|
The following is an interview Jeff Clark,
co-editor of Casey’s International Speculator,
conducted with Dr. Sergey Kurzin, a Casey
Explorers’ League honoree. The Explorers’ League regularly
inducts serially successful mine finders with at least three economic
discoveries under their belts – a true accomplishment considering that
most explorers don’t even have one economic find throughout their
careers.
We haven't interviewed Dr. Sergey Kurzin since his
induction into the Explorers' League in October 2008. As you'll read, he's
had his head down in Kazakhstan but is now ready to speak publicly about his
company, Orsu Metals (T.OSU), a
gold-copper exploration and development company operating in Kazakhstan
and Kyrgyzstan. Sergey is one of the most knowledgeable people we know about
the politics in that region, including Russia. Here are his latest thoughts
on his company and copper…
JEFF CLARK: It’s been two years since we talked, Sergey. Tell us
what you've been doing.
DR. SERGEY KURZIN: I’ve been cleaning up the mess at our Varvarinskoye project, which we acquired from the merger
with European Minerals. It was a very complicated arrangement with the banks,
who could not agree with each other, and a very unforgiving, hostile,
off-take agreement. On top of that, the output was hedged at $575 gold
– can you imagine that at current prices? But the main problem was the
deposit itself – the grades were 30% below what was stated in the
reports. That’s why my head was down, to renovate this company. Now
with this cleared up, we have put all our existing projects together and
brought them to an advanced level.
Jeff: You’ve been operating in Kazakhstan and Kyrgyzstan for 20-plus
years now. Tell us about the business climate there.
Sergey: Well, the business climate, like everything, has its ups and
downs. But one can quite comfortably operate in Kazakhstan. If you have a
contract with the government, meaning a license or title, and you comply with
the requirements of the contract, you don’t have a problem. You just
get on with your business. When metal prices moved higher and people were
making big profits, they increased taxation in Kazakhstan, as a lot of other
countries did, but the climate is still positive.
Jeff: Would you consider Kazakhstan a pro-mining jurisdiction?
Sergey: Yes. Kazakhstan is predominately a natural resource country.
It is a giant country with a low population. It has oil in the west and
north, and metals in the central region and onwards to the east. They have
oil, gas, uranium, gold, copper, zinc, chrome – what did I miss? All
the metals you basically want are in Kazakhstan.
Jeff: What about the politics in Kazakhstan?
Sergey: Politically, it is stable. Perhaps it is not an identical
democracy to the United Kingdom or Canada, but it is still a democracy as
they understand it, in terms of consistency of legislation. Meanwhile,
Kyrgyzstan has just had elections, which went peacefully. The new
government is democratically elected and has the support of both the United
States and Russia, so I think it is going to be okay.
Jeff: How have you been able to navigate the political waters better than
most other companies operating in that region?
Sergey: Well, thank you, that is a compliment. The fact is we’ve
done quite a few positive things in Kazakhstan with my previous company,
Oriel Resources. We took the Voskhod deposit
through all the usual stages of development, obtained all the essential
approvals at the regional and district level, and created jobs. I have
partners in Kazakhstan who I have been working with for eighteen years. They
know what they are doing in this part of the world, so in conjunction with
them, we are working quite well.
Jeff: So it's important to have strong local partners.
s, it is
usually because they don’t have reliable, trustworthy, long-term
relations with a local partner. If you are in Canada, you don’t need
such a partner. But in Kazakhstan – which is part of the former Soviet
Union – there is a certain way people look at things. They were never
part of the British Commonwealth or anything like that, so they look at
things differently. I am a Russian by birth and an ex-Russian citizen and
lived there for 30 years. I have a lot of people with a Russian background
working in the company that help navigate these
waters.
Jeff: How did Orsu secure property rights in
Kazakhstan?
Sergey: We have a contract with the government and work in accordance
with the contract, complying with all the terms and conditions. As long as
you do this, you are in good shape.
Jeff: Speaking of Russia, how would you assess mineral exploration in the
Russian Federation?
Sergey: Well, that is a very interesting question. As you know, Orsu Metals is not in Russia at the moment. Why? Because
there is a federal law that controls strategic assets and creates risk for
explorers. But to be honest – in my personal opinion – it has
nothing to do with strategic assets. It has everything to do with Russian
companies trying to reduce competition.
Jeff: How are they doing that?
Sergey: By keeping them from developing big strategic assets. I
believe the Russians already realize that this law is a mistake, because it
puts off major Western companies to mining. I think they are currently
reconsidering the situation.
Jeff: What do you base that judgment on?
Sergey: Putin and his speeches. But Russia is a large country and pretty
slow historically. How fast they will react, I don’t know. But
they’re talking about it. At the moment, I am not sure if it is worth
establishing yourself in deep Siberia for a project of less than 50 tonnes of gold – just over 1.5 million ounces
– which is on the border of what's considered a strategic asset. It
would be too expensive and too difficult logistically.
The problem Russia faces with all its restricting legislation and bureaucracy
is basically the absence of any new exploration in the whole country! They
still exploit and use what they had twenty years ago before the Soviet Union
collapsed. So everything that was worth developing is basically taken. There
is a lack of new projects, the existing ones are too expensive, and those
still undeveloped are usually not worth the effort.
Jeff: Your flagship project is Karchiga in
Kazakhstan. I read that you recently increased your interest from 70% to
94.75%.
Sergey: Yes. Karchiga is a copper play.
There is a little bit of gold, but we are not even considering it. And Karchiga is the most advanced Orsu
project, but not necessarily the largest. It has a lot of advantages, like
the location being forty kilometers from the Chinese border. It is a
well-defined area and within an historic copper mining belt.
It is not expensive to develop. We hope to use a lot of Chinese equipment,
which will give us some interesting project finance opportunities with
potential Chinese off-take agreements. And the infrastructure is good. There
are hard paved roads on the Chinese side and a couple of smelters in the
vicinity. Electricity is 10 kilometers away, water is plentiful, and the
landscape is very gentle. Our contract with the Kazakh government is good
until 2022.
As of Q1 2010, we have a 43-101-compliant indicated resource of nine million tonnes at 1.87% copper and an inferred resource of 1.83
million tonnes at 1.6% copper. That's about 400
million pounds of copper, over a billion dollars worth. We expect to complete
our definitive feasibility study in September 2011. So this is a good project
to turn a company into a producer. We’ve done projects more complicated
than this in Kazakhstan, and it is our firm target to complete construction
by Q1 2013.
Jeff: I saw that China is investing $13 billion in Kazakhstan.
Sergey: Kazakhstan is full of natural resources, which China
desperately needs for its development and growth. It's easier to bring it
from Kazakhstan than import it from South America or Africa. Kazakhstan has a
thousand-kilometer border with China. Our Karchiga
project is only forty kilometers from the border, so it’s a given
synergy. And copper in particular is one of the key metals for
infrastructure.
Jeff: So why should I buy shares of Orsu now?
Sergey: Because we have a major resource. Six million ounces of gold
equivalent. And our enterprise value is $30 million. What is that, $5 an
ounce? It’s a pretty strong case, I think. The company will grow, too.
We will acquire added projects and are progressing
the existing ones. We are strongly undervalued. If you can discount all the
risks, we should be trading at five or six times where we are now. The fact
is, we have a track record and a very good technical
team. I’ve been on the road and there was big interest in Toronto, New
York, and London. We’ve been very well received. I think the stock will
see some movement. Nothing happens instantly, as you well know, so give me
some time.
Jeff: We will. To wrap it up, Sergey, what do you see going forward with
copper and gold?
Sergey: I will answer simply. I think that gold, for the foreseeable
future, is not going down because it is a barometer of people's fear. But
I’m even more bullish on copper because it is essential. Gold is an
artificial thing, a safe haven, and insurance against currency devaluation.
But copper – especially in Kazakhstan where you are next door to China
– has a strong future. And don’t forget, India is not far away.
Of course there will be hiccups, but the overall trend in copper is
definitely up, in my opinion.
Jeff: Thanks for your time, Sergey. We'll be watching as you develop Orsu.
Sergey: Thanks a lot.
[Finding junior mining stocks to invest in is
easy… and so is losing your shirt in the process. Finding winning
stocks, on the other hand, requires asking the right questions. Learn all
about “The 8 Ps of Resource Stock Evaluation,” Doug
Casey’s secret of success, in our FREE special report. Click here to read it.]
Jeff Clark
Editor, Casey’s Gold & Resource
Report
|
