Russian government to ease resource investment access for foreign investors
The Russian government has approved a package of legislative acts, which eases access of foreign investors to the country’s largest mineral deposits.
In accordance with new rules, foreign investors will be able to conduct exploration and development of Russia’s strategic oil, gas as well as mining fields and to purchase up to 49% stake in them (under certain circumstances).
In addition, the government has allowed foreigners to conduct exploration and production of minerals on strategic fields both during the geological study of deposits, and after its completion, based on the decision of the Russian government.
It is planned that the Russian government will provide a right to foreign investors to acquire a 25% stake in the country’s strategic mineral deposits without special permits and up to 49% – after the approval of the governmental commission.
Since 2008, Russia has kept restrictions on the share of foreigners in strategic fields of mineral deposits of 10%, as, according to initial state predictions, global oil prices should be at the level of US$90-100 per barrel by at least, however the recent sharp decline of oil prices has forced the Russian government to revise its initial plans and forecasts.
The new legislative acts has already been approved by Russia’s Prime Minister Dmitry Medvedev.
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In accordance with the Russian federal law ‘On Subsoils”, strategic oil and gas fields include those oil and gas deposits with the volume of recoverable reserves of 70 million tonnes, and 50 billion cubic meters of oil and gas respectively.
In addition, among these fields are the fields of uranium, diamonds, platinum metals, high-purity quartz raw materials, REE, nickel, cobalt and of some other metals.
In addition, foreigners will be also able to develop gold mines in Russia with the volume of reserves from 50 tonnes, and from 500,000 tonnes in the case of copper.
The change of the existing rules has been actively lobbied by foreign investors, operating in Russia, and in particular the Canadian Kinross Gold, which produces gold in Russia’s Chukotka.
In the case of Kinross Gold, the company puts big hopes on the Russian gold mining. Currently Kinross operates three gold fields in Russia, among which are Kupol, a combination underground and open pit gold and silver mine in the Bilibinsky District of the Chukotka Autonomous Okrug, (which is considered by the company as one of the best in the world), as well as Dvoynoe and Vodorazdelnoye fields. The company expects that this year its Russian assets may bring the company up to third of its overal gold production – up to 760,000 ounces of gold equivalent, while sanctions, that were imposed on Russia have no had a catastrophic effect on its Russian business.
Thanks to this the company has not ruled out the possibility of the expansion of its Russian business, which is expected to take place through the receive of a right for the development of Sukhoi Log, Russia’s largest gold field in terms of reserves, which is expected to be put on the auction by the federal government in the coming months.
In general, the liberalization of access for foreign investors to Russia’s strategic mineral deposits will be very useful for the Russian economy, amid the current financial crisis in the country and the existed restrictions on the imports of Western technologies to the country due to Western sanctions.
Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>