Mining in Turkey
Michael Schwartz takes a look at the state of play in Turkey and why it is business as usual following the failed military coup.
Turkey has recently attracted worldwide attention for its failed military coup and for several acts of violence it has witnessed. To put the situation into perspective, Materials World contacted Steve Williams, President and CEO of Pasinex, on the state of the country’s mining industry. ‘The recent failed political coup has created some tension and some uncertainties, he said. ‘However, as a business in Turkey, we have not really been affected by these events. We continue to carry out our business and our development plans. Turkey has a strong economy and the Government is focused on maintaining and growing a strong economy.’
Long-term circumstances have influenced Turkey’s minerals sector for good and bad. For example, the Turkish Minerals website lists around 60 different minerals already mined. It is further claimed that for minerals Turkey is the 10th most diverse country out of the 132 investigated, and 28th for underground mineral production. More specifically, Turkey’s natural stone exports are estimated as in third place globally, and first for marble and travertine exports.
One key disadvantage is Turkey’s geology. Virtually all of the country lies on the Alpine-Himalaya belt, meaning geology peculiar to Turkey can be highly complex. Examples include the collision zone with the Arabian plate in the southeast – the hottest continental crust anywhere in the world and the still-unfolding implications of the Taurus Mountains created as recently as eight million years ago.
Investment in Turkish mining
Geological implications or not, Turkey attracts investment from some well-financed institutions – the non-profit Istanbul Mineral Exporters' Association (IMIB) now has more than 2,100 members. Its main fields include metallic minerals, industrial minerals, natural stones and ferroalloys.
IMIB tracks mineral exports by value in US$. While Turkey’s mineral exports have generally soared since 1995, in the last two years, there has been a decline in value from US$5bln in 2013 to just under US$4bln in 2015. Notably, Turkish export totals experience significant year-on-year changes, eight years on from 1995 witnessed swings of more than 20%, but only one of -20%.
To gain a better insight on mining activities, Materials World asked three companies operating in Turkey for an update on their activities. Canadian- and Frankfurt-listed Pasinex Resources focuses its Turkish activities on Pinargozu, a direct shipping zinc-producing mine near Adana on Turkey’s southern coast. The zinc production grade exceeds 35% zinc, while ownership is shared 50/50 with Akmetal.
Williams comments, ‘This is a carbonate replacement style zinc deposit. We believe it has great upside potential. Our drilling results over this summer indicate a consistent high-grade mineralisation (more than 30% zinc in situ). This grade has permitted us to get in and mine this material at very low capital expenditure because it is direct shipping material and therefore needs no processing. We are also learning a lot about the geology controlling the mineralisation. We think there is a lot more opportunity, not just at Pinargozu, but near there too. We hold two properties in this area and we think there is more zinc to be found yet. Finally, I should mention that the zinc price is starting to look very favourable.’
As the time of writing, Pasinex has opened a third adit, 120m long, which can use bigger equipment, doubling recent production from around 60t/d to around 120 t/d. Annually, Pinaozu’s target has risen from 10.4 million lb of zinc sold in 2015 to a targeted 25 million lbs this year.
Further east, Toronto-listed Alacer Gold Corporation operates the Çöpler gold mine, which produced 204,665oz during 2015. Çöpler has substantial probable reserves of 3.9 million recoverable ounces and measured and indicated resources of 6.2 million ounces of contained gold – the foundation for
Çöpler’s 20-year mine life.
Melody Gomez, Executive Legal Assistant and HR Manager at Alacer, commented, ‘On 12 May 2016, the board of directors approved the Çöpler Sulphide Expansion Project to proceed into full construction. The project will deliver long-term growth with robust financial returns and will add more than 20 years of production at Çöpler. The project will also bring Çöpler’s remaining life-of-mine gold production to 4Moz at all-in sustaining costs averaging US$645/oz. The environmental impact assessment and all required land use permits for construction have been approved.’
Eldorado Gold, based in Vancouver, operates two producing Turkish gold mines, Kisladag and Efemcukuru. Krista Muhr, VP, Investor Relations and Corporate Communications, pointed out that the company is ‘known for operating successfully in non-mainstream jurisdictions. We strategically invest in under-explored, highly prospective areas that provide organic growth potential and access to high quality assets. Our flagship mine, Kisladag, is the largest gold mine in Turkey.’
Eldorado Gold’s proven and probable reserves total 24.9Moz of gold and measured and indicated resources totalling 33.3Moz of gold. More specifically, Kisladag and Efemcukuru offer in situ proven quantities of gold of 1.333Moz and 214,000oz, respectively, with grades of 0.85g/t and 8.31g/t.
All three companies take their environmental obligations very seriously. Muhr points out that, ‘Responsible operations are not just a philosophical consideration. Eldorado Gold strives to demonstrate that mining can be accomplished responsibly. Potential impacts from project inception to closure are assessed and ways are identified to mitigate them to ensure Eldorado Gold’s environmental footprint is as small as possible. Clean air, water and soil are of the greatest importance.’
In the case of water at Kisladag, a water treatment plant was established in 2013. It treats up to 5,000m3 of surface water per day from the rock dump and groundwater from the open pit. As a closed-loop system, water is recycled and recirculated as part of the mine’s industrial requirements. This treated water replaces some fresh water from wells and is used as a dust suppressant. Excess treated water is discharged as a final option.
Williams notes that Turkey’s environmental standards are stringent and environmental impact statements must be routinely submitted. He also informed Materials World that, ‘Pinargozu is an underground mine and, because we have a direct shipping ore, we have neither processing plant nor tailings pond. This means that our environmental impact is a lot less. Nevertheless, all operations have some environmental impact and these items must be measured, and any negative impacts must be mitigated against. Safety is also a number one priority. We have implemented a strong health and safety programme at Pinargozu.’
In Alacer’s case, an Environmental and Social Impact Assessment study, a Stakeholder Engagement Plan and a Social Impact Assessment, like all mining companies, has a full reclamation and closure plan, with social and environmental management systems meeting international finance corporation standards.
One factor absent from all the interviewed companies is artisanal mining – it is quite simply not an issue.
Royalties and taxation
Favourable replies were given to financial questions. Williams referred to, ‘a very reasonable taxation and Government royalty regime. Corporate tax rate is 20%. Royalties for zinc mines range from 1–4% (variable based on metal prices and whether the operation is open pit or underground). I think these rates are fair for business.’
Melody Gomez says, ‘The mining law and royalties were updated in 2014 and are favourable to mining. Royalty rates are tied to the gold price and have incentives if you are a producer with a processing facility, which we are.
‘We also receive incentive certificates for capital investments, resulting in a lower tax rate. We have successfully closed out two incentives and are working on our third, for the sulphide project expansion and the heap leach pad expansion.
‘The current corporate tax rate is 20%, but with the incentive our cash effective tax rate will be around 5% for the next couple of years with an accounting effective tax rate of less than zero for the life of the mine.’
All three companies are CSR-supportive. Krista Muhr points out that Kis¸ladag˘ is not traditionally a mining region. Local communities were unfamiliar with mining and the industry was viewed with scepticism. ‘We recognised this as an opportunity to educate people about how mining has evolved in general and about Eldorado’s track record and approach in particular.
‘In keeping with Turkish culture, we met with community members in local tea houses, answering their questions about the project and learning about the area and its needs, in an effort to identify areas where Eldorado could make a positive contribution to the community.
Muhr explained that the company heard that the surrounding villages lacked clean water and adequate sewage systems, so took action to address these needs during the exploration phase. ‘Over time, through open dialogue and by keeping our commitments, Eldorado established a credibility that has made us welcome neighbours and valued partners in the region.’
Williams explained the history behind production. ‘We have been in the Pinargozu area for around four years but mining for less than two years. We also started the mine at a very low production rate but we are expanding it now. We are beginning our community outreach approach, although it is still early in this programme. We want to work with the community on areas of mutual interest or concern. I hope to see this developing over the next one-to-two years.’
Finally, Gomez believes that Alacer’s commitments are numerous. ‘To name a few, we have relocated the Cöpler village, which included building new homes, a mosque, and a community centre. We have donated US$2.8 million for a new primary school in the local town, and also have scholarship programmes for high school and university students. Our success in Turkey is a direct result of our relationships with the communities in which we operate.
Alacer has been operating in Turkey successfully since 1998 and have been mining the Çöpler orebody since 2010. We have had a joint venture with Lidya Mining, a local Turkish company, since 2009.’
Finally, Williams notes, ‘We were able to get going and to sell our direct shipping zinc mineralisation on a fast timeline because we are in Turkey. We are one-and-a-half hours to a major city of 1.8 million people (Adana) down a major road. Then another hour further down the road we get to a major commercial port (Mersin) on the Mediterranean Sea, from where we export our product. This all counts for a significant business advantage.’
Those interviewed showed strong sympathy for working in Turkey. Turkey’s economy is the 15th largest in the world and is home to citizens with an average age of just 29, investing massively in infrastructure.