Russia Mining Report

Providing expert analysis, independent forecasts and competitive intelligence on the mining.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Petrochemicals Risk Reward Index, Economic Forecasts, Company Profiles and Global, Regional and Country Industry Overviews.

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Russia Mining Report
Product Price
$1,295.00

BMI View: Russia's g old and coal production growth will be the sector's relative bright spots, while P GM's and iron ore output growth will grind to a halt . Low metal prices , the country's inadequate infrastructure and Western sanctions will continue to limit the sector's production growth.

Russia Mining Industry Value
2014e 2015f 2016f 2017f 2018f 2019f
e/f = BMI estimate/forecast. Source: National sources, BMI
Mining Industry Value, USDbn 186.90 155.82 155.85 162.93 170.92 179.76
Mining Industry Value, USDbn, % y-o-y 2.20 -16.63 0.02 4.54 4.91 5.17

Latest Developments & Structural Trends

  • Although Russia's mining sector holds significant production growth potential, due to its rich mineral deposits, including coal, iron ore, gold and platinum, the country's bureaucratic hurdles, Western sanctions and weak mineral prices will limit new projects from coming online and weaken mining output growth over the coming quarters.

  • With 157 billion tonnes (bnt) of coal deposits, Russia's holds the second-largest recoverable coal reserves in the world. We expect Russia's coal production to grow from 383 million tonnes (mnt) in 2015 to 418mnt in 2019, as production ramps up in country's Kuznet's basin. This would represent an average annual production growth of 2.3% during 2016-2019, significantly lower than the average 6.4% over 2010-2014.

  • Russia's will remain the world's third-largest gold producer, with significant potential to expand output and increase the country's share of global gold production. We expect Russia's to account for 9.6% of global gold production in 2016. Polyus Gold's Natalka mine will be the key driver of Russia's gold production growth over our forecast period to 2019. The mine began production in Q315, with an initial output of 500 thousand ounces per annum (kozpa), growing to 1.5moz at full production capacity. However, in Q115, Polyus significantly revised down the estimated reserves at the firm's Natalka project. The mine's reserves were revised down by 55.0% from 36.8moz to 16.2moz.

  • Due to our downbeat view on global iron ore prices, we expect mining investment to come under pressure in the coming years. We forecast iron ore prices to average USD53/tonne during 2016-2019, significantly lower than the average price of USD137/tonne during 2010-2014. Russia's iron ore production growth will be supported by the country's vast iron ore reserves and Metalloinves t's strategy to increase output through innovation at the firm's existing mines. Russia holds more than 25bn tonnes of iron ore reserves, making it the third largest holder of reserves, after Australia and Brazil, respectively. We forecast Russia's iron ore production to grow from 110mnt in 2016 to 119mnt in 2019, averaging annual growth of 2.7% during 2016-2019, showcasing consistent growth following 2.7% y-o-y during 2010-2014.

  • We have revised down our forecast for Russia's nickel mine production due to Norilsk Nickel's (Norilsk) reduction of low-margin tolling operations at Kola MMC and the divestment of Tati Nickel in April 2015. We have revised down our 2015 growth forecast from 1.5% to -2.5% and 1.6% to 0.5% for 2016. We now forecast output to grow from 258 thousand tonnes (kt) in 2016 to 269kt in 2019. This would represent an average annual output growth of 1.5% during 2016-2019.

  • Despite our downbeat outlook, we expect new projects, including Urals Alluvial Platinum's Kluevsky and Volchetundra projects to support Russia's palladium output growth beyond our forecast period. Norilsk Nickel and by extension Russia, continues to have sizable palladium reserves, with the former's proven and probable reserves at 61.1mn ounces (moz) in 2013. We forecast palladium output to grow from 2.93moz in 2016 to 3.10moz in 2019. This would represent an average annual output growth of 1.7 during 2016-2019.

  • Although Russia is the world's second largest platinum producer, accounting for 15.0% of global output in 2014, platinum production growth will slow due to declining ore grades and a lack of new projects coming online over the coming years. We forecast the country's annual output growth to stagnate during 2016-201, while averaging 0.5% during 2010-2014. We expect Russia's platinum production to remain at 0.89moz over forecast period to 2019.

BMI Industry View
7
Coal To Fuel Growth
8
Regulatory Environment To Limit Growth
8
Western Sanctions To Impair Infrastructure Growth
8
SWOT
9
Industry Forecast
11
Coal: Eastward Shift To Support Sector
11
Government To Support Sector Modernization
12
Exports To Shift To Asia
15
Infrastructure: The Key Downside
17
Table: Russia - Distance From Coal Production Area To Shipping Seaport
18
Table: Coal Production Forecast (Russia 2014-2019)
19
Gold: Modest Growth Despite Headwinds
19
Regulatory Environment To Curb Growth
22
Table: Gold Production Forecast (Russia 2014-2019)
23
Iron Ore: Modest Growth Despite Headwinds
23
Sanctions To Limit Infrastructure Growth
26
Table: Iron Ore Production (Russia, 2014-2019)
27
Nickel: Price Weakness To Subdue Growth
28
Table: Nickel Mine Production (Russia, 2014-2019)
30
Palladium: Growth To Pick Up After 2019
31
Table: Palladium Production (Russia 2014-2019)
34
Platinum: Growth To Stagnate
35
Table: Russia - Largest Platinum Projects
36
Table: Platinum Production (Russia 2014-2019)
38
Industry Risk Reward Ratings
39
Russia Risk/Reward Index
39
Rewards
39
Industry Rewards
39
Country Rewards
39
Risks
39
Industry Risks
39
Country Risks
40
Europe: Majority To Be Low Risk-Reward
40
Latest Revisions:
41
Table: Europe - Mining Risk/Reward Index
42
Regulatory Development
43
Trade & Investment Risk Analysis
43
Commodities Forecast
47
Global - Metals: Lower Costs And Weak Demand To Anchor Prices
47
Metal Price Weakness: Chinese Equity Slump & US Dollar Strength
48
US Dollar Strength To Anchor Weak Metal Prices
49
Competitive Landscape
51
Main Players
51
Table: Russia - Key Financial Data For Select Mining Companies
52
Company Profile
53
Polyus Gold
53
Table: Polyus Gold - Financial Data
55
SUEK
56
Global Company Strategy - Norilsk Nickel - Q4 2015
59
Company Overview
60
Company Strategy
61
Table: Norilsk Nickel - Supply Chain Analysis
62
Table: Norilsk Nickel - Key Financial Data
63
Regional Overview
64
Europe Mining: The Four Key Themes
64
Key Themes:
64
Coal: Russia To Drive Regional Growth
64
US Dollar Strength To Influence Trade Dynamics
65
Steel Oversupply To Limit Growth
66
Rare Earth Production To Shift Westwards
67
Global Industry Overview
69
Global Mining: 2015 Key Themes Revisited
69
Table: Key Mining Themes For 2015
69
Theme: Mining Capital Expenditure Will Continue To Decline
69
Theme: US Dollar Strength
70
Iron Ore Consolidation & Majors Share To Increase
71
Asian Investment In Africa To Continue
72
2015's Standouts
73
Methodology
75
Industry Forecast Methodology
75
Sources
76
Risk/Reward Index Methodology
77
Table: Weighting Of Indicators
78

The Russia Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's Russia Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Russia.

Key Benefits

  • Use BMI's independent industry forecasts on Russia to test other views - a key input for successful budgeting and planning in this mining market.
  • Target business opportunities and risks in Russia's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Russia.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.

Coverage

BMI Industry View

Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.

Industry SWOT analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.

BMI Industry Forecasts

Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:

  • Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
  • Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
  • Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
  • Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.

BMI’s Mining Risk Reward Index

BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Competitive Landscape Tables & Analysis

Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.

Key Projects

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.