Head of Ministry of Natural Resources Sergey Donskoy told Izvestia about the plans of the state to promote and support the gold mining industry, in particular, on the possibility of tax incentives and creation of venture capital funds to increase the geological exploration (GE) of gold in Russia. Investments of start-up private companies in exploration today make up about 10-15% of the total or about 2.5 billion rubles per year, whereas in other countries, primarily in Canada, this figure may reach 65%, the minister said.
— Now we are analyzing the Canadian experience, in order to use similar instruments, - said Donskoy.
He noted that for the stable operation of the industry, the annual volume of replacement of gold reserves must be at least as simple replacement, that is not less than the production volume - about 280-300 tons per year.
— We provide such a replacement. Moreover, due to the reconciliation of reserves and new discoveries in 2006 and 2008-2011, we incremented significantly more reserves than we mined. In 2015, at the production level of about 280 tons, we incremented 430 tons, - said Donskoy.
Every year the state spends about 3.8 billion rubles on the replacement, and companies at least 18 billion rubles, said the minister to Izvestia.
Since 2014, there is licensing mechanism for companies on application principle in Russia, that is, without contest. Donskoy believes that this mechanism helps to attract investments of start-up companies to the industry. Under the terms of such licenses issued over the past two years, companies are investing in exploration for gold at least 18 billion rubles over five years, the minister said. However, under this principle, companies get the sites with no mineral resources, under the conditions of high commercial risk.
Russian gold miners are interested in finding deposits by efforts of beginning exploration companies, and then they could work together to sell or to develop the sites found. However, companies are skeptical about the creation of venture capital funds for geological exploration in Russia, because they do not see the potential investors willing to invest at high risks.
— There are prospects for the development of junior movement in the Russian context, they are significant, in spite of the imperfections of government regulation. But they lie in a different plane other than traditional junior movement in Western countries - said Vitaly Nesis, general director of Polymetal - one of the largest Russian producers of precious metals to Izvestia.
According to him, Chinese investors will not fund in the start-up projects, as they only interested in the control of major assets. Nesis also called the state regulation system in Russia not ready for such projects, so the company plans to support exploratory work of start-up geologists on its own.
Nesis notes that the optimal strategy for a start-up company is the conversion of exploration results in additional raw material base of already existing enterprise and that Polymetal is ready to cooperate. Polymetal wants to get from young companies a geological idea, human resources, exploration plan and the willingness to work hard. For his part, he offers assistance in financing of a project, interaction with government agencies, a second opinion, as well as organizational support.
According to analysts, the main problem is the right of a company to get a large deposit in its property without an auction, should the company be its discoverer.
— The problem is that it is the state who chooses the areas for exploration. In addition, the discovery of a deposit implies the subsequent competition, where companies discoverers have to fight for the license site with other candidates, - said Maxim Khudalov, AKRA director of corporate ratings.
In addition, major gold miners fear the emergence of small players, affiliated with the local authorities, which will spot the small discoveries in the promising sites to then require the companies to redeem their sites with premium, said Khudalov. In Canada, he explains, a company acquires the subsoil site and everything it has found on it gets to its property, so venture capital investment in exploration has a high chance to pay off in the event of exploration success.
— In Russia, it makes no sense, as in the event of discovery of a strategic deposit, it must be put up for auction, where the risk of losing the money invested in the exploration is big for small players. There is the right of the discoverer in Russia, but only for small sites that can not always compensate for the costs invested, - said Khudalov.
Igor Nuzhdin, analyst at Promsvyazbank, highlights another problem, as most of the potential new fields are in areas with weak infrastructure, and therefore requires serious investments that have risk not to pay off.