Gold output down in Russia, but expected to rebound

Russian gold firms produced 201.3 tonnes of gold last year, 1.4 percent less than in 2009, but production should rebound to 205-207 tonnes this year, the Gold Industrialists’ Union industry lobby has said. Mined output declined 1.7 percent year on year to 175.2 tonnes.
Kinross Gold Corp’s Chukotka Mining and Geological Co produced 5.2 tonnes less than a year ago and Petropavlosk’s Pokrovsky mine produced two tonnes less, the union said in a statement. Mines owned by Polymetal raised output by 2 tonnes and Polyus Gold’s mines by 1.9 tonnes.
Output of gold as a by-product of other metals increased by 9 percent to 15.9 tonnes and refining from scrap fell by 17.1 percent to 10.3 tonnes. A union spokesman said the lobby expected output to rise to 205-207 tonnes this year. “But this is a preliminary estimate, which may yet be adjusted,” he said.
Russia is the world’s No. 5 gold producer, and its reserves are second only to South Africa’s. It raised gold production by 11.2 percent to 205.2 tonnes in 2009.

Yet another new China gold production record in 2010
China, the world’s largest gold producer each year since 2007, has further increased domestic gold production in 2010.  It was clear that China’s gold production was heading for yet another new record and, according to the China Gold Association, this is indeed the case, having reached 340.88 tonnes in 2010 - a rise of 8.57% over the previous year’s figure.  China was already the world’s largest producer of the metal before this latest increase and will thus comfortably have retained this position again.
Together with record gold imports in 2010, China is challenging India as the world’s largest consumer of the metal too.  There is also the suspicion that much of the country’s own output, supplemented by gold processed in China on behalf of overseas companies, either as a byproduct from base metals concentrates shipped to Chinese smelters, or in bought-in production sent to China for final processing from other gold mining operations, is being taken into government coffers thus boosting the country’s gold reserves.  On past reporting patterns any such boost to China’s official gold reserves may not be reported unless and until it suits the country to announce this.

There is little doubt now that China is a very considerable player in world gold consumption.  It has a population pre-disposed to buy gold as a protector against inflation, which is already rearing its head, and against the vagaries of the very volatile Chinese stock market.  If the country is indeed also boosting its reserves it also has the power to strongly influence price patterns going forwards.  While it may not be in the country’s best interests to see gold rise too fast, it may also wish to limit any downside given the increasing precious metals investment by its citizens - by all accounts an investment that is being encouraged by state-owned institutions and media.

Thus, if China feels that gold may be drifting downwards in price faster than it would like don’t be too surprised if it announces a new boost in its gold reserves sooner rather than later - or at the least a policy statement suggesting that it intends to do so.


China exports less rare earths, only to earn more
China’s exports of vital rare earth elements used for numerous high-tech goods slipped almost one-tenth last year but the overall value rocketed as quota cuts lifted international prices. China, which produces about 97%of the global supply of the minerals, cut export quotas for the minerals by 40% last year, a move that alarmed buyers and trading partner.  It has cut export quotas for the first half of 2011 by 35% from the first half of last year, although total quotas for this year have not yet been announced. China says the quota cuts will prevent reckless and polluting mining of deposits.
China exported 4,738 tons of rare earth metals, ores and compounds in December, more than twice as much as in November, bringing its full-year export volume to 39,813 tons, according to data by China Customs Statistics (CCS) Information Center, Hong Kong, an authorised supplier of Chinese customs figures. The export figures were well above the 2010 quota of 30,258 tons. The additional exports may reflect shipments early in the year that were registered under unused 2009 quotas.   
As volumes shipped out of China have dwindled, the value of trade has soared. December’s tonnage was down by almost two-thirds from December 2009, but the value rose four-fold to $309.2 million on a free-on-board basis. That has helped meet other goals of China’s policy of controlling exports of rare earths and other minor metals – to raise their price internationally and lure more secondary industry to set up shop in China.  


China’s power programme to raise demand for copper
China’s plan to modernise its electricity transmission network may stimulate more copper imports and raise Chinese copper prices, Aurubis, Europe’s gest copper smelter, has said. China announced a series of targets for its power sector in January, including modernisation of the rural power grid. Power cables have a high copper content.
The grid modernisation “will result in additional copper demand,” Aurubis said. “Since a significant portion of Chinese copper consumption must have resulted from the depletion of local stocks in light of consistent imports of wrought copper and copper products in 2010, this might cause imports to rise in 2011,” Aurubis said.
“The rebuilding of stocks outside of the metal exchange could result in the copper prices in China increasing above the level of the LME (London Metal Exchange) again, and thus reopen the arbitrage window -- a situation that benefits copper imports.”
“Copper products are still in high demand, which was also evident in the 2011 annual (contract) negotiations, it said. What is traditionally the most demand-intensive time of the year for products will begin in February, it noted.


RUSAL chooses 4 banks for bond issue in yuan
United Company RUSAL has selected four banks for a yuan-denominated bond issue in Hong Kong that it plans to launch in the first quarter.  Deputy Chief Executive Oleg Mukhamedshin did not identify the four banks as some details had yet to be finalised, but said one was Chinese, one was from Hong Kong, one from Europe and one bank was Russian. Mukhamedshin said the size of the issue should not be more than $152 million, depending on demand. “We believe the RMB (bond) market is a promising one. (It is) growing extremely fast. We want to be in the market at the very beginning,” he said.
Mukhamedshin said RUSAL had no plans to sell its 25 percent stake in the world’s top nickel producer JSC MMC Norilsk Nickel as the Russian company considered it a long-term investment. RUSAL, the world’s leading primary aluminium producer, has filed lawsuits to defend its interest in Norilsk Nickel.
Mukhamedshin said RUSAL expected the first physical aluminium exchange-traded fund (ETF) to be launched in the first quarter in London, which could draw demand for 1 million tonnes of aluminium this year. “I think it will take a certain amount time to develop this product ... our estimate is there should be demand for 1 million tonnes this year, depending on how quickly it is launched.” Mukhamedshin said RUSAL was interested in becoming a supplier of the metal to such ETFs.


China’s Zijin to pay extra $3 billion for toxic leaks
Chinese gold miner Zijin Mining will fork out 20-billion $3 billion, its latest penalty for its key role in hazardous waste water leaks last year. Poor maintenance of the lining of the waste reservoir at the Zijinshan copper and gold mine led to two breaches in July 2010, dumping toxic waste into Fujian province’s Ting river, killing a large number of fish and polluting drinking water for tens of thousands of people.
Zijin, which had enjoyed a reputation as one of China’s premier mining firms and has mining interests overseas, has run into frequent trouble with tailing dams. In September last year, the firm halted production at a tin mine in southern Guangdong province after it said a leak in the mine’s residue pool caused by heavy rains had flooded nearby villages and killed several villagers.


Norilsk Nickel ends year “successfully” beyond expectation
Norilsk Nickel, the world’s top nickel and palladium miner, expects to post a net profit of over $5 billion on revenues of $15 billion for 2010, the company’s chief executive,  Vladimir Strzhalkovsky, has told Vladimir Putin. “The year has ended successfully. The capitalisation has risen by nearly 90 percent. We had not expected such a result,” he said. In 2009 Norilsk posted a net profit of $2.65 billion on revenues of $10.2 billion.
Strzhalkovsky said Norilsk Nickel plans to invest 90-billion $3.01 billion in its development this year, some 130% up from 2010. The company eyes total investments of $32 billion between 2011 and 2025, he said. He also said that the company has prepared a request to the government to tender two major nickel deposits located in the central Russian Voronezh region. “If we win those tenders, we are ready to invest $1.2 billion in their development in 2011-2018,” he said.