Will precious metals have access to loans?
To define Dore alloy (gold and silver) obtained from gold deposits and sent to refineries as highly liquid collateral, by analogy with refined precious metals, to stimulate lending to the economy in the gold mining industry – such a proposal was announced at the third meeting of the Gold Mining Subcommittee industry of the Committee of the Geological Industry, Mining, Coal Mining and Metallurgical Industry (ZDP KSGUMP) of the Presidium of NCE RK “Atameken”. Representatives of the MIIR RK, MNE RK, second-tier banks took part in its work.
Kanat Baitov, Chairman of the Subcommittee of the Gold Mining Industry, informed that at the end of last year, the extraction of gold-bearing ore in the republic amounted to 39 million tons, which is 18% more than in 2021. The production of gold concentrate was at the level of 455 thousand tons (2021 – 576 thousand tons), the production of raw gold – 129 tons (2021 – 115 tons), refined gold – 73 tons (2021 – 65 tons). The production of unwrought silver amounted to 1,011 tons (2021 – 1,004 tons), refined silver – 995 tons (2021 – 982 tons).
The meeting discussed the agenda of the Fourth Forum of Gold Miners, which will be held on June 2, 2023 in Astana as part of the International Mining and Metallurgy Congress Astana Mining & Metallurgy – 2023. The purpose of the annual dialogue platform is to discuss issues in the development of the gold mining industry, including subsoil use, environmental, tax and labor aspects of activity and interaction with state and public bodies. The event will be attended by representatives of government agencies, business communities, leading companies in the gold mining industry.
As the next issue, the representatives of the Subcommittee of the ZDP KSMU considered the inclusion of the provision on the Dore alloy (gold and silver) obtained from gold ore deposits and sent to refineries, as a highly liquid collateral, in the Resolution of the Board of the National Bank of the Republic of Kazakhstan dated September 13, 2017, by analogy with refined precious metals.
As the head of the Gold Mining Subcommittee explained, this measure is necessary to activate the gold and silver market, stimulate lending to the economy in the gold mining industry, finance the costs associated with the technical re-equipment of gold mining enterprises and the introduction of new technologies for the extraction of precious metals. This proposal of the Dragmet Association is currently under consideration by the Agency of the Republic of Kazakhstan for the regulation and development of the financial market.
The meeting raised the issue of the export of precious metals in order to attract loans from second-tier banks and attract financing from international banks.
“In order to achieve the large-scale strategic goals set by gold mining enterprises, extensive development programs or growth projects are being developed, the implementation of which requires a commensurate amount of financing, which, unfortunately, cannot be provided by Kazakh second-tier banks,” emphasized K.K. Baitov.
According to him, at the moment, due to lack of funding, the implementation of growth projects is under threat. Enterprises see a way out of the situation in the export of the precious metal they produce.
In addition, international banks are ready to consider providing financing to enterprises for general corporate purposes and capital expenditures through a prepayment instrument (Prepay) under a long-term export Offtake contract in the form of doré or refined gold of the London Good Delivery standard. The prepayment received and the remuneration accrued on it are subject to return to enterprises within five years after receipt by supplying gold in doré or refined gold. Today, this proposal of the Dragmet Association is under consideration by the Ministry of Foreign Affairs of the Republic of Kazakhstan and the National Bank of the Republic of Kazakhstan.
The agenda of the meeting also included a discussion of problematic issues in the jewelry industry. The head of the League of Jewelers of Kazakhstan, Kaisar Zhumagaliyev, made proposals to legalize the shadow turnover of domestic manufacturers by labeling goods and conducting regular inspections by authorized bodies at points of sale, to amend the Law of the Republic of Kazakhstan “On Protection of Consumer Rights” in terms of excluding jewelry from the list of precious metals and precious stones.
K. Zhumagaliyev identified the key problems in the production and circulation of precious products as jewelry smuggling and the import of low-quality jewelry, as well as the lack of a developed domestic jewelry industry that produces products from domestic raw materials. According to the League of Jewelers, 95% of the Kazakhstani jewelry business is in the shadows, and the state budget annually loses $200 million. 99% of the Kazakh jewelry business is semi-legal. The League of Jewelers gives figures for domestic production in the amount of 2-10%, of which only 1% is legal production.
The turnover of jewelry is actually associated with imports and, as a result, the displacement of domestic manufacturers from the jewelry market, which creates a threat of loss of the jewelry industry in the future.
However, in many countries VAT is not charged on the sale of jewelry. The absence of VAT on the sale of jewelry has led to the successful operation and development of jewelry production in the world even in countries with a complete absence of their own production of precious metals (India, Turkey, Italy, UAE). For the sustainable development of the domestic jewelry industry, a proposal was made to abolish VAT on the sale of jewelry made from precious metals and precious stones.
Press service of AGMP