Russia Mining Report Q2 2013: New research report available at Fast Market Research

From: Fast Market Research, Inc.
Published: Thu May 09 2013

We forecast Russia's mining industry value to reach US$160bn by 2017, growing at an annual average rate of 1.3% from 2011 levels. We believe strong growth in 2010 and 2011 will be followed by years of slowing growth as palladium and platinum production in the country experience modest increases over the coming years. Nevertheless, we have a positive view on the Russian mining industry given the country's vast unexplored mineral resources. The coal sector is promising as the government plans to invest RUB3.7trn (US$120bn) in the sector between 2012 and 2030.

The government will maintain 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 miners with obstacles to foreign investment remaining. Endemic corruption will likely further dissuade foreign investment.

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Looking at production, we expect the platinum and palladium sectors to experience modest growth, growing at an annual average rate of 1.7% and 1.0% respectively. Production growth in platinum will be coming from Amur Minerals. The largest producer Norilsk Nickel will not be contributing to production growth in the PGM sector as the miner reduced its target output for palladium in 2013.

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