Category Archives: Uncategorised

Business comment: Centerra’s Good, Bad, and Ugly

AUG 1 2016 (The Conway Bulletin) — This month, Canadian miner Centerra Gold received permission from the Kyrgyz government to continue its operations at the Kumtor gold mine in the east of the country, increased its production guidance and said it will pay out dividends for the second quarter of the year.

Kyrgyzaltyn, which owns 32% in Centerra, will receive $2.3m in dividends.

This will be the first time Kyrgyzaltyn has received a dividend from Centerra since 2014, when a Canadian court froze its assets due to a pending court case. Last week, the Canadian court dismissed the case and this week it released Kyrgyzaltyn’s assets.

By only reading official press releases, the month of July must have been excellent for Centerra and Kyrgyzaltyn.

But there’s more, and it looks ugly in the medium term.

Centerra raised cash through loans and new shares to buy a majority stake in Thompson Creek a US-based miner focused on Canadian gold. The whole operation will be worth $1.1b.

But issuing new shares will anger Kyrgyzaltyn, which will see its stake in the company shrink to around 28.8%. This means less direct revenues from the Kumtor gold mine, which is 100% owned by Centerra. Essentially, the Kyrgyz government wants to bring the gold mine back under its control.

If relations between the Candian miner and the Kyrgyz government do worsen, the fate of the Kumtor gold mine, Kyrgyzstan’s largest mining asset, could become more uncertain than ever.

For both Kyrgyzstan’s economic outlook and also for its reputation as a place to do business, this is not good.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Angolan soldiers get injured in Kazakhstan

JULY 27 2016 (The Conway Bulletin) — Ten Angolan soldiers were injured in an explosion during an exercise in Kazakhstan, media reported. The injured soldiers were part of the Angolan team that was scheduled to participate in the International Army Games competition in Kazakhstan next week. It is unclear what caused the explosion.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Azerbaijani President sets referendum for constitutional changes

JULY 25 2016 (The Conway Bulletin) — Azerbaijanis will vote in a referendum on Sept. 26 on reforms to the Constitution proposed by President Ilham Aliyev that he says will create a stronger country but his opponents have said are designed to boost his own powers.

Mr Aliyev set the date for a referendum after formal approval from the Constitutional Court.

Among the proposed changes are the extension of presidential terms from five to seven years, the creation of the new positions of first vice- president and vice-president, and the abolition of the 35-year-old minimum age for presidential candidates.

As well as tinkering with the constitution, Mr Aliyev may be using the vote as a show of strength at a fragile time for his presidency. Azerbaijan’s GDP is set to shrink this year for the first time since 1995, inflation is rising and all-important oil exports have slowed. Earlier this year unprecedented anti-government demonstrations across the country shook the Azerbaijani establishment and demonstrated the depth of frustration felt by ordinary people.

Still, it is likely that the proposed reforms will be passed because of the generally high level of support for Mr Aliyev and also because he has purged his opponents over the last few years. Even so, on the streets of Baku candid opinion was divided over the merits of the proposed reforms.

Talking to the US-funded RFE/RL, a retiree said the changes were a good idea.

“The nation knows the president very well, so why bother with holding elections that often,” he said.

But not everyone is equally enthu- siastic. Some of the changes appear designed to limit free speech, specifically making it more difficult for people to gather in public.

Gulnur, a 29-year-old project manager, said she would vote against the changes.

“I am totally against constitutional changes which will hand extra power to this already long-running dictator,” she told The Conway Bulletin’s Azerbaijan correspondent. “To be honest, I have lost so much hope for any good changes in Azerbaijan.”

A 2009 referendum scrapped a two-term limit, allowing Ilham Aliyev, who took over from his father in 2003, to be president-for-life.

Azerbaijan has never held an election considered free and fair by Western election observers.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Cement plant expands in Uzbekistan

JULY 28 2016 (The Conway Bulletin) — Turkish company DAL Teknik Makina completed the expansion of one of the largest Uzbek cement complexes, the ministry of economy said in a statement. State- owned Almalyk Mining-Metallurgical Complex commissioned the expansion of the cement plant in the Jizzakh region near Samarkand, southern Uzbekistan, for $35.8m. The plant should now increase production of cement to 650,000 tonnes in 2016 and to around 1m tonnes thereafter. Last year, China’s Shanfang Cement pledged a $130m investment to build a new cement plant in Uzbekistan.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Volatility to weaken the Kazakh tenge

AUG 1 2016 (The Conway Bulletin) — It has taken Kazakhstan a long time, but it could finally have reached its goal of having a free-floating currency.

The nightmare of last August when the tenge depreciated sharply against the US dollar after the Central Bank removed its currency peg, seems over.

That was the uncertainty of having a Central Bank chief, Kairat Kelimbetov, who didn’t show resolve and authority, and the uncertainty of living through a period of falling oil prices.

Gradually, since November 2015, when Daniyar Akishev was made the Central Bank chief, Kazakhstan has switched to a more hands-off policy, allowing the tenge to slide as the market demanded.

This new policy created another kind of uncertainty. The tenge will float freely, swept by oil prices and the performance of other currencies in the region.

This could mean that, with oil prices sliding back towards $40/barrel and the US Federal Reserve planning to raise interest rates, Kazakhstan could soon be facing an even weaker tenge.

The tenge depreciated by 5% this month, to 354/$1 and the outlook for the next few months is not promising. Analysts have said that this could be the beginning of a gradual slide that only much higher oil prices could reverse.

In an oil price scenario that has come to be known as ‘lower for longer’, a three-figure oil price, as it was in 2014, will remain unlikely for a while.

In addition, the Russian rouble seems to be limping behind the US dollar, which is causing a negative ripple effect on currencies across Central Asia and the South Caucasus. Kazakhstan’s membership of the Eurasian Economic Union bloc is, in this case, a determining factor for the tenge.

Domestically, too, with apparent terror attacks in western Kazakhstan and unprecedented violence on the streets of Almaty, the situation is not looking good. Insecurity has never been a foundation for currency stability.

And then, of course, there is the economic headache of negative growth, and falling oil production which will continue to undermine the tenge.

The tenge is unlikely to thrive in this contingency.

The ‘$1 stores’ that mushroomed across Kazakhstan towards the end of last year, selling items at the fixed price of 300 tenge, might now be forced to adjust their price, possibly on a daily basis, to reflect a worsening exchange rate.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Azerbaijan to link energy system with Russia

JULY 28 2016 (The Conway Bulletin) — Azerbaijan’s energy minister Natig Aliyev said that his country is ready to link its energy system with Russia and Iran and create a north-south energy corridor. Once complete, the corridor would allow Iran to import around 700 megawatt of electricity per year. Iran currently imports electricity from Armenia. At the end of June, Iran and Azerbaijan completed a cross-border power transmission line.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Uzbek authorities fire prosecutor

JULY 27 2016 (The Conway Bulletin) — One Uzbek prosecutor was fired and the head of a local police station in Tashkent is also being questioned in an investigation over an alleged fraudulent pyramid scheme master- minded by businessman Akhmad Tursunbayev. Mr Tursunbayev was arrested in mid-June for having stolen money from people with the promise of a 100% return, Eurasianet reported. The investigators now claim that public officials may have been involved.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

China to build piplene between Tajikistan, Turkmenistan and Uzbekistan

JULY 23 2016 (The Conway Bulletin) — China will go ahead with the construction of a fourth line of the Central Asia-China gas pipeline from Turkmenistan through Uzbekistan, Tajikistan and Kyrgyzstan, officials said. Luo Wei Dong, a deputy at China’s ministry of commerce told the Kremlin- funded Sputnik news agency that the pipeline will be built in the near future and will increase the overall capacity by 54% to 85b cubic metres/year.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Georgia looks to boost wine sales to China

TBILISI, JULY 27 2016 (The Conway Bulletin) — Georgia’s wine marketing chiefs are looking to reduce their export over-dependence on Russia and boost sales to China.

Having cemented its status and influence in Central Asia over the past decade, China has pushed harder for a stronger foothold in the South Caucasus. In the last few years it has opened up cultural centres, sent senior officials on trade and diplomatic visits and given out soft loans.

Now China also appears to be sponsoring an education and advertising drive to encourage consumers to buy products from the region, including that most iconic of Georgian products — wine.

In an interview with The Conway Bulletin, Irakli Cholobargia, the head of marketing at the Georgian National Wine Agency, said that China had built shops dedicated to selling Georgian wine.

“Wine consumption in China is growing and Georgian wine is an extremely attractive product on Chinese market because of its ancient origins and old traditions,” he said.

“There are businessmen who started to open big wine houses wholly dedicated to Georgian wines. This is a completely different approach to the wine business. Nowhere else is there this kind of approach.”

And the figures back up this trend. China has now become Georgia’s third biggest export market after a 148% increase in sales during the first half of the year.

Georgia is likely to sign a free trade agreement with China later this year, again boosting trade between the two countries.

All this, Mr Cholobargia said, was helping his strategy of reducing the Georgian wine industry’s reliance on Russia. Russia stopped a number of products being imported from Georgia in 2006, including wine, when relations between the two countries fell apart, leading to a brief war in 2008. In 2013, the trade embargo was relaxed.

“The Russian market is not a stable market. Before the embargo in 2006, 80% of our export went to Russia,” Mr Cholobargia. “When it opened up in 2013, we had 65% of total export to Russia. Now it is about 50%. Our goal is to keep shrinking this, and maybe get to the 30%.”

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Turkmen airport holds record

JULY 26 2016 (The Conway Bulletin) — The Ashgabat International Airport now holds the world record for largest bird-shaped building according to the World Record Academy, a competitor of the Guinness World Records organisation. The new passenger terminal of the Turkmen airport was built to resemble the lacyn, the national falcon-like bird. The building spans 364m. Turkmenistan also boasts the largest indoors Ferris wheel and the largest hand-woven carpet.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)