Turkish Mining: Ready for Maturity
By Mungo Smith, E&MJ correspondent, Istanbul
Most of Turkey's mineral wealth still lies buried underground following years of underdevelopment. Only recently, lured by gold reserves and inspired by the price spikes of industrial commodity prices, have mining companies committed to bigger exploration programs.The government paved the way for deeper and more effective drilling cam-paigns by reforming the new mining law in 2010. Furthermore, Ankara is about to ten-der over a thousand new exploration licens-es. Geologists from mining companies operating in Turkey are busily identifying the licenses that are worth a bid. They have until January 2012, when the round of auctions is due to begin.
To date in Turkey, most mineral explo-ration activity has been restricted to shal-low environments (200-300 m) so that the country's mineral potential lies largely unexploited. Turkey ranks 10th globally in variety of mineral resources, containing 50 different minerals in sufficient quantity to support mining, while another 27 types also have been found, but lack the quanti-ty or quality to be commercially exploited.
Gold is currently Turkey's most glitter-ing treasure. Production at Eldorado Gold's Efemçukuru mine and Koza Gold's Kaymaz mine kicked off in the second half of 2011; and, according to the local Gold Miners Association, overall 2011 gold pro-duction will reach 25 mt, compared with 17 mt in 2010. Turkey is by far the largest European gold producer—Sweden follows distantly with 6.5 mt/y.
Potential for further developments remains large, with ready-to-mine gold reserves forecast at 700 mt, while exploration activities could bring to surface a further 6,500 mt. No wonder the number of projects under development is high. AIM-listed Ariana Resources' Red Rabbit project (proven reserves containing 400,000 oz) will start producing gold by the end of 2012. Another AIM-listed company, Stratex International, is expected to bring to production its Inline and Altintepe developments in 2012 and 2013, respectively (total reserves containing 868,000 oz). Meanwhile, Canadian Aldridge Minerals is carrying out final feasibility stud-ies for its gold-rich Yenipazar project.
The appetite for Turkey's base metal reserves also is growing. Riding on the back of Chinese demand, chrome ore production is ramping up, as are other products employed by the steel industry including iron ore, nickel and zinc. Contrary to development of the gold sector, base metals deposits lie mostly in the hands of local companies. Ankara-based Meta Nickel is developing a large nickel-cobalt play in western Turkey. It has produced a total of 230,000 mt of nick-el ore since 2003. Turkish Oremine has just handed AIM-listed ENK $40 million for a nickel prospect close to Izmir.
Turkey's government is stepping up efforts to exploit coal reserves to serve the country's growing need for electricity. Licenses were granted to private conglom-erates such as the Koç and the Ciner groups to develop coal mines in order to supply coal-fired power plants. More recently, Polat Kömur joined with a Chinese company to win the mining rights for a mine in the coal-rich area of Soma and build the accompanying power plant.
All this has resulted in a steep increase in mineral production: according to the Turkish Statistical Institute, mining activity has grown by 50% since 2005. However, the mining sector only accounts for 1.5% of national GDP, a modest contribution compared with developed countries such as Germany (4%) and the U.S. (4.2%), let alone mining powerhouses such as Australia (8.7%) and Canada (7.5%).
This is largely due to a lack of explo-ration activities. For years, anyone could obtain exploration licenses just to sit on the properties and wait for values to increase. To prevent this, amendments to the mining law approved in 2010 set tighter exploration requirements, introduc-ing a three-step exploration period of a maximum of seven years. Reserve reporting also is due to become more reliable: the government's bureau for mining activities (MIGEM) is drawing up a new code to bring Turkish reserve reporting practices in line with international standards. Companies will soon be obliged to regularly report the results of their exploration activities and will be closely scrutinized by the cognizant authorities.
Recent exploration has already led to encouraging results. As drilling goes deep-er, both Alacer Gold and Aldridge Minerals are confident that they will soon revise upward their gold reserves at the Çöpler and Yenipazar mines. With regard to coal, the MTA (Mineral Research and Exploration General Directorate) conduct-ed 650,000 m of drilling between 2005 and 2010, doubling the country's coal reserves to 12 billion mt of unexploited coal. Coal producer Soma Grubu has just been awarded a licence to exploit 90 million m of coking coal in Zonguldak province.
Another boost to exploration programs will come from the gov-ernment's move to tender 1,252 exploration licenses via a con-secutive closed and open bidding process due to start in January 2012. Mining companies are gearing up to pick up the most inter-esting plays.
"This marks a key opportunity to substantially increase the com-pany's mineral exploration footprint in Western Turkey, an area which we believe holds significant exploration upside and potential for multi-million ounce discoveries," said Kerim Sener, managing direc-tor of Ariana Resources.
If Turkey wants to capitalize on the results of increasing and more effective drilling campaigns, it needs to close the investment gap that still weighs down the sector. Signs are encouraging. Meta Nickel is planning to spend $500 million on a processing facility at its Gördes mine and the Soma group will invest $200 million in their Zonguldak project.
According to the estimates of Güven Onal, a professor of geol-ogy at the Istanbul Technical University, fresh capital could unleash Turkey's mining potential and increase its share of the national GDP to 4%..