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Russia Mining Report Q4 2010
Business Monitor International, Oct 2010, Pages: 100
The recent global downturn and the resulting crisis in the Russian economy had a negative effect on Russia’s mining sector which had zero growth in 2008 and suffered a 9% decline in 2009. In 2010 however, the authors expect a return to growth of 7% to end on a total value of RUB4.01tn or US$162bn. They predict this growth to be consolidated in succeeding years with between 4-7% real year-on-year (y-o-y) growth up to 2014. The growth is likely to be led by the big players in Russian mining. The past few months have seen some major Russian companies acquiring assets and expanding their global trading base. Atomredmetzoloto (ARMZ), the mining division of Rosatom, the state energy agency, has acquired a controlling interest in leading Canadian miner Uranium One which has been described as stage one of further mining acquisitions. Rosatom’s Chief Executive Sergei Kiriyenko has been conducting a PR offensive in the West and makes no secret that he wants his agency to diversify its operation across the nuclear industry, of which uranium extraction will play a big part.
Meanwhile, Russian business tycoon Suleiman Kerimov and his associates have been planning the merger of Russian miners Uralkali and Silvinit, to dominate the Russian potash mining business. If he succeeds, the company could become the world’s second largest potash producer.
Russian companies are also becoming increasingly global in outlook as further evidenced by London-listed miner Petropavlovsk’s decision to look at a listing on the Hong Kong stock exchange to raise fund for the development of iron ore mines. The company, normally associated with gold production is looking to diversify its operations in Russia’s far east.
However, things are not always going to run smoothly. The saga of Polyus Gold’s ambitious plan to get listed on the FTSE100 through a complicated reverse takeover of Kazakhgold appears to have come unstuck resulting in a lawsuit in London, frozen bank accounts in Astana and the possible suspension of production in Kazakhstan.
Russian mining companies will also be wary about the decline in confidence of international companies doing business in Russia. The recently reported results of Frasers 2010 Mining Survey show a big drop in the perception as Russia as a favourable environment for business. Russia dropped from 29th to 46th out of the 51 regions covered with 50% of respondents claiming that attitudes to the mining business in Russia had become more hostile. International mining executives were clear that they wanted to see more clarity and consistency in mining regulations as well political stability and attention paid to security concerns.
Despite these problems with its vast territory, Russia remains a mining powerhouse which the authors expect will further develop over the next few years when it is estimated that the sector will be worth US$236bn by 2014.
Russia Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Russia's mining industry.
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