The peaks and troughs of Eurasian mining

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Reaching agreement on what Eurasia means, as a geographical or political concept, has long been a thorny problem.

The region has been variously defined as stretching from Portugal to the Ural Mountains, from the most westerly tip of Europe to the Bering Strait (bounded by Siberia and the Mediterranean Sea), or, more narrowly, as a group of countries that straddle Eastern Europe and the western edge of Asia.

The Organisation for Economic Co-operation & Development (OECD) concentrates its Eurasia activities in 13 countries, extending from the borders of the EU to the Far East. These are Afghanistan, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, the Republic of Moldova, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

Turkey’s industrial minerals mining industry has also been among the most successful in the Eurasian region, setting it apart from countries such as Armenia and Georgia, which are struggling to revive what were once fairly profitable sectors.

Meerschaum pipes are synonymous with Eurasia. They are smoking pipes made from the mineral sepiolite, which is found floating on the Black Sea iStock

Turkey

Around $2 billion-worth of this material was natural stone – such as limestone, marble and aggregates for the construction industry.

Among the rest, a huge range of non-metallic minerals accounted for a significant slice of Turkey’s mineral export revenues.

These included borates (worth $265.5 million), feldspar ($176 million), magnesite ($101.1 million), quartz ($76.2 million), bentonite ($64.7 million), gypsum ($45.2 million), perlite ($27.7 million), salt ($25 million), barite ($24.2 million), sulfur ($17 million), pumice ($16.2 million), emery ($5.1 million), clays excluding kaolin ($4.7 million), kaolin ($4.4 million), dolomite ($2.1 million), talc (1.3 million), natural graphite ($966,500) and mica ($120,000).

With the exception of a few years following the 2008 financial crisis, production at Turkey’s mines has been fairly active since around 2000. Recent currency instability has generally worked in favor of mineral exporters, which pay costs in Turkish lira but receive payment for orders in US dollars.

Pressure on the lira has come from both short-selling in the foreign exchange markets and from Turkish citizens converting lira-denominated savings into foreign currencies, in an effort to preserve them from devaluation.

But extreme levels of intra-day volatility in the value of the lira, which hit a low of TRY5.76 to $1 at the end of March 2019, and the recession in Turkey have been less beneficial to domestic consumption of Turkish mineral products, due to the associated economic uncertainty and a high rate of inflation.

Despite the recent economic turmoil in Turkey, the country’s outward-looking mining executives remain upbeat about their industry’s prospects, although they generally agree that more needs to be done to maximize its potential.

"One of the main advantages is Turkey’s fortunate location, exactly on the Tethyan Belt, which is an extremely rich area for minerals," Ali Emiroğlu, president of the Turkish Miners Association, said in a 2018 report on the Turkish mining sector.

The Tethyan Belt runs from Southern Europe through Turkey, into Iraq, Iran and Pakistan and across northern India into Southeast Asia.

"So far, this potential has not been exhausted, as our mining extractions have not reached deeper reserves yet, although exploration has taken place. The government has shown serious interest in supporting this cause by making analyses on a meta-basis to locate minerals," Emiroğlu added.

"They achieved their target of 1 million meters of drilling [in 2017] and [in 2018, they intended] to increase that to 2 million meters, and [in 2019 to] 3 million meters. Foreign and private players are also doing a lot of research," he said.

According to Australian consultancy MinEx, exploration expenditure in Asia Minor (comprising Turkey and Greece) totaled just under $1 billion between 2006 and 2016. This was less than was spent in other regions in the Tethyan Belt, such as the Himalayas and Southeast Asia, but it yielded far more significant discoveries.

But mapping Turkey’s minerals is only part of what needs to be done to help the sector to grow and modernize. Improving the industry’s health and safety record is another hurdle that must be overcome to make the sector more bankable.

In 2017, 93 deaths were recorded at Turkish mining operations, according to the Workers’ Health & Work Safety Assembly (İSİGM). This was more than during the same year in South Africa, which has a much larger mining industry and employs considerably more people than Turkey, and yet faces much sterner criticism of its safety record.

International lawyers who advise foreign companies seeking to develop Turkish mines also talk of a litigious local culture, with numerous disputes springing up concerning land use, compliance with local laws and obligations to domestic shareholders, as well as the need to deal with around 20 licenses and permits for a single mine.

But they do acknowledge that there is a need to bring more value-added mineral processing into Turkey, to make the sector more profitable and to boost exports further.

In a speech on April 10, 2019, Turkish finance minister Berat Albayrak said that the country’s government intends to prioritize efforts to boost exports from the mining industry, because it is a strategic sector for Turkey.

An abandoned Armenian mine. Armenia produces several low-cost industrial minerals including basalt, pumice and olivine, but most of its mining income is generated through gold, copper and other precious and base metals. iStock

Armenia

Armenia, a small landlocked country wedged against Turkey’s eastern border, faces several challenges in terms of developing its mining industry.

According to a report on the Armenian mining industry prepared by a consortium of international consultants for the World Bank in 2016, the country is "situated in a geopolitically complex and volatile region, which in turn means that, at present, the only significant land-based routes for trade in and out of the country run through neighboring Georgia in the north and Iran in the south."

Armenian industrial minerals production consists mainly of diatomite, gypsum, limestone, perlite, bentonite and zeolites.

Notable mines include the Akhtala barite mine in northern Armenia, which forms part of a larger copper deposit. According to public records, the mine has operated non-continuously for 250 years, having been closed during periods of economic recession in the country.

The country’s ministry of energy, infrastructure and natural resources says that ore concentrates and metals have accounted for just over half of Armenia’s exports in the past few years – although most of this has been gold, copper and other precious and base metals, rather than non-metallic minerals.

Tuff is a type of rock made of volcanic ash and containing crystalline minerals such as anorthite, olivine, augite and hornblende. It is quarried in western and central Armenia and is mainly used in domestic construction, although it also has potential applications in nuclear waste storage.

Quarrying of basalt and andesite, pumice and volcanic slag is concentrated in the area around the Armenian capital, Yerevan.

Efforts to establish new non-metallic mineral mining operations, or to expand existing ones, have been slow to get going and have not been helped by the fact that tensions are rising in Armenia about the effect that mining is having on the country’s natural environment.

The country’s ministry of energy and natural resources stressed that it is "open to, and encourages, discussion with interested investors about the possibility of introducing new, efficient, environmentally friendly technologies in the mining sector."

It is hoped that by encouraging international investment into the country, and the use of modern mining technology, Armenia’s mining industry can grow cleanly and efficiently.

Further, the report recommended that "operations should be more mechanized and modern, and perform in an environmentally responsible way, and with adequate concerns for the health and safety of their workers."

Georgia

The country of Georgia, which sits to the north of Armenia and Azerbaijan and south of Russia, is not well-known for its mining industry. But like Armenia, this is something Georgia is trying to change, with the help of policy advice from international consultants.

The German Economic Team Georgia (GET Georgia) is a consultancy that advises the Georgian government and other Georgian state authorities such as the National Bank on a range of economic policy issues. It says that, although the mining sector in Georgia only accounts for a small share (0.8% in 2014) of gross domestic product (GDP), around one-quarter of Georgia’s total exports are related to mining activities.

"The mining sector in Georgia… is essentially comprised of two parts: extraction of relatively inexpensive construction materials such as stones, which is carried out by a multiplicity of often small companies and on numerous sites; and mining of relatively valuable metals and minerals, which is concentrated on a small number of relatively large extraction sites run by large companies," GET Georgia said in a policy paper published in 2015.

The group recommended a simplification of the country’s mining laws to help boost investment in the sector.

"The current regulations create unnecessary obstacles to investment in mining. These deter investors from increasing activities in Georgia," GET Georgia said, referring to the country’s system of licensing publicly owned natural resources to private companies.

In May 2018, Georgia’s ministry of economy announced that it had issued a license for the development of a calcite deposit in Mekveni, in Georgia’s Tskaltubo municipality, where a sum of at least 30 million Georgian lari (equivalent to about $11.1 million in April 2019) was due to be invested.

Calcite, a form of limestone, is mainly used in construction, but it also has uses in abrasives, agricultural soil treatments, pigments and pharmaceuticals.

Exports of mineral-based fertilizers to neighboring Azerbaijan were also reported to be increasing, and in early 2019 there was a series of announcements concerning investment to expand all of Georgia’s existing and future Black Sea ports, improving the country’s connections to global maritime routes and increasing its export potential.

Like other Eurasian countries, Azerbaijan has a reasonably well-established precious and base metals industry, but its industrial minerals sector has lagged behind.

Whether the various Eurasian countries follow the recommendations of international consultants, regarding how they can increase the size and value of their mining industries, will depend partly on political will, partly on social license, but more importantly on economic conditions.

For many countries in the Eurasian region, the strength of Turkey’s mining sector, coupled with its recession, has cast a shadow over them, although Turkish companies are among the most important investors in the wider region’s mining industry.

The removal of economic sanctions against Iran in 2015 generated real hope that a major new market would open, but the re-imposition of trade restrictions by the United States in 2018 has largely stifled Iran’s potential as an investor or consumer of foreign products.