Russian companies in 2016 may increase gold production by two percent - up to 242.4 tons. The total production, including byproduct and secondary gold will raise by nearly a percentage - up to 297 tons, a new domestic record.
Now mining Russia ranks third in the world after China and Australia;in terms of production RF ranks second with a large margin from The Heavenly Empire, which produces more than 400 tons per year. The record is forecasted by the Union of Gold Producers of the Russian Federation. At the end of January this year, Chairman of the Union SergeiKashuba in an interview with RossiyskayaGazeta suggested that the year 2016 turn zero growth, but now he is hoping for a speedy start-up and development of several large deposits of the precious metal.
In case of successful implementation, the production growth can continue in 2017. The main dRiver of growth, which was in 2015 is the weakening of the ruble against the world's reserve currencies and margin of safety of domestic companies accumulated due to this. Due to the high price of gold and large investments of the companies,mining in Russia in the period from 2011 to 2014 grew by five to seven percent per year, and slowed to just two per cent last year. According to Sergei Kashuba, devaluation may maintain gold miners residually before the end of 2016.
In many ways, the high growth rates were possible because of the industry consolidation level. Thus, six of the largest Russian companies mined half of Russian gold, while the share of the top-30 companies account for 80 percent of the production of the yellow metal. The remaining 20 percent is a merit of small players, whose number exceeds 400. In total, the domestic gold mining involves 24 regions of Russia, in 17 of which 99 percent of yellow metal extracted from the bowels are concentrated.
Now gold producers see several possible points of growth. Among them is the launch of mega-projects in the fields of Sukhoi Log (Irkutsk region), Natalkinskoye (Magadan region), Nezhdaninskoe and Kyuchus (both – in Yakutia), as well as the formation of the hubs for the processing of refractory and non-refractory ores.
"We also believe that the expansion of Russian companies will continue abroad, because within the country there are no large deposits left", said Sergei Kashuba at the International Exhibition of technologies and equipment for mining and mineral processing MiningWorld Russia.
According to him, one of the trends is that "large companies will get rid of non-core assets for them, and mergers and acquisitions transactions will go increasingly in medium-sized companies".
Where Goes Gold Mined in Russia
The Central Bank became the largest consumer of gold in Russia in the last year having bought 208.4 tons, which is a world record. It leads to decreased export of the yellow metal. It is important to note that the Central Bank purchases not in dollars, but in rubles, that is, only in 2015, it put about half a trillion rubles in the real economy, in no way accelerating the inflation. The purchases by the Russian Central Bank increase intensely: in 2012, the regulator bought 74.6 tons, in 2013 - 78 tons, in 2014 - 171 ton.
Second place in terms of the consumption of precious metal took jewelry industry and foreign buyers - 34 tons in each direction. Moreover, both categories for the year showed a fall. So, in 2014 Assay Office marked 56.8 tons of gold for jewelry industry, and 56 tons in the same year for export. At the same time, worldwide demand for physical gold remains weak and still not much catching up the proposal (4,214 tons against 4,306 tons). Weak economic growth rates of China as a major producer and consumer of gold, rate increase of the US Federal Reserve, low oil prices and inflation in the euro area and behind the ocean – all of these factors, coupled with the excess of gold supply over demand talk about the future volatility of prices – from 1,050 to 1,350 dollars per ounce. Evaluation of the Union of Gold Producers of Russia at the average value of the yellow metal in 2016 remains unchanged in this regard – $ 1,100. In the event that the dollar will remain in the range of 65-70 rubles, it can be quite a comfortable level for mining companies in Russia.