The arrest in May 2009 of Mukhtar Dzhakishev, the long-serving head of Kazatomprom, cast a shadow over the foreign companies that have dealt with the company in recent years. As accusations of illegal sales of uranium deposits were being reported, Canadian mining firm Uranium One saw its shares plunge 38% as the announcement of an investigation by Kazakhstan into past uranium sales was made.

The company explained it was working with Kazakhstan authorities on their investigation. One deal in with which Uranium One may be associated was the sale of a 30% stake in the uranium mine in Khorasan. Though the buyer was not specified in the announcement, Uranium One purchased a 30% stake in the mine in 2007. Uranium One is adamant that the purchase of the stake was carried out within the remits of Kazakh law. However, as reported by Reuters, the issue may not be with the company’s actions, but of the ownership rights of the vendors. Uranium One saw some recovery of its share price after Kazatomprom announced in June 2009 that it would continue to honour existing agreements despite the arrest of the company’s former president.

In the same month, further announcements were made stating that more of the country’s uranium fields had been sold illegally to foreign companies. There are a number of foreign investors with significant uranium mining joint ventures (JVs) established within the country and though the sales under investigation have not yet been announced, such news will no doubt make the investors in these projects nervous. Kyzylkum, owned by Uranium One (30%), a consortium of Japanese investors (40%) and the remaining share by Kazatomprom; runs the Khorasan mine in Kazakhstan. Betpak Dala operates two uranium deposits and 70% is owned by Uranium One. Appak is owned by Japan’s Sumitomo Corporation (20%), Kansai Electric power (15%). Katco is owned by France’s Areva (51%) and Canadian firm Cameco Corp owns 60% in Inkai.

Despite the scandal affecting the uranium industry in Kazakhstan, the country’s rich resources continue to attract investment from foreign businesses. Cameco announced in June 2009 that it would be persisting with investment into the country and the investigation into the illegal sales of uranium deposits were not related to any of Cameo’s deals with Kazamtomprom.

In March 2009, the government demonstrated a willingness to relieve some of the financial burdens being felt by mining companies in the country. A tax relief on minerals extraction was offered to any companies within the sector who were operating at a loss. The move will go some way to avoid bankruptcies and job losses and demonstrates a commitment to support the industry. The tax relief would be waivered, however, should any of the companies begin to make a profit, no matter how small, and taxes would have to be paid in full. With eligibility for the tax break stipulating that no major job redundancies can occur, some firms with marginal profits may prefer to take cost cutting measures by reducing personnel.

Industry Forecast The recent arrests and scandals surrounding Kazatomprom has had a detrimental effect on the uranium mining industry. However, as further developments are revealed and more foreign companies are cleared of involvement, share prices and confidence in the sector is slowly being restored, though it is far from resolution. Despite the impact of the global fall in metals and commodity prices, the report expects growth to be solid in the Kazakh mining industry. By 2013, the report forecasts that the market will be worth US$18.9bn, up from a level of US$15.38bn in 2008.