Slovakia Mining Report 2009

The Aluminium market has attracted a modest amount of foreign investment into Slovakia in 2008 and 2009; however, falling market prices for aluminium and the global economic downturn have hampered the growth of this sector, which, along with steel, is one of Slovakia's foremost metal products. The decline in the global construction market will affect production levels - the announcement by Slovalco (Slovakia's largest aluminium producer) that it would to cut in production by 10% in Q109 is illustrative of this.

Drilling prospects at EMED Mining's Biely Vrch project demonstrated strong results and increased potential value in the area. Drilling between 2007 and 2009 has highlighted a rich area measuring 300m by 350m with a depth of more than 250m. The project's 34 completed drill holes have uncovered a vertical structure over 400m in depth. Grades of up to 1.34g/t have been discovered. Based on such strong results, EMED announced in February 2009 their first JORC (Joint Ore Reserves Committee)-compliant resource of 41.7mn tonnes, with an average grade of 0.79g/t over a contained amount of 1.1mn ounces of gold, 65% of which occurs near the surface.

A significant acquisition for a foreign investor was that of Slovmag - the second-largest producer of magnesite refractory materials in the country - by Russian Holding Magnezite Group. This was seen as a strategic move on the part of the Magnezite Group to access trade markets of the EU through Slovakia, and to exploit Slovmag's notable capacity for producing magnesite construction materials. This was encouraging to the local economy as Slovmag is one of the area's largest employers; however, in December 2008, the company announced that they had to make 300 redundancies.

Exploration for uranium development is expanding as Slovakia looks to reduce dependency on Russia for imports of oil and gas. A significant amount of electricity production comes from nuclear energy at 24%, with the majority of production stemming from natural gas at 31%. The government is committed to expanding nuclear energy and Slovakia currently has five nuclear reactors with two more in construction.

The country has previously had a poor reputation for safety, though this is expected to continue to make improvements on the back of its EU membership. Commitment to nuclear energy is rarely without opposition, however, and in 2008 and 2009 several protests were made against uranium mining and exploration in Slovakia. Objections were raised in February 2008 against the uranium exploration by Crown Energy in the Torkay region; objections were raised by the City of Kosice in May 2009 against exploration work by Ludovika Energy; a subsidiary of Tournigan, in the Jahodna-Kuriskova region; and in April 2009, 92,000 people petitioned against mining for uranium in the Tencin region. Despite this opposition, it is likely that commitment to the sourcing of indigenous fuel sources such as uranium will be sustained, especially as Slovakia is a country that relies heavily on imported fossil fuels.

One of the main developments in 2008 was the approval from the Slovakian government in October for the largest brown coal mining company, Hornonitrianske bane Prievidza, to open coal deposits and begin construction on the 11th mining field in the Novaky mining area. In addition to approving the project, which is expected to realise extractable coal stocks of 7.2mn metric tonnes, the government also approved the issuance of state aid for the initial investment in the project. Capital expenditure for the project is estimated at EUR36.5mn (SKK1.1bn). The opening of the mine is expected to add increased capacity of 400,000-600,000 metric tonnes of extractable coal and generate employment prospects for 500 people over 15 years. With work beginning in May 2008, completion of construction is anticipated for July 2009, while the first extraction is expected to be mined in October 2009.

Industry Forecast Slovak mining prospects are not particularly upbeat in the medium term. BMI forecasts that the industry will reach a value of US$0.6bn by 2013, representing growth of just 8% from 2008.