Goldbelt hosts delegation from Kazakhstan

The collapse of the Soviet Union has prompted a number of its former republics to seek non-traditional sources of capital to develop mining projects.

In late July, a delegation from Kazakhstan visited Vancouver to advance a joint-venture agreement with Goldbelt Resources (VSE) for a gold tailings project, construction of which is expected to begin later this year. At the same time, the delegation expressed interest in attracting other foreign investors to participate in joint ventures in the republic.

“Kazakhstan is a rich and prospective region with many deposits not yet fully explored and the potential (exists) to find more,” said Ivan Dumanov, general director of the Polymetallic Combine.

Kazakhstan, along with Russia, is one of the major mineral-producing republics of the former U.S.S.R. It produced about 70% of the lead and half of the zinc output of the former Soviet Union, plus 49% of the silver, 30% of the uranium, and a major portion of copper, molybdenum, titanium, bismuth, cadmium, chromite. It has also been an important source of various strategic metals and industrial minerals.

Dumanov said 93 elements (of Mendelev’s chart of 103) can be found within Kazakhstan. The resource wealth of the region, which includes gold and oil and gas, enabled it to become an important centre for the former Soviet Union’s military and space programs.

The Polymetallic Combine, based in Leninogorsk, employs 14,000 of the town’s 85,000 citizens. Several large deposits are being mined to feed two flotation mills and a smelter complex. The operation has been in production since the late 1920s and reserves are considered sufficient for another 100 years of production.

The government of Kazakhstan wants to form joint ventures with foreign partners who have the means of modifying existing operations so that they are more efficient and able to produce more byproducts. “We are particularly interested in partners willing to help upgrade our mills and our zinc and lead smelters,” Dumanov said. “But we are also interested in new explosive techniques, drilling equipment and better reagents for metallurgical processing.”

The republic has entered one agreement with Finland-based Outokompu and is involved in discussions with other parties.

Goldbelt’s tailings project is among the country’s more advanced ventures involving foreign investors. The company became involved in early 1992 when it acquired a 99.5% equity interest in Comptoir, a Luxembourg-based firm which holds the interest in the project. Two Australian principals of Comptoir, Paul Morgan and Paul Naughton, joined the board of Goldbelt at that time.

The agreement signed with the Kazakh authorities led to the formation of a local company, Kazgold, to undertake the gold project. Kazgold is owned equally by Comptoir and the Polymetallic Combine.

The project is structured so that the Combine contributes the tailings deposits and land to Kazgold while Comptoir funds the feasibility study and provides the technology to process the tailings.

The tailings have resulted from a polymetallic mine which operated for about 70 years. There have been no attempts to recover gold and silver values during that time.

Extensive sampling was carried out in 1992 on two of the four tailings deposits to be reprocessed. This work confirmed gold and silver grades and led to the development of a 14-year mining plan for the initial two deposits. The four deposits contain 137.9 million tonnes of tailings. Total reserves, according to Goldbelt’s feasibility study, are projected at 2.8 million oz. gold and 20.2 million oz. silver. The study addressed the first 14 years of operation and projected that total recoveries during this period would be 1.48 million oz. gold and 7.83 million oz. silver.

During the first five years of tax-free operation, the project is expected to produce 608,000 oz. gold and 2.5 million oz. silver. Capital costs are expected to be in the range of US$43 million and cash operating costs will likely be significantly below the average of Western gold producers. The joint venture is still completing details related to project financing and engineering, though construction is expected to get under way by the end of this year. The Kazakhs are being advised by a unit of the World Bank and appear to be proceeding cautiously in light of their unfamiliarity with Western business practices.

Companies interested in opportunities in Kazakhstan have to be prepared to demonstrate a long-term commitment, according to Goldbelt directors. “We are making progress on a step-by-step basis,” said co-chairman Michael Muzylowski. “We are optimistic about the future of the republic and our joint venture, and hope to conclude agreements on other projects.”