OCT. 26 2016 (The Conway Bulletin) — Kazakh president Nursultan Nazarbayev visited Saudi Arabia where he signed deals with King Salman bin Abdulaziz Al Saud, including a deal to boost nuclear cooperation. Kazakhstan is one of the biggest producers of uranium in the world and has been trying to build up a market to sell to.
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(News report from Issue No. 302, published on Oct. 28 2016)
OCT. 17 2016 (The Conway Bulletin) – ArcelorMittal, the world’s largest steelmaker, has shown signs of trouble in its operations in Kazakhstan due to the fall in commodity prices.
In early 2014, it laid off around 1,000 workers. The subsequent devaluation of the tenge currency seemed to have fixed its cost problems but as the US dollar strengthened against all commodities, effectively pushing prices down, the company felt the bite of lower revenues.
In 2015, it cut worker salaries by 25% only to later face a court order that deemed the move illegal. Later in 2015, when the tenge sank after the Central Bank ditched the peg to the US dollar in August, ArcelorMittal Temirtau’s former boss Vijay Mahadevan said that the tenge value needed to be even lower for the company to effectively cut costs.
But exchange rate fixes are only one-off solutions that cannot ensure long-term stability.
Earlier this year, the company predicted a 13% drop in net income and cancelled a promised pay raise to its employees, lowering their benefits instead. And in September, the government lodged a veiled accusation against ArcelorMittal Temirtau for allegedly slowing production to keep revenues low and avoid a higher tax bill. The company said this week it had resumed full production, to avoid further problems.
But the headaches are still there, despite the potential growth of the Iranian market, vital for ArcelorMittal, after most sanctions were lifted this year.
Besides the thousands that it currently employs, the plant in Temirtau holds symbolic value, as President Nursultan Nazarbayev worked there in his youth.
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(News report from Issue No. 301, published on Oct. 21 2016)
OCT. 17 2016 (The Conway Bulletin) – Over the course of just a few months, KAZ Minerals has nearly doubled its stock price in London, reaching 267.1p by Thursday.
The company, which operates in Kazakhstan’s copper mining sector, continues to rally off the back of good production results throughout the year and timidly growing copper prices, now at 2.11/lb.
Copper prices, which have fallen sharply from the $3/lb of November 2014, had hovered at around 2.15/lb in September, before dropping back. But now the feeling is that prices are moving back up.
China, a major copper consumer, posted steady growth prospect and negative news from the US housing market indirectly bodes well for copper prices. Sluggish US economic news weakens the dollar and pushes up prices. KAZ Minerals improved its position in both production and revenues this year, mostly due to the start of the Aktogay project, which cost $2.2b to put in operation.
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(News report from Issue No. 301, published on Oct. 21 2016)
OCT. 17 2016 (The Conway Bulletin) – ArcelorMittal Temirtau, the subsidiary of the Luxembourg-based steel- maker, said it resumed operations at its plant in central Kazakhstan. The company had to cut production for three days, due to administrative issues which blocked train transport. In a separate note, the company said that Mojtaba Damirchilu, Iran’s ambassador to Kazakhstan, visited the plant and pledged to increase Iranian imports of ArcelorMittal Temirtau’s steel by 1/3 to 1.5m tonnes next year. Iran is ArcelorMittal’s biggest client. The international sanctions on Iran had hit its demand for steel, hurting the Kazakh steelmaker.
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(News report from Issue No. 301, published on Oct. 21 2016)
OCT. 7 2016 (The Conway Bulletin) – Centerra Gold’s stock price has been on a rollercoaster this summer, closely following the ups and downs of the price of gold.
This week, both fell. Centerra contracted by 9% to 6.49 Canadian dollars and gold registered an unusual 5% fall to $1,254.38/troy ounce on Thursday. After a tense spring, when the Kyrgyz government and Centerra were at loggerheads over permits and court cases, calm now appears to reign. Importantly, though, this year Centerra has actively tried to diversify its portfolio away from Kyrgyzstan, investing in Turkey and in the US.
As part of the financing for the acquisition of Colorado-based Thompson Creek, Centerra issued new shares which analysts said will dilute the share that Kyrgyzaltyn, the government-owned gold miner, owns in Centerra from 32% to approximately 28.8%.
The deal, inked in July, put relations between the company and the government under strain once again.
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(News report from Issue No. 299, published on Oct. 7 2016)
SEPT. 30 2016 (The Conway Bulletin) – London-listed China Nonferrous Gold said it is close to reaching its goal of increasing production capacity at its Pakrut gold project in Tajikistan to 2,000 tonnes/day. The company produced its first gold in Tajikistan in January. It has held an exploration licence since 2004. The Pakrut gold mine lies 120km north-east of Dushanbe.
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(News report from Issue No. 299, published on Oct. 7 2016)
ALMATY, OCT. 5 2016 (The Conway Bulletin) — Kazakhstan-focused copper producer Central Asia Metals reported a 38% growth in production in Q3 2016 compared to the same period last year, because of the expansion of its Kounrad project near Lake Balkhash.
The company, listed in London, said it could potentially surpass its goal of producing 14,000 tonnes of copper this year. In the first nine months of the year, it produced 11,010 tonnes of copper cathode, up 31% compared to last year.
The news sent its shares up 3.6% to 181.75p, its highest level since April. The depreciation of the Kazakh tenge after the Central Bank ditched the peg to the US dollar in August 2015 also helped the company cut production costs which should help its full-year results.
“As a result of the devaluation of the tenge as well as some engineering cost savings, we remain confident that we can complete this capex programme approximately 25% below our initial budget of $19.5m,” chairman Nick Clarke said.
Central Asia Metals mainly exports its copper products to Turkey. Its exposure to other markets is limited.
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(News report from Issue No. 299, published on Oct. 7 2016)
SEPT. 28 2016 (The Conway Bulletin) – Kyrgyzstan-focused miner Chaarat Gold said it raised £4.1m ($5.3m) by issuing 78.8m new shares in London. Labro Investments, which previously held a 25.6% stake in the company, will raise its ownership to 31.7%. Last week, Martin Andersson, owner of Labro Investments, was named non-executive chairman of the British Virgin Islands-registered company.
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(News report from Issue No. 298, published on Sept. 30 2016)
SEPT. 27 2016 (The Conway Bulletin) – TALCO, Tajikistan’s aluminium smelter and the country’s biggest industrial asset, should cut output to survive because aluminium prices have fallen below production costs, the company auditors said.
Tajikistan’s government has repeatedly intervened to give TALCO incentives and preferential loans but has not been able to prevent thousands of job losses.
Now production cuts are likely.
“This year, a significant decrease in the level of world prices for aluminium has impacted TALCO’s earnings. The company auditors have suggested that the management orders a cut in production in order to keep financial losses at a minimum,” TALCO said in a statement.
TALCO produced over 73,000 tonnes of aluminium in the first half of 2016, a 13.5% increase compared to the same period last year. It exports to clients in Turkey, Taiwan, Iran, British Virgin Islands, Uzbekistan and Pakistan.
Low commodity prices, though, meant it sold aluminium at a price range of $1,400-$1,600/tonne. Production costs have reached $2,000/tonne. In April, it laid off around 600 workers to cut costs.
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(News report from Issue No. 298, published on Sept. 30 2016)
SEPT. 30 2016 (The Conway Bulletin) – Kazakhstan-focused copper producer Central Asia Metals continued to gain this week, rallying on its positive half-year report it published in mid-September.
Its stock price in London was up 1.3% to 182.3 on Thursday compared to last week. It has averaged a growth of 1.2% over the past three weeks.
In its half-year report, published on Sept. 13, the company said it increased copper production by 27% to 6,908 tonnes, which helped its revenues to grow marginally to $30.9m despite a sharp fall in copper prices, which have fallen by 17.5% compared to last year.
Importantly too, the company managed to cut production costs by 40%.
“[H1 2016 was] another record period of copper production, resulting in a continued strong financial performance for the Group. The devaluation of the local currency has been a key factor in our reduced costs of production,” Nick Clarke, Central Asia Metals’ executive chairman said in a note.
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(News report from Issue No. 298, published on Sept. 30 2016)