THE ECONOMIST: Surging gold prices have mineral-rich countries seeking foreign investors

Tian Shan — the name for the mountains that cross Kazakhstan, Uzbekistan and Kyrgyzstan — roughly translates as “Mountains of Heaven”. It is fitting for a range that is dotted with gold mines, including Kumtor, one of Central Asia’s largest and a symbol of Kyrgyz national pride. Moreover, it is not just the mountains of Central Asia that hold big reserves. Hundreds of kilometres to the west, in Uzbekistan’s Kyzylkum Desert, sits Muruntau, the world’s largest open-pit gold mine.

Now the good times are rolling. The price of gold has more than doubled since 2019. In March it breached $US3000 ($4800) per troy ounce for the first time. That is good news for both governments and miners in the poor but mineral-rich Central Asian states. The yellow metal is the biggest export for Kyrgyzstan, Tajikistan and Uzbekistan, and one of the biggest in Kazakhstan, the region’s largest and richest economy.

Indeed, the Uzbek Navoi Mining and Metallurgical Company (NMMC), which operates the Muruntau mine, is the world’s fourth-largest gold producer. It accounted for almost one-sixth of the Uzbek state’s revenue in 2023, when prices were significantly lower than they are today. The European Bank for Reconstruction and Development forecasts average economic growth of 5.7 per cent for Central Asia this year — well above its forecast of 3.2 per cent for emerging markets in general.

The gold boom has made life easier for the region’s central bankers. After the Kazakh tenge struck a record low against the dollar in January, the country’s policymakers sold some of their gold reserves — the value of which had soared to a record $US25.9 billion in October — to prop up the currency. Russia has become reliant on imports from Central Asia to dodge Western sanctions. In both Kazakhstan and Uzbekistan central bankers have used gold to settle transactions with their trading partner without the need for SWIFT, a Western financial-messaging network from which many Russian banks have been barred.

Little surprise, then, that the region’s leaders are eager to mine still more gold. Under his “Uzbekistan 2030” strategy, Shavkat Mirziyoyev, the country’s president, seeks 50 per cent more production by the end of the decade. Mr Mirziyoyev wants to reduce the government’s role in the economy and entice foreign capital. To that end, the state-owned NMMC is reportedly planning an initial public offering (in London, with a rumoured valuation of more than £4b ($8.3b). China has also invested in Central Asian gold-mining as part of its Belt and Road Initiative, focusing on Tajikistan, the region’s poorest country. In 2018 it agreed to build a power station in return for the right to develop the Upper Kumarg gold mine.

Foreign investors have not always had an easy time in the region. Kyrgyzstan’s Kumtor mine had for decades been run by Centerra Gold, a Canadian company. In 2021, amid tax disputes and allegations of environmental damage, it was taken over by the government of Sadyr Japarov, Kyrgyzstan’s nationalist president. In ordinary times, that might give overseas investors pause. But gold is alluring, especially when prices are this high.