Russia Mining Report Q3 2012

Published : August 2012
No. of Pages : 64

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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 63Table: Recent Tax Increases . 10

Table: Largest Coal Projects . 12

Table: Major Frontier Mining Projects . 13

Table: Major Nordic Mining Projects. 17

Table: Key Gold Projects In Eastern Europe . 18

Table: Russia''s Mining Industry Value And Production . 21

Table: Russia''s Coal Production . 23

Table: Russia''s Largest Platinum Projects . 25

Table: Russia''s Platinum Production . 25

Table: Russia''s Largest Palladium Projects . 27

Table: Russia''s Palladium Production . 27

Table: Russia''s Largest Nickel Projects . 29

Table: Russia''s Nickel Production . 29

Table: Russia''s Largest Iron Ore Projects . 31

Table: Russia''s Iron Ore Production . 31

Table: Mining Business Environment Risk/Reward Ratings . 34

Table: Russia''s Largest Mining Projects . 38

Table: Russia - Comparative Metrics . 39

Table: SUEK - Financial Results . 43

Table: Norilsk Nickel''s Financial Data . 47

Table: Polymetal - Financial Results . 50

Table: Select Commodities – Performance & BMI Forecasts . 60

Table: Mining Business Environment Indicators . 62

Table: Weighting Of Components . 63

Russia Mining Report Q3 2012

Published By: Business Monitor International

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