Russia gold rush sets miners on course to leapfrog Australia

Moscow

RUSSIA could overtake Australia as the world's No 2 gold producer over the next five years as increasing output from junior miners complements the development of a huge untapped deposit in Siberia.

Russia increased gold output to 297.3 tonnes last year, but a record 315 tonnes kept Australia in second place behind China, according to the World Gold Council.

While Australian production is set to peak at 346 tonnes in 2020, government projections show a sharp decline in 2023 or 2024.

Russia, by contrast, should maintain its growth momentum, said Sergey Kashuba, head of the Union of Gold Producers of Russia.

"Russia may become the world's second-biggest gold miner globally, beating Australia in three to five years, assuming that there is no force majeure," Mr Kashuba added.

Russian growth will partly come as Polyus PJSC, its biggest miner, develops Siberia's Sukhoi Log, one of the world's largest untapped gold fields, with a potential annual output of as much as 1.7 million ounces.

Smaller gold companies will also play a key role, generating significant volumes, Mr Kashuba explained.

The higher gold output coincides with increased bullion buying by Russia's central bank as President Vladimir Putin seeks to break the country's reliance on the US dollar.

Of the smaller miners, Petropavlovsk plc plans to boost capacity, while BlackRock Inc-backed GV Gold may expand further, after more than doubling output since 2016 to 304,000 ounces.

"We are in an advanced stage of a geological exploration programme based on which we shall be entering a new phase of the capex cycle,"said GV Gold chief executive officer German Pikhoya.

Starting from scratch, junior miner New Mining Co plans to produce eight to 10 tonnes per year in 2023, according to chief executive officer Egor Bogdanov.

The miner, founded less than three years ago, plans to start output soon after acquiring licences in Russia's Far East and Siberia.

While funding has so far come from private investors, Mr Bogdanov doesn't rule out an IPO at some stage.

Russia's Far East has the potential for new deposits once further studies are conducted, according to Polymetal International plc chief executive officer Vitaly Nesis.

Russia's No 2 gold producer plans to do deals with junior miners to support their studies, Mr Nesis said in April. BLOOMBERG