Russia intends to move to third place on the list of the world's largest gold miners by 2016
By Vladislav Vorotnikov
|Seligdar has successfully employed |
heap-leaching technology for gold
extraction in the Republic of Sakha
(Yakutia), which endures severe
swings in climate.
Russia ranks fourth in the world gold production. In 2012, the country produced about 212 mt of gold. For the first time ever in modern Russia's history, its output surpassed total production from South Africa.
Russia has the second largest gold reserves in the world, as well as significant probable reserves—about 18,000 metric tons (mt). The largest share of gold reserves are located in the eastern regions, in southern Siberia, and in the Ural region. Russia has identified 5,862 gold fields including 5,443 placer, 419 hard rock and 133 complex fields.
According to the official forecast by government experts, the country's gold mining industry is now entering a period of "stable growth" with the main operational figures rising by 4%-5% per year until 2020. As a result of this trend, The Russian Union of Gold Miners expects that in the next three years, through a number of investment projects and the development of new gold deposits, Russia will move to third place among the largest gold miners, producing an estimated 250 mt and overtaking the United States by 2016.
The Structure of the Russian Gold Mining Industry
In 2012, the level of mining in Russia rose by 7.2% to 212 mt in year-on-year figures, as announced in mid-February by Sergei Kashuba, chairman of the Russian Union of Gold Miners. According to Kashuba, the level of mining will rise steadily until 2020, which will allow the government to maintain high prices for this precious metal on the market.
|Table 1: The Largest Gold Deposits in Russia|
|No.||Gold Deposit||Owner||Gold Content
(grams per mt)
(mt/ million ounces)
|1||Natalkinskoi||Polyus Gold||1.7||1,500 / 48.0|
|2||Sukhoi Log||State||2.7||1,029 / 33.0|
|3||Hezhdaninskoi||Polyus Gold||5||477 / 15.0|
|4||Olimpiada||Polyus Gold||3.9||377 / 12.0|
|5||Blagodatnoi||Polyus Gold||2.4||222 / 07.0|
|6||Maiski||Highland Gold||16.3||136 / 04.0|
|7||Kuchus||Polyus Gold||9.8||136 / 04.0|
|8||Kupol||Bema Gold||16.9||120 / 03.8|
|9||Kuranah||Polyus Gold||1.7||110 / 03.5|
|10||Pioneer||Peter Hambro Mining||1.4||100 / 03.0|
|11||Svetlinskoi||Uzuralzoloto||2.6||100 / 03.0|
|12||Darasun||Highland Gold||10.3||96 / 03.0|
|13||Vnogovershinnoi||Highland Gold||7.7||87 / 02.8|
|14||Veduga||Trans-Siberian Gold+Sigma||N. A.||72 / 02.3|
|15||Vorontsovskoi||Polimetal||4.9||62 / 02.0|
According to official statistics reported by the Russian Federal Statistics Service (Rosstat) in 2012, the level of gold mining rose in:
- Krasnoyarsk Krai by 11.3% to 44,041.1 kg;
- Amur Oblast by 0.5% to 29,265.8 kg;
- Republic of Yakutia by 9.6% to 21,222.5 kg;
- Magadan Oblast by 30% to 19,659.5 kg;
- Irkutsk Oblast by 11.9% to 19,000.4 kg;
- Khabarovsk Krai by 4.4% to 13,025.5 kg;
- Trans-Baikal region by 7.7% to 6,772.4 kg;
- Chelyabinsk Oblast by 33.8% to 5,025.4 kg;
- Republic of Tiva by 25% to 1,709.0 kg; and
- Republic of Khakassia by 10.4% to 1,282.0 kg.
At the same time, the level of gold mining in 2012 year-on-year volume fell in:
- Chukot Autonomous Area by 10.8% to 17,978.7 kg;
- Sverdlovskai Oblast by 5% to 7,748.9 kg;
- Republic of Buryatia by 7.8% to 5,991.0 kg; and
- The Kamchatka region by 1.3% to 2,456.5 kg.
|Table 2: Gold Production from Russian Regions in 2009-2012 (mt)|
|2009||2010||2011||2012||% 2012 to 2011|
|Chukot Autonomous Area||31.2||24.9||20.1||18||-10.8|
|The Republic of Yakutia||18.6||18.6||19.4||21.2||9.6|
|The Pepublic of Buriatia||6.6||6||6.5||6||-7.8|
|The Republic of Tiva||1.2||1.4||1.4||1.7||25|
|The Republic of Khacassia||0.7||1.2||1.1||1.2||10.4|
In 2012, growth in Russian gold mining was due to the increased activity of several companies, including: Polyus Gold, in particular its Olimpiada mine in Krasnoyarsk Krai, the Verninskoye mine in Irkutsk Oblast, and the Kuranah mine in the Republic of Yakutia; and Polymetal, in particular its Omolon mine in Magadan Oblast and the Albazinskoj mine in Khabarovsk Krai, as well as the Visochishi mine in the Irkutsk region and some others. A slight decline in production was noted at the Kupol mine in the Chukot Autonomous Area due to the planned reduction of gold content in the processed ore.
|Polyus Gold's Blagodatnoe mine in the Krasnoyarsk Krai region.|
The main characteristic of the Russian gold mining industry in recent years has been a trend toward consolidation. Currently, the top five players account for more than 50% of the total level of mining in the country. Experts from the Ministry of Subsurface Resources predict the consolidation in coming years will continue with the acquisition of small and medium enterprises by the largest companies. As a result, by 2020, the top five Russian gold mining companies could account for more than 65% of the total volume of mining.
In total, the Russian industry currently comprises 400 gold mining companies. The top 26 companies account for more than 80% of the total market share.
|Table 3: Gold Production by Russia’s Top 10 Companies in 2009-2012 (mt)|
|2009||2010||2011||2012||Changed Compared to 2011 (%)|
|1. Polyus Gold||38||39.6||42.8||48.8||13.9|
|2. Petropavlovsk Plc||14.8||13.9||21.2||22.1||13|
|4. Chukotka Mining and Geological Co||25.5||19.9||16||14.5||-7.8|
|6. Highland Gold||5.1||6.2||5.7||6.7||18|
|7. Yuzhuralzoloto Group||5.2||4.8||5.1||6.5||27|
|10. Susumansky Gold||1.6||3.1||3||3.7||13.5|
|Total for Top 10||115.8||113.9||124.1||136.9||10.3|
|Total for Russia||178.4||178.1||188.7||212||7.4|
Also, by the end of this decade, the share of production of placer gold is expected to decline from its current 30% to 25% because the state does not fund exploration of placer deposits. At the same time, the share of hard rock gold mining will rise to 75% (from the current 70%). However, it is predicted that stable growth will be achieved in both segments, attributed mostly to recent developments of mining in the Sukhoi Log gold deposit, one of the largest in the country and the only one that still belongs to the state.
Currently, Russia doesn't have undistributed deposits with significant gold reserves, which has led to the expansion of company activity abroad (Polyus Gold to Kazakhstan; Petropavlovsk to Venezuela and Guyana; Polymetal to Kazakhstan; Highland Gold to Kyrgyzstan; and Severstal to Kazakhstan, Burkina Fassi and Guinea). Medium and small gold deposits are not of interest to large companies unless they are located in the immediate vicinity of their production assets. As a result, large companies have begun a gradual sale of their non-core assets to the smaller companies, which will result in an increase in the number of small companies in the Russian market in coming years. Paradoxically, this trend will occur in parallel with the consolidation of the industry.
Gold Mining and Investment by the Largest Companies
In first place among Russian gold miners is Polyus Gold, which increased 2012 gold production in Russia by 13.9% to 1.569 million oz/48.8 mt compared with 2011. Mining from deposits in the Krasnoyarsk region provided Polysus Gold with 1,171,000 oz/36.4 mt of gold; the Olympiada mine provided 653,000 oz, with Blagodatnoye adding 401,000 oz and Titimukhta, 117,000 oz. In the Irkutsk region, the company mined 260,000 oz/8.1 mt of gold. The Verninskoye mine produced 46,000 oz, while the Alluvial deposits produced 214,000 oz. In Yakutia, the Kuranakh deposit produced 138,000 oz of gold.
|Milling facilities at Polyus Gold's
The total level of gold mining in 2012 for Polyus Gold, including its assets in Kazakhstan, increased by 12% to 1.68 million oz/52.25 mt in a year-on-year comparison. The company's revenue rose 22% to $2.8 billion. By the end of 2013, the company expects to produce 1.7 million to 1.8 million oz/53-56 mt of gold in total and 1.59 million to 1.68 million oz/ 49.5-52.2 mt, excluding assets in Kazakhstan.
In 2012, the group of companies comprising Petro increased gold mining by 12.7% to 710,400 oz/22.1 mt compared with 2011. Mining in the Pioneer deposit declined 7.1% to 333,600 oz/10.38 mt, while in Malomyr it increased 16.7% to 103,300 oz/3.2 mt. At the Porkovskay deposit, mining grew 0.3% to 92,100 oz/2.86 mt, and at Albyn, mining grew 89,300 oz/2.78 mt vs. 1,100 oz a year earlier. Gold mining in the Alluvial deposits rose 2.8% to 92,100 oz/2.86 mt. The group's main assets are concentrated in the Amur region in far eastern Russia. By the end of 2013, the company plans to mine 740,000 to 780,000 oz/23-24.3 mt of gold.
In 2012, Polymetal increased its gold mining by 33% to 589,000 oz/18.3 mt in a year-on-year comparison. The Dukat deposit produced 36,200 oz; the Khakanja mine in Khabarovsk Krai, 90,800 oz; Voro, 154,400 oz; Omolon, 129,000 oz; and in Albazino-Amursk, 77,500 oz. The company's revenue rose 40% to $1.855 billion. In 2013, the company plans to produce 1.2 million oz/37.3 mt of gold. It also expects the cost of mining an ounce of gold to cost $700-$725, while the volume of capital investments in developing its mine assets is estimated at $300 million.
|Table 4: Top Five Foreign Gold Miners in Russia in 2005-2012 (mt)|
|Company||The Main Assets||Level of Mining|
|Kinross Gold Corp.|
|(Great Britain)||Pokrovskoe, Pioneer||7||7.4||8.4||12.2||14.8||13.9||21.2||22.1|
|Highland Gold Mining|
|Central Asia Gold|
|Total share of the|
|foreign companies in|
|Russian gold mining (%)||—||16.1||15.1||15.6||23||27.4||24.8||25||25.4|
JSC Chukotka Mining and Geological Company, a subsidiary of Canadian Kinross Gold, reduced gold mining at the Kupol deposit 7.8% to 14,486 kg in 2012. The level of mining fell early in the year as the mine began a planned transition to process ore with lower gold content.
In 2012, Nordgold produced 327,400 oz/10.18 mt of gold, which amounted to $546.3 million in revenue. In the Berezitovy deposit, the volume of gold output rose 9% to 116,300 oz/3.6 mt and revenue increased 17% to $193.6 million, according to the company. At the same time, the mines at the Buryatzoloto deposit reduced gold output 19% to 108,900 oz/3.39 mt and revenue fell 14% to $181.3 million. The Neryungri deposit also reduced gold output by 9% to 66,300 oz/2.06 mt, with revenue declining 6% to $111.4 million. The Aprelkovo deposit increased gold output 18% to 35,900 oz/1.1 mt with revenue rising 22% to $60 million.
|Polyus Gold's Timituhta mine in
Currently, the company is preparing to start gold mining in the Gross deposit in the Republic of Yakutia. A number of new mines in this deposit will be commissioned by the end of 2013. For mining development in the Gross deposit, Nordgold will spend $70 million. In total, in 2013, Nordgold plans to produce 770,000 to 850,000 oz/23.95-26.44 mt of gold. According to analysts, Nordgold's production will peak in 2015 at 970,000 oz/ 30.17 mt of gold. After that, yearly output will begin to decline.
In 2012, British Highland Gold Mining saw gold mining increase 18% to 216,885 oz/6.7 mt in a year-on-year comparison. At MNV in Khabarovsk Krai, gold mining rose 3.2% to 148,493 oz/4.6 mt, while at the Novo deposit in Trans-Baikal Krai, mining decreased 6.5% to 64,438 oz/2 mt. At the White Mountain deposit in Khabarovsk Krai, mining fell 43% to 3,954 oz/123 kg. In 2013, the company will begin equipment delivery to the Klone gold deposit in Chukotka, which the company acquired in July 2012. Gold mining here is scheduled to begin in 2015 at about 50,000 to 60,000 oz/1.56-1.87 mt/y from mine output of processing of about 300,000 to 400,000 mt of ore. The content of gold at this deposit is reported at 5.1 g/mt. For 2013, the company plans to mine 225,000 to 240,000 oz/7-7.5 mt of gold.
JSC Yuzhuralzoloto Group saw a rise in gold mining by 27% to 209,000 oz/6.5 mt compared with 2011. In 2013, the company will commission a gold processing plant at the Bereznyakovskaya deposit with a total capacity of 450,000 mt/y of ore. The company will use pressure leaching technology at this plant. In September 2012, Yuzhuralzoloto began construction of a gold processing plant in the Svetlinskaya deposit with a total capacity of 8 million mt/y of ore. Construction should be completed by mid-2013. According to the five-year development plan of Yuzhuralzoloto, the Ural assets will be a major growth point for the future. Expected production of the Ural assets will rise by 12 mt/y of gold.
|Recapitalized gold mining operations plan
to replace much of the antiquated equipment
still being used in many of the pits.
In 2012, the Visochaishi Company increased gold mining 18.6% to 168,000 oz/5.23 mt compared with 2011. Gold sales rose 17.4% to 5.215 mt, while gold sales revenue increased 29% to $290 million. Gold mining in the Golec Visochaishi deposit in Irkutsk Oblast rose 16.8% to 4.866 mt. In the Great Kuranakh deposit in the Republic of Yakutia, the company increased gold mining by almost 50% to 353.5 kg. In 2013, Visochaishi plans to increase this figure to 6 mt. Capital expenditures are expected to reach $100-$120 million in 2013. In 2012, the company also purchased the Drajnoie gold deposit in the Republic of Yakutia for $20 million.
Gold production by Sovrudnik was expected to amount to 3.95 to 4 mt in 2012. In 2011, output from this area was 3.561 mt. The company has not provided official data on 2012 production, but for the first nine months of 2012 it increased production 16% to 2.885 mt in a year-on-year comparison. Sovrudnik has production operations in the North-Yenisei region of Krasnoyarsk Krai and appears to be the second-largest gold mining company in the region. The main raw deposits of the company are Eldorado, Soviet and Alexander Ageevskoe. The total balance resources on licensing of facilities are estimated at 71.3 mt of gold C1+C2.
In 2012, JSC Susumansky Gold increased mining in the Kolyma region 13.5% to about 3.7 mt, compared to 3.56 mt in 2011. In 2013, the company plans to keep gold production at the same level. After encountering difficulties due to its rapidly depleting ore base, the company began acquiring mining enterprises, not only in Magadan Oblast, but also far beyond its previous operational borders. In particular, the company purchased the Omchak deposit in Trans-Baikal Krai, and will soon begin construction of a mine there.
The Expansion of Foreign Companies
In recent years, foreign companies have been steadily increasing their shares in the Russian gold mining industry. However, out of the 30 foreign companies that have been interested in gold mining in Russia at various times, there are only 14 left. Eight of them are the owners of existing mining projects (or included in joint ventures). They include: Peter Nambro Mining, Angara Mining, Highland Gold Mining, High River Gold, Kinross Gold, Central Asia Gold, and divisions of transnational corporations, such as Leviev Group, Sun Group and Lundin Group.
|A blast at Polyus Gold's Olimpiadnenskay
mine in Krasnoyarsk Krai.
It is estimated that as many as nine additional companies are considering investments that would involve them in the Russian market. Another six companies, including Trans-Siberian Gold (U.K.), Kola Mining (Canada), Sun Mining & Exploration Ltd. (India, Sun Group), Zoloto Resources (Canada), Fortress Minerals Corp. (Canada/ Lundin Group) and Ovoca Gold (Ireland) are currently carrying out exploration with varying degrees of intensity with the possibility of further investments.
In total, foreign companies currently account for 70 ore deposits, ore occurrences and areas, and up to 30 placer deposits in Russia. This is about 1,000 mt of resources or about 30% out of the capacity of all gold-mining objects in the stages of design, preparation and exploration in the country, and at least 1750 mt of expected resources. And with further investments by foreign companies, this figure is about to rise.
A freelance journalist based in Moscow, Vladislav Vorotnikov contributes regularly to Engineering & Mining Journal and other industrial and agricultural trade journals. He can be reached at: [email protected]