BELOW TERRA FIRMA

Azerbaijan 2012 | INDUSTRY & MINING | REVIEW: MINING

While gold mining draws the most attention, Azerbaijan's deposits of alunite and iron ore are becoming the real focus of attraction.

The economic success of the Caucasus has been closely linked to the abundance of natural resources, and Azerbaijan, the country with the largest economy in the region, has abundant precious and non-precious metals resources. Azerbaijan is thought to have commercially exploitable reserves of iron, lead, zinc, molybdenum, alunite, gold, and silver, as well as industrial minerals such as zeolite. Currently, the country is heavily investing in the mining industry, a segment of the economy with a long tradition. During the Soviet era, several metal deposits were discovered in Azerbaijan. However, the beginning of the 1990s witnessed a decline in ore and concentrate production, as well as the output of metals production. Over the past half decade, the Azerbaijani government has adopted a strategy to diversify the national economy and put the country on the map as a regional mining power. Over the last few years, gold production has been the shining star of the sector. However, steel and aluminum are also beginning to enjoy their own day in the sun through companies such as the Baku Steel Company and Det.Al Holding, which are heavily investing in Azerbaijan's capabilities in terms of both mining and production.

GOLD RUSH

The development of the Azerbaijani gold mining industry is prompting the emergence of a strategically important sector. The revival of gold mining, a young segment of Azerbaijan's economy, is considered to have a promising future. The popularity of the precious metal since the onset of the global financial crisis is strengthening in the world market, encouraging the exploration and development of new mines in what were considered technically difficult or expensive areas, and Azerbaijan too has received its fair share of attention.

According to the State Statistical Committee of the Republic of Azerbaijan (Azstat), the country produced more than 62,000 ounces of gold in 2011. Gold in Azerbaijan is extracted exclusively from the Gedabek field in the west of the country. UK-based company Anglo Asian Mining signed a production sharing agreement (PSA) with the Ministry of Natural Resources and Ecology and began gold production in Gedabek in late May 2009. By the end of 2011, the country had produced over 141,000 ounces of gold. Although Gedabek is the only active field, Anglo Asian Mining is planning to start producing gold from the Gosha field by the end of 2012, anticipating to unearth between 15,000 and 20,000 ounces in its first year of operation. The company is also in the process of building a new agitation plant at the copper-rich Gedabek mine, in order to extend the life of the field and increase its productivity, as Reza Vaziri, president of Anglo Asian Mining, told TBY.

Azerbaijan produced 57,068 ounces of gold in 2011, and during the same period, the country sold 49,304 ounces at an average price at $1,573 dollars per ounce on the world market. Anglo Asian Mining has plans to increase gold production in the country to 300,000 ounces per year by 2015, envisaging the exploration of other mines, such as Ordubad. The PSA between the Ministry of Natural Resources and Ecology and Anglo Asian Mining envisages the production of 400 tons of gold, 2,500 tons of silver, and 1,500 tons of copper annually in the coming years.

RICH IN RESOURCES

Apart from vast reserves of copper, silver, and gold, Azerbaijan is also rich in iron, aluminum, pyrite, molybdenum, rock salt, as well as construction materials such as gravel, sand, limestone, bentonite clay, dolomites, volcano ash, and cement. Rock salt deposits are located in the region of Nakhchivan, and are embedded within Miocene era sandstone, shale, limestone, and marl deposits. Nehram deposit rock salt reserves have been estimated at as much as 2 billion to 2.5 billion tons. Azerbaijan also has a number of bentonite clay deposits, the largest of which is located in the Gazah region, where there may be commercial reserves of about 84.5 billion tons. The deposits of construction stone in the country are estimated to be about 300 billion tons and approximately 24 million tons of facing stone.

According to the latest Azstat figures, Azerbaijan produced 181,000 tons of bentonite, 3.47 million tons of crushed stone, 4.57 million tons of calcareous building stone, and 11,623 tons of salt in 2010. In addition, the country's overall cement production increased by 12.4% in 2011, reaching 1.44 million tons. The Garadagh Cement company has driven such growth with the construction of a new kiln, an expansion that has set a trend in the cement sector. Qizildas Cement will also put a new plant into operation in 2012. However, the country's resources of iron ore and alunite in the Dashkesen Zeilyk region, as well as the limestone deposits in Khoshbulag, represent the most important contributions to the industry.

In 2010, Azerbaijan produced 578,000 tons of iron ore, a number that is set to increase in 2012, owing to important projects led by Det.Al Holding and the Baku Steel Company. The Baku Steel Company currently boasts 300 million tons of approved iron ore reserves. In 2012, Det.Al Holding will inaugurate the newly built Ganja Aluminum plant, an important project to expand aluminum production in the country. The new complex, which utilizes a number of semi-fabrication facilities, will produce 50,000 tons of high-quality primary aluminum and 50,000 tons of aluminum coiled sheets annually by 2014. This plant has the possibility to increase production capacity up to 200,000 tons per year, as Sarkhan Babayev, general director of Det.Al Holding, told TBY.

The production of aluminum in Azerbaijan is based upon the large alunite ore fields, which are currently being mined in the Dashkesan Zeylik region. Det.Al Holding has formed an agency agreement and sales-purchase contract with Azerbaijan Aluminum, including the Sumgait Aluminum Smelter, which produces 60,000 tons of primary aluminum per year, and the Ganja Alumina Refinery, which produces 450,000 tons of metallurgical grade aluminum types. Azerbaijan Aluminum also owns alunite mines with estimated reserves of 300 million tons. Without doubt, the mining industry has become very attractive in Azerbaijan for both local and foreign companies interested in making investments. This environment is enhanced by the incentives and favorable business conditions created by the government, which seeks to drive the development of the metallurgical industry in the country.