Russian Mining Industry: Why It’s Time to Take a Second Look

Western sanctions have been plaguing the Russian economy since last year, resulting in a decline in oil and metal prices, considered to be the nation’s economic lifelines. But Vladimir Potanin, CEO of Norilsk Nickel and Russia’s richest businessman, thinks that the effects of these sanctions are now waning as 2015 has seen signs of improvement in the United States and Russia relations.

Western sanctions have been plaguing the Russian economy since last year, resulting to a decline in oil and metal prices, considered to be the nation’s economic lifelines. But Vladimir Potanin, CEO of Norilsk Nickel and Russia’s richest businessman, thinks that the effects of these sanctions are now waning as 2015 has seen signs of improvement in United States and Russia relations.

Earlier this month, US Assistant Secretary of State Victor Nuland visited Moscow, just weeks after Russian President Vladimir Putin met US Secretary of State John Kerry for the first time in more than a year. Though there were no concrete deals cemented, both Russia and the West agreed that the so-called “sanctions war” is not benefiting anybody in the long run.

The West lost an estimated €40 billion last year because of the sanctions, while Russia is suffering the brunt of it as it loses around $40 billion a year. Potanin suggested that improving relations between Russia and the rest of the world should be a “challenge to overcome together.”

But while Russia’s deep recession is not expected to end anytime soon, some improvements have been seen in the country’s first quarter GDP. The slight appreciation of the ruble has brought down inflation, making Russia’s first quarter growth better than what financial firm Barclays forecasted. “The ruble appreciation will short-circuit some of the expected external adjustments and thus bring our forecasts for current account surpluses somewhat lower,” Barclays commented.

But while Russia’s deep recession is not expected to end anytime soon, some improvements have been seen in the country’s first quarter GDP. The slight appreciation of the ruble has brought down inflation, making Russia’s first quarter growth better than what financial firm Barclays forecasted.

Metals and Mining on the Rise

The country’s metal and mining sector also remains as one of the few rays of hope in the market these days, since these products are mostly exported, yielding higher income against the weaker ruble. New developments have been seen in the past few weeks, such as the approval of Russia’s Federation Council for the provision of state incentives to the country’s uranium mining industry.

The country’s metal and mining sector also remains as one of the few rays of hope in the market these days, since these products are mostly exported, yielding higher income against the weaker ruble. New developments have been seen in the past few weeks, such as the approval of Russia’s Federation Council for the provision of state incentives to the country’s uranium mining industry.

“The strategic importance of uranium production for the development of Russia’s energy sector and the strengthening of national security, as well as the presence of rich mineral resources and modern industrial facilities capable of meeting Russian uranium demand now and for decades to come, were all noted,” said Atomredmetzoloto (ARMZ), the uranium mining arm of state nuclear corporation Rosatom. ARMZ is not planning to construct Mine No. 6, a project that includes the development of “high-quality deposits that will enable the company to maintain stable and competitive production for decades,” ARMZ said.

Similarly, the Russian government’s approval of the mining license of Amur Minerals Corporation (AIM: AMC) for its Kun-Manie nickel copper sulphide project has sparked hopes of boosting the country’s nickel mining industry. Russia’s Norilsk Nickel is still the top producer of nickel in the world, and with Amur Minerals entering the picture with an estimated 841,000 tonnes of nickel, the company is also poised to become one of the top 20 largest nickel miners in the world.

It might be a long time before Russia’s economy totally recovers, but based on recent developments, the country’s metals and mining industry might be worth a second look.

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