It will begin in 2035, and preparations for it five years earlier.
Polymetal will switch to underground mining at the Bakyrchik gold deposit in the Abay region in 2035. The head of the company, Vitaly Nesis, announced this during an online conference on production results for 2023 and its fourth quarter. Open pit mining at Bakyrchik has been carried out by Polymetal under the auspices of the Kyzyl project since 2018.
“We planned to actually start underground ore mining at Bakyrchik in 2035. But the project itself will begin in 2030 in terms of building the surface infrastructure for the underground mine and the development workings that will be required to access the ore. I think it will last more than four years. Thus, despite the fact that from the point of view of total capital expenditures, the expenses will be very significant – presumably the current estimate is $200-250 million, they will not be critical from the point of view of the amount of total capital investments,” explained the head of Polymetal, commenting on the issue in business. kz.
Let us remind you that earlier the media reported that Polymetal intends to begin the underground mining stage at Bakyrchik in 2030, in addition, other dates were announced – 2031.
During his speech at the online conference, Vitaly Nesis also said that in addition to searching for objects for subsoil use in Kazakhstan, where the company may be interested in deposits of base metals – copper, zinc, lead, tin, Polymetal is now engaged in a country analysis of possible projects in Tajikistan. A similar assessment has already been carried out for Uzbekistan and Kyrgyzstan, however, nothing suitable has been found there yet.
As is known, Chinese companies dominate the mining sector in Tajikistan. More than ten years ago, Kazzinc tried to enter there through a tender for the Bolshoi Konimansur silver deposit. This spring, Polymetal management plans to travel to the mountainous republic again to visit subsoil use facilities; perhaps, already in the third quarter it will become known about any projects in this country.
As for Russian assets, the gold mining company plans to part with them by the end of the first quarter, as was promised to the Kazakh authorities; now there is a potential buyer for this within the Russian Federation. In Russia, the company continues to have difficulties with the sale of finished product reserves; a significant tightening of control over the export of precious metals has led to the accumulation of concentrates from Kyzyl, Albazino, Nezhdaninsky, Vorontsovsky and Maysky in seaports, Polymetal indicated in a release for the past quarter.
“Our Russian subsidiary continues to make efforts to convert inventory into sales in Russia, which also affects sales from Kazakhstan, since a significant portion of the concentrate from Kyzyl is sold as a mixture with pure Russian concentrate. As a result, we are seeing an accumulation of concentrates from Kyzyl, Albazino, Nezhdaninsky, Vorontsovsky and Maysky in all directions in seaports. We continue to hope that this issue will be resolved in the first half of this year, obviously with a particular focus on Kyzyl. We inadvertently expect that the concentrate from Kyzyl this year will be much purer and will not require as much mixing as in 2023,” said Vitaly Nesis during a conference call.
Let us remind you that high-carbon concentrate from Kyzyl is exported to China. In October, inbusiness.kz wrote that Polymetal faced logistical challenges when delivering gold-containing raw materials from Kyzyl to the Far Eastern harbors.
It should be noted that in 2023, production at Kyzyl decreased to 316 thousand ounces of gold, 4% less than the 2022 production figure of 330 thousand ounces. The company explains this by a decrease in the content of precious metal in the ore of the deposit. When switching to underground mining, it can increase by 20-25%, Nesis believes.
The decline in production at the Varvarinsky hub in the Kostanay region was even greater – by 20% from 211 thousand ounces in 2022 to 169 thousand ounces in 2023, which “is due to the lower content of Komarovsky ore in the cyanidation area and a decrease in the share of high-quality third-party ore in raw materials at the flotation section,” as specified in the Polymetal release. In total, the company produced 486 thousand ounces (approximately 15.1 tons) in Kazakhstan last year, which can hardly be called achieving the previously planned figure of half a million ounces. By the way, in the context of the unclear prospect of the withdrawal of capital expected from the upcoming sale of Russian mines and the planned capital expenditures for the Irtysh MMC, Polymetal was not able to completely free itself from the debt load of its Kazakh assets – at the end of 2023 they reached $171 million.
Meanwhile, the cost of gold production in Kazakhstan began to be strongly influenced by tariffs for electricity and freight transportation by rail, growing from year to year.
“The Company expects cash costs (TCC) of US$ 900 – 1,000 and all-in cash costs (AISC) of US$ 1,250 – 1,350 per gold equivalent ounce. The increase compared to the previous year is mainly due to a sharp increase in tariffs for electricity and rail transportation in Kazakhstan,” the final release states.
Commenting on the publication’s questions about how the growing tariffs of KTZ and the electric power industry will affect the cost of production in Kazakhstan in the next five years, Vitaly Nesis noted that the company is not particularly trying to analyze tariffs on the railway due to uncertainty, but in energy supply it plans ensure your own generation.
“From an electricity perspective, we believe tariffs will rise in real terms by at least 20% per annum over the next five years. Therefore, we continue to invest in our renewable energy facility: solar energy plus gas (gas piston station – approx.) at Varvarinsky, and then we have plans to do the same at Kyzyl. The only way to avoid significant increases in electricity prices in Kazakhstan is to switch from expensive coal power to renewable energy sources, which are much cheaper and more environmentally friendly, and this is our strategy in this regard,” Nesis noted.
PS This material was adapted on February 2, 2024 at 18.30 after receiving updated information that the subsoil use contract for the Bakyrchik gold deposit was extended until December 31, 2030.
