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Diagnosis: a golden fever

The WEF discussed how to help investors produce more precious metals

The volume of gold mining in Russia is growing 10 for years in a row, but recently the number of mining companies and licenses issued has increased dramatically. However, the industry still needs support, and in most areas the state is ready to provide it, the participants of the WEF “Gold. New Gold Rush Page.

Diagnosis: a golden fever
Photo: Tass / VEF Photobank
“Gold is the leader in terms of exploration expenditures at the expense of both the federal budget and subsoil users. The level of financing shows steady growth since 2015 of the year and is about 16,5 billion rubles, ”said Sergey Donskoy, one of the main speakers at the session, Minister of Natural Resources and Environment. According to him, the bulk of the invested funds - approximately 14,8 billion rubles - accounted for subsoil users. At the same time over the past couple of years, the number of licenses has increased - from 1504 to 1940 pieces.

“The gold miners themselves are also getting bigger - only in 2016 a year the number of subsoil users increased from 446 to 518,” said Boris Yatsenko, EY partner and head of the mining and metals services in Russia and the CIS. During the session, he confirmed the industry diagnosis of the gold rush and provided detailed statistics on the growing market.

According to EY, the mining and production of the main precious metal has consistently increased in Russia since 2007. Over 10, the numbers nearly doubled, rising from about 163 to 297 tons. Starting from 2015, the picture looks more harmonious - the market price and production volumes are gradually rising.

The Far East is perhaps the main site of this positive "fever": the DFO is confidently leading in terms of production. "There are more than 40% of national gold reserves in the region, and the share of production in 2016 amounted to 46% of the total Russian," the head of the Ministry of Natural Resources said. According to EY analysts, the share of DFO in production is even higher - 53% as of 2016 year.

However, it is becoming increasingly difficult to get it, the participants of the session stated. "All deposits go to places far from the infrastructure, with complex climatic and geographic conditions, with complex logistics. And in order to organize geological exploration there, considerable expenses are required, "said Aleksey Golubenko, General Director of Kamchatka Gold JSC.

From the speech of the head of the Ministry of Natural Resources Sergei Donskoy it followed that gold miners of the Far Eastern Federal District have every reason to count on support. He stressed that the "eastern sector" is gaining an increasing priority, including - in the implementation of programs to reproduce the mineral resource base and prepare amendments to the legislation. "Russia has a unique advantage in the form of its mineral and raw materials potential," Donskoi stressed. "Without a doubt, we must increase this advantage, thus creating the basis for the growth of other industries that indirectly participate in mining or use raw materials for production. And in such a business as prospecting and exploration of minerals, joint efforts of the state and investors are required to reduce industry risks. "

According to the minister, in 2017 at the expense of the federal budget is geological exploration of gold at the 31 facility. In addition to direct financing of works, the state intends to actively use PPP mechanisms to provide infrastructure for mineral and raw materials projects, Donskoi pointed out. He mentioned other measures to support investors operating in the Far Eastern Federal District - primarily tax incentives and the possibility of financing from the Far East Development Fund.

However, some measures and mechanisms, as recognized at the session, still need to be improved. So, according to the moderator of the event of the General Director of PJSC "Polyus" Pavel Grachev, the market with great enthusiasm took new measures to support regional investment projects, which were introduced at the initiative of the Minsk region from 1 January of this year.

However, the mechanism provides that the entire production cycle of the project takes place in the region. “With regard to gold mining and processing, this includes refining. Well, as you know, refining in the Far East is not well developed, so this “tail” of the production chain ends outside the region with all the ensuing discussions with the tax authorities, ”Grachev explained.

A representative of the Department for Attracting Private Investments of the Ministry for the Development of the Far East, Demis Eminov, acknowledged that “the tail remained” and promised to eliminate the flaw. “I think that in the autumn session, as a last resort at the beginning of spring, we will correct this situation and, if the government allows it, we will amend it,” Eminov assured.

Before the officials at the session, they posed several problems requiring the attention of the relevant departments and legislators. For example, harvesters were concerned about restrictions on changing the boundaries of plots: on many projects, the ore body or vein regularly goes beyond the boundaries of the license area, but it is actually possible to make "cuttings" only once. The relevant bill, as the head of the Ministry of Natural Resources said, has already been prepared, although not all agencies have supported it yet. "We are sure that under certain conditions the initiative can be supported," Sergei Donskoi said.

Foreign investors have also succumbed to a fever and are showing active interest in Russian gold mining. "The market sagged some time ago, but now interest is returning - both to gold and to Russia," said John Mann, a member of the Russundragmet Management Committee, which manages the Russian assets of British group Highland Gold Mining Ltd.

At the same time, foreigners complain about limited access to large deposits - facilities with stocks of 50 tons are considered strategic, and to attract foreign investors to them you need a government permit. The work on this issue is underway, the head of the Ministry of Natural Resources assured during the session. He is sure that in the end, "a solution will be found."

John Mann from Russdragmet explained that first of all, Chinese investors can come to Russia - they are already showing genuine interest in the country and the industry. “We will see new partnerships, direct investments, and a corresponding increase in the stock price,” a representative of Highland Gold predicted.

And the governor of the Magadan Region, Vladimir Pechenyi, on behalf of the Far Eastern officials, urged investors not to hesitate. "Who came to us, he did not regret," he said. "And whoever has not come yet is a bit late, hurry."

Published in the journal "Economy of the Far East."
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