Financing projects & exploration in Russia Scene setting: What - - PowerPoint PPT Presentation

financing projects exploration in russia
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Financing projects & exploration in Russia Scene setting: What - - PowerPoint PPT Presentation

Financing projects & exploration in Russia Scene setting: What is different about exploring for & developing projects in Russia? What is changing about the way of developing projects in Russia? What risks & opportunities


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Financing projects & exploration in Russia

Scene setting:

  • What is different about exploring for & developing projects

in Russia?

  • What is changing about the way of developing projects in

Russia?

  • What risks & opportunities exist?
  • Tips for working in Russia

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Unlocking Russia’s mineral wealth

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First, what is happening about exploration?

Russia is relying on historical Soviet exploration to sustain its mining industry Petropavlovsk, Polymetal, Kinross and others are lobbying government to change the Mining Tax Code

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Unlocking Russia’s mineral wealth

(Source: ¡MEG) ¡

(Ra$o ¡of ¡number ¡of ¡projects ¡in ¡the ¡Explora$on ¡and ¡Target ¡Outline ¡Phases ¡to ¡projects ¡in ¡the ¡Reserve ¡Development ¡and ¡Feasibility ¡Phases) ¡

0.0 ¡ 0.5 ¡ 1.0 ¡ 1.5 ¡ 2.0 ¡ 2.5 ¡ 3.0 ¡ 3.5 ¡ 4.0 ¡ Cr ¡ Cu ¡ Fe ¡ Au ¡ Pt ¡ Dia ¡ Mo ¡ Zn ¡ Pb ¡ U ¡ Sb ¡ Ti ¡ V ¡ Ni ¡ Nb ¡ Potash ¡ W ¡ Sn ¡ Co ¡

Ra#o: ¡Explora#on ¡projects ¡to ¡feasibility ¡studies ¡

Global ¡ Russia ¡

First, what is happening about exploration?

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Why are Companies not exploring in Russia?

  • Conducting research to identify greenfield targets does not necessarily result in

getting an exploration licence

  • Applications for a licence are published leading to expressions of interest => auction
  • Lack of co-ordination between departments resulting in contradictory decisions
  • Departments focused on achieving departmental objectives not best result for Russian

State e.g. focus on maximising value of auctions rather than developing projects

  • Overlapping licences create confusion e.g. mineral licences; forestry and mining licence
  • Concern about the risk of revoking licences
  • Whilst actual examples are rare, the risk affects ability to get funds
  • Need confidence that Discoveries will get mining licences
  • Current approval step adds doubt
  • Strategic limits discourages majors and caps opportunity for juniors
  • Effort only justified for richer, larger deposits
  • Elsewhere smaller projects can be developed more easily
  • But perception of risk of losing licence increases doubt

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Unlocking Russia’s mineral wealth

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Next, how are projects evaluated?

Must comply with Russian systems & standards

  • Currently based on polygonal methods, moving towards block

modelling

  • Best for lithologically controlled & simple 3D orebodies
  • Geotechnical analysis quite simplistic and conservative
  • Metallurgical analysis is generally good
  • Economic analysis is generally poor
  • Weak links are geological model and scheduling
  • Productivity and development rates conservative
  • Cost estimates based on cost estimation handbooks, factored by inflation
  • Few options evaluated

Projects often developed in parallel

  • International & Russian approach

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Unlocking Russia’s mineral wealth

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What is changing?

Greater awareness of a need for exploration

  • Creation of RosGeology and some review of legislation
  • Discussing softening strategic limits ; Some flexibility regarding licencing rules
  • Kinross invited by President Putin to advise on exploration & foreign investment

Resource reporting

  • NAEN Code developed – a CRIRSCO family code
  • Block modelling – rules are being amended by GKZ to incorporate block modelling

Services & Logistics

  • Several international laboratories
  • Trans-Siberian Railway still constrained but capacity increases each year
  • Most international equipment suppliers have dealers & parts network in-country

Finance

  • Russian banks willing to finance studies as well as projects

Perspective

  • More internationally focused management pushing to use modern technology &

economic justification

  • Greater use of international consultants / engineering companies

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Unlocking Russia’s mineral wealth

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There are opportunities as well as risks

Risks

  • Corporate governance
  • Corruption
  • Project development takes longer
  • Weak link between technical & economic decision-making
  • Moscow is not Russia
  • Skill & labour shortages
  • Tonnages quoted for Prognostic resources: P1, P2, P3
  • Due to lack of exploration, remaining projects often of poor quality

Opportunities

  • Existing operations have potential to improve efficiency
  • Under-explored by modern methods
  • Can be easier & cheaper to develop projects
  • Starting from a low base

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Unlocking Russia’s mineral wealth

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How foreign companies thrive in Russia?

  • Understand you are welcome
  • Be seen to give
  • Communicate frequently
  • Create multiple communication paths
  • Develop relationships
  • International specialists must be good
  • Be consistent yet flexible
  • Be aware of the history & culture
  • Be aware of similarities & differences
  • Be willing to push hard
  • Have a thick skin & be willing to drink

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Unlocking Russia’s mineral wealth

Moscow ¡Times ¡books ¡

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In summary

Exploration rules need to evolve further

  • Likely to take several years

Consider partnering with RosGeology Be cautious of any prognostic resources (P1, P2, P3) Ensure international-style projects match Russian project documentation Consider the opportunities as well as the risks

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Unlocking Russia’s mineral wealth