SRK Consulting is an international consultancy providing technical services to the mining industry with a consulting practice in Almaty, among 45 consulting practices worldwide. We are attuned to the progressive changes in Kazakhstani law that are advancing environmental management in the mining sector, as part of the country’s broader sustainability agenda. In the light of these changes, we share some of our global insights on aspects of mine environmental management of high interest to investors and lenders – decarbonisation, water stewardship and mine closure.

Trends in the decarbonisation of the mining sector

More than a third of companies in the global mining and metals sector have set ambitious decarbonisation targets and are publicly reporting on their progress in meeting these targets. Some Kazakhstani companies are among these industry leaders.

Climate disclosure standards and laws have evolved to address the interest of investors in climate risks, strategies and performance. Mandatory climate disclosure requirements are being introduced by many stock exchanges, using standards designed to reveal companies’ decarbonisation ambitions.

There are many complementary international initiatives that push for a level of decarbonisation ambition aligned with Paris Agreement goals. Relevant to the mining sector, members of the International Council on Mining and Metals (ICMM) have collectively committed to a goal of net zero Scope 1 and 2 greenhouse gas (GHG) emissions by 2050 or sooner in line with the ambitions of the Paris Agreement. The Glasgow Finance Alliance for Net Zero (GFANZ) pushes for ambitious decarbonisation targets aligned with 1.5ºC pathway in the Paris Agreement.

The decarbonisation commitments of leading mining and metallurgical companies differ in detail but are commonly aligned with the less than 2ºC pathway in the Paris Agreement. They involve targets to reduce their Scope 1 and 2 GHG emissions by at least 30% by 2030 when compared to their baselines (often their emissions dates between 2018 and 2021) and to achieve Net Zero by 2050.

Achieving these goals requires significant changes to the technologies being used. The trends in decarbonisation by mining and metallurgical companies can be described as broadly following these paths:

• Switching to low-carbon electricity. Underwriting the development of solar and wind farms by electricity generating companies through Power Purchase Agreements with the electricity generating companies allows the mining and metallurgical companies to reduce emissions while not fundamentally changing any aspect of their operation. This is often the easiest and quickest solution with companies such as BHP reducing their emissions by 24% since 2018 in this way.

•  Efficiency improvement initiatives. Improving efficiency, often through investment in information systems to enable better decision-making, is another effective way to reduce emissions.

•  Using current technologies to reduce Scope 1 emissions. There are a number of changes which can be implemented today to reduce emissions, such as switching from coal to natural gas for powering boilers and dryers, installing Trolley Assist systems or In-Pit Crushing and Conveying systems to reduce diesel consumed by haul-trucks, and using renewable diesel. These solutions are easier to introduce in new developments than retrospectively at existing mines.

•  Supporting the development of new technologies. There has been significant investment in the development of new technologies such as battery-power, hydrogen fuel cells, switching to using natural gas or green hydrogen in smelting, or switching from pyrometallurgical to either hydrometallurgical or electric smelting technologies. Many underground mines are already purchasing battery-electric machines. Commercial production of battery electric haul-trucks is forecast to commence in 2027.

•  Methane capture / destruction. Using methane to generate electricity is a way to reduce emissions as the methane is destroyed. The challenge is extracting methane from the coal seams through either pre-drainage boreholes or from mined out areas at a concentration high enough to be used. An alternative method of destroying methane is to install systems to destroy the methane contained in Ventilated Air Methane though this is currently difficult to do. As methane has not been a safety factor in open pit coal mines, there are currently no systems in place for capturing methane. These would require pre-drainage boreholes drilled in advance of mining – this approach is being explored in several countries.

•  Valuing carbon in decision-making. As decisions made today often commit a company to a long-term outcome, many companies globally are therefore applying a “shadow carbon charge” of between USD 50 and USD 150/t.CO2e to reflect potential future carbon tax values.

•  Identifying multiple projects. Companies are comparing many alternatives to achieve carbon reduction targets and are ranking these by Net Present Value and by quantum of emissions saved using the Marginal Abatement Cost Curve (MACC) methodology.

Lenders are also playing a role in facilitating the transition with organisations such as the IFC and EBRD providing loans for solar and wind farms, and many commercial banks requiring companies to show how they plan to achieve reductions in their stated targets in emissions.

The Government of Kazakhstan is also exerting pressure on mining and metallurgical companies to introduce changes in order to meet the Government’s target of a 15% reduction in emissions by 2030 and at least 15% of consumed electricity provided by renewable sources. Emissions quotas have been set to the top emitters and the number of free quotas are being reduced, requiring companies to purchase emission credits on the open market. This is expected to increase the cost of carbon from less than USD 2/t.CO2 today to USD 15-20/t.CO2 by 2030. For those companies exporting materials which will ultimately be sold to the EU, the EU’s Carbon Border Adjustment Mechanism (CBAM) will add a further cost which will cause high carbon intensity steel and copper, for example, to incur a discount to sales prices.

Whilst some of the points mentioned above all indicate increased costs, Kazakhstan is fortunately blessed with significant potential for low-costs solar and wind power.   Consequently, the price for renewable electricity agreed at auction in 2023 was, at 10.4 KZT/kWh, cheaper than the cost of electricity generated by coal.

Further, Kazakhstan has large uranium resources. Small Modular Reactors (SMRs) are proven technologies with the potential for generating low-cost electricity. Canada, another major host of uranium, is seeking to position itself as the world’s major supplier of both uranium and nuclear power by supporting the adoption of SMRs across Canada.

Therefore, SRK sees opportunities for Kazakhstani mining and metallurgical companies to reduce their costs through embracing the move towards reducing GHG emissions and for Kazakhstan to position itself as a low-cost energy hub.

Changing Water Management in the Mining Sector in Kazakhstan

Kazakhstan will soon introduce a new Water Code that aims to transform water resource governance throughout the country. Considering this Code together with the new Environmental Code and the instruction for liquidation of mines (closure) made under the Subsoil and Subsoil Use Code, it is foreseeable that water management of mines in Kazakhstan will be much more strictly regulated.

Our due diligence work for investors and lenders provides us with site-level knowledge of water governance by mines across the globe. We see that water law, and its effective enforcement, has a formidable influence on water management by mines. This is particularly true where environmental and water permits are hard to gain and maintain, and where suspensions of operations for water impacts are not unheard of.

Public access to information on water resources, as provided for in the draft Kazakhstan Water Code, adds to this influence as communities living downstream of mines are empowered to hold regulatory authorities to account for protecting water resources. The increased awareness of water quality issues and water scarcity are expected to facilitate this movement.

Mines in Kazakhstan are not widely viewed as contributors to stress on the country’s water resources. Perhaps this is because many of the mines are in remote locations, far from human settlements, and in terrain where the drainage is not well defined.

Impact assessment and permitting documentation for Kazakhstani mines often gives the impression there are no affected water resources and water users. This is different from norms in other mining jurisdictions across the globe where most mines have a detailed understanding of their water context, even if they are in remote settings and arid climates. They acknowledge stresses in the occupied river basin and often have a good understanding of the downstream river system, downstream water users, and surrounding groundwater uses. The interrelationship between surface water and groundwater is usually well understood too.

Strong understanding of geochemistry is not so widespread, but many countries with well-developed mining industries are strict about understanding the geochemistry of rock exposed by mining (potentially causing acid mine drainage), particularly waste rock placed on surface, and tailings.

Water stewardship aligned with international standards requires the above information to ensure water management and monitoring is focussed on clearly defined impacts and risks, considering the life of assets and the needs of water users in the river basin. Several local mining firms are aspiring to implement water stewardship principles and have established progressive water policies matching those of international corporations and are transitioning to water management and monitoring that is more impact centric and proactive.

The recently approved Best Available Techniques (BAT) handbooks for mines identify many water management measures that must be implemented if mines wish to obtain complex environmental permits and be exempted from escalating pollution payments for emissions, water discharge and waste disposal. It will be interesting to see the rate of implementation of BAT on mines in Kazakhstan. Outside of the 50 major polluters that are now legally obliged to implement BAT, there is much deliberation how to go forward. For many mines, it will be a while before the pollution payments become financially material; escalations in these payments are only scheduled for the 2030s.

 Nikolai Kirillov, Senior Consultant (Environment and Mine Closure)

 Nargiza Ospanova, 

Mine closure maturity in Kazakhstan

Kazakhstan has advanced the regulation of mine closure. The new Subsoil and Subsoil Use Code (2017) requires integration of mine closure into mine planning and makes mining companies responsible for achieving an agreed post-closure land use. It also requires ongoing financial provision for mine closure. Supporting subsidiary law includes instructions for mine closure planning processes, cost estimation, and financial provisions for closure.

Currently, there is a gap between closure law and closure practice, which could be attributed to inexperience with the new concepts in law. Many mine closure plans in Kazakhstan, although formally approved, are conceptual, and the corresponding closure cost estimates and financial provisions are generally too low. This presents risks to investors, to the government and taxpayers, and to local communities if a miner fails to fulfil its closure duties.

Refinements to the legal requirements for mine closure are ranked as a Priority #4 under the subject of Developing the Mineral Resources base of Kazakhstan in the National Development Plan 2029 (2024). The proposed refinements will cover closure cost estimation and criteria for reviewing the closure plans to avoid risks of insufficient funds for closure. Guidance based on international practices will support these refinements.

Closure planning and costing reliability is likely to increase steadily through the mandatory three-year update process. SRK considers that this should include improvements to the knowledge base for closure and more detailed technical design coupled with the setting of realistic closure criteria for each closure domain. A risk-based approach to closure planning would enhance closure designs and strengthen the assumptions.

The geochemistry of mine waste and rock exposed by mining and associated potential water impacts are commonly not well understood. Globally, this is a widespread closure planning weakness. However, numerous governments have become strict about addressing this during permitting – particularly in countries where there is much experience of mining and an effective drive to improve the quality of water resources. Both mining law and new environmental law in Kazakhstan provide for the necessary geochemical studies, but more guidance is needed to support professionals to undertake these to inform mine design and closure planning that protects water resources.

Previously, mine closure focused largely on biophysical and health and safety issues only. Nowadays, the socio-economic transition is getting more attention. Mining is a major industry in Kazakhstan and many local economies are dependent on mining. Examples are Temirtau, Rudny, and Ridder. While the socio-economic transition is important, it is not addressed in law yet.