ODDS’N’SODS — Russian tailings offer investment

Western companies have recently expressed interest in Russia’s mineral resources and mining industry — interest which is justified in view of the tremendous resource capabilities of that country.

Just as the territory of North America (excluding the Arctic regions) has been explored and re-explored several times, and still new deposits are found, Russia’s territory, especially Siberia and ocean shelves, is a zone of vast unrealized opportunities.

Even during the past few years, which were very difficult economically for the former U.S.S.R., spectacular discoveries were made and prospected. These include the Udokan copper deposit in eastern Siberia, a new gigantic diamond deposit in European Russia (Arkhangelskaya region) and the Sukhoy Log gold deposit in the Irkutskaya region (eastern Siberia).

These projects, as well as the resources of existing mining enterprises, make it possible to speak about the investment potential of Russia’s mining industry.

Mining new deposits requires great investments — a large starting capital and a long payback period. At present, Russia’s energy balance is barely sufficient for operating enterprises. Only one large Zeiskaya hydroelectric station was built in eastern Siberia during the past decade. It was designed mainly for power supply to the new Baikalo-Amur railway. New power projects, including nuclear ones, have been frozen for an indefinite period of time. An example of successful co-operation between companies on a new Russian venture is the Sukhoy Log gold deposit. The project is a joint venture with Australia’s Star Corp., which invested US$250 million in the enterprise. However, today it is more realistic to invest one’s capital in new technology for existing operations rather than new ventures. For 70 years, the Soviet mining industry was developed extensively, with little regard for financial profit. Rational mining was not encouraged, and a vast territory containing a great number of deposits with high-quality reserves was mined with no concern for the amount of metal within the ores extracted. Volume was the only factor. The approach to deposit evaluation was difficult under the Soviet economic system. The output of mines, open pits and placers was often planned without considering mill capacity. According to official statistics, the loss of minerals during mining was tremendous. Oil losses were 35-50%, coal losses were up to 40%, iron losses were up to 30%, and non-ferrous and noble metals were in the 25-to-40% range. The losses were especially large during the mining of polymetallic deposits.

The fact that enterprises belonged to different ministries also played a negative role. Ministries involved in mining were concerned first and foremost with metals from their own sphere of activity. Other, more valuable minerals were considered unprofitable and often went to waste and tailings without concentration. At the same time, new deposits were prospected and mined by other enterprises at great expense to produce these “unprofitable” minerals.

Such an approach resulted in practically all large mining enterprises having tailings and metallurgic slags within their zones of operation. Re-mining these, using modern concentration technologies, would, in a number of cases, be more profitable than mining new deposits (which would require expensive deposit development and ore extraction).

Such re-mining is feasible for companies with comparatively small capital — and besides, it can be classified as waste utilization, which allows for a decrease in taxation.

— The author, a mining engineer with 20 years of experience in Russia, currently resides in Toronto.