Although often covered as just a statistical rounding error in the overall distribution of geological wealth in the country, Azerbaijan’s potential for precious and non-precious metals as well as other minerals is beginning to get a boost. The gold sector has led the way, with the healthy international gold price proving to be irresistible for some. The sector has more history to it than at first it might seem. In 2010 archeologists from the Azerbaijan National Academy of Sciences published results showing the Duzdagi salt mines in the Aras River Valley being first put into production as early as 3500 BC.
The Ministry of Ecology and Natural Resources is in charge of the national geological survey, and in recent years it has stepped up its efforts to discover the overall extent of the country’s underground wealth. As Hüseyn Bağırov, Minister of Ecology and Natural Resources, told TBY “Over the last decade we have discovered 125 new deposits of valuable materials including gold, silver, platinum, copper, and so on.” The Minister has reason to be hopeful, and in late 2010 announced the discovery of substantial platinum and other precious metal deposits in the Shamkir region.
CATCH THE FEVER
One of the early movers in Azerbaijan’s precious metals sector was Anglo Asian Mining PLC, a small-cap miner listed on London’s AIM market. The company entered into a production sharing agreement (PSA) with the Ministry of Natural Resources and Ecology, and began producing from Azerbaijan’s first modern gold mine at Gedabek in the northwest of the country in May 2009. The company has some 1,962 square kilometers of land attached to its prospective exploration areas, though has concentrated on Gedabek, Gosha, and Ordabek, with three other prospective sites located in the Nagorno-Karabakh enclave awaiting more
detailed geological work.
Although Gedabek is the only mine actively under production, all the early signs look healthy. The mine is set to have a minimum six-year life, producing a minimum of 300,000 ounces of gold over that time period. In its annual 2010 report, Anglo Asian Mining upgraded its reserve estimates for the Gedabek project to 791,000 ounces of gold, 49,300 tons of copper, and 7.6 million ounces of silver.
In 2010, Anglo Asian Mining managed to beat its forecast gold production estimates of 60,000 ounces for the full year, producing some 67,267 ounces. Of the 57,398 ounces sold on the open market, the average price reached over the year was $1,241 per ounce. More importantly, the cost of production (including the state’s share under the PSA) worked out to $358 per ounce, putting it in the low-cost producers bracket internationally. In the first half of 2011, the company looked set to meet its annual production target, and had produced some 29,000 ounces of gold, at an average sale price of $1,385 in 1Q 2011 and an even healthier $1,506 per ton for 2Q 2011, despite extreme winter conditions affecting operations.
Gold may have been the main reason to spark Anglo Asian Mining’s interest in Azerbaijan, but it is also starting to extract other precious and semi-precious metals from the ore it is mining. By using a sulfidization, acidification, recycling, and thickening process, better known by its abbreviation SART, the company has also been recovering saleable quantities of silver and copper. Some 49,260 ounces of silver were recovered over 2010, and 182.5 tons of copper. The company also announced in its mid-2011 report that it is looking to build a new agitation leaching plant, with a feasibility study being conducted by mining consultants Arcadis Chile. The new agitation leaching plant would be used to extend the life of the mine, and improve the recovery rate for gold and other metals.
In its other two main exploration areas, Gosha and Ordabad, Anglo Asian Mining has also been active. In February 2011, the company filed a “Notice of Discovery” with the government covering the Gosha exploration area, and has publicly stated it will be opening mining facilities in the latter part of 2012.
MORE THAN THE YELLOW STUFF
Although precious metals have taken the headlines, other non-precious metals as well as construction material deposits, such as sandstone, marble, sand-gravel, clay, limestone, cement raw materials, volcano ash, and bentonite clay, have been located so far by the Ministry in commercially exploitable quantities in 19 districts and 25 deposits around the country.
According to the latest numbers from the State Statistical Committee, the production of construction-related ores for 2009 included 1.23 million tons of rubble, 152,400 tons of clay for cement, 214,300 tons of volcanic ash, and 2,100 cubic meters of marble. The extent of the reserves for the construction industry will be tested, with Garadagh Cement looking to boost its production, while Qızıldaş Sement is looking to install its own large-scale cement facilities. Initial estimates indicate that the country has some 300 billion tons of construction stone, and at least 24 million tons of higher quality facing stone.
In the iron and aluminum sector, local Azerbaijani company Det.Al Holding is looking to revive the industry, and exploit some of the richest deposits in the Caucasus region. Many of the deposits, mostly residing in the Dashkesen region of northwest Azerbaijan, have been relatively underexploited since the end of the Soviet Union, though represent a low-cost, rich mineral reserve.
In 2011, Det.Al announced that it would open an aluminum plant in the city of Ganja, in the northwest of Azerbaijan, as well as complementary semi-fabrication facilities. The first phase of the primary processing facility, set to produce 50,000 tons per year of aluminum, was to open in May 2011, while the second phase of the project would double the plant’s capacity by mid-2012. The semi-fabrication facilities, set for opening in 2012 or 2013 at this early stage, would look to use around half of the raw aluminum production, with the rest being made available to the market.
© The Business Year