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(Last updated: 3 Feb 2012)
Trends and opportunities
The market
Russia is one of the largest mining nations in the world. It possesses huge sub-soil resources and is a significant producer of almost all types of valuable minerals, including nickel, copper, iron, gold, platinum group metals (PGM), zinc, lead, tin, diamond, coal and uranium. Russia holds an estimated 15-17 per cent of the world’s total mineral deposits and produces approximately 14 per cent of the world’s total mineral output. Business Monitor International (BMI) forecasts the value of the Russian mining sector to grow to US$259 billion by 2015.
The eastern part of Russia (Siberia and the Russian Far East), house the bulk of Russia’s mineral deposits. The presence of Russian mining companies in these areas is strong, despite the harsh climatic conditions. Some projects are also being developed with participation by international mining companies. These include Kinross gold mining projects in Chukotka and Yakutia, Highland Gold projects in Khabarovsk region and London-listed Petropavlovsk (formerly Peter Hambro Mining) has gold and iron ore projects in Amur region, near China.
Russian mining companies, including a number with international links, are aware of Australian mining technology – but have limited direct exposure to Australian expertise, equipment and services. Some of Russia’s largest mining companies include ARMZ, Evraz, Mechel, Metalloinvest, MMK, NLMK, Norilsk Nickel, Polymetal, Polyus Gold, Renova, Rusal, Severstal, SUEK and VSMPO-Avismo. Austrade and Austmine regularly arrange missions and exhibitions to promote Australian companies, technologies and services in the Russian market.
Resources industries also play significant roles in the economies of other CIS countries. Kazakhstan holds a third of the world’s chromium and manganese deposits, Ukraine has considerable reserves of coal and uranium. Uzbekistan, Kazakhstan and Turkmenistan all have world-scale oil and gas fields. Many technical standards and supply chains are shared throughout former Soviet Union countries, enabling international companies to expand their market.
Opportunities
Opportunities for Australian exporters
Opportunities for Australian suppliers of mining equipment, technology and services (METS) exist across the full spectrum of activity in many mining sectors and geographic regions of Russia and the CIS. Some key areas of opportunity include:
- Prospecting and definition of new and existing ore bodies
- Mining software and systems development
- Investment, including joint ventures
- Integrated project management
- Contract mining
- Supply (including leasing and acquisition) of mining plant and equipment
- Technology transfer and consultancy expertise
- Business process consulting
- General engineering and business procedures
- A range of other services including training
Opportunities for Australian investors
The recovery in commodities prices following the global financial crisis has made the Russian mining industry again more attractive to foreign investors. Particular interest has been exhibited by investors from South Korea, Japan and China, which are looking to secure long-term stable supplies of the energy and mineral resources. There is confidence that investment will return to Russian mining industry when the demand for mining products recovers driving by China mostly.
However, one of the key challenges for foreign investors centres on the law on strategic investments, which was adopted in 2008. The law ostensibly clarifies procedures for approval of foreign investment, but at the same time it also defines a broad swathe of resources as ‘strategic’ to Russia’s national interest. Foreign investment in these areas requires advance approval from a special committee headed by the Prime Minister of Russia. The law has led to a decline in foreign investment pending a better understanding of procedures and practice. Amendments were made in late 2011 to relax some restrictions and practical application of the law has generally been supportive of foreign investment.
Mining infrastructure in the most of CIS countries is underdeveloped and requires upgrading. This creates significant opportunities for Australian METS. Some samples of areas for opportunities include but not limited by:
- Mining equipment and technology supply
- Mining engineering services
- Mining software
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