Tajikistan puts largest silver deposit up for bid

Observers say Chinese companies are likely to win contract

By Rukhshona Ibragimova

2010-03-24

DUSHANBE – Rights to Tajikistan’s Bolshoi Koni Mansur are up for grabs, and some independent observers say Chinese companies are the likeliest to win the contract.

Four corporations are competing in a tender for rights to the Bolshoi Koni Mansur mine, which industry observers estimate will cost US $2 billion to develop. They are Zijin Mining and JNMC of China; BHP Billiton of Australia; and Kazzinc, a privatised Kazakh conglomerate in which Switzerland’s Glencore International holds a controlling stake.

The mine’s size, rather than its richness, makes it attractive, said former Tajik Deputy Prime Minister Georgii Koshkalov.

“This is one of the world’s poorest fields in terms of ore content”, he said. “Bolshoi Koni Mansur has 39-41g of silver per tonne. Other fields have 400g of silver per tonne but only 2,000 tonnes (of silver). We have 51,000 tonnes”.

The mine has 70,000 tonnes of silver, according to a competing estimate by the consultancy Micon International, said Azim Ibrogim, head of the Tajik Main Geological Administration.

Nine companies originally competed to enter the tender, according to a Tajik Ministry of Energy and Industry official who spoke to Central Asia Online on condition of anonymity. Five had to drop out because they lacked US $250m in assets, the official said.

Markedly absent from the final quartet of companies is Russia’s Nornikel. Its absence in a competition for a mine in a former Soviet republic has aroused comment. Nornikel simply lacked the capital to meet the stated investment requirements, said Niyatbekov.

However, others have remarked that Russian President Dmitry Medvedev’s refusal last November to contribute to the Rogun hydropower project may have caused Dushanbe to exclude the Russian firm from the tender.

Observers predict a Chinese company is likeliest to prevail.

“The Chinese side provides more favourable offers”, said Vafo Niyatbekov, an analyst at the Centre for Strategic Studies.

“With (China’s) financial base, Chinese companies are favourites practically everywhere”, agreed Alexander Shtok of Moscow-based 2K Audit Business Consulting. However, he added that Koni Mansur might be an exception. “If you factor in the high costs (of working Koni Mansur), Kazzinc has a higher chance of winning the rights”.

An international consortium might not create the hoped-for harmony, said Niyatbekov.

“Let one country receive the rights in order for differences not to arise within the (hypothetical) consortium”, he said.

Whoever wins the bid will, like Tajikistan, have to watch world silver prices. The country failed to foresee potential downward pressure on silver prices, Shtok said.

“Precious metal ... prices are at their peak now”, he said. “But those prices might head down if the financial markets recover and if investors transfer their funds to more liquid instruments”.

The miners will need, even in the “most favourable scenarios”, eight to ten years of work to begin extracting silver, Koshlakov said.

The government still has not announced a date for the tender, but the results are “likely before the end of the year”, said Wendy Werner, the International Finance Corporation’s Tajikistan Country Officer.

Tajikistan is admittedly new to the business of holding tenders, said Shuhrat Rahmatboyev, deputy chair of the Tajik State Committee on Investment and State Property. But it can use the experience to “attract investments to other deposits”, he said. The country’s Main Geological Administration said that preliminary exploration of two more silver deposits is under way.

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