Major Sectors -- September 1998

Gold mining sector	According to the Gold 1998 Survey (Financial Times, 22 June 1998), Kyrgyzstan is ranked as the 19^th largest gold producer in the world (in 1996 it was ranked 37^th). The country has increased its gold output dramatically, from 4.1 tonnes in 1996 to 17.4 tonnes in 1997. This shift is primarily due to the expanded production of gold from the Kumtor gold mine. The first gold mine in the Kyrgyz Republic was discovered in 1969 (the Jerui mine) and as of 1997, a total of 28 gold deposits had been prepared for exploration. About 90% of the country’s gold reserves are concentrated in four major mines: Jerui, Kumtor, Taldy Bulak Levoberezhny, and Makmal.
Kumtor deposit	The Kumtor gold mine was discovered in 1978 and is located high in the mountains at attitude of more than 4,000 meters above the sea level. The project site is located in an area of permafrost and high seismic activity. Due to the specifics of the site location, the project team has had to overcome a number of engineering challenges.
Outlook	Two major challenges will determine the future of the gold mining sector in Kyrgyzstan: the development of new fields (through new joint ventures) and world gold prices. The latter represents a significant concern: due to the Asian crisis and increased gold stocks, world gold prices are falling. In this gold rich country, most of the fields are located high in the mountains and their development poses significant challenges. To balance out these negative factors, the Government is making every effort to increase the attractiveness of investing in this sector.

Monopoly provider	Kyrgyztelecom (KGT) is Kyrgyzstan’s national telecommunications operator and is responsible for both inter-city and international telecommunications. The current exclusive license for domestic and international long-distance services is valid until 2008.
KGT	The operating assets of KGT encompass urban and rural telephone exchanges with an installed capacity of approximately 470,000 lines of which approximately 460,000 are in service (connected to subscribers). KGT’s telephone exchanges are connected to international networks, and particularly well-developed links with CIS countries. There is a cellular network operated by KGT’s joint venture, a network of cable, coaxial, fibre-optic, microwave relay lines, and a Standard A satellite system. About 73% of all Kyrgyzstan’s telephones are installed in cities and 27% are in rural areas. Of the total number of lines, 62% are residential, 15% are used by state organisations, and business subscribers use 23%.
Outlook	The major event in 1998 in the telecommunications area was the enactment of a law on telecommunications, followed by the establishment of a governmental regulatory agency. It is expected that 35-40% (to be confirmed) of KGT will be offered to a strategic investor soon. Also, KGT has implemented a number of technological projects and in satellite, fibre-optic network construction, mobile, etc. The company's growth factors include the implementation of a large-scale cost reduction programme and the improvement of their financial management. There is a strong belief that the expected strategic privatisation will bring more strengths to KGT's market position and will increase its market value.
Our publications	Kazkommerts Securities published a report on Kyrgyztelecom in May 1998. For this report or other information, please contact us. Research reports on other major Kyrgyz companies (KyrgyzEnergo, Kant Cement and Bakai) are scheduled for publication in September-October 1998.

© Kazkommerts Securities 1998. Please cite source when quoting.

This report has been prepared by Kazkommerts Securities and provided solely for information purposes to recipients only. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. This information does not constitute an offer to buy or sell securities. Kazkommerts Securities or its affiliated persons may be buying, selling or holding long or short positions, acting as investment bankers, be represented on the Board of the issuers in securities mentioned herein. This report is not intended for the use of private investors. Investment in Kazakhstan markets is an extremely risky activity and many persons, physical and legal, may be completely or partially restricted from dealing in the Kazakhstan securities markets.

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