"SAKARTVELOS EKONOMIKA"  2006 (10)
  EXPORT POTENTIAL
Georgian mineral deposits in expectation of investments
Nongovernmental organization “The Institute of Free Economy and Business” presents
Tata Toria

Russia’s blockade against Georgia is one of the issues of current importance in the world. Everyone wants to help Georgia, especially in finding of new markets and attraction of investments. However, when we speak to foreign politicians or representatives of business circles we make certain that they idea of Georgia’s natural, mineral or human resources, which will be the target of investments, the subject of doing business in Georgia and realization f the export potential. Georgia should not only find an alternative to the Russian market for the goods falling under the embargo, such as wine, fruit and mineral waters, but also study the commodity anatomy of the export and broaden the component part of its basket.
   Nongovernmental organization “The Institute of Free Economy and Business” continues the discussion on Georgia’s export potential, and at the request of our foreign friends we present you a discussion on Georgia’s resources and the investor’s guide.
   
I n order to find out what reserves of resources Georgia has in accordance with the latest data, we have spoken to a scientist of the Caucasus Institute of Mineral Raw Materials – Mr. Vazha Buadze.
   According to Mr. Buadze’s statement, Georgia’s mineral resource base has broad development prospects. Georgia possesses more than 450 deposits of with more than 70 denominations of minerals. The kinds of minerals in Georgia are represented as follows:
   1. Minerals intended for the development of the fuel-energy sector. These are coals, their assist gas, oil and thermal waters.
   Out of three coal deposits in Georgia (Tkibuli-Shaori, Tkvarcheli, Akhaltsikhe), attention is mainly paid to Tkibuli-Shaori deposit that, according to the volume of recoverable reserves and quality of minerals, represents the base of the development of the coal industry. A big amount of unused remains of coals are located in Tkibuli deposit’s sector, which makes up 8 million tons. The share of coal in them makes up 25-30%. Tkibuli-Shaori deposit has good prospects from the viewpoint of production of coal and assist gas.
   Approximate forecast reserve of thermal waters makes up 250-300 million m3 a year. Currently, out of Georgia’s thermal resources, Tbilisi and Zugdidi deposits are prepared for exploitation best of all.
   25 wells bored at Zugdidi deposit give 30 000 m3/day with temperature of water 85 0-100 0 C.
   2. Minerals for the development of ferrous metallurgy. Here manganese and iron are implied. In Georgia the base of manganese industry is represented by Chiatura deposit. In all the reserves of manganese payable ores make up 210 million tons. As to iron, in the country’s territory there are deposits studied to different extents, which are located in Poladauri, Dzami, Shrosha-Ubisi and on the Black Sea cost.
   3. Minerals for precious metals production industry and development of the non-ferrous metallurgy. Here the matter concerns the prospects of creation of gold resources base and its prospecting, as well as the development of silver, copper, lead, zinc, aluminum, magnesium metallurgy, obtaining of pure arsenic, development of stibium production and other aspects of non-ferrous metallurgy. However, among the priority sectors, the prospects of Georgia’s territory related to prospecting of new gold deposits should be propelled to the forefront. According to the statement of Mr. Buadze, the country’s geological structure is specialized in gold, though Georgia cannot boast of gold reserves as yet. Its industrial reserve makes up 45,5 tons.
   Gold reserves in Bolnisi region are calculated and production of the metal is implemented here on the basis of Kazreti production enterprise. It is Madneuli deposit. In other regions the process of prospecting of the mentioned deposits has not reached the level that would give us hope of finding them.
   According to Mr. Buadze’s statement, the first reason explaining why this problem has not been solved is that Georgia does not have traditions of gold mining, though on the basis of the research works carried out by the Caucasus Institute of Mineral Raw Materials over the past 2-3 years, the new methods of prospecting and forecasting of new gold deposits were worked out. In case of the government’s support, in Georgia, particularly in Zemo Racha, Guria, Ajara region, Samtskhe-Javakheti, Svaneti, Kakheti region on in the whole territory of Kvemo Kartli, except for Marneuli deposit, considerable gold reserves can be discovered and gold mining industry can be created. However, there is an obstacle: the total cycle of geological prospecting works has not been completed, a list of real reserves has not been made. That is why investors does not make up their minds to make investments in gold. He must have real reserves at hand in order to start gold mining without any prospecting.
   According to Mr. Buadze, with the purpose of completing the cycle of calculation of precious non-ferrous metals, it is necessary to allocate 300-400 million USD, and in order to prepare the level of investment attractiveness of mineral deposit units in Georgia it is necessary to allocate 8 million USD from the state budget during the period of 4 years.
   As to copper, Madneuli and Tsitelisopeli copper deposits create a corresponding base on the basis of explored reserves. The reserve of Tsitelsopeli copper deposit makes up 280 thousand tons. On the country’s scale the amount of explored copper reserves makes up 808,310 tons.
   Kvaisi node represents the resource base of lead and zinc deposits. The explored reserves of ores make up 5278000 tons. They contain 83 400 tons of lead, 229 500 tons of zinc and 64,4 tons of silver. Lukhumi deposit represents a resource base for the development of pure arsenic. Stibium reserves in Georgia make up 41,1 thousand tons and are located at Zophiti deposit in Zemo Svanetia.
   5. Minerals of the development of construction industry. Represented here are: trim and building stones, brick and tile clays, inert materials for production of concrete, cement, etc.
   Trim stones are represented at 65 deposits that have been studied to different extents, the total recoverable reserves of which make up 155 308 m3. Out of the mentioned amount, 44 deposits are represented by abyssal rocks (82719 thousand m3), while 21 – by limestone and marble (72589 thousand m3).
   Brick and tile clays are represented by 45 deposits. Here the total reserves of minerals makes up 98,6 million m3. We can mark out Miriani deposit in Kaspi region.
   Noteworthy are the reserves of light concrete stuffers in Georgia, in particular Paravani deposit of high quality perlite, where explored reserves make up 13,5 million tons. Volcanic slag is also referred to light concrete stuffers. Currently 16 deposits are famous for this mineral, the total reserves of it make up 189,9 million m3. This volume will meet the demand of the construction industry for some time.
   Road metal out of natural stone is also referred to the category of concrete stuffers. Its base is created by limestone and sandstone deposits. Currently 14 deposits of this kind are known and their total reserves make up 196 million m3.
   Production of sheet (pane) glass holds an important position in construction industry. Bajity high-silica sand deposit in Sachkhere region represents the raw materials base for the development of sector. The amount of explored reserves makes up 6,5 million tons.
   Cement production in Georgia is represented by functioning of 2 cement plants – in Kaspi and Rustavi. Limestone reserve base of Kaspi cement plant is represented by Kavtiskhevi (363 million tons) and Saskhori (143,6 million tons) deposits, while the reserve base of cement clays is created by Kavtiskhevi and Kaspi deposits (60,7 million tons). Rustavi cement plant is orientated for Dedoplistskaro limestone deposit (39,7 million tons) and Gardabani clay deposit (11,8 million tons).
   Five deposits of gypsum, which is an indispensable component for cement production, are known in Georgia. Their total reserves make up 16,4 million tons.
   The new field – petrurgy is referred to the construction sphere. Basalt melting sphere intended for production of basalt glass and fiber, as well as production of oil, gas and water pipelines out of melted basalt. Kvemo Kartli and Samtskhe-Javakheti regions are distinguished by their basalt deposits.
   6. Raw materials for glass production. Georgia has a big amount of reserves in this sphere, particularly in Bolnisi region.
   Noteworthy are the reserves necessary for ceramics production. Their raw materials base is represented by: tractites (Tsikhesubani deposit in Guria region), porcelain stone (Bektakari and Bolnisi deposits in Kvemo Kartli region), pegmatites (Srosha deposit in Imereti region), granites (in Imereti and Shida Kartli regions).
   Georgia has made a serious claim for the development of chemical industry. Formation of a new chemical industry’s center on the basis of Litophony factory (Kutaisi) has good prospects.
   Such chemical raw materials as bentonite clays, zeolites, perlites, etc are also produced in the country. Gumbara and Kumistavi deposits in Imerety, Askana, Mtispira and Vaniskedi deposits in Guria, Kakabeti deposit in Kakheti are well known.
   We have a significant base for the development of barite production (Danit-Gareji and Madneuli deposits of barite in Kvemo Kartli, Khaisi deposit in Samegrelo, Chordi deposit in Racha-Leckhum-Svaneti, Mekveni and Rtskhilati deposites in Imereti); we have raw materials for the development of food industry, such as diatomites (represented by Kisatibi deposit in Samtskhe-Javakheti), the recoverable reserves of which exceed 8 million tons, perlites (Paravani deposit, at which 12 thousand tons of the raw material is annually produced), limestones (the approapriate raw material base is created by Brili deposit in Shida Kartli and Dedoplistskaro deposit in Kvemo Kartli), etc.
   Water industry is developed in Georgia: fresh drinking, mineral and therapeutic waters.
   The total amount of underground fresh drinking waters exceeds 50 million m3 a day, 60 % of which falls on western Georgia, and 36% - on eastern Georgia.
   There are up to 2000 natural springs and artificial wells of mineral waters.
   A lot of minerals are produced for the development of agriculture, i.e. the ones intended for land improvement , such as limestone, gypsum, brown coal and many others.
   Semi-precious and jewellery precious stones are produced in the territory of Georgia. However, for the time being, our resource base is not distinguished by the abundance of these minerals. The following minerals draw attention: jasper, opal, rock crystal, garnet, agate, perlite.
   In general, the mineral resource base in Georgia is like this, but in order to explore it and maximally use the reserves, financial assistance of the state and correct planning of the investment policy is necessary. The latter represents a most important factor for the country’s social-economic development.
   It is interesting what concrete steps the state is taking in this direction and what novelties we should expect in the near future. With the purpose of receiving information on these issues, we have spoken to the Head of the Sustainable Development Service of the Ministry of Environment and Natural Resources Protection – Mr. Zviad Cheishvili.
   According to Mr. Cheishvili’s statement, the ministry is implementing serious arrangements aimed at promotion of nature management. The reform in this sphere started in the last year’s August. The following steps have been taken: the Space Information Center was set up in Georgia’s Geological Service, and under its direct management the information on the reserves of the country’s mineral resources was collected and placed on the ministry’s web site.
   Noteworthy is the fact that the new Law on Licensing was adopted on the initiative of the Ministry of Environment and Natural Resources Protection. It introduces a new type of licenses – operating license. Before the adoption of the mentioned law issue of the operating license took place in a competition form, which was a source of corruption in conditions of weak administration and overblown bureaucracy. The procedures related to acquisition of the license were complicated, which, of course, made a lot of obstacles and, at the same time, required much time. As you know, time is money in the economy, and the longer the procedure is dragged out, the slower the economy is developing. That is why these requirements were cancelled and the auction was introduced. A positive side of the reform is that a license issued according to this form has become tradable. In other words, in accordance with the current legislation, a license acquired for production of natural resources can be divided into parts, i.e. one part can be sold, another can be leased, mortgaged, etc by the holder. In fact, the license has acquired the function of a security. It is very important for the economy, since it gives economic agents an incentive to put licenses into circulation.
   Now, as to license holders’ obligations to the state. There is a number of technical regulations and requirements. In other words, they are obliged not to spoil the mineral, for use of which they will acquire a license and not to endanger or inflict damage to the society. As for the rest, it is up to the holder what to do and how. At the same time, it should be pointed out that there is Environmental Protection Inspection – control authority that checks the license holder’s activities once a year. In the event that he does not fulfill his obligations, the state will terminate the contract. In accordance with the new draft law on minerals, along with the right to sell the license, in case of complete observance of the terms, the license holder will be given the right of automatic prolongation of the license for the period indicated in the license contract. As Mr. Cheishvili has pointed out, minerals are divided into 2 two groups – exhaustable and renewable ones. Automatic prolongation of terms concerns renewable minerals. As to the exhaustable ones, the license term will be prolonged for the person in the event that did not manage to extract the reserves of the resources indicated in the same contract if, of course, there was no serious violations on his part.
   The fact that selling of land is planned along with the right to use minerals is a significant novelty. It is clearly implied in it that in accordance with the norm introduced in the law, the user of minerals is obliged to carry out restoration of the land (i.e. to render the initial state to it) after the end of the utilization period. If we do not take into account some exceptions, in reality this requirement was not fulfilled by license holders. For this reason, it is planned to put up for auction the land, on which the deposit is located. In other words, the land will pass into private ownership. What motivation does the ministry make by taking this step? The person that will possess the land will improve and try to use it, which, in Mr. Cheishvili’s opinion, is a significant motivation. According to his statement, the prospects of passing of minerals into private ownership are becoming increasingly real.
   The Ministry of Environment and Natural Resources Protection is taking concrete steps with the purpose of investment attraction. On its own initiative it is preparing a batch of important deposits and is planning to put it up for auction at the end of November 2006. At the same time, the electronic version in the Georgian and English languages is being worked out with the purpose of awaking interest of international organizations, embassies, local establishments and attraction of investments.
   By the example of the aforementioned resources it can be said that the arrangements aimed at exploration and use of minerals in the country have been started and there is a rather significant base for that. However, a number of problems should be still solved and purposeful work on the part of both geological services and institutes and the state is necessary for that purpose. Their eradication and the sector’s development is an integral part of the general policy of the country’s economic development.
   


Publisher: THE INSTITUTE OF FREE ECONOMY and: CHAMBER OF COMMERCE AND INDUSTRY OF GEORGIA