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Article Excerpt
IN BRIEF
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*** The starting price for the license to the giant Sukhoi Log gold deposit in Russia's Irkutsk region will be at least 1 billion euro, according to a new calculation method for the starting price for license bids, the Siberian Federal District's Natural Resources Department said this week. There is concern the new method might be beyond the means of a Russian company in current economic conditions. As the deposit is one of only two metals deposits to be considered of federal strategic significance, and can therefore only be awarded to companies which are at least half Russian-owned, it may mean that any tender for the license is postponed indefinitely.
*** The amended Russian budget will now allocate a further 50 billion rubles this year to state nuclear corporation Rosatom to buy shares in Atomredmetzoloto (ARMZ), the state uranium mining holding, with Rosatom saying the money would go towards the uranium holding's investment program. The amended budget also states that the Investment Fund will allocate 2.391 billion rubles for the Elkon uranium mining project in Yakutia.
*** Russia's Yakutia-based diamond monopoly Alrosa this week approved the terms of long-term contracts on delivery of raw diamonds to 15 companies via the Antwerp World Diamond Center worth an estimated $500 million. Alrosa left the market last December in order to support prices and help dry up the supply of Russian diamonds, selling output only to state-run Gokhran and its decision has been warmly met by the market. In other news, Standard & Poor's Ratings Services this week suspended its 'BB-' long-term and 'B' short-term corporate credit ratings on Alrosa due to a continuing lack of information on its financial and operating performance and prospects, particularly information on the company's sales volumes in the fourth quarter of 2008 and first quarter of 2009, and on the details of its agreement with Gokhran.
*** The Russian government announced this week that it plans to strengthen monitoring over the import of iron and steel in order to prevent false declarations at lower duty rates as part of a number of anti-crisis actions in the industry. The measures are aimed at supporting exports and stimulating domestic demand on the part of the construction industry, manufacturing and the fuel and energy sector. In addition, Russia has reduced import duty on refined copper scrap and waste and copper and zinc alloy scrap and waste from 5% to zero for a period of nine months and extended a 10% import duty on painted, lacquered or plastic-coated aluminum alloy roll thicker than 0.2 mm.
*** The Environmental, Technological and Atomic Oversight Service Rostekhnadzor foresees the closure of around 10 coalmines in Russia owing to the current financial crisis, it was announced this week. Many mines were seen as struggling before the current financial crisis broke, and around ten are seen as in real danger of being mothballed. The Kuzbass area is seen as being specifically at risk from closures.
*** A titanium joint venture between Boeing and VSMPO-Avisma will be opened in July as part of U.S. President Barack Obama's trip to Russia, the country's biggest titanium producer said this week. The venture will engage in the final processing of VSMPO elements for the aircraft's skin and their shipment to Seattle. Previously the venture was scheduled to begin operations at the end of the first quarter. The joint high tech projects between VSMPO-Avisma and United Aircraft Corporation (UAC) will also be carried out, such as the Sukhoi Superjet 100 project.
PRECIOUS METALS
Resources agency estimates Sukhoi Log gold license at EUR1 bln
NOVOSIBIRSK. (Interfax) - The starting price for the license to the giant Sukhoi Log gold deposit in Russia's Irkutsk region will be at least 1 billion euro, according to a new calculation method, Alexander Nevolko, head of the Siberian Federal District's Natural Resources Department, told a press conference at the Interfax-Siberia press center in Novosibirsk.
Nevolko said a new method for calculating the starting price at for license had entered into effect. "As a result, starting payments are becoming disproportionately high," he said. This might be beyond the means of a Russian company in current economic conditions, he said.
"Federal mineral properties can only be awarded to companies which are at least half Russian-owned," he said.
In these circumstances it would not make sense to license Sukhoi Log, Nevolko said. "I don't know what the government will decide, but in general I think that right now it would be premature to license Sukhoi Log," he said.
Olga Gaikova, the Irkutsk region's acting natural resources minister, has said that whoever does develop Sukhoi Log would probably receive the license on the basis of a government order and not by tender.
"The government will probably allocate Sukhoi Log to a company or a consortium," Gaikova has said, adding that a tender would probably not be held.
A feasibility study for Sukhoi Log projects a recoupment period of 12 years for the project.
Sukhoi Log contains just under 2,000 tonnes of recoverable gold at present, but follow-up exploration during the course of the project could increase these reserves to 2,600-2,700 tonnes. A mine at the field could cost 49 billion rubles to build and produce up to 50-60 tonnes of gold per year in time. It would have a life of 30-40 years.
PRECIOUS METALS
Polyus may finance power infrastructure for phase-1 of Natalka
MOSCOW. (Interfax) - Polyus Gold, Russia's biggest gold miner, may finance the construction of power infrastructure for the Natalka gold deposit in the Magadan region out of its own pocket.
Existing power facilities in the region will be sufficient for the first phase of the project if grid infrastructure is extended with the construction of the Omchak substation and replacement of power transmission cable, Polyus said in an April 3 presentation.
Polyus estimates this would cost 1.3 billion-1.5 billion rubles and said it may finance the cost on its own.
Polyus confirmed in a conference call on April 2 that it was prepared to independently finance the power grid upgrade if necessary.
The Polyus board on March 26 approved the feasibility study for the development of the Natalka gold deposit, one of the world's largest with proven and probable reserves of 40.8 million ounces, or 1,270 tonnes with an average grading of 1.13 g/t.
The company plans to launch the gold recovery mill at the deposit in 2013, as previously planned.
The mill will initially produce 10 tonnes of gold per year, which is the maximum amount that can be produced in 2013 given the region's energy capacity, the source said.
Capacity will be increased in future, and the mine is projected to produce 40 million tonnes of ore annually by 2022.
The plant will produce an average of 25-30 tonnes of gold annually in the period from 2013 through 2017, the source said.
Investment in the project was estimated at $2.5 billion this time last year, before the global crisis took hold. The new plans enable the company to invest $1 billion, with the recovery plant generating the remaining $900 million after it has been launched.
The source said the company expects to carry out this project without attracting any external financing.
Regional Development Minister Viktor Basargin said earlier that the government is prepared to co-finance the creation of energy infrastructure at the Matrosov mine, which is developing the field.
Polyus projects that the mill will process about 20 million tonnes of ore annually in 2017-2021, producing 1.1-1.4 million ounces of gold, and then double processing capacity to 40 million tonnes of ore, producing 1.6 million ounces.
The Natalka project is expected to require power consumption of 267 MWh in 2013-2017, 532 MWh in 2018-2023 and 978 MWh in 2024-2041.
The Magadan region now has the 900 MW Kolyma hydropower plant, the 224 MW Arkagalinskaya condensing plant and the 96 MW Magadan combined heat-and-power plant. The available capacity of these facilities is sufficient only to meet the needs of the first phase of the deposit's development.
The company will only be able to expand the capacity of the gold recovery mill to 40 million tonnes of ore after the launch of the Ust-Srednekanskaya hydropower plant. In addition, new power lines will need to be built and substations upgraded for the second and third phases of the project.
The feasibility study for the project provides for investment of $1.1 billion in the initial phase. An equal amount, needed to finance both the second and third phases, is expected to be generated by the mill following its launch.
The project assumes a gold price of $700 per ounce, an exchange rate of 32 rubles/$1 and a 15% discount, but it does not factor in inflation.
PRECIOUS METALS
Polymetal acquiring Sopka Kvartsevaya deposit from Levaev group for stock
MOSCOW. (Interfax) - Russia's top silver producer Polymetal has agreed to acquire the Sopka Kvartsevaya gold-silver deposit from Lev Levaev's group of companies for 10 million ordinary shares, Polymetal said in an April 8 press release.
Polymetal is acquiring 100% of Rudnik Kvartsevyi LLC, which holds the license to Sopka Kvartsevaya as well as 100% of Vneshstroygroup LLC, which holds the license to the Dalniy gold-silver deposit. The Polymetal board of directors approved the acquisition at a meeting on April 7.
The deal must receive clearance from the Federal Antimonopoly Service and shareholders have yet to approve the supplementary issue of shares. The deal is expected to close in the third quarter of 2009, the press release says.
Polymetal plans to begin mining operations in the third quarter. In the first quarter of 2010 it will calculate JORC reserves and draw up a detailed plan to develop the assets whose ore will feed the Kubaka plant (Birkachan, Oroch, Sopka, Dalniy). The Kubaka plant is slated to begin operations in the third quarter of 2010 and production of over 100,000 oz of gold equivalent from the ore extracted at Sopka Kvartsevaya will commence in 2011.
The indicated resource at Sopka Kvartsevaya as of 2007 was 1.7 million tonnes of ore (12.9 million oz of silver and 562,000 oz of gold). The inferred resource was 11.7 million tonnes (14.2 million oz of silver and 432,000 oz of gold).
The Russian standard resource at Dalniy was 802 million tonnes of C1+C2 ore containing 152,000 oz of gold and 3.9 million oz of silver.
At the April 7 meeting, the first since the board's election at the end of March, the board of directors also elected...
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