Mining News

Kazakhstan’s on the Right Path

Posted by Cheryl Rutledge on 10/22/2014 11:09:04 AM

By Taylor Jackson and Kenneth P. Green

Kazakhstan is finding out that even small changes in policy can pay off. Bloomberg is reporting that Kazakhstan is set to ease rules on foreign investment in mining and is planning on awarding between 50 and 100 new mining licenses beginning next year. Erlan Sagadiev, Kazakhstan’s deputy minister investments and development was quoted as saying that “[n]ext year will probably be the most active year and we would expect international mining companies coming in and bidding.”

Change in policy is badly needed for Kazakhstan. The country is a perpetual underperformer in the Fraser Institute’s Annual Survey of Mining Companies. Over the past five years on the Policy Perception Index (PPI), which is comprised of 15 policy factors such as taxation and trade barriers, Kazakhstan has never ranked higher than the bottom third of countries. In the 2013 edition of the survey, the country scored a 22.1, indicating that there is not much positive sentiment towards the prospects of mining here. This figure is also down from Kazakhstan’s high of 39 in 2009/2010.

What is most interesting though is the potential that investors and company executives have bestowed upon Kazakhstan. On the Best Practices Mineral Potential Index, which measures investment attractiveness based on mining company executives’ perceptions of a jurisdiction’s geology, Kazakhstan fares much better. In 2013, the country scores in the attractive second quintile, and ranks as the 31st (of 112) most attractive jurisdiction in the world based on pure mineral potential.

It appears that Kazakhstan intends to begin taking small steps towards harnessing their potential in mining. It is reported that by 2017, the value of Kazakhstan’s mining industry could reach $30 billion, and despite a depreciation in prices, coal mining employs around 40,000 people in the province of Karaganda. If Kazakhstan enacts the proposed reforms, it is likely that the $30 billion expected value of mining could rise considerably. We wish them luck.

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