Russia bars foreign firms from auctions

Foreign companies will no longer be allowed to bid for exploration and development licenses in Russia, the country's natural resources minister said Feb. 10. Only companies that are at least 51 percent Russian owned may participate in the auctions, according to Yuri Trutnev. This will exclude mining companies like Canadian major Barrick Gold and Britain's Highland Gold Mining, which are already active in Russia.

The decision by Russia brings it more in line with other countries' policies. Now foreign companies will have to form joint ventures if they wish to bid on the huge Sukhoi Log gold deposit or Udokan copper deposit, both in Siberia. Sukhoi Log's gold reserves are thought to be much higher than the 1,000 tons estimated in the 1970s. Development is expected to cost more than $1 billion. A tender for rights to explore Sukhoi Log may be postponed until after this year, the Natural Resources Ministry said Feb. 16.

Highland Gold produced 195,026 ounces of gold at its Mnogovershinnoye deposit in Khabarovsk in 2004, an increase of 4.1 percent on the previous year, the company announced in a release Feb. 2. Highland produced another 4,870 ounces of gold at Darasun in Chita and plans production of more than 70,000 ounces for 2005. The company has adopted a new upscaled mining plan based on 1 million tons of ore for its Mayskoye deposit in Chukotka, and it obtained a 20-year mining license for the Taseevskoye deposit in Chita (a joint venture with Barrick) last November.

Kinross will not develop Tsokol

Meanwhile, Toronto-based Kinross will not proceed with development of the Tsokol vein near the Kubaka mill in Magadan, the company said in a release Jan. 25. Tsokol represented around 158,000 ounces of proven and probable reserves in Kinross's December 2003 reserve report. These reserves will be reclassified as resources in 2004.

Kinross owns 98.1 percent of Omolon Gold Mining, which operates the Kubaka mine. "Omolon management is currently reworking their mine plan based on this announcement," the Kinross release said. "Should closure of the Kubaka operation become the best alternative, this would take place only after completing the mining and milling of the Birkachan open pit and Central Zone Kubaka ore body, and the milling of the existing Kubaka stockpiles. This would provide feed for the mill for approximately 12 months. Closure would take place over an additional 12-month period. Development of the Birkachan underground deposit is still being considered."

The decision was taken because Kinross was getting an insufficient return on its investment in the Tsokol project, the company said. There were also problems with Magadan's unpredictable tax climate. "It was not the most robust ore body in the world," Chris Hill, Kinross's vice president for investor relations, told Mining News. "We had to put money in first and get it back three years later. We used to get a 4 percent management fee that we could write off, but now the regional tax guys want it."