How is Russia developing rare earth metals?

All that glitters IS gold, when it comes to Russian mining

The nation is well placed to enjoy a golden future, as it continues a major gold development push. From new projects to production updates, we chart the course of Russian gold mining, its challenges, and the opportunities it is creating for mining professionals worldwide.

Russia’s gold mining industry

Rising output puts Russian on course for global gold supremacy

One of our top trends to watch in Russian mining in 2020 is its continued growth in gold output. Russia could very well become the world’s second largest gold producer by 2023.

China, the current world leader, and number two Australia are seeing production slowdown.

As it stands, Russia producers over 80% of all European gold, so it is a major player in international markets.

It all depends on annual output. As Australia’s, expected to peak in 2020 at 346 tons, is in decline, Russia’s is currently on an upward trajectory. For instance, production rose 13% y-on-y in Q1 2019.

The previous year saw Russia mine 297.3 tons of gold, according to Metals Focus, representing a 5.9% increase.

The Union of Russian Gold Producers (URGP) domestic forecasts suggest Russia has already passed this, with its internal estimates suggesting Russian producers mined over 350 tons in 2018. However, with estimates varying, the Metals Forecast analysis is likely the most accurate.

One thing benefiting Russian gold is its production costs. For example, resources mined at Svetloye Mine, an operation run by market-leaders Polymetal, are amongst the world’s lowest in terms of cost per ounce. In 2018, gold extracted from Svetloye was valued at $425 per ounce.

Projects add to Russia’s gold potential

At present, Russia sits on roughly 8,000 tons of recoverable gold reserves.

Even so a spate of upcoming projects, and new discoveries either from fresh exploration or new discoveries at existing mines, will add further resources.

For example, in January 2020, Trans-Siberian Gold discovered a new zone in Asacha gold mine, an underground operation in Kamchatka.

In a 400-metre area north of Asacha Vein 25, dubbed Vein 25 North, 133 grams of gold per ore ton was discovered upon initial drilling. These are healthy numbers and drilling in other sectors has uncovered similar gold-ore ratios.

Trans-Siberian Gold plans on drilling throughout 2020 across its various operations, aiming to achieve 25,000 metres by year’s end – testament to Russian miners’ commitment to exploration and production expansion.

Polyus, amongst Russia and the world’s chief gold companies, is also doing its bit by investing in huge projects. The most significant of these is Sukhoi Log, the fourth largest gold deposit globally, according to Mining.com.

Sukhoi Log will have a maximum initial capital outlay of $2.5bn, involving construction of mining and processing facilities. Its potential lifespan is as high as 35 years, with annual production levels of roughly 1.6m ounces at a low cost of $420-470 per ounce, once fully operational in 2026.

This would make Sukhoi Log number two globally in terms of annual output behind only Muruntau in Uzbekistan.

Polyus started full-time production at its Natalka project, situated in Magadan, Northeast Russia, in 2019, which again is another very significant project. It’s expected to pump out up to 470,000 oz of gold annually for 24 years.

Canada’s Kinross, one of the biggest foreign players in Russia’s gold sector, is also pushing along with its recently acquired $283m Chulbatkan heap leach development project.

Located in the Khabarovsk of Far East Russia, Chulbatkan holds as much as 3.9m oz of gold in indicated mineral resources, and 80,000 oz of gold in inferred mineral resources.

Kinross is currently undertaking pre-feasibility studies and feasibility studies, which are expected to take three years. A two-year construction period is expected, so we’re looking at a 2025 production start at Chulbatkan at the earliest.

International interest in Russian gold is by no means a recent phenomenon as mining professionals will no doubt know.

China is certainly very interested in shoring up its supplies with Russian resources as its own production levels drop.

In 2017, Far East Development Fund, a Russian state-owned entity, partnered with China Gold to invest $1bn into developing gold sites in Russia and the Far East.

With the Russian Union of Gold Producers targeting 400 tons annual production by 2030, there remains huge potential for gold mining in Russia, and its projects like the above that are helping fuel continued growth.

Issues & opportunities in Russian gold mining

Although the potential is massive, there are still some aspects of Russia’s mining sector that could hold back gold development. Challenges facing the sector are:

Quality of ores – Russia’s natural bounty is massive, but the quality of ores extracted from gold fields tends to be of a lower grade when compared with other leading gold producers. As such, the largest costs associated with gold production in Russia come from ore refinement, despite the competitive price of Russian end product.
Regulations & sanctions – Sanctions may not have had the impact on Russian mining many forecasters predicted, the tricky political situation regarding Russia and the West, in particular the USA, may rear its head and affect gold mining operations. It’s worth keeping a close watch on the ongoing international situation to spot if potential future sanctions are coming, and how they may affect Russian gold mining.
Lack of infrastructure on key projects – In a similar vein to coal mining, a lack of supporting infrastructure, such as road networks and even trucks and transport equipment, can hamper gold projects in Russia. With those challenges, however, come significant opportunities:
Transport equipment – Moving ores to production and refinement facilities is a must for all mining developments, but in Russia this is particularly necessary. The lack of modern transportation solutions has created a gap in the market waiting to be filled.
Refinement equipment – Again, because of the relatively low grade of ore, up-to-date refinement and processing technologies are very much in high demand throughout Russia’s gold sector.

There are trends separate from each challenge that dovetail neatly into Russia’s top mining trends, as well as fitting into the gold market.

Modernisation – Related to the above but more a mining-wide opportunity, local players are seeking out technologies that can increase productivity and boost efficiency. This includes heavy machinery, but also IT solutions, such as Wi-Fi, software, and communications technologies.
Health & safety – A 2015 survey of Russian miners said improving working conditions and safety in mines is a top priority. Following on from a recent decree from the Ministry of Mining, this is now enshrined in law, and as such has generated high demand for mine health & safety equipment throughout Russia.
Energy efficiency – Russia miners are increasingly energy and eco-conscious, so any solutions that will reduce fuel, power and other related consumables, and improve efficiency, are welcome.