No mention of AMC1 Dec 2021 11:01
Russia Mining Competitive Landscape
01 Dec 2021
Key View
Russia's strict regulation on foreign investment will ensure the continued dominance of domestic miners within the mining sector over the coming years. Norilsk Nickel will remain the largest domestic player.
Russia's domestic miners will continue to dominate the country's mining industry as the strict regulation of foreign investment will prevent foreign miners from entering the sector. In our view, local mining companies will account for the majority share of Russia's mining sector over the coming years. The country's regulatory environment will deter foreign investment from entering the mining sector. The Federal Laws 57-FZ and 58-FZ aim to regulate foreign ownership and control of strategic assets and industries, including certain types of minerals, such as copper and any deposit area with mixed mineralisation. The Russian government has a tight hold on local mining industry assets. For instance, foreign miners willing to enter the domestic market must first gain previous consent from the Governmental Commission headed by the prime minister and are subject to a limit of 25% ownership in any domestic mine, as per the Strategic Investment Law. Additionally, the lack of financial resources available for miners suggests that foreign players will continue to struggle to obtain adequate mine financing. The London Stock Exchange has been the popular destination to raise capital for many Russian miners.
Main Players
The mining sector in Russia is highly consolidated, with only a handful of companies accounting for the main share of domestic output.
Norilsk Nickel is the country's largest metals producer. The company accounts for the lion's share (more than 90%) of domestic nickel output. In February 2021, Norilsk Nickel received a USD1.9bn fine from a Russian court in response to a large fuel spill which occurred in the Arctic in May 2020. In January 2021, the firm joined the Responsible Sourcing Blockchain Network (RSBN) built on IBM blockchain technology which helps improve transparency in the mineral supply chain. In 2020, the firm's Russian nickel operations increased 4.0% y-o-y to 172kt.
The country's palladium and platinum subsectors will rely on Eurasia Mining and Polymetal International in the coming years for production growth.
Russian Platinum, a member of Musa Bazhayevs Alliance Group, will boost its market share in the years ahead, having won the tenders for the rights to explore and develop the southern portion of the Norilsk-1 deposit. The area is home to one of the largest deposits of copper and nickel in Russia's Taimyr Peninsula, with estimated nickel, copper and cobalt reserves of 273kt, 378kt and 12.7kt respectively. In March 2020, Norilsk Nickel announced that Russian Platinum has decided to terminate the negotiations concerning Arctic Palladium JV. In turn Russian Platinum will develop the southern part of the Norilsk-1
Sign In
Follow the stocks
