Turkey's mining industry comes of age: already Europe's largest gold producer, its miners are targeting $15 billion in mineral exports by 2023--more than triple the current level.
Mining has been something of a late-starter in Turkey, and it is only over the last 10 years that the industry has freed itself from the shackles of state ownership and attained a commercial dynamic. Even today, the mining sector accounts for only 1.5% of GDP, which is well below the world average of 2% and a far cry from that of major mining jurisdictions such as Australia (8.7%) and Canada (7.5%). This small share is not a reflection of Turkey's geology, which is rich in a large variety of metals and minerals and a world leader in boron, feldspar and marble, but of an industry at an early stage of development. The actual pace of the industry's development suggests that now it is going through an adolescent growth spurt. Exports of the mining industry over the last decade increased in value from $700 million to around $4 billion. In 2012, the industry grew by 4.6% and aims to reach $15 billion of exports by 2023, the 100th anniversary of the republic.
Traditional products such as marble and boron account for much of the growth, with Turkey expanding its dominant market share of both, and new export destinations are proving to be ravenous markets. According to the Istanbul Metals and Minerals Exporters Association (IMMIB), China was the biggest recipient of metals and minerals for the first three months of 2013, increasing in value by 101.5% over the same period last year to $605 million. Chinese companies are also investing in Turkey, and natural stone exports to China from Turkey are expected to exceed $1 billion in 2013. Eti Maden, the state-owned boron producer, increased its world market share to 46%. But new sectors such as gold, which was not produced in any significant quantity in Turkey until recently, are also growing so quickly that Turkey can already boast as being Europe's biggest producer of the precious metal.
It is a wave of liberalization and state divestiture of its role in the industry that has unleashed this spurt of growth. A decade ago there was almost no foreign investment in Turkey's mining industry and the state owned 85% of it; today, the numbers are reversed so that state companies now account for just 15%. Encouraged by government legislation and an exciting geology, foreign miners now make up an important part of the industry--particularly in regard to gold, where Turkey now has three major producers (Alacer, Eldorado Gold and Koza Gold), a larger number of companies with advanced projects (including Alamos Gold, Aldridge Minerals, Arian and Stratex) and an ever larger number of explorers. This represents a healthy pipeline of activity that should ensure that, before long, Turkey will join the ranks of the world's top producers.
Many of these companies are the juniors from Canada and Australia that you would expect, and are thus affected by the general confidence crisis and shortage of capital affecting the global industry, but what has mitigated these effects is the entry into the market of the "Anatolian Tigers"; a title that denotes relatively new businesses that have grown mostly in-sync with the current Muslim/ conservative government and who, like them, originate from Turkey's Anatolian heartlands and have made considerable profits from the construction sector.
Though inexperienced and untested when it comes to extraction, these companies ensured that when the State Licensing Auctions were restarted in 2012, and 1,253 Group IV (precious and base metals) licenses were put up for auction, they met with a good reception. Combined with legislative reforms that have curbed a tendency for companies to sit on blocks while speculating, by enforcing that where there is no activity licenses will be revoked, Turkey's long dormant reserves are at last being exploited.
Gold Grabs the Headlines ...
While boron and marble and other less glamorous sub sectors of the mining industry in Turkey are achieving eye-catching results, it is gold that always seems to make the headlines. Turkey is Europe's leading gold producer, extracting 948,000 oz in 2012 and placing it in the top 30 gold producing nations. A sudden surge of foreign investment in the sector, and the fact that only around 15% of the country has been explored, means that Turkey expects to be counted among the top 15 gold producing nations by 2016. There are about 26 gold exploration companies active in Turkey and their number is growing. In many instances, foreign companies are partnering with the Anatolian Tigers that can rely on them for expertise. Calik Holding has partnered with Alacer Gold, forming Lidya Madencilik in 2006, which owns 20% of the Copler mine in central Turkey and is a 50:50 joint venture partner with Alacer on another 16 license areas. In the first nine months of 2013, 203,858 oz of gold were poured at Copler, and the updated Copler resource estimate has resulted in its measured and indicated resources increasing to 194.2 million mt at a grade of 1.4 g/mt gold, containing a total of 8.5 million oz (inclusive of reserves) as of June 30.
Other examples of partnerships with Turkish construction companies are Stratex International with NTF Insaat and Ariana Resources with Proccea.
Eldorado's Kisladag operation in Usak, western Turkey, is the country's largest gold mine with proven and probable reserves of 10.5 million oz and an average grade of 0.71 g/mt Au. Eldorado also operates Efemcukuru, which has combined proven and probable reserves of 1.5 million mt at an average grade of 9.10 g/mt Au. During the first nine months of 2013, production at both mines combined was 301,301 oz.
Koza Gold is the only completely Turkish company that is currently producing gold from Turkey's first gold mine, the Ovacik mine. Annual production there reached 338,182 oz in 2012, but according to their annual report published in the third quarter of 2013, the company's gold production decreased by 7.2% during the first nine months of 2013 and amounted to 242,459 oz. Nevertheless, Koza has many other encouraging projects under way, including 13 exploration projects and its 2013 budget will allow the company to spend up to $30.5 million on exploration to reverse this trend.
Other companies at advanced stages include Ariana Resources, which announced in September a JORC resource estimate for its Kizilcukur and Ivrindi projects that are 100% held by the company outside of the Red Rabbit joint venture in western Turkey. This added 27,600 oz Au equivalent JORC inferred to the resource base from the two satellite prospects. Ariana's total resource base in western Turkey increased to approximately 475,000 oz Au equivalent gross (currently 395,000 oz Au equivalent net to Ariana) in addition to 1.09 million oz gross (534,000 oz Au net to Ariana) located within the company's JV with Eldorado Gold in northeastern Turkey. Ariana announced in July that it has submitted its final EIA report for the Kiziltepe gold-silver project to the Ministry of Environment and Urban Planning (MEUP), via its joint venture company in Turkey, Zenit Madencilik.
Stratex International has eight gold projects under way in Turkey. Nearest to production is its Altintepe project, which aims to produce gold by late 2013 or early 2014. Altintepe has a resource of 593,131 oz of gold and is shared with joint-venture partner Bahar Madencilik. As part of the joint-venture agreement, Bahar Madencilik is funding 100% of the development costs through to production in exchange for a 55% stake in the project. In January, Stratex sold its 30% stake in the Oksut project to Canterra Gold.
Canada's Aldridge Minerals completed its final feasibility study for its polymetallic Yenipazar project in 2012. The report estimated an indicated resource of 2.6 million oz gold equivalent at 3.05 gm/t Au equivalent. The Yenipazar project will be developed as an open-pit mine producing copper, zinc and lead, together with significant quantities of gold and silver.
Pilot Gold, under the Fronteer Gold name, entered Turkey in 2004 and has advanced projects including the Kirazli and Agi Dagi deposits (sold to Alamos Gold in 2009) and also is advancing its projects at TV Tower and Halilaga. On September 5, Pilot completed arrangements to acquire the Karaayi project. Pilot Gold's president, Matthew Lennox-King, said, "This decision comes down to geology and Pilot Gold has always viewed Karaayi as the missing piece of the TV Tower district. Karaayi is the natural extension of the Kayali oxide gold target and the addition of this area increases the prospectivity of the southern part of the TV Tower tenure.... Halilaga was discovered in 2007 by Fronteer Gold and was subject to the same property arrangements as Agi Dagi and Kirazli. Early on, Teck Resources backed-in to the project and since 2007 it has grown into a copper-gold porphyry project with an indicated resource estimate of 1.664 million oz gold and 1.112 billion lb of copper. The preliminary economic assessment from October 2012 highlights that this project will pay back its capital expenditure very rapidly, at 2.6 years after tax at $1,200/oz for gold and $2.90/lb for copper. This is largely driven by a big pocket of high-grade resource at the surface, in addition to the comprehensive infrastructure in the area."
... but Stone Leads the Pack
This flurry of activity has led to mineral exports increasing from January-October 2013 by 24.5% compared to the same period last year, reaching $4.178 billion. The most important element was natural stone, exports of which increased by 18.45% for the same period, while metallic ores' export value jumped 36.5%, an increase of $1.4 billion.
There can be no doubt that Turkey's government has been successful in regard to legislating the industry, and its actions have so far been beneficial. But this achievement might be spoiled if it does not know when to stop interfering. Miners were dismayed by a Prime Ministerial decree in 2012 that all permit applications related to government land be referred to the prime minister's office. This will create more bureaucracy and less transparency. Concern is also voiced that the General Directorate of Mineral Research and Exploration's (MTA) is being allowed to take over prime licenses before they go to public auction.
While the influx of capital that the Anatolian Tigers represents is an enormous boon to the industry at a time when mining finance is hard to obtain, many of these companies have very limited experience in the mining sector and may struggle to make good on their investments.
But provided good management and governance prevail, Turkey's mining boom still has a long way to go. With a healthy pipeline of projects for the next few years and unprecedented levels of exploration, the Turkish mining industry is rapidly coming of age.
By Mungo Smith, Special Correspondent
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|Title Annotation:||TURKISH MINING|
|Publication:||E&MJ - Engineering & Mining Journal|
|Date:||Dec 1, 2013|
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