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Notable Developments in the Balkan Mining Sector: 2020 Year-Ahead

By Chris Deliso

February 16, 2020

Heading into 2020, several promising mining projects are enhancing the visibility of the Balkan region. Historically an area known for its mineral resources, the Balkans is now attracting more interest from foreign investors and preparing for new rounds of exploration and, in some cases, proceeding with major new production facilities, making 2020 a historic year for mining in the Balkans.

The following are just a few notable examples of major projects from in-place and newly arrived investors in the region. They indicate both the wide geographical interest from outside investors, and the sorts of modernization that companies are utilizing to stay in line with EU and national regulatory standards. Even if the region is still primarily not in the EU, the issue of environmental compliance always weighs heavily in the decision-making of mining companies considering that most regional countries are EU candidates, and thus must follow recommended reforms and best practices as laid out by Brussels.

2020: Notable Industry and Scientific Events

Readers interested in the general topic may note also that several events will occur in the region throughout 2020. Before discussing notable mining activity, we will take a moment to go through these now.

The first notable event, taking place in Brussels on 13 February, was MINPOL Chief Executive Officer Irina Sokolova’s presentation before EU officials regarding Critical Raw Material (CRM) in European policy. Sokolova presented the latest report of the 30-month SCREEN project in which the growing importance of the Balkans was noted, before a senior-level European Commission audience, in the context of creating a smoother value chain for mining in countries that belong to the EU core and periphery- not only the Balkans but also Ukraine and even Greenland. According to the EU list in 2017, there are 27 critical raw materials to be considered, and the work done by SCREEN experts helps EU decision-makers decide on policy for raw materials security- an obvious economic and security issue for the bloc.

Although it’s not held in the Balkans, the PDAC 2020 convention in Toronto from 1-4 March is notable for its size and due to the fact that many Balkan mining companies have Canadian headquarters or cooperation. Thus some information about upcoming mining trends in the Balkans is sure to be gleaned at an event at which several Balkan-oriented mining companies will exhibit. PDAC describes itself as “the leading convention for people, companies and organizations in, or connected with, mineral exploration,” and attracts over 1,100 exhibitors, 2,500 investors and 25,800 attendees from 132 countries.

As for events in the Balkans itself, the year starts with a 5-6 March training in Skopje, held by Datamine. This leading provider of mining software technology and services offers technological tools required to plan, manage and optimize mining operations. According to the company, “our solutions span the entire value chain across exploration geology, geostatistics, resource modelling, mine planning and operations management.” Three days after the Skopje event, the company will host a similar training in Sofia.

The first major regional mining event will occur in late May, with the European Mining Business Forum, organized by the Bulgarian Chamber of Mining and Geology. The Forum, which will be held in Sofia, will focus on “topical issues such as contemporary policies and strategies for the sector, medium, conditions and trends for development of the mining business in Bulgaria and Europe,” according to the event website. Simultaneously, EMBF 2020 will provide “the opportunity for presentation of the latest technological solutions and innovations in the sector, sharing good practices and successful examples for business development.”

The full list of co-organizers of the Sofia event includes the Bulgarian Chamber of Mining and Geology, Bulgarian Ministry of Energy, St. Ivan Rilski University of Mining and Geology, Brussels-based industry lobby group Euromines, Confederation of Employers and Industrialists in Bulgaria (CEIB), Scientific and technical union of mining, geology and metallurgy, and the United Nations Global Compact Bulgarian Network.

Secondly, June 2020 will see the 8th Balkan Mining Congress, set to mark 60 years since the founding of the Belgrade Mining Institute. In late August, Belgrade will also host the NSG2020 Conference, of interest to the emerging technology side of the industry. Also known as the 26th European Meeting of Environmental and Engineering Geophysics, the event is comprised of two parts: the 4th Applied Shallow Marine Geophysics Conference and the 3rd Conference on Geophysics for Mineral Exploration & Mining. According to organizers, this “innovative combination” allows NSG2020 to “provide insight into emerging geophysical techniques for mineral exploration and discuss the state-of-the-art in characterizing the shallow subsurface in aquatic settings.”

A third Belgrade event, beginning on 5 November, is the 9th International Conference on Mineral Resources in the Republic of Serbia. This is a major event put on by the Ministry of Mining and held under the auspices of the British, Canadian, Australian and Swedish embassies in Belgrade, among others. Event sponsors include the largest mining and mining-related companies with a presence in the country.

According to its official website, the event will “will address all important issues of the Mining Sector and will focus on the significant contribution of the Mineral Resources to the development of the Serbian economy and Region.” With presentations from senior local, regional and international mining business leaders, as well as government officials, the conference will also provide current professional perspectives on sustainable mining, female leadership in mining, best international practices, local impact assessment and more. Finally, “the aim of this conference is to connect mining sector investors and experts with all relevant governmental, financial and social stakeholders.”

With this list of events having been cited, we can now turn to discuss some of the major mining moves to take place in Serbia, Macedonia and Bulgaria since 2019, going forward into 2020.

Dundee Precious Metals Starts New Gold Interests and Continues with Copper in Bulgaria

On 30 August 2019, Novinite reported that Canada’s Dundee Precious Metals had received “the final operating permits for its Ada Tepe gold mine” near Krumovgrad in eastern Bulgaria. The website quoted Dundee’s president, Rick Howes as saying that the new project was “expected to deliver significant growth for the company going forward.” Previously known as Krumovgrad, the Ada Tepe open-pit facility has an anticipated 8 years of mine life, in which it is expected to produce “85,000 ounces at a US$404/oz cash cost, according to a NI 43-101 technical report filed on November 2017,” Novinite reported.

Achieving commercial production here will also establish Dundee as “a mid-tier gold producer,” the report adds, with a targeted annual production of 350,000 gold equivalent ounces.

Dundee’s other Bulgarian mine, the primarily copper-producing Chelopech mine in western Bulgaria, is located 70km east of Sofia. While it produces some gold and silver, this 19th-century mine refurbished in the 1950s under communist rule was later privatized. In 2016, Chelopech won Mining Magazine’s ‘mine of the month’ distinction for its use of new technology.

In the second quarter of 2019, it produced 9.1 million pounds of copper, fitting estimates. However, while Bulgaria’s MDK-Pirdop copper smelter is a regional fixture for smelting copper from Macedonia and Bulgaria, in 19990 the post-communist government declared that Chelopech’s copper concentrate could no longer go there due to high arsenic content. For three years it was closed before being reopened by a Bulgarian-Irish company and, in 1999, the Bulgarian state entity Chelopech EAD. After a subsequent privatization, the new company Navan Chelopech took over but was soon out in bankruptcy. Dundee came into the picture in 2003 by purchasing the Irish firm’s assets in Bulgaria, renaming the local project Chelopech Mining EAD.

Dundee succeeded in “transforming the ore’s arsenic to an environmentally stable form that could be disposed of at a tailings management facility (TMF),” the Mining Magazine reported continued. Nevertheless, despite these environmentally-friendly efforts, a Bulgarian court intervened to block the project and Dundee had to take other measures. Thus in 2010 it acquired the Tsumeb smelter in Namibia, which now handles the duties of smelting Chelopech’s copper.

Heavy investment in the mine and production facilities in recent years have allowed Dundee to achieve optimization goals in water reuse and electricity-use reduction. From 2003-2016, Dundee “invested close to 90% of its profits to transform the mine from an undercapitalised operation into a modern and viable one that meets international standards for worker safety, environmental protection and sustainable development,” the magazine quoted company vice-president Iliya Garkov as saying.

Velocity Minerals- Bulgaria’s Next Open-Pit Gold Mine at Rozino

Another important player in Bulgaria is Vancouver-based Velocity minerals. This company holds the license for the next open-pit gold mine in the country, known as the Rozino project. Describing itself as “a gold exploration and development company focused on eastern Europe,” Velocity states that its “management and board includes mining industry professionals with over 100 years of combined experience spanning Europe, Asia, and the Americas as employees of major mining companies as well as founders and senior executives of junior to mid-tier public companies.  The teams’ experience includes all aspects of mineral exploration, resource definition, feasibility, finance, mine construction and mine operation as well as a track record in managing publicly listed companies and bringing real value to shareholders.’’

In September 2018, Velocity completed a Preliminary Economic Assessment (PEA), thereby earning a 70% interest in the Rozino project. “The PEA provides a base case assessment of developing Rozino by open pit mining and on-site crushing, milling and simple flotation to produce a 30 g/t gold concentrate,” according to Velocity. “The concentrate would then be trucked 85km on existing roads to the currently operating carbon-in-leach (CIL) plant where saleable gold doré would be produced. The planned work program will advance PEA-level Rozino to prefeasability. The program will focus on drilling, optimization of PEA assumptions, and environmental monitoring and baseline assessment.”

Located in southeastern Bulgaria, Rozino is the most advanced of Velocity’s four gold projects in the country, according to TheNorthernMiner.com. Recent exploration results from 40 drill holes at the Rozino site “confirmed the presence of low-grade gold,” reported Mining Journal on 25 November 2019. The latter report noted that these results mean Velocity is confident it can extract gold “at relatively little cost,” and that it will complete a pre-feasibility study by the second quarter of 2020.

In addition to the Rozino site itself, Velocity has three prospective areas in the immediate vicinity (within 6km of Rozino itself), and they have been screened by large-scale soil and stream sediment. According to a 5 December 2019 press release, Velocity categorizes these targets “as having potential to share common infrastructure with the Rozino deposit if a significant discovery were to be made. As potential add-ons, these targets have been prioritized for regional geochemical screening. Results of the regional surveys are pending.”

Therefore, depending on the results of the analysis of the three peripheral sites, the Rozino deposit may turn out to be cumulatively more substantial.

Geotechmin Subsidiary Awarded for Success while Reaching New Deals in Bulgaria

In December 2019, Ellatzite-Med (the mining subsidiary of Bulgarian mining, construction and real estate giant Fotechmin) was awarded by ICAP Bulgaria, a major consulting firm, for its leadership and innovation. According to a press release, Ellatzite-Med “ranks 40th among the top employers in Bulgaria with 1,873 employees. It achieved employment growth rate of 2.5% in 2018 compared to 2017. Most of the company’s workers and office personnel are local residents. The stable credit rating is another major advantage indicating good prospects for the company.” Ellatzite-Med AD is currently among Bulgaria’s largest copper mining companies, operating the open-pit Ellatzite site near Etropole (80 km east of Sofia in the Stara Planina region). From the mine site, minerals are transported away from Etropole to the Flotation Complex in Mirkovo village, via a 6.5km underground conveyor belt.

This distinction came two months after Hexagon, a global leader in sensor, software and autonomous solutions, announced it had signed a five-year technology partnership agreement with Ellatzite-Med. According to Mining Engineering, “the seven-figure deal will supply the company with HxGN MinePlan software and services.” Describing the technological upgrade as part of the company’s long-term plan, M.Eng. Ivaylo Nikolov, director of Ellatzite Mine Complex stated that “modernization and investment for the digitalization process of the mine complex are one of our top priorities. The integration of Hexagon’s software MinePlan 3D is yet another step towards the development of the mine complex into an upscale technology company.”

In the bigger picture, the Hexagon deal is just the latest development in a general mine modernization and sophistication program started in 2016. So far, it has borne significant results for the company. “The implementation of MinePlan3D has increased labor productivity by providing multivariance in the choice of strategy and development of mining operations, finding the optimal final pit design, a prospective design, and optimization of the intermediate pit designs,” notes Geotechmin. “Furthermore, using this software has helped to improve staff qualification and the engineers’ analytical and spatial expertise.”

Solway- Opening Macedonia’s First Major Mine in Four Decades at Borov Dol

Similar investments in new technology and efficiency are marking the notable mining developments in neighboring Macedonia. Near Radovis in eastern Macedonia, Solway Investment Group (operator since 2005 of the Bucim copper minine) has been conducting extensive work over recent months to prepare for the opening of Borov Dol, a mine-extension project set to replace Bucim, which is winding down its project life after four decades. Swiss-based Solway Investment Group acquired the Bucim copper mine in 2005 through a government tender, Borov Dol will begin operations in September 2020.

While Macedonia is an ancient mining land, project backers note that Borov Dol is the only newly developed ore body developed in the past 40 years in the country. It will continue the nearly-exhausted Bucim mine, thus preserving most of the jobs that have made it a major local employer in the region over the years.

According to a press release of 13 December 2019, development work has been funded by local Komercijalna Banka AD Skopje’s EUR 5.5 million loan. This financing has allowed “construction of the conveyor belt, development of primary crushing equipment, and removal of the overburden.” (The total project cost of EUR60 million).

Borov Dol’s life expectancy is currently estimated by Solway at 10 years or more, and it is expected to produce 4.5 million tonnes of copper ore annually.

The Borov Dol project will replace Bucim mine, which began work in 1979 in the last decade of Tito’s Yugoslavia. According to the official press release, Borov Dol construction and operational plans “have been developed to ensure a minimal environmental impact on the neighboring regions, and for the mutual benefit of the employees, investors and residents of the Konche, Radovish and Shtip municipalities.”

To minimize potential environmental impact, for example, project engineers used a infrastructure development plan that uses most of Bucim’s current processing and storage facilities, “while transporting the extracted ore via a 7 km long covered conveyer belt. This modern engineering solution for ore delivery controls the spread of dust and reduces air pollution to a minimum. This new project preserves the jobs of most of the employees currently engaged in Bucim’s operations, and also creates new opportunities for the residents of Konche, where most of the Borov Dol mine concession is located,” the press release added.

“Our goal is to establish sustainable development at Borov Dol, with a focus on environmental, social and safety standards, thereby contributing to the positive development of mining in the region,” Pavel Krivinsky, General Manager of Borov Dol was quoted as saying.

Since arriving in Macedonia in 2005, Solway has also invested over US $2.8 million in “the development of civil infrastructure and environmental protection in the Macedonian towns neighboring the Bucim mine,” according to its website. “We have upgraded local athletic, cultural, and educational facilities, purchased medical equipment for local hospitals, constructed municipal roads and improved other local infrastructure. Solway has also introduced a closed loop and environmental management control systems.”

Tethyan Resources Announces Find in Serbia

In October 2019, Canada-based Tethyan Resources announced a new discovery in its Kremice project in southwest Serbia, a site 10 km north of the Rudnica copper-gold project. The October discovery of “an outcropping gold porphyry system on the western side of the Kremice project” was noted by Tethyan CEO Fabian Baker, who commented that “the discovery of gold porphyry mineralization at Kremice West is an exciting development for Tethyan and provides us with a high-quality exploration target.”

The outcrop of porphyry stockwork veining and potassic alteration was identified as geologists had expected from prior modeling, Baker continued, which gives Tethyan “additional confidence in targeting the core of the system.”

Rio Tinto’s $200mn Gamble on Serbian Lithium Mining

Also in October 2019, SEENews reported that British-Australian mining giant Rio Tinto had thus far invested $200 million in exploration at Serbia’s Jadar lithium borate project, and had plans “to make a final investment decision in 2021,” according to the Serbian government. The mining company hopes to capitalize on the increased global appetite for lithium batteries for electric cars.

According to the report, Rio Tinto had by October already drilled about 300 wells and processed over 200 kilometers of core. The Jadar project would require “the development of underground mines and the construction of a plant for the metallurgical and technological processing of concentrates. Expected end products are 99.5%-pure boric acid and lithium carbonate, to be used in the production of lithium batteries, the government said.”

Rio Tinto first discovered the lithium borate deposit in the Jadar River valley in 2004; according to the article, the region is “estimated to contain 10% of the world’s deposits of lithium,” an amount equal to “135.7 million tonnes with a weighted average concentration of 1.86% of lithium oxide.”

A December 2019 report by MiningSee.eu describes the spatial plan offered by the company to the local community of the affected area (near Loznica in western Serbia), which involves railway modernization, reservoirs, landfills and environmental safeguards. The project is expected to employ 700 people, and may commence production by 2023. In a 30 January interview with local subsidiary Rio Sava’s general manager, Marnie Finlayson, Cord Magazine revealed that the corporation is taking elaborate measures to test the mineral – known as Jadarite – as it was declared new to science in 2007, and may have other commercial uses. This attention, and the fact that the whole project is still in a pre-feasibility study process, imply some delays are inevitable, though the company appears optimistic.

Chinese Zijin with Major Copper Move in Serbia

Further to the east, on the rugged border between Serbia and Bulgaria, major new investments in gold and copper are also being made. This time, it’s a Chinese and American partnership set to profit from unexcavated mineral riches.

On 14 January, SEENews reported that China’s Zijin Mining Group “plans to invest $800 million (718.2 million euro) in expansion of its production capacity in Serbia in 2020.” Among China’s biggest gold producers, Zijin seeks to expand the Veliki Krivelj and Majdanpek open-pit mines and to launch an investment to open the Cerovo 2 copper and gold mine in 2020.

The Chinese company seeks to prepare “for the launch of the Borska Reka deposit in the Jama underground mine, which is estimated to contain reserves of nearly 4 million tonnes of copper, 130 tonnes of gold and over 1,000 tonnes of silver,” the report added. Zijin also seeks “to build a new sulphuric acid plant and a new electrolysis plant at the copper mining and smelting complex RTB Bor and start works on the opening of the Cukaru Peki Upper Zone mine of the Timok copper-gold project in Serbia,” the report continued, citing Belgrade media.

The Timok copper and gold deposits have been tipped for years as among Serbia’s most promising major minerals projects; located in eastern Serbia near the border with Bulgaria, this area consists of the Cukaru Peki Upper Zone and Lower Zone. Zijin owns 100% of the Cukaru Peki Upper Zone, and 60.4% of the Cukaru Peki Lower Zone. US-based Freeport McMoran owns the minority share (after a sale in November 2019, when Zijin signed an agreement to acquire Freeport McMoran’s copper and gold assets in Serbia for up to $390 million).

Zijin also is the majority owner of RTB Bor, in which it invested $350 million in December 2018, out of a total expected investment of $1.26 billion “to improve its production operations, open new mines and increase efficiency.”

In November, Reuters had reported that Zijin’s investment “strengthens its foothold in the Balkans.” After having entered Serbia with RTB Bor in 2018, it went on to purchase Nevsun Resources, which also has interests in Serbia, for $1.4 billion earlier in 2019. Zijin achieved the 100% interest in the upper zone through the Nevsun acquisition. Production from the upper zone is expected to begin in 2021, Reuters cited the company as saying.

Also noteworthy is that, according to the deal, Zijin has acquired Freeport’s interests in five exploration licenses near the Bor site, which the company considers “favourable potential for prospecting,” the statement said. As of November, Zijin expected the transaction to be completed no later than February 29, 2020.

Conclusions

Although it is early still to tell whether all of the above-mentioned projects will succeed to the extent envisioned, and when, it is clear that the Balkans are entering a new phase of interest from a more diverse investor base, with registered interest from EU policymakers and national governments becoming more apparent as well.

The mining sector has shown a demonstrated capacity to survive difficult times, whether due to economic vicissitudes or local politics, and the new interest from big global players in controlling critical resources is going to have an impact in this region as well. Finally, the mining sector in the Balkans will continue to see spin-off value in related industries such as specialized high-tech, as new and expanded mines look to capitalize on all the available tools that help mine efficiency, profit maximization, and compliance with environmental and work safety regulations.

 

 

 

 

 

 

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