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Russia opens the Far Eastern piggy bank
The Far East has strategic reserves of minerals: gold, diamonds, ferrous and non-ferrous metals
Due to the remoteness of the regions and the complexity of implementing projects, the country's largest deposits have not been developed for a long time. However, today the situation has changed - there is already work on each of the directions, which will soon make it possible to significantly strengthen the position of the mining industry in the Far East and in Russia as a whole.
Rostislav TurovskyDoctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
Since Soviet times, gold has remained the most important specialization of the Far East, which has enormous undeveloped reserves of this precious metal. Now in the Far East about 45% of gold of the whole country is mined, and almost all the gold mining regions of the Far East occupy leading positions in the ranking of the subjects of the federation in terms of production. At the same time, Kamchatka shows the most rapid growth in production, which is not yet one of the largest gold producers: last year 4,2 tons of gold were mined there, which is almost a quarter higher than the previous year.
It is worth highlighting several drivers of gold production growth, which will allow the macro-region to significantly increase current production indicators. Firstly, in August 2015 year in Magadan Oblast, the gold-mining GOK Pavlik (IC Arlan) was put into full operation. The reserves of precious metal in this field are estimated at 150 tons, and they should be enough for 20 years of operation. The output of gold is planned to be increased to 10 tons per year. The launch of this mining and concentration plant has become a very important event in the economic life of the region. Taking into account the plans to develop other new deposits, Magadan region is able to once again gain a foothold in one of the leading positions in the gold mining industry of the country and, probably, to achieve a confident first place.
Thus, the large growth of gold production in the Far East as a whole and in the Magadan region in particular will be facilitated by the start of operation of the Natalka Mining and Processing Division (Polyus company). The launch of the mine was transferred several times, but now it can be argued with high probability that it will be put into operation in the 2018 year. The Natalka mine with the production of gold more than 40 tons per year can become the largest gold mining enterprise not only in the Far East, but in the whole of Russia. This investment project has acquired a priority status in the federal government, which will allow it to receive about 10 billion rubles in state support for the development of the field infrastructure. First of all, the field needs an energy infrastructure, without which it was impossible to get down to work for a long time.
Secondly, in September 2015 the Ametistovoe mine was launched (the Kamchatka Gold Company, part of the Renova Group of Companies) in the Kamchatka Territory. "Amethyst" is the largest studied deposit of ore gold in the region with proven reserves of more than 52 tons of gold. In the spring of 2016, GOK reached its designed capacity, it is able to process up to 600 thousand tons of ore and produce about 4 tons of gold per year. The launch of Ametistovoye GOK will double the production of precious metals in Kamchatka, which is gradually consolidated in a number of significant gold mining regions of the country.
Thirdly, the state allocated a subsidy to support gold mining in the Selemdzhinsky district of the Amur Region, which Petropavlovsk is engaged in. The program received the status of a priority investment project, in connection with which the state allocated 1,1 billion rubles in 2015 and another 2 billion rubles in 2016, and the total amount of state support should amount to 5,5 billion rubles. Investments will go to the construction of the transmission line 220 kV "February-Rudnaya" in the Selemginsky district.
Nevertheless, the implementation of some projects of the gold mining industry has dragged on. Among them - development of Nezhdaninskoye field in Yakutia, the right to develop which the company "Polyus" received back in 2005 year. It is worth noting that Nezhdaninskoye is difficult to implement a project that requires large investments in infrastructure. As a result, in 2015, Polyus, along with another major player, Polymetal, began the creation of a joint venture to develop the field. It is worth noting that the "Pole" is more focused on the development of Natalka, so the development of the Nezhdaninskoye field is not a priority for the company. However, the creation of a joint venture indicates a high probability that work on Nezhdaninskom all the same begin.
From extraction to cutting
As for Russia's diamond mining industry, it is still almost completely concentrated in the Far Eastern Federal District. At present, about 99% of all the country's diamonds are mined in Yakutia, and the main player is ALROSA, whose share in the world market is about 25%. If we talk about the latest development trends of the company and the industry as a whole, then it is worth noting plans for a small decline in production in 2016 due to the fall in world prices for diamonds. In 2015, the company produced 38,3 million carats, but ALROSA managed to sell only 30 million carats, which led to a significant increase in inventories. As a result, in 2016, the company's management decided to reduce production to 37 million carats, mainly due to placer deposits.
It is worth noting that the company one of its priorities puts the development of the cutting industry to increase the added value of products. However, the cut will not be performed on the territory of Yakutia. In the Far East, a significant event will be the opening of the diamond exchange in Vladivostok. The opening of the diamond exchange should contribute to a more active promotion of ALROSA's products in the promising markets of the APR in connection with the gradual change in the scheme of international supplies of Russian diamonds. It is worth noting that the idea of the diamond exchange was actively promoted by the Plenipotentiary Representative of the President in the Far Eastern Federal District, Deputy Prime Minister Yuri Trutnev, curator of ALROSA in the Russian government. In addition, the diamond mining company ALROSA on the basis of the Verkhne-Munsky ore field in Yakutia, recognized as a priority investment project, received a state subsidy of 8,53 billion rubles.
Also it must be noted that in 2016, ALROSA was the first state company to go through the privatization process - 10,9% of the company's shares were transferred to private hands. However, as a result of privatization, we can not say that ALROSA has a new key investor, as the shares were purchased by various portfolio investors from Russia, Asia and Europe. Thus, the company's freefloat increased to 34%, while the federal government retained a package of 33%, while the government of Yakutia owns 25% plus one share, and 8% - to the regions of Yakutia. Regional authorities still insist on keeping the shares in their hands, seeking to influence the work of the key company of Yakutia.
New projects with state participation
In the Far East, there are also large reserves of metallurgical raw materials represented by iron ore deposits, but in the Soviet era they were not developed, as they were not considered to be profitable. The pioneer here is Petropavlovsk - Black Metallurgy, a subsidiary of GC Petropavlovsk, the only producer of iron ore in the region. This company is engaged in the creation of a mining and metallurgical cluster for the extraction and processing of iron ore in the Amur region and the Jewish Autonomous Region. In 2010, a relatively small Olekminsky GOK was commissioned on the basis of the Kuranakh deposit, the design capacity of which is 900 thousand tonnes of iron ore concentrate with an iron content of 62,5%.
Currently, preparations are underway for the launch of the Kimkano-Sutarsky GOK in the Jewish Autonomous Region, which will become the largest mining company in the region. The commissioning of the mine was postponed several times, but finally it became known that the launch will take place in the fall of 2016 of the year, and in 2017 the company will reach its design capacity. The production capacity of the first stage of Kimkano-Sutarsky GOK is 10 mln. Tons per year for the original ore and 3,15 mln. Tons of iron ore concentrate with 65% iron content. It is assumed that in the future GOK products will be exported to China through the Nizhneleninskoe-Tongjiang bridge under construction. For the Jewish Autonomous Region, the poorest region of the Far East, Kimkano-Sutarsky GOK can be a breakthrough project, ensuring the growth of production indicators and budget revenues. The next iron ore processing project in the macro-region will be Garinsky GOK in the neighboring Amur Region, whose production capacity will also be 10 million tons of ore per year. Moreover, the products of Garinsky GOK will be supplied for deep processing at the Kimkan-Sutarsky Combine, which is becoming the main center of the mining and smelting cluster in the Far East.
However, Far Eastern iron ore projects are being implemented quite slowly, due to the lack of investment resources and problems with the sales markets. For example, the construction of the Taiga Mining and Processing Plant in South Yakutia has not yet begun, the design capacity of which is 4,1 million tons per year. The project is to be implemented by a joint venture of the Evraz Group and ALROSA-Timir GC, which owns a license for the development of four deposits (Taezhnoe, Desovskoye, Tarynnakhskoye and Gorkitskoye). However, ALROSA decided to sell its stake, and thus withdraw from the project, which, however, is expected, since in reality this project was dealt with only by Evraz.
It is also worth noting new important projects in the field of non-ferrous metallurgy. Recently, the recovery of tin mining started, which in Soviet times was another specialization of the Far East. By the end of 2016, the Molodezhny deposit, launched last year, and the concentrator in the Sunny district of the Khabarovsk Territory, which is currently the main tin mining center in the Far Eastern Federal District and Russia, are due to reach their designed capacity. It is planned to produce at the level of 400 thousand tons of ore. Another key center for tin mining is again Yakutia, where in 2017 the "Tikherekhi Creek" project will be launched, which envisages the development of a large deposit of alluvial tin. The volume of production will be from 500 tons to 3,5 thousand tons of tin per year, whereas the annual needs of the country in tin are 6,5-7 thousand tons. At the moment, Russia imports up to 90% of the required tin, so the creation of new Far Eastern capacities will again lead the country to self-sufficiency.
The Far East has long remained the most important reserve for copper mining in the country. Here about 40% of all Russian copper reserves are concentrated, which are practically not developed. The subsidiary company Millhouse - GDK Baimskoye received in 2015 a license for the exploration and extraction of non-ferrous and precious metals at the Baim copper-porphyry area in the Chukotka Autonomous Okrug, including the Peschanka deposit, the largest copper deposit in the Far East. In case of parallel implementation of all necessary infrastructure projects (first of all - energy supply of deposits) Chukotka is able to turn into a new center of growth of the copper industry in Russia. An interesting project in the Khabarovsk Territory is, in the meantime, the development of the gold-copper-porphyry Malmyzh deposit with reserves of 5,6 million tons of copper and 298 tons of gold, which will be handled by the American-Canadian company Amur Minerals. Investments in geological exploration work at this field have already amounted to 1 billion rubles. Recently, the Russian government supported the granting of a license for the field to a Western investor, which creates excellent prospects for this field and allows attracting important investments to the Khabarovsk Territory.
In general, we can say that the mining industry of the Far East is developing quite well and successfully. Gold mining is on the rise, in which both Russian and foreign investors are investing. Renewal is noted in the ferrous metallurgy, where the ambitious project of the mining and metallurgical cluster is gradually being implemented. In addition, the Far East is intended to become the center for the revival of the tin industry in Russia, as well as to begin large-scale copper mining. Meanwhile, the diamond industry is adjusting its strategy to the conditions of falling prices and looking for new sales markets in the APR. The state support of a number of priority investment projects in the mining industry is of considerable importance.