How is geological exploration industry doing during quarantine? Has it been hit by the crisis? Said Sultanov, partner of Aurora Minerals Group, shares his opinion in an exclusive interview for inbusiness.kz
Today everyone is talking about crisis in many sectors of the economy due to the pandemic and falling oil prices. But for the world community, including for Kazakhstan, this is not the first crisis. How today, amid all the world events, are things going in the mineral exploration?
Mineral exploration is integrated into the global mining and metallurgical complex, and all those changes and fluctuations that we observe today in the global market for mineral raw materials are affecting the mineral exploration as well. Therefore, a drop in demand and prices will inevitably affect investment programs and exploration budgets. Speaking about the unfolding coronavirus pandemic, the first thing we are witnessing is a direct impact on the country’s exploration companies, which, due to travel restrictions were not able to mobilize and begin the field season. Thus, all plans for the current year have fallen behind the schedule one after another - from the customer to the contractor, from small plans to big ones.
Secondly, major mining companies are postponing their investment exploration programs to the next year. Hence the sharp decline in geological exploration works, which will be followed by defaults on loans, project shutdowns and the dismissal of key staff.
Today all domestic companies are complaining about this, be it a small, medium or big one, including those working in other sectors of the economy. But what will happen to our geological exploration now?
Let’s not be pessimistic. Every new crisis means new opportunities. For example, some local exploration companies, which were created during the 2015 currency crisis, decided to concentrate only on gold projects that are actually developing better during the crisis.
For example, in 2015, gold was worth $1,200 per ounce, today its price has risen to $1,700 per ounce, and due to the monetary policy of the United States and world central banks, a number of analysts believe that gold can grow up to $3,000 per ounce.
Therefore, taking into consideration that the cost of gold production in Kazakhstan is approximately $600 per ounce, such a crisis is a favorable time for exploration and preparation of projects, both for gold and a number of other metals with a similar forecast of growth in prices.
In this case, we would like to know what are the prospects of Kazakhstan in gold mining?
The balance reserves of explored deposits amount to more than 2.2 thousand tons of gold, while the estimated gold resources in prospective areas that require exploration and evaluation can equal to more than 12.7 thousand tons, which is six times higher. Over the past five years, the country's gold extraction has almost doubled, from 49.2 tons in 2014 to 88.5 tons in 2018. Today, Kazakhstan is actively increasing the amount of gold in its international reserves. Over the past five years, the share of gold in Kazakhstan's reserves has doubled, from 29.7% to 65.6%, while international reserves have grown from $26.9 billion to a level of about $30 billion.
It is well known that gold reserves are like the safety cushion for any state in times of crisis. By disposing gold reserves, the republic can always support the national currency. At the same time, according to the latest data from the Committee of Geology, the provision of gold reproduction in our country is still low, and therefore the state should pay special attention to stimulating gold exploration.
And which regions of Kazakhstan have prospects for the presence of gold deposits?
Virtually all regions. In terms of gold reserves, the East Kazakhstan and Akmola regions can be recognized as the richest, while gold deposits are also widely present in the Aktobe, Kostanay, South Kazakhstan, as well as in Almaty, Pavlodar, Karaganda and Zhambyl regions.
And what are our prospects for other types of minerals? Can we expect the discovery of new deposits of copper, chromium, bauxite - all of which are always in demand on world markets?
Definitely. According to the Committee of Geology of Kazakhstan, our forecasted copper resources amount to 195.3 million tons; polymetals - 193.6 million tons; iron ore - 12.7 billion tons; chromium ores - 396 million tons; bauxites, titanium-zirconium placers and rare metals - 227 million tons.
These numbers are impressive. However, at the same time, the reserve replenishment coefficient for gold, lead, and zinc is negligibly small in our country. Taking into account the time required for exploration of the deposit from the moment of its discovery to the development stage, the current state of the mineral resource base of our country looks deplorable. In 10-15 years, Kazakhstan may begin to experience a shortage of copper, lead and some other metals. It's like sitting by the water and feeling thirsty. With the resources that I have listed, we are not far from the full-scale extraction of all our reserves.
Today we do not have a single mining project from Kazakhstan on the Toronto Stock Exchange and we believe it is time to change this state of affairs. Indeed, the more local companies are listed on the stock exchange, the more there will be high-quality transparent projects that financially stimulate the industry and really improve the investment attractiveness of the country.
What is the reason and what needs to be done in order to remedy the situation? After all, exploration, as you emphasized, has always attracted and is attracting foreign investment into the country's economy.
There are several reasons. Firstly, today we are witnessing the depletion of the fund near surface deposits that are relatively easily to access. In order to discover new deposits it is necessary to go deep, which requires innovative, primarily advanced geophysical research methods. However, there are some problems in the application of advanced technologies, despite the fact that leading exploration companies come to us with their technologies and see the promising potential of our mineral resources. This is the second reason for the crisis in our geological exploration sector.
Sorry to interrupt, but I wonder, companies from which countries do see the potential for geological exploration in our country?
First of all, major mining powers of Canada and Australia, as well as the United Kingdom, Switzerland, Turkey and the USA. All investors from the above countries begin with an analysis of geological information and the use of advanced geophysical research methods, both ground and airborne. Airborne geophysical surveying are key methods in exploration for mineral deposits. I will explain why on the example of Namibia. High-resolution airborne geophysical surveys and open publication of survey results made it possible to increase the number of licenses in Namibia by several times, despite the fact that its territory was considered to be quite explored with ground geophysical methods. Hence, the volume of investment in geological exploration of this country has more than doubled. Unfortunately, in Kazakhstan, despite the big territory, airborne geophysical surveys are not widely used, which means that we are missing out on opportunities for investment into our economy. A similar situation is happening with widespread use of gravimetric surveying in the exploration works. For example, gravimetric surveying is one of the main research methods used in oil and gas exploration. In the Ural-Emba region, for instance, gravimetric surveying works have been ongoing since 1925.
Unfortunately, independent Kazakhstan has inherited the Soviet practice of secrecy of gravimetric survey data (such data is classified as “confidential”), which greatly complicates the conduct of such types of surveys and actually closes the Kazakhstan market from modern innovative technologies. It is another obstacle for an effective and active development of geological exploration in the current conditions and the inflow of new investments.
It is pitiful that because of the data “secrecy”, acting under the laws of the Soviet era, today we are losing investments to discover the same gold deposits that have been in demand at all times, not to mention other minerals.
We should be proactive, I would even say, we should use the latest technological progress more aggressively. If to talk about the prospects of discovering new deposits, we cannot ignore the issues of digitalization of geology and exploration stages. In my opinion, digitalization of geological exploration allows us not only to obtain a large amount of data, but moreover, to process the data quickly and efficiently. This is what is now called machine learning. Let me refer to Karim Masimov, who in his book “The Next Master of the World: Artificial Intelligence” provides a detailed overview of the milestones in the development of artificial intelligence and talks about the national strategies for artificial intelligence in a number of countries. So, according to the author, artificial intelligence is developing so fast that Kazakhstan risks falling behind in the global race. For now we are just on the verge of transforming the process of geological exploration. The increasing use of drones, robotic automation of equipment and increased speed of information processing and transmission, as well as development of information technologies and software for working with large data arrays - all this leads to the creation of artificial intelligence in geological exploration. The introduction of artificial intelligence will allow companies engaged in the exploration for minerals to increase productivity and reduce the time for the exploration cycle, thereby reducing costs. This is relevant both for world geological exploration and exploration in Kazakhstan in particular.
And what prevents the implementation of digitalization and artificial intelligence in geological exploration?
To accomplish this task, we need to analyze and digitize all available geological information, and create a National Mineral Data Bank. All exploration work must comply with the information protocols for implementation into the database, thereby we will be able to quickly access different layers of data from satellite imagery, airborne geophysics, geochemistry, drilling, while the machine will analyze patterns and provide tasks for further exploration. Today in the world, Canada and Australia are actively developing in this direction, and there are dozens of companies on the market that provide such services. The future will be in the hands of those players who can combine geology with data science.
Are there such players who already use science and artificial intelligence on our market?
We have a new generation of professional exploration geologists who create private companies and are capable of implementing the latest achievements in the field of science and technology. These are the so-called junior companies. 70% of mineral discoveries in the world are actually made by juniors. Such companies differ from large companies in the complete absence of bureaucracy and the ability to effectively make decisions on a particular project. While large major mining companies were the main driving force in the field of discoveries of new deposits in the 50-60s of the last century, are now more focused on extraction and processing. It is worth noting that major players in Kazakhstan such as “Polymetal” or state owned mining company “Tauken Samruk” actively support juniors and have appropriate stimulus programs. We have the Astana International Financial Center, therefore it is important to make emphasis on juniors in geological exploration, and for this they need tax incentives and a competitive market. It is all up to the government that wants investment in the economy, but nothing can be achieved without tangible and rapid decisions!
Source: https://inbusiness.kz/ru/amp/news/skolko-zolota-ostalos-v-kazahstane
