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Said Sultanov: Now is the perfect time to go exploring – Successful investors understand that to make outsized returns they must act in a counter cyclical fashion.

Kazakhstan is only 15 % exploited and experts consider that great discoveries are in future. Kazakhstan is undoubtedly a “God-marked country”. Its subsurface resources contain teeming treasures, such as oil, gas, coal, rare metals… However, it is well known that the discoveries of Soviet period are being actively developed nowadays. Native geologic exploration, depleted of sufficient financing for a long time, was in a deep crisis. In recent years, despite on fall of prices of carbohydrates and ores, there is a turning point in this field. New generation of Kazakhstani geologists, equipped with knowledge from the best world institutions and ambitious to use breakthrough technologies when searching for new discoveries, work in this field now. Today, our talker is Said Sultanov, Chairman of Supervisory Board of Aurora Minerals Group LLP. Within the framework of his exclusive interview to abctv.kz he told us about what is doing on now in native geologic exploration and what problems the investors suffer from.

Said Muratbekovich, how do things go in the field and why Aurora Minerals Group, lead by you, decided to come to Kazakhstan?

– During the last 25- 30 years, no large-scale investments were made into geological exploration in Kazakhstan that resulted in deficiency in professional personnel, technologies and working methods at the market. Depletion of old major fields triggered a potential threat of production suspension at plants and that is why the issue of mineral resources base is very important nowadays. It is a problem not only for private companies, but also for the state at whole. It is up to you to decide, but such state of affairs may lead to loss of thousands of jobs, especially in mono-cities. No memorandums will be able to keep them.  To our opinion, it is time to carry out geologic exploration with the use of new technologies and solutions. That is why, together with powerful world (SkyTem -Denmark, Ground Probe – Australia, Asahi Diamond – Japan, DiasGeophysical – Canada, Tromino- Italy) and native partners, we decided to establish our own company, which will be focused on transfer of technologies and investments into Kazakhstani mining sector. On December 1, 2015, we opened our company and named it Aurora Minerals Group (“Au” for aurum in Mendeleev’s table). Our aim is to make something useful for the state and society, using breakthrough technologies in fact.

– Many various technologies are created and offered in the world. How is it not to go amiss among such a variety?

– We visit world exhibitions, carry out negotiations, both formal and informal, to make world engineering companies invest into Kazakhstan. In addition, we train our young specialists at an innovative equipment for them to become high-grade specialists and devolve their knowledge to others.

– Am I correct in stating that Aurora Minerals Group is a union, consisting of local and international professionals? However, before Aurora Minerals Group was founded, you worked in public administration, in fact you were the CEO of the joint venture between state-owned KazGeology JSC and Canadian airborne company “Geotech”. Another partner, Kaisar Kozhamuratov was the chief investment manager of state owned KazGeology JSC. Expat form Australia, Kent Balas was the senior geologist of Australian Company “Iluka Resources” , so what made you decide to establish your own business?

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– Quite so. Me and my partners – Kaisar Kozhamuratov and Kent Balas- were leaders, top-managers in our structures and demonstrated good work efficiency. However, we wanted to do something more, end up with the next level. The life itself showed as a new way.
By the moment of Aurora Minerals Group foundation, each of us had already had working experience in the field, we had known about both good and bad sides, could correlate and compare, analyze and work out alternative solutions to develop any given processes.  In brief, we were ready to create a business, which first brings us professional satisfaction. And herewith, we tended to feel ourselves free and relaxed, not to depend on someone`s mood, as well as not to compromise with our conscience.

– Then, is it easy to drive business in Kazakhstan?

– I think that the most important success factor is a correct business-plan and qualified team. Start-up budget and connections is secondary.  It is easy to arrive to Kazakhstan thanks to visa free regime with many countries; it is easy to open business distantly via E-gov, spend much money on office rent and nice furniture. But!  It is very difficult to drive your own business, as well as to make it profitable especially when it is independent of government contracts and floating tenge exchange rate. Sometimes even success has “minuses”. For example, during high season of airborne surveys, when you try to do your best while the weather being so unpredictable, man – made problems really put you off.

– Do you mean “putting stones into your shoe”, are competitors always awake?

– If we have any… but maybe they are. We are going to work at this issue later. However, in fact, various problems arise repeatedly and we have to spend precious time and assets to solve them (geologists` work is seasonable – author’s note). However, despite all these obstacles, we are extremely satisfied with what we have already achieved and we will overcome all problems and will continue to develop further. The main fact is that we extremely motivated and united in our vision to develop our business/

– For how long does Aurora Minerals Group operate in Kazakhstan? Do you have any results?  

– It will be one year on the1st December and we have already have some good results. First, we accomplished over 40 000 linear kilometers of airborne geophysics. It is the largest volume of work in Kazakhstan. Secondly, we operate a “turn-key” geological prospecting project for further IPO allocation at a stock-market in Toronto. Thirdly, we established a range of technological companies in Kazakhstan mining market by the means of geological franchising: SkyTem- Danish airborne geophysical company, providing 3D electromagnetic technologies, Tromino- Italian Company, manufacturer of passive seismic sensor, DiasGeophysical – Canadian geophysical surveying company, GroundProbe Australian company-manufacturer of slop stability radars and manufacturer of spare parts for AsahiDiamond drill units.

– It sounds great…  

– All above-mentioned companies already operate in Kazakhstan and we are their exclusive representatives. Moreover, on request of private investors, our company acted as a consultant during acquisition of subsoil use rights and prepared a feasibility study that was, approved by governmental agencies. More than 30 people got work because of our activity.

– Which exploration works are being carried out now and how can you evaluate our subsurface resources potential? 

– Our Australian partners think that Kazakhstan is only 15% explored and we are doomed for great discoveries. By this moment, we have already accomplished a large part of planned work and airborne surveying season is about to close, however we carry out electro-magnetic airborne geophysics using SkyTem on gold-mining project and planning to perform drilling works.  Our company also does analytical work at request of local companies`, which are planning to take part in auction for subsurface use rights.  In parallel, we carry out a piece of work with large subsurface users on the use of Ground Probe radars for slopes stability monitoring in Kazakhstan. Recently, we sent two radars to the Russian Federation, where much attention is paid to open cast mines devolution prevention. We hope that soon these Ground Probe radars will be used in Kazakhstan to check open cast mines that will help us to save lives of our miners and prevent open cast mines devolution.

– Said Muratbekovich, is it not the most profitable time now to search for new mines considering oil and ore price downturn?

Now is the perfect time to go exploring – Successful investors understand that to make outsized returns they must act in a counter cyclical fashion.  I believe we are past the bottom of the boom/bust mining cycle and there is only upside from here on. that undoubtedly, will affect positively the development of Kazakhstan and in particular, the development of our company.

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– There is a phrase: human capital – is everything. How did you create your team? How do expats relate to Kazakhstan?

– It is a phrase, which is applicable to Kazakhstan, because it is impossible to drive such a difficult business as we have without the qualified people, who understand local specificity. Our company is successful thanks in large part to professional team. I am proud of the fact that we could create such a friendly and qualified international team with diverse backgrounds. It should be noted, that is it quite difficult to find a job at our company considering the fact that our salaries are not the highest ones. Our principal criterion is honesty. Each employee must stand by for his words and acts, be honest to himself and his colleagues.  Secondly, he shall be a professional, aimed at effective result, and be positive. Thirdly, he shall be educatable and always tend to professional growth. All members of our team speak English, possess knowledge of IT software’s and young specialists-geologists can work with the equipment of our technological partners. Kent Balas, our business partner, is more Kazakh than Australian is. He likes our culture, food; he likes to work in Astana, but party in Almaty. He, as a real geologist, works in the most distant and hard-to-reach areas of Kazakhstan. He knows how our people live. He is very depressed with the fact that the most Kazakhstani business people tend to monopoly, whereas in Australia everybody works at market increase through competition. It is a big “plus” to have an expat in the team: he tries to do everything correctly, effectively, safely and qualitatively. During the process of work, Kent teaches all these qualities and skills to our local geologists.

– What do you think the government and lawmakers need to do to make Kazakhstan more investment-attractive?

– The Government and personally Nursultan Nazarbayev, head of the state, made much work to attract investments, having created the atmosphere of stability and interethnic concord. Alongside with that, there is a range of desires and recommendations.

In my opinion, firstly the government needs to finally transfer to market-oriented economy and get rid of quasi-public sector by means of privatization. Why does the government need to feed hundreds of ineffective national companies? It is better to pass available assets to competitive environment, of course excerpt for strategic enterprises. Competition is profitable for consumers, because one obtains qualitative goods at optimal price. I think, that bureaucracy level will sufficiently drop, as the market will dictate for fast and effective decisions.

Secondly, Yellow pages principle and law that was adopted in Kazakhstan, but it lags behind in fact. For example, three large groups work in Kazakhstan in airborne geophysics field- two private and one quasi-government. Through national companies, the State gives work contracts to affiliated “subsidiaries”, prices of which are much higher and which has no equipment and personnel. While private sector, large private subsurface users and big business select two other private airborne companies. Why? It happens because business needs for qualitative goods at optimal price and subordinated contractor, who they can work with.

Thirdly, it is necessary to increase financing of geological explorations, which use new technologies, because we need mineral resources base in order to provide industrialization. Although the budget to geologic exploration was increased, tenge devaluation made its negative corrections.

The fourth, in my opinion, there is a need to create or update existing government IT system database, so it will be possible to buy geological information, as well as acquire subsurface use rights. The easier it is to obtain geological information and get subsurface use rights, the sooner we have junior-companies, similar to those in Canada and Australia.

Fifthly, the Mining Code “On subsurface resources and subsurface resources use” needs to pass through the procedure of public consultations and hearings with all interested parties, considering world best practice and be adopted in Parliament in 2017 year.

 

I will express a common opinion of the mining industry in Kazakhstan that we need to have long term transparent, fair and consistent rules in the market for all players

 

 

Kul’pash Konyrova

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