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Ban for Export of Unrefined Gold is Extended

Application of the ban

For the third time in the last year, the Ministry of Investment and Development of Kazakhstan (the "MID") introduced a temporary ban on export of unrefined precious metals, scraps and waste of precious metals, which contain precious metals. A new ban will be valid for a period of four (4) months, starting from 9 September 2015 until 9 January 2016.

As we have earlier informed you in our legal alert of 6 March 2015, for the first time Kazakhstan introduced a similar ban on export of unrefined gold in 2014 for a period of six (6) months from 21 June 2014 until 21 December 2014, and then for the period from 2 March 2015 until 2 September 2015.

 The current ban applies to the same types of unrefined precious metals, scraps and waste of precious metals, as the previous ones, i.e. to:
• gold (including platinum-coated gold, both unrefined or semi-refined, or in the form of powder, commodity gold), except for gold in pellets, both unrefined and refined with a purity equal to or exceeding 0.995 parts our of 1000 parts of ligature mass, or 23.88 carats (customs codes 7108 11 000 0 and 7108 12 000 9); and
• gold-filled or gold-containing scrap and waste (customs code 7112 91 000 0).

Export of unrefined gold to the EEU countries

We note that the temporary ban does not apply to export of unrefined gold to the countries of the Eurasian Economic Union (the "EEU"), i.e. to Russia, Belarus, Armenia and Kyrgyzstan.

Moreover, it is provided in the MID's Order that Kazakhstan should raise before the Eurasian Economic Committee the issue as to introduction of temporary ban for export of unrefined gold as well as scraps and waste, containing gold, by the other EEU countries.

The reasoning behind the current ban

We assume that the ban for export of unrefined gold was extended simply because the Parliament of Kazakhstan has not adopted a Law "On Precious Metals and Precious Stones" (the "Law on Precious Metals") by September this year, as was expected by the MID at the beginning of the 2015 year. This time, the MID believes that the Law on Precious Metals (a draft of which is now being considered by the Mazhilis, the lower chamber of the Parliament of Kazakhstan) will be adopted by the Parliament by January 2016. If the Law is adopted, there will be no need for the MID to introduce a further ban for export of unrefined gold.

The Law on Precious will be a totally new law, aiming to regulate the circulation of precious metals and precious stones as well as establishing and developing the jewellery production in Kazakhstan. The Law on Precious Metals will tighten control over the export of raw materials containing gold. The draft Law provides that gold producers, who intend to export raw materials, containing gold, for refining outside the EEU, should, prior to exporting, obtain either refusals from all of three domestic refineries to refine gold in Kazakhstan or the relevant confirmation from the regulator, i.e. the MID.

Apart from that, it is provided in the draft Law on Precious Metals that the priority right of the National Bank of Kazakhstan (the "NBK") to buy gold bullion will be extended, so that if a gold producer wishes to export gold for its refining outside Kazakhstan, such a gold producer will be obliged to return gold, being refined, to Kazakhstan and sell it to the NBK. This will definitely increase the transportation costs, which will not reimbursed by the NBK. Therefore, it will become economically impractical to export gold for refining outside Kazakhstan.

The political and commercial intent for introduction of the ban is to fully utilise the existing domestic refinery capacity, especially the new Astana refinery (which owned by a State-run company Tau-Ken Altyn and which is currently underutilised), and provide them with the necessary raw materials containing gold.
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