Kazakhstan’s Ministry of Industry and Construction has proposed a new methodology for calculating treatment charges on copper concentrate, aimed at establishing a unified and transparent mechanism for setting processing tariffs. This draft order, signed by Minister Yerlan Nagaspayev, is designed to balance the interests of both producers and processors while promoting domestic processing of mineral raw materials. The methodology applies not only to copper concentrate but also extends to copper intermediates, gold-bearing copper concentrate, gold-bearing pyrite concentrate, and other concentrates containing copper or precious metals.
The treatment charge (TC) will be calculated based on a formula that includes unit processing costs, calculated profit, and two capital components. Unit processing costs will be derived from the approved budget and business plan, divided by planned concentrate throughput and cathode output. The profit margin will be based on the average quarterly profitability of Kazakhstan’s large and medium-sized enterprises over the last 20 quarters, as reported by the Bureau of National Statistics.
The two capital components are designed to fund investments in maintenance, modernisation, and capacity expansion. Each component will be calculated based on planned capital spending divided by the project payback period and annual throughput. This approach ensures that only planned figures from approved budgets are used, while actual results from previous periods will serve for monitoring and analysis.
Additionally, the methodology stipulates that costs incurred in tenge will be converted to US dollars using the median forecast average annual rate from the National Bank of Kazakhstan’s latest Macroeconomic Survey, with adjustments made for any discrepancies. The copper refining charge (RC) will be set at a fixed ratio of one-tenth of the treatment charge, aligning with international contract terms.
Importantly, processors will have the autonomy to set their own tariffs, calculate their own TC and RC, and publish them on their websites by 1 November of the year prior to the tariffs taking effect. This flexibility allows processors to forecast tariffs for the subsequent two years as well. However, the tight timeline for publishing the 2027 tariffs raises concerns that processors may struggle to adapt to the new methodology if the order is signed at short notice.
The implications of this new methodology are significant for miners selling concentrate to domestic processors, as the commercial benchmark established may differ from prevailing market terms. Traders and investors monitoring Kazakhstan’s processing capacity will also be closely watching how this new framework impacts the industry.
