Turkey: The rising star of the mining industry in the next century ... Big potential with deep drilling. ⢠In-depth ge
Turkey’s Mining Industry
Feb 2014
Disclaimer McKinsey Danışmanlık Hizmetleri Limited Şirketi supported Investment Support and Promotion Agency of Turkey (ISPAT) on the fact base and analysis for this document. The document was prepared within the scope of the Service Procurement Agreement for Strategic Sector Reports signed between ISPAT and McKinsey Danışmanlık Hizmetleri Limited Şirketi. ISPAT gives no assurances or guarantees about the information in the report. The report can not be used without the written permission of ISPAT. Investment Support and Promotion Agency of Turkey
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1
Contents
Investment Support and Promotion Agency of Turkey
▪
Mining overview
▪
Selected Minerals information
▪
Business opportunities
▪
Legislation
2
GLOBAL OUTLOOK OF THE INDUSTRY
After years of stability, the mining industry has experienced fast growth in revenues and profit over the last 10 years and should manage a sustained growth and healthy profitability in the next decade Revenues
Revenues & EBITDA of the global mining industry
EBITDA
US$ billion
Series
2.200
3,6% p.a.
2.000 1.800 1.600 1.400 19,7% p.a.
1.200 1.000 800 600
EBITDA margins are expected to move to levels of ~40% in the Medium to long term versus 48% in 2011
-0,3% p.a.
400 200 0 1990 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 192020 SOURCE: McKinsey Basic Materials Institute – Nov 2011 Investment Support and Promotion Agency of Turkey
3
GLOBAL OUTLOOK OF THE INDUSTRY
Over the next 10 years, the mining industry will accumulate up to US$ 3 trillion in cash after capex – creating FDI opportunities for countries such as Turkey 2012-2022 aggregated figures, US$ billions Royalties at current rates 15,400
700
8,200
600-1,000 Potential increase if royalties double/ triple
6,500
1,400
2,200 2,900
Revenues
Royalties
Operating expenses
EBITDA
Taxes
Capex
Net cash
SOURCE: McKinsey & Company Team analysis Investment Support and Promotion Agency of Turkey
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MINING SECTOR IN TURKEY
Turkey: The rising star of the mining industry in the next century
Major untapped reserves potential
• Strong tectonic and magmatic history led to rich underground reserves • Tethyan-Eurasia Metallogenic belt covers Turkey – high proven potential • Mining wealth untapped: Entire Southeastern region which had no drilling since 80s, offers massive potential due to mineral wealth
• In the other regions, mining has been limited to surface excavations. Big potential with deep drilling
• In-depth geologic research and data for offered by General Directorate Established infrastructure
of Mineral Research & Exploration (MTA)
• Reliable power lines and available underground water resources • World-leading construction sector offers low cost and on-budget field projects
Investor friendly environment
• Favorable tax regime – corporate tax 4-20% • No nationalization threat – All mining companies treated against the law • Ownership (transfer) rights clearly defined and protected by law
• Sophisticated geology requires expertise and model development – Considerations
professional explorers have an edge
SOURCE: McKinsey & Company Team analysis Investment Support and Promotion Agency of Turkey
5
MINING SECTOR IN TURKEY
Important mineral belts of the world
High probability of reserves Mid probability of reserves
Investment Support and Promotion Agency of Turkey
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MINING SECTOR IN TURKEY
Turkey stands as a very promising region for miners and explorers as the least explored portion of Tethyan Metallogenic Belt Tethyan belt is formed as a result of the collision of African, Arabian and Indian plates with Eurasia
Turkey is an important part of the Tethyan-Eurasia Metallogenic Belt within the Alpine-Himalayan orogenic system
• Tethyan belt is one spesific kind of ophiolite
• Underground deposits of Turkey are mainly
extending from the western Mediterranean via the Alps to southeastern Europe, through Turkey, the Lesser Caucasus, Iran, and the Himalayas to China
• •
result of Alphine-Himalayan orogenic system Due to the collision of 3 continents with different geologic and techtonic settings, Turkey presents a variety of mineral deposits Turkey has high likelihood of having porphyry gold and copper deposits such as Kışladağ and Çöpler
• So far, 6.5 kt gold, 80Mt copper reserves proven on Tethyan belt
SOURCE: Gentor resources; MTA General Directorate Of Mineral Research & Exploration; LIPS; Ozcan Yigit – Mineral Deposits of Turkey in Relation to Tethyan Metallogeny Investment Support and Promotion Agency of Turkey
7
MINING SECTOR IN TURKEY
In the last decade, mining in Turkey has grown significantly
Total mining production in Turkey USD Billion +11% p.a. 10.5
10.1
• 11.5 11.8 12.8
•
9.2
8.1
5.7
6.3
2005 06 07 08
09
10
Big untapped regions in Turkey started to attract miners increasingly Miners in Turkey do not go deep in the ground and miss the extreme potential created by Tethyan Belt (avg. depth of mines in Turkey is ~100-150m)
11 12 2013
SOURCE: MTA; Expert interview Investment Support and Promotion Agency of Turkey
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Contents
Investment Support and Promotion Agency of Turkey
▪
Mining overview
▪
Selected Minerals information
▪
Business opportunities
▪
Legislation
9
GOLD
Turkish gold market overview
•
Gold production is one of the few areas of the mining industry where Turkey is present at all steps of the value chain
•
Currently Turkish gold reserves are around 700 tons, which increased from 600 tons over the last 5 years, while MTA alone discovered 45 tons of reserves in 2009. As a result, production grew 40% YoY from 2005 to 2012 and reached 29 tons in 2012 (5 tons in 2005)
•
Based on a pure academic research, probable reserves estimated around 1,700-6,500 tons1 which make up for as high as 1/8th of globally proven reserves. Such claims should be confirmed with further exploration investments
•
Although exploration and production volumes keep growing, Turkey still has not captured its fair share out of global exploration investments
1 ODTU metallurgical engineer Ayhan Erler and MTA’s cooperative study concluded 1,700-6,500 tons of gold potential in 580 different locations in Turkey SOURCE: McKinsey & Company Team analysis; Gold potential in Turkey; Dr. Erler Ayhan (1997) Investment Support and Promotion Agency of Turkey
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GOLD
Trade deficit of unwrought gold has been decreasing due to price increase, yet further savings are possible by increasing production •
• Domestic production in Turkey Tons
Gold imports have been diminishing due to rising prices, curtailing trade deficit since 2008 High import volumes in 2005-2007 period allowed Turkey to increase exports to realize profits as prices were on the rise
30 24
+29%
5
8
10
11
15
•
17
• 2005
06
07
08
09
10
11
2012
•
Gold production in Turkey gained momentum following the legislation change that lifted tax exemption for exporting unrefined gold Domestic production is increasing yet it is still low compared to the volume of gold trade In the long run, increasing production further will cap Turkey’s import figures
SOURCE: Istanbul Gold Exchange; Gold miners association; ISPAT(Investment Support and Promotion Agency of Turkey); Expert interviews Investment Support and Promotion Agency of Turkey
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ALUMINIUM – PRIMARY PRODUCTION
Seydişehir is currently the only active reserve where production is far below the domestic demand Chromite mine
Aluminum production
Semi product production
Port
Power plant
Aluminum production across Turkey
• Oymapınar HES (540 MW)
▪
▪
Potentially can support production up to 200-300k Currently powering only 60k of production
Corlu Sakarya Kocaeli Seydişehir integrated plant
Mugla
Antalya Oymapınar
Seydişehir plant can and should feasibly increase primary production capacity: – Access to rich and high grade, bauxite reserves – Dedicated power supply and cheap energy (2-3 US¢/kwh) – Opportunity to enlarge capacity feasibility on top of existing infrastructure
SOURCE: Team analysis; Company websites; expert interviews Investment Support and Promotion Agency of Turkey
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ALUMINIUM – PRIMARY PRODUCTION
Bauxite reserves in Turkey concentrated in 5 major areas 3 Kokaksu
Seydişehir
5
2 Paya s
1
Among the 5 reserves, only the first one is actively operated
4
Bauxite deposits
1. Seydişehir-Akseki, 2. Silifke-Taşucu (S.Turkey), 3. Zonguldak (N.Turkey),
4. İslahiye-Payas and 5. Milas-Muğla
SOURCE: MTA Investment Support and Promotion Agency of Turkey
13
ALUMINIUM – SECONDARY PRODUCTION
In addition to primary opportunuties, Turkey presents an increasing potential in secondary aluminium production as a result of growing industrial activity HIGH LEVEL ANALYSIS Key facts
Aluminium scrap generation in Turkey
• Aluminum scrap generation •
•
in Turkey keeps increasing even in 2009. Majority aluminum scrap generation is coming from new aluminum scrap (Aluminum and/or aluminum alloys from collection and/or treatment of aluminum products before final usage). Old aluminum scrap (Aluminum and/or aluminum alloys from the collection and/or treatment of aluminum products after use) in Turkey has not yet taken of but is likely to increase over time
Total Al scrap
Al scrap production1 Thousand metric tons 700 650 600 550 500 450 400 350 300 250 200
+11% p.a.
+5% p.a.
0 200405 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
1 Al scrap generation w/o impact from import SOURCE: EAA(European Aluminum Association); Aluminum Manufacturers' Union of Turkey; McKinsey analysis Investment Support and Promotion Agency of Turkey
14
CHROMIUM
Turkey is a net exporter in Chromium, however a net importer in Stainless Steel which uses Chromium as core input Midstream
Upstream
Ferrochrome
Chromite(46-48%)
Market price U.S. $/ton Export 2013, U.S. $ millions
• • •
•
290
2,756
450
140
High FeCr grade is needed for high-quality ferrochrome 85% used for ferrochrome production Turkey is one of the largest global chromite producers with rich reserves Multiple midsized players
• •
•
Raw material and energy intensive 91% used for stainless steel production Turkey has a single producer, ETI Krom
SOURCE: McKinsey; Metal Bulletin Investment Support and Promotion Agency of Turkey
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CHROMIUM
Turkey can be attractive in ferrochrome production by building integrated FerroChrome facilities where there are high grade reserves
▪
Attract investment for an integrated facility by bundling chromite and lignite fields – Access to raw material – Provision of cheap energy source
Lignite Chromite
Potential areas for integrated ferrochrome facilities
SOURCE: MTA; Team analysis Investment Support and Promotion Agency of Turkey
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MARBLE
Turkey is a net exporter of processed and unprocessed marble Upstream
Midstream
Raw Marble
Market price U.S. $/ton
Slab
800–1,100
250–350 1.141
1.083
Export 2013, U.S. $ billions
• Raw material intensive • Profitability largely •
depends on the quality of the ore Turkey has reserves and is a leading exporter of raw marble
• Raw material and capital •
intensive Turkey is a leading exporter of marble slabs
SOURCE: McKinsey; Interviews; USGS(U.S Geological Survey),IMMIB(Istanbul Minerals and Metals Exporters Association) Investment Support and Promotion Agency of Turkey
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MARBLE
Turkey has important natural stone and marble deposits in all of the provinces
Most important marble types found in Turkey are
• • • • • •
Supreme Salome Elazığ cherry Milas wine-red Akşehir black Manyas white Bursa wine-red
SOURCE: MTA Investment Support and Promotion Agency of Turkey
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MARBLE
Turkey is the fastest growing export country to China driven by marble quality and rich supplies Raw marble exports to China Thousand tons
647
950
1,360
39%
1,669 1,821
Egypt
557
813
1,048 1,219 1,264
1,688
25%
15% 420
526
497
436
730
Spain
295
399
557
556
435
233
277
302
332
“Chinese customers want something new and fresh, not Marfil. Marfil is like the white shirt in your wardrobe – it is classic and if you cannot decide what to wear, you go for it”– Medium scale processor
18%
“Turkish marble has reasonable pricing, good quality and good political environment (unlike Iran and Egypt) that allows easy trade relationship – Iran’s political/ trading environment is challenging (e.g. requires cash, no letter of credit) ”– Medium scale processor
25%
“Turkish is very popular and will stay like that. Turkey has variety, Italian supply is very small””– Medium scale processor
679
Italy
166
“There are 3 main weaknesses of marble from Egypt and Iran: a) Late-comer in market, b) Weak transportation capacity, c) Poorer quality of stone. This results in 10-20% price difference vs. Turkish marble” – Real estate developer
“Turkey is top exporter to China and Shine is the #1 among all Turkish exporters. Levantina can match Shine’s scale, but they are facing succession issues and their quarry is old”– Customer
Iran
367
CAGR ‘05-’10
“5 years ago, we were buying most of marble from Spain and Italy; today, we buy from Turkey”– Real estate developer
3,394 Turkey
X%
502
2005 2006 2007 2008 2009 2010
“Our marble has became very popular in last 4-5 years”– Customer
SOURCE: UN Comtrade Investment Support and Promotion Agency of Turkey
19
MARBLE
Turkish marble is well positioned to capture a large share out of the growing global market Turkish
Spanish
High
Mid
Low
0 Color
Chinese
Egyptian
• Relative importance of key buying
Brand rankings for marble
Price
Italian
CHINESE MARKET
Homogeneity Strength/ durability
Supply volume
factors vary depending on the project type and required volume – “If small quantity, then color and texture come before price; if large quantity, then price comes first” – Real estate developer – “Turkey has the biggest reserves so it can guarantee supply stability because some projects are really big in China and need large amount of supply. Moreover, Chinese developers like unified look so tend to use same marble across their projects” – Customer – “ Italian marble scores better than other marbles in all quality-related criteria (e.g. color, texture, strength) Turkish product is similar in looks and finish to Italian marble hence can be substituted in place of Italian at a cheaper price” Customer
SOURCE: Interviews Investment Support and Promotion Agency of Turkey
20
BORON
Boron has identified uses in almost 500 industries… Special characteristics of Boron
• • • •
Identified as areas of use
Strengthener Isolation/insulation Inflammability Energy content (H2 production)
Glass manufacturing Glass fiber
Ceramics manufacturing Added to give thermal shock resistance
Electronics and conductors Semiconductors
Communication technology Satellites
Construction/cement Strengthener
Metallurgy Rare earth magnets
Chemicals Water clarifier
Cleaning/whitening Detergents
Agriculture Fertilizers
Paper/pulp Strengthener
Energy/Nuclear Shielding
Automotive industry Anti-corrosion systems
Textiles Fiber
Pharmaceutical/cosmetics Neutron therapy for Cancer
SOURCE: ETİ Maden; team analysis Investment Support and Promotion Agency of Turkey
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BORON
… however current consumption is concentrated in a few industries Share of consumption Percent Glass manufacturing and construction
Product
Benefits of Boron
Outlook
•
•
•
Isolating glass fiber
34
Improve strength and chemical resistance of fiberglass products
• •
21
Textiles
19
Ceramics
Agriculture
Cleaning/ whitening
Other
7
5
•
•
Borosilicate glass
Ceramic glass
•
•
Optical properties, increase resistance to chemical attack and thermal shock
•
Increase strength, scratch resistance and chemical resistance
•
•
•
Push for energy efficiency through insulation will drive growth Continued growth from corrosion-resistant fabrics, composites reinforcement, and sound absorption Potential substitution by phosphates Growth driven by shift from single to double or insulated glazing for energy efficiency Potential substitution by phosphates GDP-level growth through home re-modeling with wall/floor tiles and household fixtures Potential substitution by phosphates
• •
Fertilizer Pesticides
•
Essential micronutrient for growth and development of healthy plants
•
Growth in humid countries such as India and Indonesia will grow demand
• •
Detergent Toothbrush
•
Makes detergents more resistant to humidity and high temperatures
•
Demand in humid and high temperature countries such as Middle East, India and Indonesia will grow
14
SOURCE: US geological survey; Eti Maden; analyst reports; team analysis Investment Support and Promotion Agency of Turkey
22
INDUSTRIAL MINERALS
Feldspar
Yearly production, Global Million tons
General overview Reserves (million tons): • World total: Large • Turkey: 372 Turkey is world’s one of the leading feldspar producer
Yearly production, Turkey Million tons
-1%
+2%
21,5 22,7 19,6 20,6 21,0
“Feldspar is used in glassmaking, ceramics, and to some extend as a filler and extender in paint, plastics and rubber. In glassmaking, alumina from feldspar improves product hardness, durability, and resistance to chemical corrosion. In ceramics, the alkalis in feldspar act as flux, lowering the melting temperature of a mixture” USGS Fledspar is mainly used in glass industry and pottery production
2007
08
09
2010 2011
6,5
6,8
2007
08
4,2
09
6,3
7,1
2010 2011
Prices USD/t +1%
Top producers Million ton
Top exporters Million U.S.D $
Italy
4,7
Turkey
4,5
China
2,0
France
0,7
Korea
0,6
Thailand
0,6
Turkey
62
65
61
62
2007
08
09
2010
2011
104,0
India
25,4
China
16,3
France
16,0
Germany
14,0
Total
Total
60
Important feldspar reserves in Turkey
260,0
1 Based on US consumption SOURCE: MIGEM(General Directorate of Mining Affairs), USGS, MTA, IMIB,Uncomtrade Investment Support and Promotion Agency of Turkey
23
INDUSTRIAL MINERALS
Barite
Yearly production, Global Million tons
General overview Reserves (million tons): • World total: 170 • Turkey: 34.2
8,0
8,7
0,5
8,4
8,1
6,7
Yearly production, Turkey Million tons
0,2
0,2 “The leading application of barite is as weighting agent in natural gas and oil field drilling muds. The density of barite helps in down-hole flow and bit lubrication. An additional benefit of barite is that it does not interfere with magnetic measurements taken in the borehole.” USGS
Top producers Million ton China India United States
Morocco
3,6
China
1,0
Morocco
0,5 0,2
Mexico
0,1
174,6
India
0,7
Turkey
Total
Top exporters Million U.S.D $
6,9
76,3
07
08
09
2010 2011
07
08
09
0,3
0,2
2010 2011
Prices USD/t
115,0
102,5
101,0
104,0
07
08
2009
2010
143,0
2011
Important barite reserves in Turkey
51,7
Netherlands
25,0
USA
24,2
Turkey
19,4
1 Based on US consumption SOURCE: MIGEM, USGS, MTA, IMIB, UNcomtrade Investment Support and Promotion Agency of Turkey
24
INDUSTRIAL MINERALS
Phosphate General overview
Global production Million tons
Phosphate value chain
+6% Fertilizer use • Phosphoric acid • Ammonium phosphate
Phosphata rock
• •
• •
Reserves (million tons): – Global: 65,000 – Turkey: 71 “Phosphorus is an essential element for plant and animal nutrition and is consumed primarily as a principal component of nitrogenphosphorus-potassium (NPK) fertilizers. Phosphate rock minerals are the only significant global resources of phosphorus” USGS Phosphoric acid: Besides nutrition use, phosphoric acid can also be used in acidic beverages Ammonium phosphate: Mainly used as a fertilizer ingredient due to high nitrogen content
▪
20.4
China
7.4
USA
Tunisia
166
181
198
210
2007
08
09
10
11
2012
Global Trade1 2010, U.S. $ billions
Phosphate rock Top importers
0.5
Fertilizers2 Top exporters Morocco
Top importers
1.1
3.0
India
Lithuania
0.2
Jordan
0.1
Brazil
USA
0.2
China
0.1
Thailand
Belgium
0.2
Egypt
0.1
France
Top exporters
1.1 0.9 0.6
3.0
USA
2.7
Russia China
Israel
2.5 1.5
Important poshphate reserves in Turkey
8.5
Morocco2 Russia
161
Turkey’s phosphate rock production is extremely low around 1,000 tons per annum
India Top producers Million tons
156
4.0 2.2 56.2
Other
1 Phosphate rock
2 Western Sahara
3 Fertilizers include other input as well
SOURCE: USGS, MTA, MIGEM Investment Support and Promotion Agency of Turkey
25
INDUSTRIAL MINERALS
Bentonite
Yearly production, Global Million tons
General overview
•
Total market size is estimated to be USD 700 million in 2011
•
Total global demand is estimated around 22 million tons indicating a shortage
•
12.0 12.3
Bentonite and clay (kaolin) are readily hydratable aluminium silicates. Bentonite is used to assist in the clarification of juices, beverages, and other food products, as a binding agent for the preparation of pelleted animal feeds, and as an ingredient of coatings and adhesives for food packaging materials
9.3
Yearly production, Turkey Million tons
1.7
10.6 10.3
1.6 0.9
0.8 0.5
2007
08
09
10
2011
2007
08
09
10
2011
Prices USD/t
Top producers, 2010 Million tons
68
4.6
US
57
52
49
2007
08
51
3.4
China Greece Turkey
0.8 0.9 09
10
2011
SOURCE: VSGS, MIQM, Indian Bureau of Mines, US FDA Investment Support and Promotion Agency of Turkey
26
INDUSTRIAL MINERALS
Pumice
Yearly production, Global Million tons
General overview
•
Pumice is a froth of felsic volcanic glass. It is rock foam with so much air in its structure that it often floats on water
•
Mainly used in manufacturing of lightweight concrete or insulative low-density cinder blocks
•
Total market is estimated to be around USD 400 million
Share of global production, 2010
18.3 19.3 17.1 17.0 18.0 17.0
2007 08
09
10
11 2012
Yearly production, Turkey Million tons 5.8 4.0
3.5
2007 08
N/A
4.3
4.2
09
10 2011 2012
Prices USD/t
Percent
30.3
Turkey
20.1
30.0
20.0
22.9
24.0
10
2011
2012
25
2007
08
09
Important pumice reserves in Turkey Others 62 18 Italy
9 5
Chile
6
Iran
Saudi Arabia
SOURCE: USGS, MIGEM, University of Pittsburgh DGPS, team analysis Investment Support and Promotion Agency of Turkey
27
INDUSTRIAL MINERALS
Perlite
Yearly production, Global Thousand tons
General overview
• •
Mainly used in construction materails, hurticaltural materials, fillers and filters US and China are the main consumers of perlite
1,760
1,780 1,650 1,660 1,770
2007 08 Key players Percent
Yearly production, Turkey1 Thousand tons
09
10
270 270 230 230 250
11
2007 08
09
10 2011
Prices USD/t
Others
17 28
46
49
50
52
55
2007
08
09
10
2011
Greece Important perlite reserves in Turkey
Turkey 14
17 Japan
24 US
1 Crude ore SOURCE: USGS Investment Support and Promotion Agency of Turkey
28
INDUSTRIAL MINERALS
Soda Ash
Yearly production1, Global Million tons
General overview
•
Used in manifacturing of glass, making of soaps and detergents, manifacturing of paper and pulp, water treatment and drugs
•
Turkey is an important producer with Eti Soda and Şişecam Soda being the biggest players
11.7
11.1
12.8
13.0
1.7
1.6
1.6
1.7
09
10
2011
N/A
2007 Use of soda ash
12.1
Yearly production1, Turkey Million tons
08
09
10
2011
2007
08
Prices2 USD/t US EXAMPLE
Water Misc Pulp&Paper 3 3 Detergents 3 6 40
Glass
286.6
286.6
286.6
08
09
10
303.1
170.9
Chemical 20
25
2007
Export 1 Natural production only
2011
2 Estimates
SOURCE: USGS; MIGEM, General Chemical Industrial Products Investment Support and Promotion Agency of Turkey
29
INDUSTRIAL MINERALS
Diatomite
Yearly production, Global Thousand tons
General overview
• •
Filtration (including the purification of beer, liquors, and wine, and the cleansing of greases and oils) is the largest end use for diatomite
1,910
Yearly production, Turkey Thousand tons
2,090 1,790 1,840
67
1,060
Transportation costs will continue to determine the maximum economic distance 2007
08
09
10
77 45
33
2011
2007
18 08
09
10
2011
Prices USD/t
Key players Percent
137 Others
2007
24 39 US
224
255
299
269
08
09
10
2011
Important diatomite reserves in Turkey
Japan 5
Denmark
11 21 China
SOURCE: USGS Investment Support and Promotion Agency of Turkey
30
Contents
Investment Support and Promotion Agency of Turkey
▪
Mining overview
▪
Minerals information
▪
Business opportunities
▪
Legislation
31
INVESTOR FRIENDLY ENVIRONMENT
With the recent regulatory improvement, Turkey has become more attractive for mining investments
Historic Current Adjusted
PPI rating of Turkey in Fraser report PPI index score out of 100
67
67
•
Turkey has increased its ratings in most important aspects becoming more attractive
•
Turkey also increased the number of mining engineering department by 33% since 2005 enriching the talent pool
•
By the successful policies of government, especially in economics, the risk of instability does not exist anymore
•
As the corporate tax rates and royalties show explicitly, Turkey is actually in a superior spot in taxation regime now than shown in the report
50 41 37
35
2011
12
Turkey 13 Brazil 13
Chile 13
Turkey 13 Adjusted1
1 Adjustment is done on 3 metrics by taking the scores of the countries with similar attributes in regarding areas SOURCE: Fraser Report; team analysis Investment Support and Promotion Agency of Turkey
32
INVESTOR FRIENDLY ENVIRONMENT
Turkey also has the lowest corporate tax rates as well as low mining royalties Country
Corporate tax rate Percent
4 Turkey Chile Madagascar Sweden Egypt Ghana Mongolia Zimbabwe Canada Burkina Faso South Africa Australia Morocco Niger India Brazil Mali Zambia DRC USA
16 20 21 22 25 25 25 26 26 28 28 30 30 30 32 34 35 35 40 40
Gold Percent
XX
Royalties Percent
Copper Percent
4
2
0-14 NA 0 NA 5 1-5 7 2-16 3-5 1-5 0-3 3 6 2 1 3 6 3
0-14 NA 0 NA 5 22-30 2 2-16 3 1-7 3-4 3 NA 4 2 3 6 2
3
3
•
Turkey charges the minimum corporate tax rate with 4% among the leading mining countries for mining companies
•
Turkey stands at the lower end of loyalty fees which is encouraging for investment
1 Actual corporate tax for mining companies is 4% due to 80% tax incentive SOURCE: PWC; KPMG Corporate Tax Tables; Deloitte Corporate Tax Table; Ministry websites Investment Support and Promotion Agency of Turkey
33
INVESTOR FRIENDLY ENVIRONMENT
Mining investments are supported by the measures of Region V regardless of the location as mining is among spesific priority investments
Mining incentives
Regional investment incentive scheme Incentives
I
II
Tax deduction in regional incentives III
IV
V
VI
Regions
•
VAT Exemption
•
Custom Duty Exemption
•
Investment Contribution Rate (%)
•
–
Out of OIZ
15
20
25
30
40
50
–
Within OIZ
20
25
30
40
50
55
Out of OIZ
2 years
3 years
5 years
6 years
7 years
10 years
–
Within OIZ
3 years
5 years
6 years
7 years
10 years
12 years
II
III
IV
V
VI
Investment contribution rate (%)
15
20
25
30
40
50
•
Tax deduction (%)
50
55
60
70
80
90
•
Investment contribution to be applied during investment / operational period (%)
Payment for Employer’s Share of Social Security Premium (Support Period)
–
I
•
–
Investme nt period
0
10
20
30
50
80
–
Operation al period
100
90
80
70
50
20
With 80% tax deduction, corporate tax in Turkey becomes 4%
•
Land Allocation
•
Interest Support
N/A
N/A
•
Income Withholding Tax
N/A
N/A
N/A
N/A
N/A
10 years
•
•
Employees’ Share for Social Security Premium Payment (Support Period)
N/A
N/A
N/A
N/A
N/A
10 years
•
Mining investments are considered to be in the scope incentives only if they are at the development stage and exploration projects are left out of the scope There is support1 on funding as well in form of – 5 points for TL loans – 2 points for foreign currencies
1 Max amount is TL 700k SOURCE: ISPAT; team analysis Investment Support and Promotion Agency of Turkey
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INVESTOR FRIENDLY ENVIRONMENT
Furthermore, there are 4 activity spesific additional incentives
•
If the mining operators create additional added-value by processing minerals in the country, they pay 50% less royalty
•
If the production takes place underground, the mine operator pays 50% less royalty
•
The Value Added Tax (VAT) is collected on all minerals except gold, silver, and platinum exploration expenditures
•
In addition, there are certain incentives for mining investments, commonly defined by the Cabinet Decree
SOURCE: MIGEM Investment Support and Promotion Agency of Turkey
35
INVESTOR FRIENDLY ENVIRONMENT
AS a result, Turkey is attracting an increasing amount of FDI during the recovery from the global financial crisis US$ millions
350
•
300 250 200 150 100
•
50 0 2005
06
07
08
09
10
11
12
Decreasing production due to the global economic crisis and decreasing appetite on new projects affected mining FDI in Turkey negatively Since then, FDI has been rising
2013
SOURCE: Ministry of Economy Investment Support and Promotion Agency of Turkey
36
Contents
Investment Support and Promotion Agency of Turkey
▪
Mining overview
▪
Minerals information
▪
Business opportunities
▪
Legislation
37
LEGISLATORY ENVIRONMENT
Once established in Turkey, Turkish and foreign companies have exactly the same rights •
6th clause of mining law states that
– Mining rights are given to • Turkish citizens eligible to
use the civil rights • Companies having legal personality established in accordance with the laws of Turkish Republic that are made on the status of mining companies • Institutions of state-owned enterprises which are authorized in this regard, its subsidiaries and affiliates and other governmental agencies and administrations
•
Furthermore, there is no discrimination towards foreign companies in any of the laws
SOURCE: Turkish mining law; expert interview Investment Support and Promotion Agency of Turkey
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LICENCING PROCESS
Metallic minerals are considered under the group IV mines Group I
Group II
Group III
Group IV
Group V
Group VI
•
Sand, gravel, brick clay, cement clay, marl etc.
•
Marble, decorative stones, limestone, basalt etc.
•
Salts, CO2, gas
•
Lignite, coal, gold, silver, copper, zinc, chromium, ,ron, cobalt, nickel, alumininum, trona, sulfur etc.
•
Diamond, saphirre, opal, amazonite etc.
•
Radioactive minerals
1 For the full list of minerals please refer to Turkish Mining Law - 5995 SOURCE: MIGEM Investment Support and Promotion Agency of Turkey
39
LICENCING PROCESS
Licence timelines
Operating year
License period , (year) License groups
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Exploratrion year
License area (hectare)
Group I
10
• a Group1 • b Group1
50
Group II
100
• a group1 • b group
100
Group III Group IV Group V
Group VI In sea, III, IV, and VI groups
500 2,000 1,000 5,000 50,000
1 operating license is granted directly SOURCE: ISPAT; MIGEM Investment Support and Promotion Agency of Turkey
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ISPAT Worldwide CANADA Murat ÖZDEMİR
[email protected]
RUSSIA Eduard ZUBAIROV
[email protected]
CHINA Hui ZHAO
[email protected]
SOUTH KOREA Veyis TOPRAK
[email protected]
FRANCE Utku BAYRAMOĞLU
[email protected] Selçuk ÖNDER
[email protected]
SPAIN Yasemen KORUKÇU
[email protected]
GERMANY Kemal KAFADAR
[email protected] Ole Von BEUST Rezzo SCHLAUCH Wolf Ruthart BORN
INDIA Sanjeev KATHPALIA
[email protected] Fariha ANSARİ
[email protected]
SAUDI ARABIA Mustafa GÖKSU
[email protected] UK Ahmet İPLİKÇİ
[email protected] Muhammed AKDAĞ
[email protected] USA Öner AYAN
[email protected] Olivia CURRAN
[email protected]
JAPAN Hitoshi SEKI
[email protected] Saya ASHIBE
[email protected]
For comments on the report and additional information please contact:
[email protected] www.invest.gov.tr Head Office
Office
Address: Kavaklıdere Mahallesi Akay Caddesi No:5 Çankaya/ANKARA 06640
Address: Dünya Ticaret Merkezi A1 Blok Kat:8 No:296 Yeşilköy/İSTANBUL 34149
Phone: (+90 312) 413 89 00
Phone: (+90 212) 468 69 00
Investment Support and Promotion Agency of Turkey
41