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Kazakhstan unrest has little impact on metal mine output, but logistics disruptions feared

Highlights

Unrest said focused on cities, not mine areas

Telecommunications cut could impact logistics

Uranium spot prices jump amid unrest

International metals producers active in Kazakhstan told S&P Global Platts this week there had been no specific impact to date on their mine operations as a result of anti-government protests in Kazakhstan's cities, notably Almaty, despite reports of one copper smelter being hit by a protest.

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However, concerns were raised late Jan. 6 over the impact on logistics of a lack of telecommunications in the central Asian country, much of whose metals output is aimed for export markets.

Civil protests, which started earlier this week over high energy prices, leading to the resignation of the country's government, have reportedly turned into a broader anti-corruption movement against what is viewed as the power of the country's elite. Russian-led army units arrived in city centers Jan. 6 amid scenes of violence.

A spokesperson for a major mining house, which produces zinc and gold in Kazakhstan, said there was no impact at its mines from the protests, especially as mines were typically located far from city centers. However, the spokesperson added that all communications networks, including internet, have been cut within the country. It is understood this may lead to delays in news of any disruptions and potential logistics difficulties.

UK-listed copper, zinc and lead miner Central Asia Metals Ltd. (CAML), which owns a solvent extraction electrowinning (SXEW) copper production plant near Balkhash, confirmed Jan. 7 its plant and other operations, including the nearby Kounrad copper mine site, have not been impacted by the disturbances elsewhere in the country.

Operations have, however, been interrupted at the Balkhash metallurgical copper smelter in the Karaganda region in central Kazakhstan as plant workers joined nationwide protests, a channel on Russian messaging platform Telegram reported Jan. 6, as demonstrations and instability posed risks to industrial operations and logistics in the minerals-rich country.

The smelter is part of private Kazakh mining and smelting concern Kazakhmys, according to Telegram. S&P Global Platts was unable to establish effective communication with Kazakhmys Jan. 7. A mining source active in the region said it could not confirm reports of disruption at the smelter Jan. 7.

Market sources said China's copper market, a significant importer of cathode from Kazakhstan, was not immediately impacted by the protests as buying interest from Chinese smelters was low because they are holding ample inventory.

The London Metal Exchange cash copper price was quoted at $9,563/mt late Jan. 6, down 2.2% from Jan. 5.

Major Kazakhstan miner Eurasian Mineral Resources, which is 40% owned by the country's government, declined to make an immediate comment on the situation, indicating lack of communication with production sites. ERG produces chrome, ferrochrome, aluminum and electricity in Kazakhstan and is a major railway operator.

41% of world's uranium

Kazakhstan's diversified mining industry has grown in recent years to provide around 41% of the world's uranium output, 18% of its chromite, 6% of its titanium sponge and is a significant producer of barite, bauxite, cadmium, magnesium metal, sulfur and zinc, according to the US Geological Survey.

The government has supported investment in the mining industry, including by foreign investors. In March of last year, CAML CEO Nigel Robinson said the company considered Kazakhstan "a comfortable" jurisdiction to operate in.

Uranium spot prices jumped around 8% late Jan. 5, their biggest on-day jump since Sept. 15, partly as a result of the continuing unrest, although miners including Cameco and France's Orano reported their mine activity had not been affected. Platts assessed the current month spot price of U3O8 to Canada at $45.50/lb at 1 pm ET Jan. 5, up $3.25 from $42.25/lb assessed Jan. 4.

Carlo Alberto De Casa, a consultant with investment company Kinesis Money, expected the Kazakhstan riots to have limited impact on the gold market, as the country accounts for only around 2% of the world's gold supply, despite having large reserves.

However, this could change if the rioting were to last for a prolonged period or extend to neighboring countries, bringing in geopolitical elements that could boost gold's role as a safe haven investment, he said.

Spot market gold prices slipped to $1,788/oz late Jan. 6, down 1.99% on day.

Logistics costs

An executive of a steel company that deals with Kazakhstan confirmed that "the telephone and internet of my colleagues that work in Kazakhstan are not working," which has made it impossible to contact them over the last few days.

"I think that overall the problem for the industry will be more on the increase of logistic costs rather than the difficulty to have steel products for the short time being," the executive said.