Page 79 - Russia OUTLOOK 2024

people and companies from Switzerland, Germany and the Middle East for helping Moscow evade earlier sanctions.
The new measures, announced on the first anniversary of Russia's invasion, hit over 250 individuals and entities. OFAC hit four mining and metals sector companies, including TPZ-Rondol, a unit of Russia's largest ammunition maker, for producing weapons for the Russian military, including the navy, the Treasury said. However, Russia’s biggest companies have not been sanctioned for fear of causing chaos on the international metals market.
The future of Russia’s mining industry depends upon a reorientation away from its traditional Western markets and towards Asian countries, such as India, Malaysia and Vietnam, which have decided to retain their economic ties with Russia. Due to the size of its mineral deposits, Russia has the potential to become a mining superpower on a par with its oil production.
For a decade, Russia’s ambitious mining policy has been aimed at expanding its revenue sources, whilst also weaning itself off its excessive dependence on hydrocarbons. From the exploitation of diamond deposits and the development of a high-tech value chain to the relaunch of the coal sector, Russia intends to pursue the development and modernisation of an industrial sector that is not affected by sanctions and has now become strategic, but for this to work the sector needs heavy investment and modernisation.
In general investment into the global metals business is in decline. Total capital expenditure is forecast to drop approximately $1.26bn in 2024, with all sectors except iron ore and palladium subject to spending cuts. Sustaining capital cuts are also forecast across most commodities, with only some "green" metals, such as lithium and cobalt, insulated against the general downward trend. S&P Global says total capital spending is predicted to further decline in line with previous estimations, with over 25.5% reduction expected between 2023 and 2027.
Development capital in Russia has also fallen in recent years, with further declines anticipated in 2024. Most of the capex has been at NorNickel, a large part of which is allocated to environmental, energy and infrastructure projects.
Looking further into the future, the Sukhoi Log project in the Irkutsk region of Russia is set to become one of the largest gold mines in the world. Owned by PJSC Polyus, the project hosts 67mn ounces of contained gold in its measured and indicated resource. The estimated startup date is in 2027, and the final feasibility study is underway. The most recent prefeasibility study estimated the initial capex at $3.30bn.
In Russia over the last five years, the extractive economy has accounted for 58.6% of the total value of Russian exports, broken down as follows: crude oil (26.4%), refined oil products (16.5%), natural gas (10.5%) and ferrous metals (5.3%). Russia’s mining output represents 14% of global mineral production, according to some estimates.
While mining makes up a small share of Russia’s overall raw materials exports, it has considerable market power in many mineral categories. It is particularly strong in many minerals needed for the EV and green revolution
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