BHP Billiton, one of just two companies left in the running to develop Tajikistan's largest silver deposit, pulled out of the race in July, leaving the future of the tender in doubt. Finding a company with the resources to develop the Kalon Konimansur silver-lead-zinc deposit is of vital importance to Dushanbe, as it would have a transformative effect on the Tajik economy, but BHP's withdrawal has ended Tajik hopes of impressing investors with the Central Asian region's first open competitive tender for a major mining project.
Only one bidder, a consortium led by Kazakhstan's Kazzinc that includes Kazzinc's parent company Glencore International, as well as Konimansur and Adrasman, now remains in contention to develop the deposit - a project that is expected to cost around $3bn. A decision on the tender was due to be made in September, but after BHP's withdrawal it might be brought forward.
A source close to the process tells bne that a bid from the Kazzinc/Glencore consortium would still be considered by the Tajik government provided it complies with all tender requirements. "However, much also depends on whether the government sets the minimum bid price at a reasonable level. If they go excessively high, then the consortium will not be able to submit a bid," the source says.
A blow to prestige
BHP's decision to withdraw is clearly a blow for the Tajik government, which had hoped the tender would help put the country on the map for international investors. Dushanbe had rejected earlier offers from Russian mining companies to develop Kalon Konimansur in favour of a competitive process.
This would have been the first time an open tender has been used for a mine development project of this scale and complexity in the entire Central Asian region. Dushanbe had been working for more than a year with the World Bank's International Finance Corporation to ensure the process was fair and transparent. While the contract may still be awarded to the Kazzinc/Glencore consortium, its rival's decision to quit the race means it will no longer make the same impression on investors.
The number of potential bidders was inevitably low, as only a relatively small number of companies, most of them focused on Latin America, specialise in developing silver-lead-zinc deposits. The contenders have been gradually whittled down, with three initial bidders failing to qualify and two Chinese bidders - Ziti Mining and Sichuan Group - later withdrawing. BHP is understood to have withdrawn for strategic reasons rather than because of issues specific to the Tajik project; under current economic conditions, the company has been scaling down investment projects and focusing on cost control.
Kalon Konimansur is expected to cost the successful bidder around $3bn to develop, including the huge but necessary infrastructure investments. The poor state of Tajikistan's transport and energy infrastructure means that substantial investments will be needed in roads and - unless Tajikistan can ensure a stable power supply - power generation.
Another issue is that the deposit is situated directly under the town of Adrasmon, near Tajikistan's border with Kyrgyzstan, requiring the relocation of some 13,000 people. This would be one of the largest relocations ever carried out.
However, should development of the deposit go ahead, it could transform the economy of Central Asia's poorest country, boosting export revenues for 30-40 years given that Kalon Konimansur contains around 1m tonnes of ore, and estimated silver reserves of around 70,000 tonnes. It would also help to address chronic unemployment in Tajikistan, by providing work for around 10,000 people who would be employed during the construction phase and steady jobs for another 2,000 after production begins.