Engineering & Mining Journal

MAR 2019

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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Page 40 of 67

MINING IN RUSSIA MARCH 2019 • E&MJ 39 Nickel, in which UC Rusal holds a stake, is a major supplier of nickel on the global market. The price hike was prompted by fears of an acute shortage of these metals in the supply chain. Rusal said it had to postpone the con- struction of the Taishet aluminum plant with the designed production capacity of 430,000 mt per year because of the sanc- tions. There was also no clarity on whether the company would expand its Boguchan- sky aluminum plant after 2019, given the turbulent situation. No details were giv- en about how this could impact plans to expand bauxite mining capacities both in Russia and abroad, but statements made to the Russian news media outlets during 2018 were rather pessimistic. Some sources in the company warned that UC Rusal may cut production by 70% to 80% as a result of sanctions. In response to the threat of sanctions, the Russian government prepared a bail- out package for UC Rusal, Denis Man- turov, Russian industry and trade minister, said during a press conference in Moscow in August 2018. The federal government had already adopted a roadmap on the development of the Russian aluminum in- dustry from 2019 to 2023 in which some state subsidies were promised to UC Rusal and some other measures were aimed to increase the demand for aluminum in the domestic market, Manturov added. In 2017, UC Rusal produced 3.6 mil- lion mt of aluminium, of which only 1 mil- lion mt was sold on the domestic market. By 2024, the domestic demand is expect- ed to rise to 2.5 million mt, the government forecast. To achieve that target, the federal government promised to allocate Rub140 billion ($2.2 billion) on various programs. This is a never-before-seen state support of the Russian nonferrous metals industry. The roadmap was announced to help UC Rusal in case the sanctions are actually introduced and there would be some real impact on the company's export operations. In late December 2018, the U.S. Treasury announced it would lift sanctions against UC Rusal as the company "committed to significantly diminish Deripaska's owner- ship and sever his control" in the company. This decision, however, would not prompt the Russian government to revise the roadmap on the Russian aluminium industry development. This means UC Rusal eventually could take advantage from both rising demand for aluminium on the domestic market and good export opportunities. The decision to lift sanctions against UC Rusal raised optimism in the Russian nonferrous metals industry where sanc- tions were a hot topic in 2018, just as in all other segments of the Russian econo- my. Basically, up to 60% of top managers in the Russian companies believed inter- national sanctions brought some negative impact to the market conjuncture, with 40% of top managers claimed the restric- tions negatively affected their business, according to an opinion poll conducted by PricewaterhouseCoopers in November. On this background, UC Rusal recently confirmed its plans to expand production of its biggest asset in Russia, the Timan baux- ite mine. The company nearly completed the second stage of the Middle-Timan baux- ite mining and processing complex. When launched, this project would increase the overall production at the mine by 25% to 5.1 million mt/y, the regional government of Komi Republic said in a statement in December. In 2020, Timan could achieve production of 5.7 million mt/y. With no significant impact from the U.S. sanctions, the Russian aluminium company could increase production from 3.9 million mt in 2018 to 4.1 million mt in 2021, Russian consulting agency AKRA forecast. There will be some increase in ex- ports, from 2.9 million mt in 2018 to 3.2 million mt in 2021. Some slight increase in domestic sales is also anticipated. A haul truck dumps its load at the Bashkir Copper Co. On the right, Russian mining industry will invest in equipment now that sanctions were lifted. Russian aluminum and bauxite production are no longer in jeopardy.

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