By TBY | Azerbaijan | Jun 10, 2015
Azerbaijanis have mining in the blood, with some of the oldest mines in the world found in the country. While in the recent past, the sector has not been performing […]
Azerbaijanis have mining in the blood, with some of the oldest mines in the world found in the country. While in the recent past, the sector has not been performing to its full potential, a number of companies, both state owned and private, have been increasing their productive output and mining minerals that were previously untouched. In some areas of the sector, mining for commercial purposes is relatively new, such as gold and iron ore, while in other areas, such as salt, people have been mining salt since the 3500 BC. Archeologists recently found proof that the Duzdagi salt deposits, located in the Araxes Valley and still mined today, is the site of the world’s oldest known salt mine. Things have naturally moved on since those early days and the introduction of modern technology and mining methods have created a powerful sector in the Azerbaijani economy, one that in 2013 was valued at $22.9 billion according to The State Statistics Committee of Azerbaijan Republic (Azstat).
Azerbaijan is rich in both fuel ore and non-ore minerals. The ore and non-ore minerals are largely located in the mountainous regions while its fossil fuels are located in the plain territories and South Caspian Basin. In terms of metallic ores, Azerbaijan is rich in iron, aluminum, chromite, tin, zine, cobalt, gold, silver, and copper, among others. The country’s iron ore industry is relatively new in terms of commercial production having only started in 2010 on an industrial scale, apart from sporadic years where a small amount of the ore was mined.
The largest deposit in Azerbaijan is the Dashkesen iron ore reserve, which is estimated to hold around 250 million tons of varying qualities. The deposit serves as the main source of ore for the metallurgy industry in the South Caucasus with ore also being exported to neighboring Georgia and the Rustavi metallurgical plant. Azerbaijan is looking to expand its export partners and in January 2015 announced plans to increase ore exports to Europe. The Russian company Electrostal Heavy Engineering Works and Dashkesen Filizsaflashdyrma signed a contract with Azerbaijan Steel Production Complex. Dashkesen Filizsaflashdyrma is a part of the Azerbaijan Steel Production Complex and will import modern machinery from Electrostal Heavy Engineering Works. This will help improve the quality and concentration from 60% to up to 66%, along with an increased production capacity. This increase in quality will allow it to compete on the European markets. Dashkesen Filizsaflashdyrma imported dump trucks with a capacity of 45 tons and 140 tons, as well as excavators and bulldozers, which will reduce the production cost of iron ore by 20%. This reduction in cost is vital to keep the country ore competitive on the international market as globally iron prices fell by 2.5 times from $146 per ton to $63 per ton. This drop has limited export revenues globally. According to AzStat, iron ore exports fell in 2014 two fold because of low prices to 73,300 tons. Of that total, 50,000 tons went to Panama, which was worth close to $2 million, and the remaining 23,300 tons went to Georgia for an estimated $1 million. This is a considerable change to 2012 when the country exported 210,550 tons of iron ore worth $5.55 million, with the ore going to the UK (168,850 tons at $4.59 million), Hong Kong (27,350 tons at $738,000), and Georgia (13,350 tons at $227,000). In January 2015, iron ore mining was only 800 tons, a whopping 94.3% decline on the same month the year before. Over the past two years, iron ore production has fallen from 141,400 tons in 2013 to 91,400 tons in 2014, which represents a 31.8% drop according to AzStat.
While iron ore maybe struggling due to international low prices, the falling prices in gold do not appear to be affecting production as much. In 2014, gold production by the country’s main producer, Azerbaijan’s Anglo Asian Mining, rose by 16% to 1,875kg or 60,285 troy ounces, which surpassed the company’s target production goal. Of that production, 50,615 ounces were sold at an average price of $1,267, providing the Anglo Asian Mining with an income of $64.12 million. The company’s and Azerbaijan’s, main gold mine is Gedabek, which is 350km west of Baku. Reserve estimates for the mine put it at 20.5 million tons of ore grading 1.03 grams per ton of gold (682,000 troy ounces), 102,000 tons of copper, and 7.35 grams per ton of silver (4.84 million troy ounces). Silver production for the company fell in 2014 to 31,117 ounces from 65,939 ounces in 2013. The CEO of Anglo Asian Mining stated to the media that he was happy with the company’s progress in achieving its targets, not only in gold production but also copper, and he hoped that this success would continue into 2015. In terms of copper, the company increased its production in its main mine Gedabek as well as in the Gosha mine to 784 tons in 2014 from 327 tons in 2013. In May 2014, Anglo Asian Mining signed a three-year contract with Industrial Minerals to become the exclusive partner for copper concentrate product, including both wet and dry concentrates. At the time, Anglo Asian Mining had 75 tons of dry copper concentrate and 550 tons of wet copper stockpiled ready to sell. In 2013, the Gedabek mine sold copper reserves for a company record $6.6 million. In an effort to continue the company’s success in the copper field, Anglo Asian Mining announced in October 2014 that it would build a copper recovery plant in Azerbaijan to extend the longevity of the Gedabek mine. The mine has experienced the common problem associated with deep mining of the low recovery of gold because of a high-copper content. This has increased the cost of producing gold due to the increased use of cyanide to separate the gold and copper. The new plant hopes to reduce the cost and increase the efficiency when mining gold and copper.