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Kazakhstan 2014 | INDUSTRY & MINING | REVIEW: MINING

With some of the largest mineral reserves in the world, both national and international companies are looking at ways to access these underground riches.

Kazakhstan is well known for its minerals and resources, and the mining industry has long been a stable provider for the country's economy; however, according to industry experts, the good times are still to come. The three main drivers of the Kazakhstani mining industry are coal, gold, and copper, but increased production in rare earth materials and uranium are seeing the country move to new heights. Business Monitor International believes that by 2017 the total value of the mining industry will reach $29.5 billion. A number of recent deals and increased production in certain sectors suggest this prediction is likely to come true. A recent report by PwC about the largest transactions taking place in the mining industry in 2013 placed Kazakhstan above some of its closest rivals, Canada and Australia—the country had a global market share of 11% in M&A terms.

COAL

Coal is one of the core segments of the mining sector and employs over 40,000 workers. In 2013, Kazakhstan produced 119 million tons of coal, while in the first four months of 2014 it managed to extract 35.07 million tons of coal. If the country is able to continue at this production rate it is set to surpass the year before and push it high into the table of leading global producers of coal. The main coal producing region in Kazakhstan is Pavlordarskaya, which is located in the northeastern part of the country. It produced 21.3 million tons of coal in the first four months of 2014, followed by Karagandinskaya in the center of the country, which produced 11.33 million tons. There are new deposits also being developed currently in Zhalyn and Kumyskuduk. Kazakhstan is one of the top-10 coal producing countries of the world and has over 400 known deposits in its territory. The latest estimates suggest the country has over 33.3 billion tons of coal, which accounts for approximately 3.9% of the global share and places its reserves eighth overall.

URANIUM

An up-and-coming segment of the mining industry is uranium. Kazakhstan currently holds 12% of the global reserves of uranium and is expected to increase this share by 2018 as it continues to expand the sector and locate new deposits. Since 2009, Kazakhstan has actually been the leading producer of uranium in the world, when it became the source of 28% of total global production. Kazakhstan's market share of uranium production continued to increase for the next few years to 33% in 2010, 36% in 2011, 36.5% in 2012, and finally 38% in 2013. According to KazAtomProm, the national nuclear holding company, in 2013 the country produced 22,500 tU of uranium, an increase of 7.6% on 2012 from 20,900 tU. Kazakhstan also exported 23,400 tU in 2013. Of the total production, KazAtomProm's own production amounted to 12,600 tU, which translates to 21% of world production. The state-ownedcompany's large capacity is down to its ownership of five of the 17 mines in the country, while it is also in joint ventures in the remaining 12 mines with foreign equity holders. KazAtomProm has also been expanding its operations with a 25% acquisition of a Russian uranium enrichment plant, the Urals Electrochemical Plant. It is now in a joint venture with the Russian fuel company TVEL after the transaction was completed in September 2013. Kazakhstan is looking to solidify its position as the largest producer of uranium as it increases its production capacity. By 2015, it hopes to have an annual capacity of 25,000 tU, while by the end of the decade it hopes to break the 30,000 tU mark. In the long term, Kazakhstan has all the requirements to raise its production far beyond its current target of 30,000 tU. While the outlook for the uranium market is positive, it must also take into account international conditions, such as the currently low price of uranium because of the Fukushima disaster. A massive increase in production is unlikely to stabilize an already volatile market; however, the Kazakhstani authorities have recognized this fact and are delaying some of the new projects and expansions of existing mines.

COPPER

Copper is another area of the mining sector that is showing promise for the future. The country has the fifth largest reserves in world, and some of the major global mining companies are investing in the country. Both Kazakhmys and Rio Tinto have committed $100 million to exploring the northern part of the country for copper. Frontier Mining is also hoping to increase its copper production eight fold as it began mining operations in Kazakhstan, with the company hoping to extract 20,000 tons per year by the end of 2014. Frontier Mining estimates that this extra production will bring in revenues of around $160 million per year, but it has put a market value of over $1 billion on the reserves it is mining. As a nation, copper production is moving along steadily, having mined 12,025 tons in the first four months of 2014.

There is a certain buzz around the Kazakhstani mining sector at the moment. The country has some of the largest mineral reserves in the world, yet it is still largely untapped. As more foreign investment pours into the country, and production continues to increase, it will not be long until everyone knows of Kazakhstan's bountiful riches.