TIME TO MINE GOLD

Another round of global economic instability together with a drop in oil prices urges states to diversify deposits in their reserve funds giving preference to gold. As gold deposits have been depleted for more than one decade in the developed countries, it is getting increasingly important to develop natural resources in regions that were not traditional producers of precious metals in the past. This steady trend can also be seen in Azerbaijan which markedly increased its gold production in 2014 and also sped up the exploration of new deposits.

In the second half of January 2015, the price of gold on world markets has exceeded 1,300 dollars per troy ounce exceeding the peak indicators of August last year. The formal reason for the new round of price rise was the Swiss National Bank's recent decision to lower the rate to minus 0.75 per cent and refusal to protect the franc from strengthening against the euro. But the main reason behind the growing demand for gold lies in the increased stagnation of the global economy, the drop in the yield of treasury bonds as well as in oil prices which led to a rise in demand for precious metals as a hedge asset. 

Since the beginning of last year, growth on the global gold market has reached 10 per cent. However, according to estimates by analysts of Standard Chartered (the biggest bank in Hong Kong), the ongoing global economic crisis will only increase the demand for gold, especially against the backdrop of a slow-down in the rise of the exchange rate of the dollar expected in the second half of this year and recession in the USA.

At the same time, a number of world experts link the long-term upward trend in the gold prices to the problem of the gradual depletion of its natural resources in a number of countries which have provided the bulk of its production in the world for many decades. In this case we are speaking about the top 10 producers: China, Australia, Russia, the USA, South Africa, Peru, Canada, Mexico, Ghana and Indonesia. In 2013, these countries accounted for two-thirds of a little more than 3,000 t of gold mined worldwide. 

Thus, comparative statistics of gold production in 2012 and 2013 shows a significant decline in its production in the USA, Peru and Mexico. The factor of depletion of natural resources of precious metals looms large over other producing countries, such as South Africa, Australia, Ghana and others. In these circumstances, there is a noticeable growth in investors' interest in the development of numerous small and medium-sizes gold deposits in South-East and Central Asia, Turkey and, of course, in Azerbaijan that have not been adequately explored to date. Thanks to this trend, in the near future, Azerbaijan stands a chance to take its rightful place among the world's producers of gold and other precious metals.

This interest in Azerbaijan is guaranteed primarily by this country's natural wealth. Thus, the aggregate potential of all fields available in Azerbaijan is estimated at about 1,500-2,000 t of pure gold. Of course, this country started to develop its gold mines only recently and it is operating quite modest volumes of output so far. However, the main positive is associated with the increased pace of development of the producing fields. 

For example, last year, Azerbaijan registered a marked increase in the volume of gold and copper output. We are speaking, in particular, about work started more than five and a half years ago on the Gadabay and Qosa gold fields operated by the Anglo-Asian Mining PLC (AAM) company.

The AAM Management Com-pany started mining and processing ore in the Gadabay field in mid-2009. Since the third quarter of 2013, under Production Sharing Agreement (PSA), precious metals have also been mined in the gold and copper field Qosa in Tovuz District. 

After beneficiation at a local plant, the concentrate is sent for refining to Switzerland. The total amount of pure gold mined in this country between June 2009 and the end of 2014 exceeds 9 t. Part of the bullions sold on the world market under the brand of Ayrim are deposited for safekeeping at the reserve fund of the Central Bank of Azerbaijan under the production sharing agreement.  

According to statistics, the two above said fields produced about 1.872 t of gold which is an increase of 16 per cent on the output of the previous year. By way of comparison, throughout 2013, the country produced about 1.62 t of gold with a comparative production increase of 3.6 per cent. The increased indicators show that the operating company managed to overcome the decline observed in 2012. "We managed to increase gold production by 16 per cent in the past year and increase copper production by a factor of 1.4 reaching 784 t," said AAM Director General Reza Vaziri. "We expect to maintain positive dynamics in the production of gold and copper in the current year too."   

It is noteworthy that, according to the results of geological surveys, the explored gold reserves in the Gadabay field have proved to be 298 per cent greater than was expected earlier. To be precise, they exceed 61.795m t of rock containing 0.73 grams of gold per tonne, or 1.5m troy ounces of pure gold. The data announced were obtained as a result of large-scale drilling carried out at Gadabay since August 2013. AAM company experts believe that continued exploration and development may lead to the discovery of new reserves in the field. Thus it will be possible to extend the life of the mine. 

An equally important factor of growth in gold production last year was the commissioning of the second processing plant in 2013. Another plant for tank leaching of ore is designed to process 100-150 t of raw materials per day. It can beneficiate not only ore with high concentrations of the precious metal but also processed rock stored in dumps or raw materials unsuitable for heap leaching. Unlike the method for obtaining gold used until now, the tank leaching technology in theory allows to extract up to 90 per cent of pure product while the figure for the old method did not exceed 70 per cent. According to preliminary estimates, gold extraction at the plant is expected at the level of at least 85 per cent from oxide ores and about 69 per cent from sulphide ores. At the same time, the company continues research and testing to improve these indicators to a peak level. It is also expected to reduce product costs to 500 dollars per ounce of extracted gold by employing both these plants and using modern technologies. 

Alongside industrial development of the known deposits, there is an active search in this country for new deposits of precious metals. "Not so long ago, new gold fields were struck in Azerbaijan. They are located in the north-west of the country, on the spurs of the mountain ranges of the Greater and Lesser Caucasus. Surveys are currently being carried out there to approximate volumes of deposits," Minister of Ecology and Natural Resources Huseynqulu Bagirov said adding that the ministry has for the first time ever published an atlas of Azerbaijan's gold fields. According to data from the ministry, as most proved fields come into operation, the country can produce more than 10 t of gold annually.

Mentioned among the promising deposits of precious metals can be the contract territory of Piyazbasi and Agyurt occupying 462 sq.km. in Ordubad District of the Naxcivan Autonomous Republic. Specialists of Anglo-Asian Mining PLC have been exploring this field for more than one year now.

The Cavdar gold field located in Daskasan District appears to be another promising area. Preparatory work is coming to an end there today and so is the construction of an ore beneficiation plant. To develop this field, Azerbaijan International Mineral Resources Operating Company was set up in December 2006. It is a consortium comprising five foreign companies and the government of Azerbaijan which holds a 30 per cent interest. According to expert estimates, one ton of Cavdar ore can yield up to four grams of gold. In terms of this indicator, this is one of the most promising mines. The consortium is also going to develop the gold fields of Qarabag, Goydag and Dagkasaman and the areas Kohnamadan and Kurakcay.

But that is not all. Geological surveys conducted a few years ago discovered new rich gold deposits. The reserves of the proved gold field Tullalar in Goygol District are estimated at 80 t of gold and 290 t of silver. One more gold field - Qosgardah-Canagci - with potential reserves of 20 t of gold - has been found in Daskasan District. A deposit of platinum has been struck in neighbouring Samkir District. According to tentative estimates, its recoverable resources total 50 t of precious metals of the platinum group making this the largest mine in the South Caucasus.

Thus the development of the mining industry will make a significant contribution in the near future to diversification of domestic non-oil economy and at the same time help to replenish this country's gold reserves.