as 14.4 million tonnes of
coal; the program of the second six months
will be much more intensive. The miners will
have to mine and ship their customers over 20
million tonnes of coal.
ENRC has a 25% interest in Shubarkol
Komir, a major thermal coal producer. It one
of Kazakhstan's largest thermal coal producers,
producing some 6.1 Mt f coal in 2007 and
accounting for over 6% of Kazakhstan's total
coal production that year. Shubarkol is also a
local producer of semi-coke. As at July 1, 2008
and based on JORC guidelines, SRK reported
that Shubarkol had 1,419 Mt of Measured and
Indicated coal resources within its coal leases
of which there were 365 Mt of Probable
reserves.
Shubarkol is majority owned by Eurasian
Finance-Industrial Co (EFIC), a private company
beneficially wholly owned by the three
Founder Shareholders of ENRC who together
hold 43.77% of ENRC's issued share capital.
At the time of the acquisition, Dr. Johannes
Sittard, CEO of ENRC, said “Shubarkol
00 International Mining OCTOBER 2009
provides for the further strategic development The Karaganda coal basin has long been the
of the Group in the region. In addition, [the country's main coal supplier. It still produces up to 50
acquisition] strengthens the integrated Mt/y of coal. To the northeast, 200 km away, not far
business model of ENRC through securing a from the city of Pavlodar on the River Irtysh, are the
reliable and cost effective supply of relatively Ekibastuz coalfields, which are among the largest in
high quality thermal coal and semi-coke, Kazakhstan
thereby further enhancing the Group's position
as a low cost producer." contribute to improving the safety of
ENRC is another of Kazakhstan’s largest employees.
electricity providers. Coal mined in 2008 Kazakhstan aims to be producing 100-105
amounted to 19.8 Mt and it has known Mt/y of coal by 2015. IM
mineable reserves for 37 years. In the June
2009 quarter, coal production volumes
decreased 6.6% compared to Q2 2008, in
response to a milder winter. Electricity
generation increased 17.5% compared to Q2
2008, reflecting increased available capacity.
Internal sales rose 29.4% against Q1 2009 to
support higher production levels, with overall
generation broadly steady.
Arcelor Mittal operates underground coal
mines that in 2008 produced 4.11 Mt. Their
published resources total 1,384 Mt. The
company is working with the Government to
improve and modernise these coal mines. Part
of the investment program provides the latest
mine environmental monitoring system and is
now installed at two of the mines,
Kazakhstanskaya and Shaktinkskaya, providing
real time monitoring of the mine atmosphere.
A new technique designed to improve the
capture of the methane released during mining
has recently been implemented at Kuzembaev
mine. The company is also working with
international experts reviewing recognised
‘world best’ techniques in degassing to
develop and apply the projects in Arcelor
Mittal’s coal mines.
New coal production equipment is being
installed at the Kostenko mine which will