Master Plan Study on Promotion of Mining Industry in Georgia Final Report Contents
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Japan International Cooperation Agency(JICA) No. Steering Committee of Mining Promotion Master Plan Study of Government of Georgia Master Plan Study on Promotion of Mining Industry in Georgia Final Report January 2002 Mitsui Mineral Development Engineering Co., Ltd. MPN JR 03 – 006 Preface In response to a request from the Government of the Georgia Republic, the Government of Japan decided to carry out the Master Plan Study on Promotion of Mining Industry in Georgia. The Japan International Cooperation Agency (JICA) implemented this study. JICA sent a study team led by Mr. Yuji Nishikawa of Mitsui Mineral Development Engineering Co., Ltd. The team was organized by Mitsui Mineral Development Engineering Co., Ltd. and Japan Association for Trade with Russia and Central-Eastern Europe. There were five trips to Georgia from March 2001 to January 2003. The study team held discussions with government officials related to the mining industry and conducted field surveys. After returning to Japan, the study team carried out further studies and compiled the final results in this report. We hope this report will contribute to the promotion of mining industry sector and a more close relationship between both countries. We also express our sincere appreciation to the Government of Georgia and its officials related to the mining industry organizations for their close cooperation throughout the study. January 2003 Takao KAWAKAMI President Japan International Cooperation Agency January 2003 Mr. Takao KAWAKAMI President Japan International Cooperation Agency Tokyo, Japan Letter of Transmittal We are pleased to submit the report of the Master Plan Study on Promotion of Mining Industry in the Georgia to you. This study was conducted by the Mitsui Mineral Development Engineering Co., Ltd. with the Japan Association for Trade with Russia and Central-Eastern Europe, under a contract with JICA, during the period from March 2001 to January 2003. This report was compiled and summarized the promotion and improvement measures for the basement area of the mining industry and production area through the recent condition analysis and results of the pre-feasibility study for the mining promotion in Georgia. Improvement and promotion measures are positioned in the promotion Master Plan toward the recovery and growth of the economy by the mining industry promotion. We hope that the Georgia government realizes this Master Plan as the highest priority subject based on the necessity of the development of society and economy for the whole country of Georgia by pulling out of the stagnation of the mining industry in the transition to a free economy and by the recovery of productivity, promotion of investment and introduction of foreign capital. We would like to express our sincere gratitude to the officials of JICA, Ministry of Foreign Affairs and Ministry of Economy, Trade and Industry for their support and guidance in carrying out this project. We are grateful to the officials in the Steering Committee and Working Team for this study in Georgia, JICA U.K. Office and Embassy of Japan in Azerbaijan for their cooperation and assistance throughout our field survey. Yuji NISHIKAWA Leader Master Plan Study on Mining Industry In Georgia ii iii President iv Minister of Economy, Industry and Trade of Georgia v Master Plan Study on Promotion of Mining Industry in Georgia Final Report Contents Chapter 1 Purpose and Background of Survey 1 1-1 Background of Survey 1 1-2 Purpose and of Survey 1 1-3 Target of Survey 2 (1) Target Area of Survey 2 (2) Target Metal Type 2 (3) Target Mine and Combinat 2 1-4 Method of Survey 2 1-5 Implementation of Site Survey 4 (1) Implementation Schedule of Survey 4 (2) Members of Mission 4 (3) Minutes with Georgia Side 4 (4) Holding of Seminar 5 (5) Contract Work 6 (6) Steering Committee and Working Group Members 7 Chapter 2 Present Conditions of Mining Industry 9 1. Grasping the Present Conditions of Mining Industry 9 2. Present Condition of Economy 12 2-1 Condition of Economy 12 2-2 Government Budget 15 2-3 Economic Policy 17 2-4 Privatization 19 2-5 Conditions of the Mining Industry 20 2-6 Mining Policy 21 2-7 Position of Mining Industry in the Macroeconomy 22 2-8 Condition of Mining Industry of Neighboring Countries 23 3. Basement Areas 24 3-1 Mining Administration and Organizations of the Mining Industry 24 3-2 Law & Tax System 27 (1) Underground Mining Code 27 (2) Foreign Investment Law 29 (3) Tax System 30 3-3 Approval & Permission, Laws & Regulations 32 (1) Passport of Exploration 32 (2) Development Passport 32 i (3) Mining Preservation and Safety Regulations 33 (4) Regulation of Ore Reserves Calculation & Procedure of Approval 33 3-4 Information Management of Mineral Resources 33 3-5 Privatizations of Enterprises Related to the Mining Industry 34 3-6 Accounting System 35 3-7 Infrastructure 36 (1) Recent Condition of Infrastructure 36 (2) Traffic and Transportation 37 (3) Recent Condition and Subject of Electricity 38 (4) Recent Condition of Communications 38 (5) Recent Condition of International Support 39 (6) Problem and Subject on Resources and Development 40 (7) Personnel Training 41 4 Present Situation of Exploration Works 42 4-1 Organization of Geological Exploration 42 4-2 Exploration Method and Evaluation of Ore Deposits 45 4-3 Control System of Geological Information 46 4-4 Problems on Geological Prospecting 46 5. Evaluation of Mineral Potential 47 5-1 Characteristics of Mineral Deposits and Their Distribution 47 5-2 Characteristics of Gold and Silver Deposits and Promising Area 49 5-3 Characteristics of Copper Deposits and Promising Area 50 5-4 Characteristics of Manganese Deposits and Promising Area 51 5-5 Mineral Deposits and Area for Evaluation 51 6. Production Field 55 6-1 Present Situation of Management and Operation (Madneuli mine) 55 6-2 Present Situation on Development 60 6-3 Privatization & Introduction of Foreign Investment 61 6-4 Present Situation on Mining Technology 62 6-5 Recent Condition of Mineral Dressing 63 6-6 Environmental Problems 66 7. Environment 67 7-1 Environmental Administration 67 7-2 Current State of Monitoring 71 7-3 State of Countermeasures and Prevention Activities 74 7-4 Assistance of International Organizations 74 7-5 Recommendations 75 8. Recent Condition of Information Infrastructure related to the Mining Industry 75 8-1 Current State and Remarks 75 ii 8-2 Web Sites 76 Chapter 3 Madneuli Mine Pre-feasibility Study Report 77 1. Objectives 77 2. Method 77 3. Outline 77 4. Present Situation of Mine 78 4-1 Management 78 (1) Situation of Management 78 (2) Production and Sales 80 4-2 Structure 81 4-3 Reserves, Grade and Exploration Activity 82 (1) Ore Reserves (Balance reserves) 82 (2) Minable Ore Reserves 82 (3) Crude Ore 83 (4) Exploration Activity 83 4-4 Production Technology, Management 84 (1) Mining 84 (2) Processing 87 (3) Management Division of Consumable Goods and Materials 89 (4) Transporting and Loading Concentrate 90 (5) Infrastructure 90 (6) Environmental Countermeasure 90 4-5 Administration Division 91 4-6 Selling Conditions of Concentrate 91 4-7 Operating Costs 92 (1) Production Costs 92 (2) Labor Costs 94 (3) Other Costs 94 4-8 Loans Payable 95 4-9 Depreciation and Evaluation of Assets 95 (1) Depreciation 95 (2) Evaluation ofAssets 96 4-10 Tax 96 5. Issues to the Present Situation 98 5-1 Ore Reserves and Grade 98 5-2 Production Field 98 (1) Mining 98 (2) Processing 99 5-3 Indirect Field and Others 100 (1) Indirect Field 100 (2) Environment 100 iii (3) Information 100 (4) Others 101 6. Recommendations, etc. 103 6-1 Promotion of Exploration 103 (1) Area around the Madneuli Mine 103 (2) Targeted Ore Reserve 104 (3) Further Copper resource of Supply and Prospecting Situation 104 6-2 Grade Control 106 (1) Ore Reserve and Grade 106 (2) Crude Ore Grade 106 (3) Consistent Control System from Mining to Processing 107 (4) Examination of Changing the Bench Height 107 6-3 Stripping Countermeasure 108 (1) Re-evaluation of Copper and Gold Grade in Stripping Waste 108 (2) Changing of the Pit Slope Angle 108 (3) Stripping Scheme Based on Intermediate- and Long-term Mining Plan 109 6-4 Production System 110 (1) Establishment of Production Plan and Control System by Using Computers 110 (2) Reduction of Cut-off Grade 112 6-5 Cost Reduction Countermeasure 112 (1) Improving Efficiency by Renewing of Mining Equipment and Facilities 114 (2) Appropriate Arrangement of Personnel 114 (3) Inventory Control System 114 6-6 Development of Market 115 6-7 Tax Reduction Countermeasures 116 6-8 Asset Countermeasures 116 6-9 Privatization 117 (1) Sales of Stock 117 (2) Transfer of Stock 118 6-10 Environmental Countermeasures 119 6-11 Information 120 7. Making Conditions for Cash Flow Analysis 120 7-1 Viewpoint for Analysis 120 7-2 Establishment of Conditions 121 (1) Common Conditions 121 (2) Present case A 123 (3) Case of increasing production B 124 iv 8. Cash Flow Analysis 126 Chapter 4. Promotion Plan for Mining Industry 132 1. Basic Policy for Promotion of Mining Industry 133 1-1 Mining Industry Position for Economic Development 133 1-2 Basic Policy 133 1-3 Guideline for Production 134 2. Master Plan of Mining Promotion 134 2-1 Master Plan (Basic Plan) 134 2-2 View for Measures of Promotion 136 3. Promotion Measures of the Basement Field in the Mining Industry 137 3-1 Mining Policy 137 3-2 Organization System 139 3-3 Law and Tax System 142 3-4 Environmental Management 144 3-5 Accounting System 146 3-6 Privatization 147 3-7 Training Human Resources 150 3-8 Arrangement of Introduction of Stable Foreign Capital 153 3-9 Market Survey 153 4.