TBY talks to Chris Welton, General Manager of Exploration at Rio Tinto, on the regional significance of Kazakhstan, new operations, and the business climate.
TBY Rio Tinto chose Kazakhstan as its hub for operations in Central Asia. What is Kazakhstan’s significance in this setting?
CHRIS WELTON As a global mining company, Rio Tinto specializes in developing large-scale and long-life mines. Kazakhstan shows potential for the discovery of such world-class resources. The country offers us the opportunity to gain experience in the region, find local talent, and develop expertise in how to operate in this environment. In the future, we expect to branch out from Kazakhstan and extend our footprint to places such as Uzbekistan and Kyrgyzstan. However, Kazakhstan will continue to be the hub for our activities in the region.
Rio Tinto has a massive global mining portfolio. In which segments are you planning to launch operations?
Rio Tinto, as a multi-commodity mining company, has the ability to focus on the quality of the opportunity and not be constrained by the commodity that we are working with. That being said, our focus is on copper and uranium in Kazakhstan and Uzbekistan. The benefits of partnering in uranium are fairly self evident, because Kazakhstan is the leading producer of uranium worldwide. Rio Tinto is also one of the world’s largest uranium producers, through our operations in Namibia and Australia, as well as with development options through a recent acquisition in Canada. In terms of copper, we firmly believe that the region is underdeveloped in respect to its resource potential. To exploit these opportunities, we employ two main strategies. The first is exploration, in which we seek to identify and develop new resources. The second is a review of existing resources that have been discovered through comprehensive exploration work completed under the Soviet Union more than 20 years ago. These resources may have value that has not been recognized, or may be unlocked through the application of Rio Tinto technology.
What value-added does Rio Tinto bring to Kazakhstan’s mining industry?
Rio Tinto is a world leader in technology and mining, and we firmly believe in our program, “mine of the future,” which evaluates step-changes in technology and advancements for exploration and mining. These are elements that are required for efficient future mining operations to be sustainable as the world consumes more and more metals. As our operations expanded, we realized that the majority of easy deposits have been found, and the more complex deposits are being developed, a process that requires technology. We seek to apply technology to our exploration, assessment of known resources, and the future development of resources. With respect to the environment, the sustainability of operations is central to Rio Tinto’s strategy, which we feel is well aligned with the Kazakhstani government’s agenda. We apply rigorous environmental standards that meet or exceed regulations in all our operations, monitoring emissions and planning for the closure of our operations. We believe that our approach will raise the bar in terms of environmental performance in Kazakhstan, and assist the Kazakhstani mining sector as it improves its performance and efficiency, thereby reducing the environmental impact. Sustainability is also about working closer with the host communities in which we operate. Through our global operations we have observed that producing additional raw materials stimulates the development of local manufacturing businesses. Wherever Rio Tinto operates, we seek to use parts, equipment, and services from local companies and service providers, which stimulates investments in manufacturing and in the local economy.
How accommodating would you consider the business climate in Kazakhstan?
In general, it’s a positive environment; if anything less, we wouldn’t be here. The country has the basic ingredients, but there are significant challenges for a foreign investor. The first is the level of bureaucracy throughout the process of establishing a business. It can be difficult to manage, operate, and report, and this procedure demands a huge amount of effort. This effort would be better directed toward operations rather than navigating through the bureaucracy of Kazakhstani investment legislation. Transparency is another very key risk in the sector, and we have significant concerns that a foreign investor is not on a level playing field with respect to local competitors. We believe that increased transparency and a more clearly defined process is crucial. With those two ingredients in place, it’s not the legislation that is causing problems, but the necessary knowledge to cooperate with the law. The government should tackle this challenge if it is serious about attracting more FDI to Kazakhstan.
© The Business Year