Gold Mining: Is Turkey a Model Country?
As Reuters1 reported in January, gold production from Turkey is expected to rise to 36 tons in 2013 from 29.5 tons in 2012. The Turkish Gold Miners’ Association expects to produce 50 tons in 2015. This would put Turkey among the 15 top gold producers in the world. This is impressive -- gold mining was negligible in this country as recently as 2000.
Why is this important?
Two of the mines, including the largest Turkish mine in operation, called Kisladag, are owned by Canadian-based Eldorado Gold Corp. A third is owned by US-based company Alacer Gold. These foreign miners have successfully built mining operations in a country that is relatively new to modern-day mining.
Our in-house geologist, Andy Jackson, believes Turkey could hold many other economic gold deposits, and the country could continue to be a very positive contributor to the mining industry going forward.
The geology of the country makes it very appealing, because Turkey is located at an area of stress between tectonic plates – specifically, the African plate is being over-ridden by the Eurasian plate. Especially in the Biga Peninsula, in Western Turkey, prolific volcanism gave rise to a host of epithermal gold deposits, a number of which are in production.
Andy spent time in Turkey in the early 1990s, working as a regional exploration manager prior to joining Sprott Global Resource Investments Ltd.. He recently returned from Turkey – and told me about how it had gone from staunchly anti-mining to relatively mining-friendly as a country.
“The attitude to foreign miners has changed drastically. When we were exploring in Turkey twenty years ago, we frequently faced blockades being put in front of us. They didn’t consider it gold that we were looking for; they considered it ‘Turkish gold.’ And nobody was going to take ‘Turkish gold’ out of Turkey. There was a very nationalistic attitude to gold.
“Environmental groups also attacked potential mining projects. They spread concern among local villages about cyanide use to extract gold. They told villagers in places around the potential mine site that 100 percent of the people in these villages would die as a result of cyanide poisoning.
“But, of course, mines have now been in operation for fifteen years, and people know that this doesn’t hold water anymore.”
The government has also embraced mining. As Umit Akdur, head of the Gold Miners’ Association of Turkey noted, gold exports reduced the current account deficit of Turkey by $1.9 billion in 2012, around 3% of the current account deficit for that year2. As a result the political environment is positive for gold mining.
“The whole attitude of the Turkish government is pro-mining now – which is very encouraging. The mining legislation is sound, very structured, and clear. It doesn’t change regularly -- there are probably no tax increases in the cards at the moment. Currently there is a company tax and a 2 percent royalty at the pit.” Royalties at the pit, as Andy explained, are better for mining companies over an NSR (Net Smelter Royalty). The NSR entitles the authorities to take a share of the gold after it has been processed. In Turkey, the government royalty comes before the added expense to the mining company of processing the ore, and thus the amount of profit taken from the miner depends on the profitability of the mine.
Are there problems nonetheless?
International relations are difficult, says Andy.
“The government doesn’t get along particularly well with the Armenians, the Shi’ite Syrian government, or the Iranians.” Tense relations with its neighbors could make trade more difficult.
“Unemployment, I’d say, is their biggest problem right now. They need to reduce it.
“But apart from that, it’s a great exploration venue. There is new mineralization being discovered in areas that had previously been looked at fairly well, because of improved ability of exploration geologists to find gold that is under cover.”
An area of particular interest is the Biga peninsula, which is an area near the Aegean Sea coastline, in Western Turkey.
“I think Turkey is a very good place to go do exploration right now.”
You can take a look at the photos from Andy’s recent site visit to Turkey, here.
P.S.: View our new Natural Resource Investing Guide with 10 questions to ask before investing in any natural resource play here.
1 Thomson Reuters: “Inside Metals” Community Newsletter. January 11, 2013
2 Reuters online: Turkish economy minister sees 2013 c/a deficit below $60 bln. September 10, 2013
Andrew Jackson joined Sprott Global Resource Investments Ltd. in 2006, and has a background of 35 years in the exploration and mining industry. He holds an M.Sc. in economic geology, is a Fellow of the Society of Economic Geologists and is Series 7 licensed.
Andrew spent 12 years with Billiton / Gencor, becoming Exploration Manager for Southeast Asia, Turkey and North America from 1991-1996. He joined Placer Dome in 1996 and over a period of 10 years with Placer, held the positions of Exploration Manager for Canada, Exploration Manager for North and Central America, and Manager Global Near-Mine Exploration (covering 17 mines worldwide). He also headed a specialized target generation team that targeted very large gold deposits worldwide using advanced geological concepts.
learn more »
Sprott Inc., a public company listed on the Toronto Stock Exchange, operates through its wholly-owned direct and indirect subsidiaries, including: Sprott Asset Management LP, an adviser registered with the Ontario Securities Commission; Sprott Private Wealth LP, an investment dealer and member of the Investment Industry Regulatory Organization of Canada; Sprott Global Resource Investments Ltd., a US full service broker-dealer and member FINRA/SIPC; Sprott Asset Management USA Inc., an SEC Registered Investment Advisor. We refer to the above entities collectively as “Sprott”.
The information contained herein does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.
This report contains forward-looking statements which reflect the current expectations of management regarding future growth, results of operations, performance and business prospects and opportunities. Wherever possible, words such as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”, “intend”, “estimate”, and similar expressions have been used to identify these forward-looking statements. These statements reflect management’s current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this document. These factors should be considered carefully and undue reliance should not be placed on these forward-looking statements. Although the forward-looking statements contained in this document are based upon what management currently believes to be reasonable assumptions, there is no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this presentation and Sprott does not assume any obligation to update or revise.
Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any fund or account managed by Sprott. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any fund or account managed by Sprott will be invested.
Tuesday, November 26, 2013
Double, double toil and trouble. ‘Treasuries’ burn and ‘markets’ bubble
Friday, November 22, 2013
Rick Rule: Are Some Mining Stocks Heading Up?
Monday, November 18, 2013
19 ‘Tough’ Questions for Eric Sprott on Gold and Silver
Wednesday, November 13, 2013
Vaults are Booming! (in Asia)
Friday, November 8, 2013
Glum Resource Market Creates Value Plays: Adam Footer
Wednesday, November 6, 2013
How to Be Your Own Central Bank
Tuesday, November 5, 2013
Are Junior Miners Just Leveraged Gold Plays? -- Eric Angeli
Monday, November 4, 2013
Will Indians Keep Buying Gold?
Thursday, October 31, 2013
Number of existing South African gold, platinum mines likely to close
Wednesday, October 30, 2013
China Needs PGM's Now
Friday, October 25, 2013
Gold Mining: Is Turkey a Model Country?