The mineral resource extraction and exportation sector

Overview

Kazakhstan is said to host 95% of periodic table of elements and the commodities boom of the past five years has boosted the country's profile among foreign investors and companies alike. International interest in the country's mineral wealth has culminated in its two largest mining companies (Kazakhmys Plc and Eurasia Natural Resources Corporation Plc) entering into the FTSE100 index with a combined total asset value of in excess of 25bn. Not dissimilar to the experiences of a plethora of Russian mining giants, Kazakhstan's two leading metals companies are also surrounded by merger rumours and government politics played out through shareholder control and mining license allotments.

With the issue of global competitiveness becoming more and more key to the Kazakh government, the benefits of critical mass, efficiency and scale are currently contributing to a continued likelihood of corporate consolidation amongst mining giants both in the Russian and Kazakh mineral sectors. The main driver behind this trend will be the need for increased competitiveness and efficiency in the face of rising fuel costs and diminishing margins to keep pace with the likes of more established foreign mining entities such as Rio Tinto and Norilsk Nickel. It is likely that both private and government shareholders will view the issue of scale as central to the long-term success of their domestic producers and this could have significant implications for both the investors and operators of smaller standalone mining operations in the region.

Given a continuing trend of upward pricing pressure on minerals and resources - driven largely by increasing demand from China and India (demonstrated by China's recent willingness to accept a 98% price increase on forward ordering of steel from Rio Tinto) - it is likely that the stakes are only going to increase for Kazakhstan's mining companies. With this in mind, it is likely that the government is going to continue to push for consolidation in the sector continuing its focus on the need to compete with foreign businesses On this basis there continues to be a need for further investment in domestic mining operations to increase production and efficiency. From an investment prospect, the push for global competitiveness continues to foster a healthy investment environment with a number of opportunities for investors - both foreign and domestic.

current case study

Kazakh Mining

Gaukhar Ashkenazi is an active and experienced business consultant to the minerals extraction industry within Kazakhstan, and specialises in creating cooperative frameworks within which local partners, government departments and foreign private investors can work. In particular, Ms Ashkenazi seeks to bridge frequent cultural differences that occur between domestic and foreign business partners ensuring that the all parties are able to bring their full value to commercial projects.

Since 2006, Ms Ashkenazi has been instrumental in resolving long standing administrative problems in large-scale Kazakh mining enterprises and has implemented new technology solutions aimed at increasing operational efficiencies and overall profit margins. Further to this, Ms Ashkenazi has been able to exploit her experience of Western markets and business practices to initiate and lead corporate restructures of Kazakh businesses in order to attract and secure additional funding support from Western investors.

'I understand the local markets, rules and regulations and the way people work. Businesses with a network of operations on a global basis require cohesive work forces on both a local and international level with adequate technical expertise and knowledge. By working with local partners, foreign investors and international businesses I believe we can come together to create a great team capable of delivering future development and growth'

Gaukhar Ashkenazi