They're calling out from the abyss…

The Government of the Republic of Kazakhstan is working on reforming the exploration industry in Kazakhstan. The situation in it causes the greatest complaints from the business community. "K" found out what problems subsurface users have to face and what rules of the game they want to see in the exploration market of the Republic of Kazakhstan, as well as how possible the existence of market conditions in Kazakh exploration is at all.

Mynzhasar AISAUTOV, Deputy General Director of the National Center for Integrated Processing of Mineral Raw Materials of the Republic of Kazakhstan (NC KPMS of the Republic of Kazakhstan):

– Mynzhasar Aisautovich, as far as I understand, the "Concept" is, let's say, a framework document, from which it is quite difficult to understand what rules the exploration market of the Republic of Kazakhstan will develop according to.– The concept should be like that. First the analysis, then the concept, then the program, and finally the development plan. For example, I like how the management of the industry will be organized. If I understand correctly, a unified system will be created. The current situation is as follows: the steps are shallow, the mineral reserves are not replenished, because we have practically no exploration.

– Why, in your opinion?– This sector is considered risky and long-term in terms of return on investment. Therefore, the riskiest part of the costs will be borne by the state. A public-private partnership will be adopted.

– How are the costs supposed to be divided and what will each side receive if successful?– The company and the state agree "on the shore". If a deposit is discovered, the shares for its use will be distributed in accordance with the contract. It's just that these nuances are not yet spelled out in the concept. In my opinion, the general approach and the amounts that will be allocated for exploration are much more important – 50-60 billion tenge from 2017.

– Let's assume that the state performs search operations and finds a certain object. What's next?– The state can conclude a contract for subsurface use with a company if it expresses a desire to work here.

– Will the company reimburse the expenses incurred by the state?– I think so. There are actual expenses that are spent on this deposit.

– According to market participants, geological information is provided free of charge in world practice.– I think the cost is taken from the poverty of our exploration. If she has sufficient funding, I hope we will be able to provide this information for free.

– In the meantime, the state undertakes to take on risks by conducting the most risky types of exploration work. And then it will require companies to reimburse these risks. Did I get it right?– Only the part that concerns a specific deposit. The rest is taxpayers' money wasted.

– It turns out that the state is going to risk 50-60 billion tenge of taxpayers per year. At the same time, in countries with a developed exploration market, these risks are assumed by private business.– A large number of companies are also engaged in geological exploration in Kazakhstan. About a thousand.

– On the one hand, there are thousands of companies engaged in geological exploration in Kazakhstan. But on the other hand, funds are not invested in exploration, there is no increase in reserves. A logical question arises: what do all these companies do?– At least by further exploration of existing deposits. This is not to say that these studies are not going ahead. But there really aren't any full–scale, deep ones.

– But the lack of research has become obvious – I'm not saying that they didn't disappear today or even yesterday. Therefore, do we have to admit that existing companies are not performing their duties well? Means it's bad.

– So maybe we shouldn't give them anything, since they are doing such an unsatisfactory job?

– Companies operate within the framework of existing contracts, they should not be infringed.

– Good. Then please give your expert assessment of the current state of the exploration industry in the Republic of Kazakhstan.– Most of the companies we are talking about are small, they are not able to conduct large–scale projects on huge areas. And the explored material needs to be viewed systematically.

– Therefore, we come to the conclusion that exploration can only be done by large companies.– No, both large and small.

– But the small ones, as you said yourself, can't.– It's not a matter of large or small, the point is that there is no increase in stocks.

– Do I understand correctly that we are returning to the idea that the state should be engaged in geological exploration?– Both the state and the private sector.

– Judging by the concept, the final distribution of the roles of government and business has not yet been decided. That's why I'm asking you as an expert.: What should the government do, in your opinion, and what should businesses, large and small, do?– In my opinion, we need to work systematically. It is necessary to determine how to carry out an assessment of the subsoil in Kazakhstan, together with scientists it is necessary to draw up a program for this assessment and its various variants using both traditional and new methods. We are talking about military training grounds and border areas.

– How will the functions and roles of the state, large and small companies be distributed?– It is likely that if a private company takes on most of the costs, it will receive a large share in the distribution of products.

– Do I understand correctly that the shares in the subsoil use contract will be distributed in accordance with the shares of investments in exploration?– It has not been specified exactly yet.

– But your opinion – would that be fair?– Yes, it seems to me that this option is quite logical.

– Which options in the relationship between government and business should be spelled out in the legislative framework, and which ones in the individual contract?– In my opinion, it is more important to shorten the time for registration of the right to subsurface use, the maximum period should be 2 months.

– Currently in the Republic of Kazakhstan, the license for exploration is separated from the contract for subsurface use. And the prospector cannot use his right of discovery as a guarantee of the right to the deposit...– I think the prospectors should be given the right of preferential ownership of the deposit.

Irina DOROKHOVA

Kursiv newspaper, No. 37 (463), SEPTEMBER 20, 2012