February 2017

Country Snapshot: Mining in Kazakhstan

  • By AusIMM

The introduction of a new mining code in 2018 will make Kazakhstan a more attractive destination for foreign miners

A wealth of minerals provides significant opportunities

Kazakhstan’s vast mineral reserves and remarkable variety of minerals (over 60 of the 105 elements in Mendeleev’s periodic table can be found in the country) make it one of the most attractive emerging markets for mining investment.

As of 2013, Kazakhstan was the:

  • world’s leading uranium producer (accounting for approximately 38 per cent of world supply)
  • second-largest producer of chromite (~13 per cent)
  • fourth-largest producer of titanium sponge (~6 per cent) and magnesium metal (~3 per cent)
  • fifth-largest producer of rhenium (~5 per cent).

In addition, Kazakhstan is a significant producer of copper, zinc, barite, bauxite, cadmium, gallium and sulfur.

In 2015, the Kazakh government began developing a new mining code to simplify the procedures for granting mineral rights and tax exemptions for investors. The new code, which is modelled on Western Australia’s mining legislation, is expected to come into effect from 1 January 2018 and will improve access to geological data, streamline the evaluation of resources and simplify the granting of subsoil use rights and licensing.

In 2013, the Kazakh government demonstrated its support for the country’s minerals industry by announcing a US$1.08 billion investment in geological exploration over six years. In addition, it introduced a program to double mineral production in the country between 2010 and 2014. These initiatives have already attracted a number of foreign mining companies, with Rio Tinto committing US$100 million to copper exploration and companies such as Glencore and Iluka Resources maintaining a notable presence in
the country.

In 2015, Kazakhstan was ranked 41st out of 189 countries in the World Bank’s Doing Business 2016 report and was listed as one of the ten most improved countries compared to the previous year.

Modernisation and investment are required to break past ties

Kazakhstan’s economy is overly dependent on its extractives sector and its two main trading partners, Russia and China. These dependencies combined to slow Kazakhstan’s economic growth to near zero in 2014 and 2015 as commodity prices declined and Russia and China both experienced lower economic growth. The Kazakh government is acutely aware of this issue and has made significant efforts to diversify its economy by investing in transport, pharmaceuticals, telecommunications, petrochemicals and food processing.

Many Kazakh mining operations have antiquated and obsolete technology, meaning that foreign investors looking to partner with local companies will have to invest in new technologies and infrastructure to optimise and modernise the existing operations. Other challenges for foreign miners looking to do business in Kazakhstan include the country’s outdated transportation infrastructure, bureaucratic project approvals process and extremely harsh approach to legal infringements by international standards.

Despite its vast mineral resources, Kazakhstan has relatively little mineral processing capacity. This has prevented the establishment of an extensive minerals value chain in the country, exacerbated its reliance on its primary trading partners and increased its vulnerability to volatile global commodity prices. If foreign miners want to add value to the minerals that they extract in Kazakhstan, they must be prepared to make significant investments in mineral processing infrastructure.

Due to its former position as a member of the Soviet Union, Kazakhstan’s mining industry is heavily integrated into a single production chain with Russia and Ukraine. This leaves it particularly vulnerable to economic conditions in those countries and fluctuations in commodity prices. While Kazakhstan also has close links with China, a lack of transportation infrastructure between the countries and the fact that the majority of China’s industrial production takes place a long way from its shared border with Kazakhstan means that the export relationship between the two countries isn’t as strong as it could be.

All information in this snapshot came from the following sources:

Australian Trade and Investment Commission, 2016. Mining to Kazakhstan [online]. Available from:
www.austrade.gov.au/Australian/Export/Export-markets/Countries/Kazakhstan/Industries/Mining

Central Intelligence Agency, 2016. The World Factbook: Kazakhstan [online]. Available from:
www.cia.gov/library/publications/the-world-factbook/geos/kz.html

Engineering and Mining Journal, 2011. Kazakhstan – not just another ‘Stan’… [online]. Available from: www.e-mj.com/index.php/features/796-kazakhstannot-just-another-stan.html

US Geological Survey, 2016. 2013 Minerals Yearbook: Kazakhstan [online]. Available from: minerals.usgs.gov/minerals/pubs/country/2013/myb3-2013-kz.pdf

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