Russia Mining Report Q2 2016

Russia Mining Report Q2 2016

BMI View: Russia's gold and coal production growth will be the sector's relative bright spots, while PGM'sand iron ore output growth will grind to a halt. Low metal prices, the country's inadequate infrastructureand Western sanctions will continue to limit the sector's production growth.

Latest Developments & Structural Trends

Although Russia's mining sector holds significant production growth potential - due to its rich mineraldeposits, including coal, iron ore, gold and platinum - the country's bureaucratic hurdles, Westernsanctions and weak mineral prices will limit new projects from coming online and weaken mining outputgrowth over the coming quarters.

Coal: With 157bn tonnes (bnt) of coal deposits, Russia's holds the second-largest recoverable coalreserves in the world. We expect Russia's coal production to grow from 392mn tonnes (mnt) in 2015 to427mnt in 2019, as production ramps up in country's Kuznets basin. This would represent an averageannual production growth of 2.3% during 2016-2020, significantly lower than the average 6.4% during2010-2014.

Gold: Russia will remain the world's third largest gold producer, with significant potential to expandoutput and increase the country's share of global gold production. We expect Russia to account for 9.6%of global gold production in 2016. We forecast Russia's gold output to grow from 8.0 million ounces(moz) in 2016 to 8.4moz in 2020. This would represent an average annual growth of 1.5% during2016-2020, significantly slower than 5.3% during 2011-2015.

Iron Ore: Russia's iron ore production growth will be supported by the country's vast iron ore reservesand Metalloinvest's strategy to increase output through innovation at the firm's existing mines. Russiaholds more than 25bnt of iron ore reserves, making it the third largest holder of reserves, after Australiaand Brazil, respectively. We forecast Russia's iron ore production to grow from 110mnt in 2016 to123mnt in 2020, averaging annual growth of 2.7% during 2016-2020, showcasing consistent growthfollowing 2.7% y-o-y during 2010-2014.

BMI Industry View
Table: Russia Mining Industry Value
Industry Forecast
Coal: Eastward Shift To Support Sector
Table: Coal Production Forecast (Russia 2014-2020)
Table: Russia - Distance From Coal Production Area To Shipping Seaport
Gold: Modest Growth Despite Headwinds
Table: Gold Production Forecast (Russia 2014-2020)
Iron Ore: Modest Growth Despite Headwinds
Table: Iron Ore Production (Russia, 2014-2020)
Nickel: Challenges Lie Ahead
Table: Nickel Mine Production (Russia, 2014-2019)
Palladium: Slow Growth In Years Ahead
Table: Palladium Production
Platinum: Growth To Stagnate
Table: Russia - Platinum Production
Table: Russia - Largest Platinum Projects
Industry Risk/Reward Index
Russia Risk/Reward Index
Europe: Majority To Be Low Risk-Reward
Table: Europe - Mining Risk/Reward Index
Regulatory Development
Commodities Forecast
Commodities Outlook
Table: BMI Commodities Price Forecasts
Competitive Landscape
Table: Russia - Key Financial Data For Select Mining Companies
Company Profile
Polyus Gold
Table: Polyus Gold - Financial Data
Table: SUEK Subsidiaries
Regional Overview
Industry Forecast Methodology
Risk/Reward Index Methodology
Table: Weighting Of Indicators

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