Bestobe project risks losing $70 million of investments

Altynalmas (KASE: ALMS) is considering an option to freeze the further development of the Bestobe gold mine, according to Diyar Kanashev, CEO of the company, at a press briefing.

«If we want to develop this mine, we will need about $70 million of investments. But it doesn’t mean that we won’t need more investments in the future,» he said.

So far, Altynalmas has invested in the Bestobe project more than $110 million. The vast majority of that money was spent on the construction of a new ore-processing plant that reprocesses mine tailings. It was supposed that in the future the plant would start reprocessing the ore from Bestobe.

The company prepared itself for two possible scenarios. The positive scenario says that the project will be operating in 2024. The negative scenario says that the Bestobe project will be frozen while the mine and the ore-processing plant is destroyed. The company will decide which scenario to choose once it gets the reaction of the local community.

This is a key point because Altynalmas wants to change its production method and turn the mine into an open-air pit. On March 18, Bestobe miners called for President Kassym-Jomart Tokayev to prevent the mine from being closed. «More than one thousand people may lose their jobs. What are they supposed to do?» they wrote in an open letter.

Last year the company already stopped the operation of its ore-mining plant in Bestobe because of the protests.

In 2021, Altynalmas produced 11.9 tons of Dore bead; this year the company forecasts 15 tons of output.

However, Kanashev noted that these plans may not come true because of the new logistical challenges linked to the anti-Russian sanctions. «We used to work with distribution centers of leading international companies such as Siemens, SchneiderElectric and ABB; almost all of them were in Moscow. Now we cannot cooperate with them as they have left the region. This happened with no prior notice, just all of a sudden. We had not had a plan “B» even though we are trying to find alternative options for logistics including China,” he said.

Altynalmas is one of three leading gold producers in Kazakhstan. The company runs mines in the Zhambyl, Karaganda and Akmola regions. Also, it has an exploration project in the East Kazakhstan region. Last year the company’s revenue reached $264 million (+21%) with a net profit of $193.6 million (+102%).

Altynalmas obtained the Bestobe project after a series of deals aimed at the acquisition of Kazakhaltyn (2019–2021). Former owners of Kazakhaltyn Vladimir Kim and Eduard Ogay in total earned $310 million when the deal was closed.

As of April 1, 2022, the main shareholders of Altynalmas are GOUDEN RESERVES B.V. (60% of common stock), Vladimir Djumanbayev (22%), Diyar Kanashev (9.5%) and Igor Vetiul (5.5%).