Resources in the Far East: From Exploration to Integrated Development

3 September 2021

Resources in the Far East: From Exploration to Integrated Development

CONCLUSIONS

Geological exploration and production are becoming more technology-savvy

“I believe that the first obligation of investors who come to invest in remote regions and metal-poor deposits is to attract and introduce new technologies. It has become possible to develop many deposits only because in the last 10 years advanced development technologies have appeared that we will be using,” Oleg Novachuk, Chairman of the Board of Directors, Mining company Baimskaya.

“I went down into a mine recently and saw automated tippers there, and everything done electronically, and Wi-Fi working. I realized that our mineral mining may soon be just like the space industry,” Pavel Volkov Deputy Minister for the Development of the Russian Far East.

Russia should conduct exploration more actively

“We believe that the scope of exploration should grow at all times. It is the first stage, the most complicated one, it carries huge risks, and that is why it is always undertaken by the government. Thanks to Mikhail Mishustin’s decision, financing for geological exploration will be significantly increased, especially for early stages of the survey. We aim to open over 150 promising areas for licensing of solid mineral resources and over 50 for hydrocarbons,” Alexander Kozlov, Minister of Natural Resources and Environment of the Russian Federation.

“We need to not only produce everything we have explored, but to continue growing our mineral reserves and creating new sectors of the economy,” Aysen Nikolaev, Head of the Sakha Republic (Yakutia).

“We need to increase the scope of geological exploration using state funds. Most of the undeveloped coal deposits were explored back in the 1960s through 1980s and identified as projected mineral resources. All this needs a significant outlay of funds for additional exploration,” Anna Tsivileva, Chairman of the Board of Directors, Kolmar Group.

PROBLEMS

Infrastructure for the industry needs to be developed

“Development of railway infrastructure to promising deposits is the key element for carrying out an investment project. We need advanced development of the railway infrastructure because it is its actual presence that is viewed by the creditor as a guarantee of product sales. It is important to design and build transportation infrastructure facilities to provide services on the basis of the long-term territory development plan,” Anna Tsivileva, Chairman of the Board of Directors, Kolmar Group.

“Of course, infrastructure is important for remote locations, such as those in Yakutia or beyond the Arctic Circle. And that requires close cooperation with the state, including construction of new ports, roads, and power lines. Undoubtedly, it is impossible without close cooperation with the government,” Oleg Novachuk, Chairman of the Board of Directors, Mining company Baimskaya.

Tax laws need to be adjusted

“The state needs to guarantee to the investor that the terms of investment will not change throughout the entire period of design stage, including tax benefits, power rates, railway rates, and so on. It is precisely these parameters that we use in the project’s financial model,” Anna Tsivileva, Chairman of the Board of Directors, Kolmar Group.

“As a rule, the tax burden is fixed when we talk about Advanced Development Zones, when we talk about building Arctic facilities. But according to the Law on Investment Protection, tax stabilization is provided for only 5 years. Complicated projects, as a rule, take seven to ten years. We haven’t finished building yet, but there is already a possibility that the law may change. Just recently, the Mineral Production Tax was changed in Russian legislation and already there is discussion on further increase of the Mineral Production Tax,” Oleg Novachuk, Chairman of the Board of Directors, Mining company Baimskaya.

Administrative barriers in the mining industry

“Lowering the barriers is quite a real goal in our industry, but this stage is going on slower than in other industries right now. For instance, the declarative principle of subsurface use licensing has been in place for 7 years. During this time, deposits were discovered and their production began in a number of tracts. We need to reduce the time it takes to review a declaration, to steer away from rejections based on technicalities,” Alexander Kozlov, Minister of Natural Resources and Environment of the Russian Federation.

“Amendments and modifications to the current legislative framework need to be planned to minimize regulated times for carrying out investment projects. The time to begin carrying out a project is 4–5 years from the time it is initiated: including the deposit in the list of licensed sites, taking into account the bidding for the right to use subsurface resources, design and survey work, expert opinions, providing infrastructure. We can reduce all this many times and carry out investment projects much faster,” Anna Tsivileva, Chairman of the Board of Directors, Kolmar Group.

“We suggest, and here we are fully in agreement with the suggestion of the Ministry of Natural Resources and Environment of the Russian Federation, reducing administrative barriers to geological exploration and production, including allowing work at the same time for different types of resources by several subsurface users at the borders of mining allotments,” Aysen Nikolaev, Head of the Sakha Republic (Yakutia).

SOLUTIONS

Revision of tax policy for a number of companies in the industry

“The Mineral Production Tax has already been raised 3.5 times and this is wholesale across all industries. Poor deposits are not taken into account in the calculations. We really need to find a compromise for the future so that poor deposits can have certain preferences, to be diversified,” Denis Manturov, Minister of Industry and Trade of the Russian Federation.

“We are putting forward the following initiative: new projects on deposits that are built in Russia should be able to use stability; keep for them the tax legislation that was in place at the time that the financial model was locked,” Oleg Novachuk, Chairman of the Board of Directors, Mining company Baimskaya.

Digitization of the industry

“We want to create an interdepartmental data showcase that would be based on state resources. We want to make this information available using the website of the Ministry of Natural Resources and Environment; it needs to include data on forest zones, bodies of water, and nature reserves where subsurface use is not allowed or limited,” Alexander Kozlov, Minister of Natural Resources and Environment of the Russian Federation.

“We are talking not about simply digitizing and consolidating geological information, but about verifying it. The problem is not just that it is sketchy. The problem is that there is different information on the same land units in different places,” Pavel Grachev – Chief Executive Officer, Polyus.

Resources in the Far East: From Exploration to Integrated Development

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