THE RUSH FOR MORE

Turkey 2013 | ENERGY & MINING | B2B: GOLD

Gold is one of the mining industry's hottest areas right now, with both domestic and foreign activity.

M. Ümit Akdur
M. ÜMIT AKDUR
Chairman
Turkish Gold Miners Association
İsmet Sİvrİoğlu
İSMET SİVRİOĞLU
General Manager
Koza Gold Corporation

How would you characterize the growth of the gold mining industry in Turkey?

M. ÜMIT AKDUR The interest of foreign mining companies began with the introduction of the mining law in 1985. That enabled foreign mining companies to operate in Turkey with 100% foreign capital investment. That attracted some 20-25 foreign mining companies, which were interested in precious metals, mainly gold. Real production in Turkey started in 2001 with Newmont. Exploration has been popular since the beginning, but now luckily we are proud to say that there are eight operating gold mines in Turkey. The production in 2012 was 29.5 tons, and with the introduction of new mines and expansions in the existing mines we are hoping that this figure will increase to 35 tons. We expect this pace is going to continue.

İSMET SİVRİOĞLU Until 1985, there was no gold business in Turkey. The last gold produced was in 1911 during the Ottoman Empire. Then it stopped, because there was World War I, World War II, and many other issues. Before 1985, there was no real gold exploration. In that year we changed the mining law and invited foreign capital to Turkey. As these companies started exploration, they seemed to be affected by the legal issues in Ovacık gold mine. As we solved the problems in Ovacık, their activities increased visibly by 2001. They have good budgets from their countries, and there are many companies doing exploration work. Turkish gold reserves have now reached 700 tons. According to one study, there are 6,500 tons of potential gold in Turkey. However, in order to prove it you should do a lot of exploration studies. In my estimation, at least $8 billion to $10 billion is needed for this exploration work. Time is also important.

How would you characterize the attractiveness for investors in Turkey's mining sector?

MÜA The tax regime is quite favorable. The corporate tax rate is 20%, which is quite attractive. On top of that, the Minister of Economy is aware of the potential that mining can bring to the Turkish economy. He is trying to make Turkey's mining sector more attractive, and he has introduced very favorable incentives, which really reduces the level of corporate tax to more positive levels. It is not actually 20% if you include the incentives; it is quite attractive compared to other countries. I have been in this sector for 26 years mining gold, and before I was in the marble sector. We had difficult times in expressing ourselves to the communities and the politicians because there was a fear about production, especially the use of cyanide. We had some really difficult years trying to explain ourselves, but with the introduction of the first gold mine in Turkey in 2001, it was much easier to express ourselves and to introduce our sector as a normal industrial activity.

Why is Turkey's gold mining sector dominated by international companies?

İS To complete the feasibility of a gold mine you need at least five to 10 years. It takes a lot of time. The gold grade can sometimes be very low, 1 parts per million (PPM) or less and you cannot see the gold itself in the ore. Therefore, you should do lots of research to understand what is contained in the ore and the expenses run into the millions of dollars. In order to complete a feasibility study, you need to spend at least $10 million or $20 million. Thence, exploration needs experience, suitable technology and technical knowledge. If one of these steps is lacking, you may spend your time and money for nothing.

How would you characterize Turkey's position in the gold mining sector worldwide?

MÜA Turkey's production is increasing substantially, but it is not a fully explored country. We know that there is high potential and a large part of it is still to be discovered. Various other producing countries, more or less, know to a great extent what the potential is and where it is. However, here there is a lot of potential because there are large unexplored areas in Turkey still.

What are your goals for the company over the next five years?

İS The first thing is to increase our production. We want to produce 375,000 ounces of gold in 2013, and then increase this number step-by-step. We have many projects. The Himmet Dede operation will start in 2013, and we have many other projects, including Söğüt. In total, we have five projects at an advanced stage. Although we want to increase our production, we also want to increase our reserves and resources. Eventually, we will start to look at overseas projects.