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Investment Opportunities in Bulgarian Mining and Exploration

Sector Overview

With the expected increase of interest and investment in commodities worldwide, the Bulgarian Mining and Exploration sector is back in the spotlight!

The following very useful and detailed analysis of the sector have been borrowed by Eng. Ivan Andreev at the BULGARIAN CHAMBER OF MINING AND GEOLOGY

MINERAL RAW MATERIAL INDUSTRY IN BULGARIA

Main raw materials that are mined: lignite coal, lead and zinc, copper and polymetal ores, gypsum, limestones, bentonite, kaolin, quartz sands, fire-clays, marbles.

The Bulgarian mining industry forms up to 5% of the country's GDP and provides direct employment to approximately 30,000, and through related industries to about 120,000. A total of 23 million tones of natural resources are registered in the country.

For 2010, the distribution of mining by kinds of natural resources as follows:


TYPE OF DEPOSIT
UNIT
MINED
%
1
Metal
000 t
29231
37
2
Industrial minerals
000 t
9002
11
3
Liquid fuels
000 t
97
0,1
4
Coal and lignite
000 t
29491
37
5
Aggregates
000 cub.m
11660
15
6
Rock-facing materials
000 cub.m
138
0,2

Almost 100% private enterprises operate in the sector, including some foreign ones.
As a result of the global recession, the Bulgarian economy posted also a 5.1% decrease for 2009 and 3.4% for 2010 year-on-year. Mining industry decreased by 18.5 % in 2009, but marked an increase of 6.4% for 2010.
Compared to the preceding 2009, the yield of liquid fuels went up by 60%, of industrial minerals – by 41%, of metal ores by 2% and of solid fuels by 8%. Mining of rock-facing materials and of aggregates went down by 32% and 14%, respectively.

Figure 1. Distribution of Mining of Natural Resources by Groups

In 2009, the total value of the production of the industrial enterprises from the mining industry amounted to 2.5 billion leva, up 20.2% year-on-year.

For 2010, the tendency of significant domination of import compared to export of mineral resources, more than twice, has been preserved, which demonstrates the great unused potential of the sector in favour of the balance of payment in the country.

For the period from 2000 to 2008, the total yield of natural resources increased in a stable way, and in 2008 it reached 102,558,000 tons of natural resources. The enormous drop in 2009 was exclusively due to the drastic decrease of the mining of construction materials and aggregates, and from 37,800,000 tons production in 2008 the orders went down almost three times due to the economic crisis and mining stood in 2009 at a little bit over 13,300,000 tons. The downward tendency remained in 2010 as well – the mining of construction materials and aggregates decreased by further 14 % to 11,660,000 tons.

Figure 2 shows the total yield of natural resources for the Republic Bulgaria. In 2010, a slight increase of production by 6% was marked and reached 79,619,000 tons. Calculated per capita, it stands at 11,000 tons, which is a very indicative index – higher than the level of production in 2009 (10,000 tons per capita); equal to the level of 2000-2004 and lower than the level of 2005-2008 – 12,000 – 13,000 tons.

Disregarding the drop in the past 2009 and the starting recovery in 2010 with this index, Bulgaria falls within the definition of a “mining state” with an indicator above the average on a world scale. The fact that on the European stage Bulgaria ranks third regarding mining of copper and fourth regarding mining of gold could be added in this respect and this shows the leading role of our country in the European mining.

ENERGY RESOURCES

Oil and Natural Gas

An enormous number of geological works for oil and gas deposits prospecting and research have been carried out in the territory of Bulgaria, localized mainly in the territory of North Bulgaria, and in recent years they have also covered part of the Bulgarian aquatory of the Black Sea. As a result, 6 oil and gas-oil deposits, 8 gas deposits and a few deposits of semi-industrial local importance were found.
The main quantities of natural gas for the needs of the users in Bulgaria are from imports, and the only source of supply is the Russian Federation.
The quantity of production of oil in Bulgaria is insignificant. It is carried out by the Oil and Gas Exploration and Production Company in Dolni Dubnik town, privatized in 2004. The company is a concessionaire under 12 concession contracts for the production of oil and/or natural gas in the territory of Bulgaria. The annual output of the developed deposits is about 25,000 tons of crude oil and 6.7 million cu m natural gas, which are completely sold out in the domestic market.
The country's needs of oil are met mainly by imports. Lukoil Neftochim Bourgas AD is the main importer and processor of oil.
The market of oil and oil products of the country is completely liberalized. The biggest oil refinery of the Balkan Peninsula operates on Bulgaria.

Coal Mining

The coal supplies in the Republic of Bulgaria are slightly over 2 billion tons; the relative share of the supplies in operation is 86%. The lignite supplies are predominant in the country – 91%, and the most of the studied deposits have geological and mining and technical conditions that allow open-pit mining.
Under preliminary data for 2011, a total of 35 million tons of coal were mined, including lignite, bituminous and brown coal. During the year 13,300 were employed by the sector.
Six mines, producing brown coal: Bobov Dol, Oranovo, Cherno More (Black Sea), Otkrit Vugledobiv (Open-Pit Coal Mining), Fundamental and Vitren; 4 for producing lignite coal – Maritza East, Chukurovo, Beli Breg, Stanyantsi, as well as one for bituminouls coal – Balkan 2000 – operate in the subsector.
The lignite coal of the Eastern Maritsa basin represents the main local resource. It was formed during the Neozoic Tertiary period. The earliest data about existence of coal in this region were provided by the French researcher Auguste Viquesnel (1847). Twenty two years later, Austrian geologist Ferdinand von Hochstetter gives a description of the coal deposit and makes the second (after Ami Bouι) geological map of Bulgaria as a part of the Turkish Empire.
The state-owned enterprise Maritza East Mines operates in the Eastern Maritsa basin, where it develops three open-pit mines – Troyanovo-1, Troyanovo-North and Troyanovo-3, which supply three thermal power plants for production of electricity and a briquette factory, producing briquettes, with coal and provide resources for the next 50 years.
In 2011, the enterprise produced 32 million tons of lignite coal.
The consumption of coal is mainly for the production of electricity and heat – 97%. After two of the units of Kozloduy Nuclear Plant, providing 35% of the production of electricity in the country, were closed down in 2007 as a precondition for the accession of Bulgaria to the European Union, the big thermal power plants using coal dominate in the structure of production of electricity (55% in 2009).
The short transition period under Directive 2001/80/EC dated October 23 2001 on the requirements for limitation of emissions of certain pollutants into the air from large combustion plants creates uncertainty regarding the future of the Bulgarian energy sector and the coal mining in the country as well as a real threat for loss of hundreds of thousands of jobs.

MINING OF METAL RESOURCES

Stocks and resources of about 245 metal resources have been found through own geological and research works in the territory of Bulgaria, namely: iron ores – 19, manganese ores – 6, chrome ores – 3, wolframs – 1, molybdenum ores – 2, lead and zinc ores – 109, copper ores – 33, gold ores – 18, gold bearing placers – 3, silver ores – 3, uranium ores – 45, pyrites – 3.

The found and studies deposits of uranium are of different genetic type. It had been mined between 1939 and 1995. Over 70% of the existing stocks are in deposits, suitable for extraction under the drilling method.

In 2010, 27 million tons of copper ores and their concentrates as well as 614,000 tons of lead, zinc and tin ores and their concentrates were produced, a year-on-year increase of 1% and 21%, respectively. A total of 6,263 were employed in the sector.
Currently, copper ores are mined by 3 companies – by Assarel-Medet and Elatsite-Med by an open-pit method, and by Chelopech Mining by an underground method. Lead and zinc ores are mined underground by 4 mining companies – Rudmetal, Gorubso-Zlatograd, Gorubso-Luki and Gorubso-Madan.

Assarel-Medet AD Mining and Processing Complex is an open-pit mining and copper ore-dressing company providing an average annual of over 50% of the national production of the essential for the human development metal. Its history dates back from the official opening of Medet Mining and Processing Complex on December 24, 1964. The company received the first for the country concession for mining of subsoil resources on December 23, 1998 and represents the first privatization in the mining sector from June 15, 1999.
Assarel-Medet AD produces and offers copper concentrates, cementation and cathode copper for the country and abroad.
It extracts traditionally the biggest volume of mine mass in the Bulgarian mining and processes about 13 million tons copper ore annually.
The hydrothermal copper deposit Assarel is of copper porphyry type and it is located 12 km away from the Medet deposit in the ore region of Panagyurishte. It was formed in the late Cretaceous period and the main ore minerals are chalcosine, pyrite, chalcopyrite, bornite and coveline, and the average content of copper is 0.45 %.
The Assarel Mine and the Assarel Ore-Dressing Factory for Production of Copper Concentrate are two of the main production units of the Assarel-Medet AD Mining and Processing Complex. The modern infrastructure of the company includes also a water facility, a workshop for micro-biological leaching of copper, cyclic-flow technology for transport of rock mass, installation for sorption and electrolysis of copper, state-of-the-art refining equipment and administrative and other buildings.
A total of 1,600 are employed by the company and its subsidiaries.
In 2009, the company was distinguished as an Investor in Society by the Bulgarian Forum of Business Leaders and was awarded the Grand-Prix for Socially Responsible Company of the Year of the national competition organized by Pari daily.

Elatsite-Med AD is a private joint stock company with a field of activity of mining and dressing of copper and gold-containing ores.
The company employs a total of 1,834. Elatsite-Med AD is among the big tax-payers and one of the biggest investors and concessionaires in Bulgaria.
The company is located at about 70 km to the East of Sofia and comprises two main units: an open pit in Etropole and an ore-dressing complex near the village of Mirkovo. Elatsite Mine is one of the biggest open-pit mines in Bulgaria and the biggest local producer of copper-gold concentrate. The ore mining started in 1983. The mine is planned to be exploited until 2021.
Mined ore is transported for milling, flotation and drying to the filter section on a unique rubber-transport underground conveyor under the ridge of Stara planina Mountain, of a length of almost 7 km.

In 2009, Elatsite-Med posted a year-on-year increase of the total volume of production of 8.83%. In 2010, the Company was distinguished by the InvestBulgaria Agency with the award Investor of the Year -2009 for its investment in Design and Construction of Coarse Crushing Unit No 3 and Optimization of Ore Transportation at Elatsite Ore Complex, implemented in the period of 2008 – 2009.

Chelopech Mining EAD is a subsidiary of Dundee Precious Metals Inc. The activity of the company is extraction and processing of copper-gold ore from the Chelopech deposit and the production of copper/gold concentrate.
Chelopech is one of the biggest copper and gold deposits in Europe. It is located West of Chelopech village, in the Northern part of the Zlatitza valley at the foot of the Balkan Range. The deposit comprises a number of discrete ore bodies within an andesitic to dacitic volcanic complex of hostrocks on the Northern side of a North-Easterly trending jog in the regional, East-West trending Balkan fault. The hostrocks in turn comprise a portion of an Upper Cretaceous magmatic and sedimentary assemblage preserved within a North to East trending graben. Basement rocks exposed to the South and East of Chelopech include Precabrian granitoid gneisses, two-mica schists, quartzites and amphipolites.
Content of gold in mined ore is on the average about 2.5 g/t, of copper – 1%, and the cfntent of silver is over 6.5 g/t.
Geological studies in the region of the deposit date back from 1840. Operation of the deposit starts at the end of the 50s of XX century.
On September 30, 2003, Dundee Precious Metals Inc. concluded successfully the transaction of acquisition of the Bulgarian assets from their previous owner. In the 2004 – 2009 period, the value of the invested funds exceeded 300 million leva. The investments planned for the next two years stand at over 170 million leva and are intended mainly for the expansion of the capacity of the mine and ore-dressing factory up to 2 million tons per year.
Chelopech Mining is among the biggest employers of the country. Over 900 are employed by the company.
The processing of the produced quantities of concentrate is taken over by the Tsumeb smelter located in Namibia, Africa, which was acquired by Dundee Precious Metals Inc. in the beginning of 2010.
Gorubso-Kurdjali AD mines about 70,000 tons of polymetal ores, containing gold, from the Chala mine.

Mining of Industrial Minerals, Rock-Facing Supplies and Raw Materials for Construction

Industrial deposits of 55 minerals and rocks for industrial production are registered in Bulgaria. Most important for the country are the deposits of rock-salt, kaolin-containing sands, quartz sands, barite, gypsum and limestones for the production of faience. An essential share belongs also to the clay deposits (fireproof, bentonite and ordinary ones), dolomites, limestones for the chemical industry, quartzite, perlite, fluorite. Prospecting for vermiculite, graphite and others has been carried out in the recent years.
In 2010, the subsector produced 9 mln. tons. Last year the subsector employed 5,500.
Leading companies in the sector of industrial minerals mining are Kaolin AD and S & B Industrial Minerals.
Kaolin AD was founded in the 1920s in the city of Varna and has established traditions in the production of industrial minerals. Currently, the company is the biggest producer of industrial minerals in Bulgaria and is among the leading companies in the sector for Central and Eastern Europe. The Kaolin Group includes a number of subsidiaries operating more than 30 mines and 10 factories for processing of industrial minerals in Bulgaria, Serbia, Romania and the Ukraine. The Company operates deposits in the region of Vetovo, Kaolinovo, Ignatievo, Dimitrovgrad and Topolovgrad. Kaolin AD is traded on the Bulgarian Stock Exchange since May 21, 2007 and is already part of the SOFIX main stock exchange index.
S & B Industrial Minerals AD (Bentonite AD), Kurdjali, is part of the economic group S&B Industrial Minerals SA, based in Athens, Greece. The company has a long tradition in mining and processing of non-ore subsoil resources. The Company's activities are in two main areas: mining of mineral resources and their processing.

The sector of mining of rock facing materials and the production of raw materials for construction is undergoing significant changes in recent years and mainly small and medium-sized enterprises operate in it. Because of the drastic drop in the construction industry due to the economic crisis, the production of these enterprises went down by 50% on the average in 2009 and about 30% in 2010.
According to the Updated List of Registered Deposits of Subsoil Resources by 01.01.2011, 51 deposits of rock-facing materials and 151 deposits of construction materials are registered on the territory of the country and they include raw materials for the production of cement and lime, for rough structural clay products, sand and gravel for concrete, rock for facing and crushed stone, clay for stoneware products and others.
The enterprises operating in the field of rock facing materials carry out activities in two main directions: mining and processing of rock facing materials and processing of imported supplies. The presence of Bulgarian raw materials in the production of decorative products is insignificant. Practically Bulgaria is producing currently only decorative limestones, marbles and gneisses. The lack of sufficient production of granites, marbles and others, required to meet the market demand, is compensated by imports of rock raw materials and products from China (granite), Turkey (marble, granite), Italy (marble) and others.
The leading enterprises in the sector include: Hemus M – mining and processing of limestones; Ilindentsi Mramor – mining of marble; Koprivlen Mramor – mining of marbles and limestones and Bumar – mining and processing of marbles and limestones.
A total of 317 quarries for construction materials are developed in the territory of the country.
After an analysis of the Ministry of Environment and Water has shown that the issued permits for mining of construction materials are sufficient to cover the needs of the construction industry in Bulgaria, in the beginning of 2010 the Council of Ministers of the Republic of Bulgaria suspended the reception of applications for issuance of permits for exploration of construction materials for a period of two years.
The leading enterprises in the sector of production of construction materials are Holcim Quarry Materials AD, Devnya Cement AD and Balsha Mining Factory EAD.
Holcim is one of the world leaders in the production of cement and aggregates. The company owns four companies in the field of aggregates: Holcim Quarry Materials Sofia AD, Holcim Quarry Materials Rudinata AD, Holcim Quarry Materials Plovdiv AD and Vris OOD. The companies operate a total of 10 sites and offer materials of different application in construction, from concrete and concrete products to asphalts, mortars, etc.
For the recent two years, the annual production of the company's subsidiaries in Bulgaria is as follows: of sand and gravel 2,230,000 tons and of crushed stone – 1,590,000 tons, and a drop of 50% of the production was marked in 2009 and 10% more reduction in 2010.
Devnya Cement AD, jointly with Vulkan Cement AD and Lyulyaka Materials EAD are part of the Italcementi Group, the fifth world's biggest cement producer. Currently Italchimenti Group has invested more than 400 million leva in Bulgaria and as a result was awarded the First Class Investor Certificate in 2007.
The companies of Italcementi Group in Bulgaria offer eleven types of cement, mainly of the Portland type, sulphate-resistant and special cements, as well as hydraulic binders for roads, including white cement, of which it is the only producer in the country.
In general, the companies are concessionaires of 7 operating quarries and of 5 deposits of limestone, marl, sand and clays. The limestone stock and reserves in them amount to a total of over 548 million tonnes, these of marble to 325 million tonnes, of quartz sand to about 32 million tonnes and of clays to over 19 million tonnes.
Currently, Italcementi Group has an annual production capacity of 2.5 million tons in Bulgaria. The Group provides over 500 direct jobs, as well as about 1,500 indirect jobs – subcontractors working in the territory of the plants.

Geology Exploring Sector

As a result of the carried out preliminary and detailed study and evaluation, about 8,000 sites with established deposits, manifestations and indications of different in nature mineral raw materials are known in Bulgaria.

TYPE OF MINERAL RESOURCES
DEPOSITS
(number)
MANIFESTATIONS (number)
INDICATIONS
(number)
SUBTOTAL
(number)
Coal
80
86
76
242
Oil and gas
21
13
64
98
Uranium
66
196
114
376
Metal ores
372
1465
899
2736
Industrial minerals and aggregates
1198
2893
290
4971
Total
1737
4743
1443
7923

Recently, geological explorations are carried out of mineral raw materials non-traditional for the current industrial productions. Explored were deposits of such raw materials such as the Kremikovtsi complex barite-iron deposit, the oolitic Fe-ore sediment deposits in the region of Troyan, the poor Fe and Ti-Fe deposits in hostrocks, as well as the Fe-V schist deposits in Strandja mountain, the deposits of kyanite (dysten) in the Central Rhodopes, the zeolite deposits in the Eastern Rhodopes, the deposites of potassium-alkali rocks (bulgarites) in the Easter part of Sredna Gora mountain, the hydrocarbon deposits, etc.

Development of technological procedures and evaluation of the possibilities for use (in the capacity of “secondary” mineral raw materials) of waste products from the mining and processing activities, such as: treatment of poor oxide ore through chemical-bacterial leaching of materials from the waste banks in the neighbourhood of the mining sites; microbiological treatment of ores and technological waste from the processing for extraction of metals; treatment of metal bearing solutions with ion-exchange resins, etc. has been implemented along with this process.

Bulgaria is a mining country with sustainable mining industry and production indices of 750 – 800 t/km2 of the area and 11 t per capita.

Despite the fact that Bulgarian mine enterprises have been strongly influenced by the world crisis and by the drop of metal prices in 2008 and in the beginning of 2009, we can say that the sector is recovering from the drop and return back to normal in 2011, and expects to have a serious growth in 2012.

However, the main task of the country is the development of policy and strategy for efficient use of natural resources and the removal of the economic growth – deterioration of environment connection. It is necessary to speed up the reforms in interest of the better protection of environment and provision of sustainable development, as well as the development of a complex of policies and measures for the implementation of this goal.

Priorities for 2011 and 2012.

- Preparation of a draft of a National Strategy for Development of the Mineral Resources Industry, jointly with the Ministry of Economy, Energy and Tourism;

- Preparation of a draft for the second stage of amendments to the Subsoil Resources Act after the first amendment of the Act in 2010 as a result of the active involvement of the Bulgarian Chamber of Mining and Geology in 2010 and a body for management of the subsoil resources was constituted;

- Establishment of a Standard and Code for Sustainable Development of the Mining Industry in the country;

- Arrangement and organization of the second International Business Conference on Sustainable Development of Mineral and Raw Material Industry in Central and Eastern Europe and the International Mining Exhibition INTERMINE EXPO 2012 within the framework of the International Technical Fair 2012.

Eng. Ivan Andreev
Executive Director of BMGK




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