Russia Mining Report Q3 2012
Business Monitor International, August 2012, Pages: 64
The 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.
We expect Russia's mining industry value to reach RUB4.16trn (US$160bn) by 2016. Strong growth during 2009 to 2011 will be followed by years of stagnation as palladium and platinum production growth in the country from 2012 to 2016 practically ceases. Nevertheless, we have a positive view on the Russian mining industry given the country's vast unexplored mineral resources. We like coal as the government plans to invest RUB3.7trn (US$120bn) on the sector from 2012 to 2030. As for platinum and palladium, we do not expect significant growth in the sector given Norilsk Nickel's plans.
The government will continue to have a strong influence on the industry. For example, total palladium supply from Russia is complicated by palladium sales from government stockpiles which are very large relative to primary production. Foreign firms are also restricted in investing in the industry. Companies seeking to develop a 'strategic resource', defined as a region with more than 1.6mn ounces of gold and 500kt ('000 tonnes) of copper, must seek permission from a government commission. Diamonds, uranium, cobalt, nickel, lithium, the platinum group metals (PGM), tantalum and niobium cannot be mined by foreign firms. In practice, legal obstacles to foreign investment have prevented large overseas firms from developing exploration projects, and smaller reserves are relatively unattractive given the bureaucratic problems. We expect the regulatory structure to remain favourable to domestic investment with obstacles to foreign investment remaining. Endemic corruption will likely further dissuade foreign investment.
Looking at production, we are most positive on the coal, nickel, iron sector as we forecast annual average growth rates of 3.48%, 2.11% and 2.04%, respectively. We expect stagnant growth in the platinum and palladium sectors given our average annual growth forecasts of 1.82% and 0.17%, respectively.
Production growth in platinum will be coming from Amur Minerals. Largest producer Norilsk Nickel will not be contributing to production growth in the PGM sector given the company's stagnant to negative production guidance for 2012 and beyond
Executive Summary 5
SWOT Analysis 7
Russia Mining SWOT 7
Global Mining Outlook 8
Table: Recent Tax Increases 10
Table: Largest Coal Projects 12
Table: Major Frontier Mining Projects 13
Europe: Mining Sector Outlook 14
Table: Major Nordic Mining Projects 17
Table: Key Gold Projects In Eastern Europe 18
Industry Trend Analysis 19
Table: Russia's Mining Industry Value And Production 21
Industry Forecasts 22
Coal: Political Risks To Increase 22
Table: Russia's Coal Production 23
Platinum: Norilsk To Increase Production 24
Table: Russia's Largest Platinum Projects 25
Table: Russia's Platinum Production 25
Palladium: Production To Be Flat 26
Table: Russia's Largest Palladium Projects 27
Table: Russia's Palladium Production 27
Nickel: Slowing Growth Ahead 28
Table: Russia's Largest Nickel Projects 29
Table: Russia's Nickel Production 29
Iron Ore: Modest Growth Ahead For Russian Miners 30
Table: Russia's Largest Iron Ore Projects 31
Table: Russia's Iron Ore Production 31
Regulatory Development 32
Business Environment 33
Table: Mining Business Environment Risk/Reward Ratings 34
Competitive Landscape 37
Table: Russia's Largest Mining Projects 38
Table: Russia - Comparative Metrics 39
Company Profiles 40
SUEK 40
Table: SUEK - Financial Results 43
Norilsk Nickel 44
Table: Norilsk Nickel's Financial Data 47
Polymetal International 48
Table: Polymetal - Financial Results 50
Commodities Forecasts 51
Monthly Metals Update 51
Steel Prices Have Topped Out 52
Copper: Relative Outperformer But Still Weak 54
Tin To Outperform 55
Aluminium: Substantial Support Around US$1,900/tonne 56
Nickel: Oversupply Pushing Prices Lower 57
Break Of Support On The Cards For Lead 58
Zinc: Downward Trend Continues 59
Table: Select Commodities – Performance & BMI Forecasts 60
Business Environment Ratings Methodology 61
Table: Mining Business Environment Indicators 62
Table: Weighting Of Components 63
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