Russia bets on boosting gold production

Weak rouble supports production, investment

UST-NERA, Yakutia, Russia, April 13, (RTRS): In winter it gets so cold that metal snaps.

When the weather is warmer people make a living sifting the earth for fragments of gold in the Oymyakon district of Russia’s far eastern Yakutia region.

But the unusually rich deposits of the alluvial gold near the surface are running out and producers have had to switch to the more expensive process of digging mines to extract gold ore.

Production at the first two mines to be opened in the area since the fall of the Soviet Union will start soon. One is being launched by GV Gold, with US fund Black Rock and the European Bank for Reconstruction and Development among its shareholders, and another by the locally-owned Yantar group.

As alluvial deposits disappear in other areas, producers are opening mines to help Russia keep its place as the world’s third biggest gold producer after China and Australia and ahead of the United States in fourth place.

“It is always hard to move away from old traditions but all regions nearby... have already gone through it,” said Elena Andreyeva, chief ore mining geologist at Yantar.

Global gold prices in London are now at around $1,285 per ounce, down by around a third from their peak in 2011. But Russia’s rouble currency has also fallen, making foreign investments more attractive in an area dependent on gold for the bulk of local revenues and that is a challenging place to work.

There are no direct flights from Moscow to Ust-Nera, the main village of the Oymyakon district, located some 9,300 km east of Moscow and temperatures often fall below 50 Celsius.

In winter, motorists keep their engines running at all times so they don’t seize up. Some people have heated garages. Locals call it “the Pole of Cold,” and the district claims the title of the coldest continually-inhabited settlement in the northern hemisphere, although other places also claim it.

The area was home to Gulag labour camps in the former Soviet Union and prisoners were made to pan for gold from local rivers with their bare hands.

Alluvial gold as a proportion of national gold production has fallen to around 30 percent from 83 percent twenty years ago, according to the Russian Gold Industrialists’ Union.

In Oymyakon it is also declining but still accounts for the bulk of 9 tonnes of gold the district produced in 2016 when Russia produced a total 297 tonnes.

GV Gold’s new plant will start production in May. It is expected to produce up to 3 tonnes of gold a year, including gold-bearing concentrate. GV Gold has put in $113 million for the first stage of investment in the mine which will become the third of its type in the area.

“This would be the biggest gold mining and processing plant in the Oymyakon district,” Alexander Tuluptsov, chief executive of the Tarynsky plant, told Reuters.