Nikolay Radostovets: “Subsurface Law will be adopted in one year already"

The Ministry of Investments and Development of Kazakhstan together with the Republican Association of Mining and Metallurgical Enterprises (AMME) is developing a new subsurface code that will bring the geological, oil, gas and mining industry to a new level. Mr. Nikolay Radostovets, an Executive Director of the Association of Mining and Metallurgical Enterprises (AMME), reveals the details of new law in this interview.

 

-There is a rumor abroad about the Subsurface Code, which would be fully able to regulate the relations between the State and investors. What type of document it is and why it shall be created?

-With all its resources, Kazakhstan is one of the top ten world powers with developed mining and metallurgical industries. Almost entire periodic table, including even rare earth metals, can be found on the territory of the Republic of Kazakhstan. That’s why, some time ago, the issue on introduction of the Subsurface Code was raised at the legislative level, which could help to attract the foreign investors.

Today, as part of the AMM 2016, the meeting of the CRIRSCO Committee was held to enable the participants discussing all advantages of creating such a document.

Certainly, establishment of the Subsurface Code is a sure step towards international standards. In addition, the investors will be able to assess the reserves and prospective resources, and given the data of the assessment specialists, they will enter the stock market and use the variety of market instruments for that. The most important thing is to do all this, being assured that their costs meet the expectations.

Today the Subsurface Code is already existed in Kazakhstan. What will be the difference between the new law from the previous one?

Subsurface Code is a document which should be simple and understandable for reading, and the responsible authorities shall make all the efforts to do so. The matter is that the current law poorly reflects many of the rights and obligations of the subsoil investors and the State.

For this reason, the investors have a question to ask-how is to resolve the disputes? According to recommendation of the World Bank and a number of other international organizations, Kazakhstan is developing the Subsurface Code for the second year. The Republican Association of Mining and Metallurgical Enterprises (AMME) is pro-actively participating in the development of the Code and it shall be admitted that the Ministry of Investments and Development involves the market players in the preparation of this document. I think the subsurface law will be adopted already in one year.

-What are your forecasts for the development of the mining industry in Kazakhstan? What difficulties the industry is experiencing now?

-The main difficulty lies in the fact that we are facing the crisis. As all countries, the Kazakhstani mining industry also experiences a drop in the metals prices.

Moreover, China, being the first in the list of the metal consumers, suspended their purchase. Traditionally, Kazakhstan was selling the resources to China as its nearest neighbor and China very quickly increased the consumption of the Kazakhstani metals. However, recently the market situation has changed: our neighbor not just reduced the consumption volumes, but also refused to purchase a number of metals.

Now we are looking for new markets so-called new "green corridors" which are being developed jointly with the government, which will reduce the price of metals transportation to the other states. For example, Iran. We try to take advantage of the Union contract for the Kazakhstani exporters. This is the second year we transport the cargoes via the marine routes at a special rate from Russia. It became profitable to sell the precious metals to Japan. However, the main factor that hinders development of mining is the remoteness of Kazakhstan from the distribution markets and impossibility of direct marine transportation. It is necessary to attract new investors with international experience, so that they can maintain the pace of development and to act as the experts in various mining issues.

In addition, I can mention the fact that such events as the VII International Congress and Exhibition “Astana Mining & Metallurgy” - AMM 2016, which are held annually - they certainly contribute to the development of mining industry. Such forums empower the mining businesses, they help to establish connections with the international partners, to learn better the market and the competitors, and, of course, to position their products properly.

-What amount of reserves is expected in 2016?

For the past two years, due to the State support, the non-ferrous metallurgy provides good reserve amount. Besides, we were able to minimize the cargo transportation expenses by railway and the electricity consumption, which made it possible to allocate part of the budget for the development of deposits.

Despite the fact that during the second quarter of 2016 we see some lag, compared to the last year, it can be hardly described as a stagnation or decline. The commodities markets are diversified. Metals are sold at a wide range of products, so the periodic price drops for one or another metal is normal for the market.

The existing Subsurface Law is not satisfactory neither for the investors, nor for the State and the possible risks in this area led to a declined funds, allocated for the replenishment of mineral and commodity base.

In 2017 the new law will be approved to conform to all international standards, in order to maintain the stability of the subsoil legislation, which is essential to the confidence from the part of foreign investors.