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FACTDROP: Russia exploration could bag $1.6 billion a year: Kinross
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10/18/2011

Russia exploration could bag $1.6 billion a year: Kinross



Πηγή: yahoonews
By Kiryl Sukhotski and Aleksandras Budrys (Reuters)
Oct 18 2011

MOSCOW (Reuters) - The largest foreign investor in Russia's gold sector believes Russia could more than triple investment in geological exploration to $1.6 billion.

Kinross Gold Corp also handed the government a list of measures required to achieve the increase, its chief executive told Reuters on Tuesday.

Russia, sitting on huge mineral resources, has been working to introduce changes to its laws to attract foreign investment, and on Monday held a meeting of the Foreign Investment Advisory Council made up of chief executives of multinational companies.

Foreign equity investment in mines is restricted by the Russian subsoil legislation, under which deposits containing enough gold or copper to merit major investment are considered strategic. Foreigners are barred from controlling them.

Low incentive to explore is another barrier.

Tye Burt, President and CEO of Kinross, presented proposals on Monday within the framework of a meeting of the advisory council chaired by Prime Minister Vladimir Putin.

"The opportunity is very large and I believe that it is a matter of time that major exploration companies follow us into Russia," Burt told Reuters Insider television.

Toronto-based Kinross, , has been operating in Russia for more than 15 years, is developing the Kupol and Dvoinoye deposits in Russia's far eastern Chukotka peninsula and has so far invested over $2.2 billion in them.

"Russia has an unparalleled opportunity to significantly increase domestic exploration and mining investment, as well as the potential to become a world center for mining finance," the paper said.

For this the government has to make some "relatively minor improvements to existing legislation", and provide greater protection and predictability for investors, it said.

Burt said to encourage an increase in foreign investment the government should ensure miners would get a fair chance to develop a deposit discovered under exploration license.

"Ensuring continuity (from exploration license to development permits) is critical," he said.

Another step should be reducing the amount of government permits required for ownership of strategic deposits.

"Currently, for example, owning more than 10 percent of a strategic deposit requires federal approval," Burt said.

"The government is underway increasing the threshold to 25 percent, but we believe there is room for increasing even further... Perhaps 51 percent could be attractive."

He said these issues have been discussed with the Russian government. "The government response has been very positive."

Kinross also suggested that Russia should provide tax incentives to investors, switching from revenue and royalty-based taxation to profit-based taxes.

GOLD PRICE TO RISE

Burt said that he saw the gold sector as an attractive investment as Kinross expected a further rise of gold prices.

"From a demand perspective investors see a safe haven for their investment and dollars are continuing to move into gold. On the supply side, global production has been in decline from 2001 ... and it is predicted to resume its decline," he said.

Burt declined to give a specific price forecast. "We believe it could be significantly higher in the near future," he said.

Burt said Kinross planned to invest $350 million in its two Russian projects in the next 2-1/2 years and to start the Dvoinoye mine by the middle of 2015.

"We are spending aggressively on exploration in the area around Kupol and around Dvoinoye. We have an exploration budget of approximately $20 million annually, he added.

"These are our plans for the near term. For long term we are open to joint ventures, but currently we have no specific plans," Burt said.


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