THE CANARY LIVES

Turkey 2014 | INDUSTRY & MINING | REVIEW: MINING

The mining sector continues to add sparkle to Turkey's export basket, although few of the global giants have been tempted to this mineral-rich country.

Turkey's mineral resources are abundant, but to get the ball firmly rolling steps are being taken to prepare the investment environment for intense exploration. Anatolia's mineral resources have supported numerous civilizations over centuries past, yet Turkey's mining sector today remains nascent, but not without enormous potential. Boasting the most prospective land in Europe, Turkey hosts 77 of the 90 various kinds of mineral traded globally, 50 of which are commercially viable and the total reserves of which are worth $2.5 trillion, according to the Directorate General of Mineral Research and Exploration (MTA).

The sector remained mainly state owned until the 2000s, when the privatization process breathed new life into the industry. The private sector now represents 80% of the industry, and helped it to grow 4.6% in 2012. The sector represents approximately 1.5% of GDP and accounts for just under 3% of its exports, according to the latest data available from Istanbul Mineral Exporters' Association (IMIB). Attracting investors and handling the vast amount of exploration—only 10%-15% of land has been drilled by estimates, some of it insufficiently in terms of depth—will be the key challenges over the coming years, and crucial to overcome if the sector is to reach its goal of $15 billion in exports by 2023, with the current figure at around $4 billion. In addition to gold, of which Turkey is a significant exporter, there is also a plethora of relatively unexploited deposits of silver, copper, lead, zinc, chrome, nickel, and boron.

MINING LAW

Turkey has failed to attract global mining giants to its shores, although a host of junior miners have jumped at the chance to dig in Europe's largest gold producer—foreign interest has largely focused on precious and base metals. The 1985 Mining Law and its 2010 amendment is key reading for any inbound investor, although the more recent changes to the Commercial Code have also done much to shore up confidence. Minerals and the right to mine belong solely to the state, which then collects royalties in return for periodic exploration and operating licenses. Foreign miners enjoy equal treatment with their local counterparts, although foreign investors must establish a Turkish company, which can be 100% foreign-owned, to do so. The sector is regulated by the General Directorate of Mining Affairs (MIGEM), although local authorities also have a say on licensing and regulation. The latest amendment to the Mining Law brought environmental and health and safety issues in line with international norms, while also smoothing over the investment environment. According to a Fraser Institute survey for 2012-2013, Turkey sits below Serbia and above Ghana in terms of industry practices, held back by environmental permitting challenges and complications in regulatory implementation.

EXPORTS

Exports grew by almost 8% in 2012, up from 6% the previous year, according to the latest data from IMIB. Total exports in 2012 were worth just over $4 billion. Natural stone is the largest category in the export basket, at 46.5%, and was worth $1.9 billion in 2012. Turkey is the world's third biggest exporter of natural stone, and number one in marble and travertine, according to IMIB. Next on the list was metallic ores, at 34.3%, industrial minerals at 15.9%, and ferro alloys and other products at 2.9%. The sector's exports represent just under 3% of the country's total exports, peaking at 3.2% in 2010. China is the largest recipient of Turkish mining sector exports, at over 43%. That is followed by the US at 7.9%, with India in third at 3.17%, and Italy in fourth with 2.92%.

THE ROAD TO 2023

Significant steps have been made to pave the way for foreign investors, but it is junior miners that are currently lavishing the most attention on the country's mineral wealth. Although domestic holdings have also moved to invest in the sector, they lack the expertise that global mining giants could bring. The government is targeting $15 billion in mining exports by 2023, the anniversary of the republic, but, according to GBReports, the fact that the country is vastly unexplored could make the target unobtainable. With only 15% of land explored going on generous estimates, there is still much prospecting to do if the sector is to reach its potential. In that vein, a number of service providers have sprung up, ready to offer their expertise in efforts to assess previous exploration data, which some have labeled insufficient given that most programs did not drill below 200 meters.

Moving forward, Turkey's mining sector remains poised for greatness. With growing attention from junior miners, however, it could simply be a matter of time before a global giant comes sniffing. Until then, Turkey's diverse conglomerates and a host of junior firms will surely keep the pits busy.