London — Russia -- the second-largest gold producer in 2020, yielding only to China -- stands a chance to become the world's largest producer of yellow metal in this decade, as it keeps expanding mining operations while China ramps them down, according to consultancy and analytics firm Institute of Geotechnologies.
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Russia tripled its gold production over the last 20 years, and between 2010-2019, it grew by an average of 5.5% per year compared to 3% annual increases in the world's total. In 2020, Russia delivered 0.6% more gold (excluding recycled volumes) than in 2019 whereas global production fell 5%.
With its estimated 331 tons in 2020, Russia ranked second in terms of global gold output accounting for 9% of the world's total, Institute of Geotechnologies wrote in a presentation seen by S&P Global Platts May 6. Production in China declined 3.8% on the year to 368 tons.
If Russia maintains its current growth trajectory, it may become the world leader in gold mining as soon as this decade, the institute claims.
The consultancy forecast that Russia will maintain 0%-2% per year production growth in the short term, but the rate may accelerate by 2025, facilitated by the launch or expansion of several large production assets/facilities currently in investment stage.
A number of sources predict Russia's production to reach 427-482 tons/year by 2030, but analysts of the Institute of Geotechnologies believe in the prospect of 550-600 tons/year output by the end of the decade.
Top 10 provide two-thirds
The top 10 largest gold mining companies in the world include three operating in Russia: Polyus (4th with 86 tons output in 2020), Kinross Gold (5th with 71.8 tons) and Polymetal (9th with 43.6 tons).
Despite several companies -- about 520 -- operating in this business in Russia in 2020, this sector is a relatively consolidated: 10 players contributed two thirds (66%) to the country's gold output in 2020.
This volume of the top 10 miners came mainly from ore assets, while alluvial gold made up 3%-5.5% of their production over the past five years, but for the second 10 largest Russian miners, alluvial gold comprises either the bulk or 100% of output, according to Institute of Geotechnologies.
The still significant share of alluvial gold in Russia's production is a feature rather unique to the country and the one that ensures consistent interest in the gold industry from new investors and creditors.
Polymetallic miners leap ahead
Over 70% of Russian gold comes from gold deposits. Polymetallic deposits (copper-pyrite, copper-nickel, etc) provided about 12% of production. The last few years saw the emergence among Russian largest gold companies of producers, for whom gold is a byproduct.
With combined 22 tons in 2020, Nornickel, UGMK and the Russian Copper Company made it to the top 20 of the Russian rating.
Taking advantage of the price situation on the gold market last year, many companies took to processing lower-grade ore, which they usually put aside in less favorable market conditions, but the trend slowed down production growth or even decreased it for some miners, noted Institute of Geotechnologies.
This year, gold price, although has been declining, still remains at levels significantly higher than in 2019, and therefore will still motivate producers to continue processing low-grade ore, at least in the short term, and yet may prompt increase in the total volume, says the institute.
A potential decline in the world gold price will have a lesser effect on production of large Russian miners due to their relatively low operational costs; it will rather stimulate them to ramp up output.