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Iluka Resources gearing up to drill the steppes of Kazakhstan

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Iluka Resources gearing up to drill the steppes of Kazakhstan

Australian miner has opened an officein Kazakhstan, exploring for rutile and zircon-containing mineral sands depositsin the north of the Central Asian state. Iluka's head representative in the country,Alison Morley, spoke to SNL Metals & Mining about operating as a foreign miningcompany in the country, the proposed new mining regulations and "beautifulrocks." The following is an edited transcript of the interview.

SNL Metals & Mining: Alison, Iluka is exploring forminerals in many other countries. What is it about Kazakhstan's geology that firstattracted the company?

Alison Morley: Geologically it is a very interesting,and very prospective country for our type of deposit, and also we believe in ourarea it was very well explored by the Soviet geologists in the 1960s. The wholenorthern part of Kazakhstan, and the West Siberian basin used to be part of a bigsea. The sea level dropped suddenly many millions of years ago, and we believe thatmeans there is a good chance that some [mineral sands] deposits have been preservedthat formed at that time.

Some say that from a geologicalperspective, Kazakhstan is the next big thing. Do you agree?

Froma geological perspective, yes it could be. There's a lot of bureaucracy and otherthings that might limit [its attractiveness], but purely in terms of the geology,there are some beautifully interesting rocks here.

That is interesting, because somepeople question the use of exploring here because it has been explored so well inthe Soviet period. Others say most of the country is still unexplored. Which viewpointis the more accurate?

I haveheard that comment quite a lot before, that they've explored it all before, so whyare you bothering? You would have got that same comment in Australia in the 1980s.For one, people were not using the same techniques we are using these days, theymay only have explored the top meter if they were only doing surface sampling. Whenpeople say they blanket covered an area, the drill spacing might have been 4 kilometers- you can fit 2 ore bodies in that type of space. I [also] think there is a senseof pride in the amount of work that was done in Soviet times, and it is pride thatis well-founded. It was good work, but there's a lot of space in there that is quiteopen.

Therehave been a lot of advances in technology since then, in terms of remote sensing,so we think there is quite a good chance to fit some ore bodies in between the spaceswhere the Soviet geologists were active.

What techniques are you usingin your exploration?

At thefirst stage, the geologists will look for geologically interesting areas, basically,we are looking for basins, old coasts of ancient seas, where the sea levels droppedor have risen … so we are always looking for that.

We alsouse DTMs — Digital Terrain Models — looking for very small differences in the relativelevel of the surface. Essentially, we are looking for old beaches, beaches thatare now high and dry.

We usethis high-level satellite imagery of the ground surface — [with it] you can seeridges popping out. Back in the Soviet period, very early stages of geophysics technologymay have been used … and we will also be looking at importing an air core rig, whichis specifically designed for looking for mineral sands, and there's none of thosein Kazakhstan at the moment. We will be doing geophysics and drilling this yearand into next year. Then we will review our progress after that point.

Your operations in Kazakhstanare only just starting. Are you finding it easy to recruit trained local staff,or will you rely on expat specialists?

The ideafor Iluka is we ultimately end up using a lot more local staff than expats. I'mhere for a year and a bit to set up the office and we will have a geologist comein to train the locals the way we do things, as we will be using an air core rig,and they don't exist in Kazakhstan at the moment. So ultimately what we are lookingto do is to train up local people and have them run the office. At the moment, wehave 2 expats and 4 local staff.

How do you find the level of trainingof the local staff?

I amvery much surprised and excited by the general skills that people here have, thereare people with post-graduate degrees, they've studied abroad, they speak threeto four different languages. But mineral sands tends to be a very specific typeof skill in the industry, so anywhere we go, we have to train up people for mineralsands type activities. But in terms of general knowledge and intelligence and peoplewith the right attitude, we've been very lucky so far.

You have spoken a lot about thegeological attractiveness of Kazakhstan, but a lot of people have been talking aboutits attractiveness as a mining jurisdiction in legal, tax and other terms. How doyou rate the country from these perspectives?

Likemany other foreign investors we would encourage the adoption of the based on some of the codeswe are more familiar with, like the Western Australian mining code. We were sayingthe same kind of things this time last year, so if the mining code is adopted asthey say, then that will be fantastic. But I can see there are still some majorobstacles in the way… and we would encourage this as much as possible.

You mentioned the Kazakh government'sproposed new mining code. What is your view there?

Theseare very good principles to have in place, but how do you actually convert a wholesystem, and what mechanisms can you use to make sure it is implemented effectively?It's all very well to say certain things will be the outcome of this, but if peopledon't understand the JORC code, then how can we make sure they understand it whenthey implement it?

Some people are saying puttingthis new code into practice will be more difficult than the Kazakh government believes.What is your view?

No, Ithink the Kazakh government has its eyes wide open and they know it will be difficult— I don't presume to tell them that it won't be. [But] there will be some need tochange some mentalities. [The director of the subsoil use department of the Ministryfor Investments and Development] Timur Toktabayev said it clearly and intensively[recently], when he said there needs to be a presumption of innocence of investors.That is because, firstly, they want to make money, there's no doubt about that,and secondly, we do deals where we make sure we have social responsibility. We payroyalties to the government, that is all a big part of our business … we aren'ttrying to shirk that … we aren't just going to come here and high-grade the orebody then walk away. And sometimes the old rules are along the lines of assumingthat you have to police investors and controleverything.

Is the move from the Soviet classificationsystem going to be a challenge for Kazakhstan?

A JORCpublic reporting code that all investors can understand will be incredibly usefulto a junior mining sector, so if you want to get 200 junior miners listed on theKazakh stock exchange [as the Kazakh government wants] then JORC is going to beincredibly important. For big companies like Iluka, it's not the main thing. Themain thing for us is security of tenure, security of taxation, and other things.

Is starting a junior mining sectorin Kazakhstan a realistic goal for the government there?

I thinkit is realistic from a technical point of view. You will see when commodity pricescome up again and everybody is going to be looking for the next big thing.

Are there significant mineralsands deposits in other parts of the former Soviet Union, and if so, is Iluka interestedin exploring these?

For meand the Iluka Kazakhstan office, it's really just Kazakhstan at the moment. Thatis our main goal. We do keep a lookout, we tend to follow the geology. There aresome deposits in Ukraine and Russia in terms of mineral sands, but technically,Kazakhstan is our first priority.