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Turkey 2012 | ENERGY & MINING | REVIEW: MINING

With significant mineral reserves, rising international commodity prices, and growing domestic demand for metals, Turkey's mining industry looks set for continued growth.


The past decade has seen exceptional growth in Turkey's mining industry. Some 15 years ago, 85% of the industry was publicly owned. Now the majority of mining is carried out by private companies, and the government is working to actively encourage new companies and investors to begin digging. As a result, Turkey has grown to become an increasingly known player in the international mineral and metal market, particularly because of its geographical advantages in terms of shipping and logistics. From 2002-2010, the value of the mining sector more than quadrupled from $1.9 billion to $7.7 billion, representing 1.4% of total GDP, and nearly 4% of industrial GDP. The country now ranks 28th globally in terms of the strength of its mining sector. Turkey has also seen a steady increase in foreign investment in mining, which has now rebounded to $195 million in 2010 after a brief drop in 2008 and 2009.

Turkey is rich in deposits of base metals, precious metals, and industrial minerals, and holds 2.5% of global industrial mineral reserves. The country has 4,500 mineral deposits with 53 different types of exploitable minerals in economically viable quantities, making it 10th in the world for a variety of mineral resources. Boron is by far the country's richest mineral deposit; Turkey has 86 million tons of boron reserves, which comprise roughly 72% of global estimates. Behind boron, Turkey is also the number one feldspar producer in the world, accounting for 30% of global production. The majority of feldspar production is conducted by private companies, and 90% is destined for export. Turkey also holds more than 50% of world pearlite reserves, 45% of pumice reserves, 30% of the world's marble reserves, and 20% of bentonite reserves. The country also holds major reserves of baryte, lignite, celestite, bauxite, zinc, lead, gypsum, emery, limestone, magnesite, chrome, silver, and manganese.

According to Musa Ertaş, Chairman of Metaş Mining, pumice mining in Turkey, which has nearly half of the world's pumice reserves, is drawing increasing attention from international investors, as “pumice mining really com[es] to the fore." Pumice is an important export product for Turkey because it has such a wide variety of uses in sectors around the world, from agriculture, to cosmetics, to textiles, where pumice is used to make stone-washed jeans. Metaş Mining has also begun promoting the use of pumice for heat insulation—a solution that is money saving, environmentally friendly, and looks set to create further value-added.

Turkey boasts a fast-growing gold segment, which looks set to take off as gold prices stay strong, and domestic demand for gold continues to increase. It is estimated that Turkey has 710 tons of untapped gold reserves. Over the past decade, Turkey's gold production has risen phenomenally, from none whatsoever in 2000, to being Europe's largest gold producer in 2011, when the country produced 17 tons of the element. Of the known deposits, Turkey currently has four active gold mines, with four additional mines under development or planned for the future. One major player in Turkey's gold mining industry is Alacer Gold, which operates the Çöpler Gold Mine near the city of Erzincan. The site has estimated reserves of 4.6 million ounces, and is steadily increasing production to meet the heavy demand for gold in Turkey. In 2011, Çöpler produced 185,000 ounces of gold; production is expected to increase further to nearly 200,000 ounces in 2012, and 800,000 ounces per year in 2015. According to Calvin McKee, Country Manager of Alacer Gold's Turkish Business Unit, the gold mining industry will continue to grow in years to come. In an interview with TBY, McKee explained that “Production will continue at about the same level for the short term, but should begin to grow considerably as more of the large copper and gold projects being explored move into production."Despite the rapid rise in Turkey's gold production, it is still unable to fully meet domestic demand. Turkey ranks fifth globally for gold demand, and is the second largest producer of gold jewelry in the world. As a result, many analysts expect the gold sector to continue on its growth trajectory in the coming years, and be a magnet for foreign investment.

NEW MINING CODE

Under Turkish law, all mineral resources belong to the state, which has the sole right to grant licenses for exploration and exploitation. In June 2010, Turkey reformed its mining code to address some licensing issues that had been hampering the growth of the sector in the past. Under the previous system, it was common for speculators to blanket purchase mining licenses for an entire area, only to then re-sell the rights to mining companies for a significant profit. As a result, many viable mineral deposits lay unexploited, and speculators were able to drive up the cost of exploration for mining companies. The reform put an end to this practice by placing financial and performance requirements on license-holders. As Taner Yıldız, Minister of Energy and Natural Resources explained to TBY, “the new mining regulations are intended to make mining more efficient." Calvin McKee, Turkey Country Manager for Alacer Gold, agreed, telling TBY “this is an advantage for companies that are serious about developing new mines in Turkey. There are additional measures that address health, safety, and environmental requirements, and make it more comfortable for international investors to see that Turkey is moving toward international standards in these areas." The new rules require licensees to demonstrate that they have the financial ability to exploit a mineral deposit, and then to carry out phases of the exploration process within a certain timetable. The rules had an effect on the industry almost immediately. Just four months after the new code was implemented, the number of active licenses dropped by one-third from 45,000 to 32,000, while the number of companies exploring for gold shot up from nine to 26.