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Gold mining in Kazakhstan

The revival of a forgotten industry

The year 1848, gold fever in the United States: ‘Everyone in the whole country shouts: "Gold, gold!" Grain is not harvested and houses are not finished. The only activity is the forging of spades and pick axes. We are forced to stop the publication of our newspaper.’ (The Californian Newspaper, 29th of May 1848). Kazakhstan had its own gold fever two hundred years ago, when hard rock gold was mined. However, small deposit - alluvial - gold mining in Kazakhstan rarely contributed more than one percent of domestic gold production. Substantial deposits are waiting to be mined. The European Union Tacis programme supported a project to stimulate small and medium sized enterprises to start alluvial gold mining.

UST-KAMENAGORSK, July 2000 - The first part of the muddy road to the mining site leads through a flowery green valley in the Altai Mountains in East Kazakhstan. Hundreds of cabbage white butterflies are startled by the noise of the Russian Jeep, the very minimum to make it to the site. After 25 kilometres, the one house village Alexandrovka is the last civilised spot on the way. From this point, nature is in control. A tractor has to pull the Jeep through tens of river arms and water basins. Mosquitoes are everywhere. It takes two hours to reach the camp ten kilometres from the village. They use an army amphibious vehicle to get to the site. The gold miners live here twenty days in a row. No alcohol, no women.

"That is the Russian tradition of gold mining", says Igor Panshin, who holds the concessions in an area of 10,000 square kilometres north of Ust-Kamenagorsk to the border with Russia. He is the second individual in the country who was granted a license for gold mining. Usually only big companies can afford such a license. It took Panshin two years to get the 18 necessary signatures of ministries and officials.

Panshin used to have a successful pharmacy company and twelve drug stores. He sold everything and invested the money in concessions and licences. Panshin realises he is taking a big risk, but he says he has "no regrets" that he sold his business, because "gold mining is only for adventurers".

Panshin is now managing director of the company Pasgold Co., set up in January 1998. Pasgold is active in the exploration of gold in this area. This year, a team of eight people will calculate the reserves in three deposits, using the method of washing out the gold from the gravel in a stream by means of a washing pan. Four miners dig pits each twenty meters, at lines perpendicular to the river at intervals of 100 meters. Samples from the pits are taken every 20 centimetres. Two men wash out the gold in the river. The geological staff records the result from each sample and calculates the gold potential of the area.

Pure gold

Apart from the exploration in its own concession area, Pasgold intends to start mining an alluvial gold deposit in the Kurchum-Maldy river area, 1100 kilometres east of the capital Astana. Industrial alluvial gold mining in this region started in 1879. In 1907, a nugget weighing 12.3 kilo was found in the area. The mining company Gold Diggers Artel Altai (GDA Altai) has mined more than 2,600 kilo’s of gold here since 1978.

GDA Altai holds the concessions in the Kurchum valley. In March 2000, Pasgold negotiated an agreement with GDA Altai to mine an area of four blocks of gold reserves in the Kurchum-river near the village Maraldy. Detailed exploration was carried out by a Soviet State Company in the mid eighties. The area Pasgold will mine contains 150 kg of pure gold.

The agreement is the result of the project ‘SME Placer gold mines’ carried out by the Small and Medium Enterprises Development Agency (SMEDA) in Aktobe. The main goal was to stimulate small and medium sized enterprises to start alluvial gold mining. The project was initiated and financed by the EU programme Tacis that founded SMEDA in 1996. Tacis provides grants to foster the development of market economies in the New Independent States and Mongolia. Pasgold receives on-going technical assistance from SMEDA with exploration methods, feasibility studies, technology transfer, technical training and business planning.

Pilot project

This is considered a pilot project for SMEDA, as well as for mining consultant and Tacis expert Willem Kramer, who assists with introducing a new gold mining technology. Kramer is an international expert in alluvial mining. He is of the opinion that it is complicated to develop mining projects in Kazakhstan. "Central development planning is very important when it comes to mining. Because of the collapse of the Soviet Union, the framework has disappeared, which makes it very difficult for new companies to set up a mining business."

Kramer designed a high tech gold processing plant that can easily be transported to the mining area, moved from one place to the next and assembled in the field. He combined western technology with a compact ready-to-go unit. "I am the spiritual father of this equipment", he says. This system requires a fraction of the water needed for the traditional hundreds of years old soviet-style technology based on sluice boxes. It reduces the risk of releasing muddy water into natural water resources, one of disadvantages of the traditional technology. Kramer: "If you use the equipment the right way, the environmental impact will be zero." Another disadvantage of the traditional method is that it is only capable of recovering 50-70% of the gold, while the technology Kramer designed has a gold recovery of up to 99%.

Though the new technology is harmless for the environment, trees have to be cut and other vegetation has to be removed to clear the mining site. On top of that, a layer of half a meter of topsoil will be removed. After the area is mined out, Pasgold will commit itself to replace the layer of fertile soil and replant the original vegetation. For this reason, a young plant, bush and tree nursery will be established to produce the necessary seedlings.

Pasgold hopes to finance the high tech equipment with the profit from its current mining activities in its own concession area. Apart from that, SMEDA is assisting Pasgold to get a loan from international commercial banks that are currently examining the opportunity to financially support in alluvial gold mining projects in Kazakhstan.

This article was publihed in the Belgian newspaper 'Financieel-Economische Tijd'.

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