KAZAKHSTAN: UST-KAMENOGORSK,S EASTERN MINING

UNCLAS SECTION 01 OF 02 ASTANA 002124

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
STATE PLEASE PASS USTDA FOR DAN STEIN

E.O. 12958: N/A
TAGS: ECON EMIN BTIO TNGD KZ
SUBJECT: KAZAKHSTAN: UST-KAMENOGORSK,S EASTERN MINING
INSTITUTE SEEKS ADDITIONAL INTERNATIONAL COOPERATION


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: Poloff met on September 10 in
Ust-Kamenogorsk with the Director of the Eastern Mining
Institute, a largely self-financing research entity that had
been part of a mining conglomerate during the Soviet era. He
discussed specific projects with international partners from
Canada, South America, and Europe. Eastern Mining's Director
believes cooperation with Russia, Japan, and China is most
critical to the Institute's future, but also expressed
interest in expanding cooperation with U.S. enterprises. END
SUMMARY.

OFF THE GOVERNMENT DOLE


3. (SBU) Poloff met on September 10 in Ust-Kamenogorsk with
Eastern Mining Institute Director Nikolay Ushakov, along with
two of his deputy directors, Aleksandr Ananin and Viktor
Shumsky. The Eastern Mining Institute was formerly a
research branch of a large Soviet mining conglomerate which
encompassed mining concern Kazzinc and three other research
institutes. The Institute is now a largely self-financing,
quasi-government entity with 250 employees. According to
Ushakov, direct government funding currently accounts for
only a small percentage of Eastern Mining's budget; the
Institute thus supports itself through the sale of its
research, and from revenue streams from patents and
joint-venture operations.

NOSTALGIA FOR THE SOVIET ERA REMAINS


4. (SBU) Ushakov, who has been with the Institute for 37
years, was clearly nostalgic for the reputation and network
of connections that the Institute had enjoyed during the
Soviet period. He still has a map of the Institute's
Soviet-era campus on his wall, and insisted on showing poloff
which facilities the Institute "lost" after the USSR's
collapse. Ushakov pointed out that the remaining, smaller
facilities were being thoroughly remodeled. (NOTE: While
the Institute's facilities appeared to be adequate, they
paled in comparison with the much more modern administrative
buildings of Ust-Kamenogorsk's Ulba Metallurgical Plant,
reported septel. END NOTE.) Ushakov said that he
nevertheless welcomed the broadening of opportunities for
research that the post-Soviet period provided. He was
bullish about the future, noting that Eastern Mining had
successfully established a large variety of remunerative
international joint ventures.

GLOBALIZATION OPENS UP NEW HORIZONS


5. (SBU) Ushakov reminded poloff that Kazakhstan has
particularly rich deposits of aluminum, cadmium, gold, lead,
nickel, and zinc. Eastern Mining has been at the forefront
of research in extraction techniques for these metals, for
instance, in developing a technology for treating low-grade
zinc. Ushakov said that Eastern Mining is currently working
intensively on hydrometry-related research, and is interested
in U.S. experience in this field. He noted that Deputy
Director Shumsky's research has been translated into English.
Deputy Director Ananin mentioned that the institute was
involved in successful projects in Bolivia, Canada, Germany,
and Italy. Ushakov explained that Eastern Mining has also
cooperated with Kyrgyzstan on gold-extraction projects.

LOOKING EAST TOWARD JAPAN ...


6. (SBU) Despite good cooperation with countries throughout

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Europe and the Americas, Ushakov believes that Eastern Mining
Institute's future lies primarily with Russia, Japan, and
China. Ushakov pointed out that many potential Russian
partners had once been part of the same Soviet mining network
as the Institute. "Eastern Mining has a broad network of
contacts with Russian firms and Russian partners pay
attention to us," Ushakov explained. Ushakov also discussed
a very successful pilot program with Japan. The Japanese,
Ushakov related, had come to him with a proposal to cooperate
on a "very specific technical issue," after having discovered
that only two such projects had been carried out successfully
before, one in Peru and the other in Kazakhstan. Ushakov
reported that the project yielded excellent results and
"solid money," although he expressed some disappointment that
it had not been larger. He nevertheless hoped that project
would lead to more cooperation with Japan.

... AS WELL AS CHINA


7. (SBU) Ushakov was particularly enthusiastic about the
prospects for cooperation with China. He explained that
countries such as Canada, Germany, and the United States
already have mature mining industries, and are not as
interested as China is in expanding their mining operations.
Consumption of mineral resources in China is currently much
greater than production. For example, China is one of the
world's largest lead producers, but still needs to import
lead because of high domestic demand. Zinc, which is used
extensively in construction, is another metal in great demand
in China. Ushakov said that last year he had met with
Chinese officials and entrepreneurs who were preparing to
build a new zinc factory. Eastern Mining expects to sign a
cooperative agreement with them by the end of 2008. He noted
that Eastern Mining has previously carried out successful
joint projects with the Chinese University of Mining and
Technology, the China Mining Institute, and the Chinese
mining concern China Metallurgical Group. (NOTE: China
Metallurgical Group was part of a consortium with Jiangxi
Copper that recently won an $808 million tender for
Afghanistan's Aynak copper mine, beating out Kazakhstani
copper giant KazakhMys. END NOTE.)

LOOKING FOR MORE U.S. PARTNERS


8. (SBU) Eastern Mining is also interested in greater
cooperation with the United States. Ushakov mentioned that
representatives of Canada-based Ivanhoe Mines, which is
headed by American billionaire Robert Friedland, had visited
Eastern Mining in conjunction with the development of gold
deposits approximately 80 kilometers from Ust-Kamenogorsk.
Ushakov recounted that on his last trip to the United States,
he had met with representatives of U.S.-based FFE Minerals
and successfully confirmed for them the results of a test
Eastern Mining Institute had conducted. Ushakov said he had
made a presentation on a cutting-edge Eastern Mining project
at an exhibition in Las Vegas, but the presentation failed to
secure any new work. Ushakov lamented that the Institute's
location in Kazakhstan's remote far-eastern corner limits
accessibility for visitors. He complained that U.S. trade
delegations visit Astana and Almaty, but not Ust-Kamenogorsk,
and requested U.S. government assistance in finding
additional American partners interested in cooperating with
Eastern Mining Institute.
HOAGLAND