Russia opens new gold mill in plans to rival South Africa

Russia has officially opened its largest gold mill which has been built by Polyus Gold at its Olimpiada mine, in the Krasnoyarsk region of the country. Olimpiada is Russia’s largest gold mine and the source of 16% of national output during 2006.

Polyus Gold produced 23% of Russia’s gold last year, and the new mill forms part of an ambitious expansion strategy.

The company plans to more than triple output to 3.9 million ounces by 2015 and will achieve this by developing several large fields in remote regions.

Russia is currently investing heavily in the exploitation of its gold reserves with the aim of coming second only to South Africa in terms of output.

Whilst sector analysts acknowledge that Polyus, which is Russia’s largest gold miner, has access to substantial reserves the company has had problems with execution.

On the other hand, Peter Hambro Mining, which is the second largest operator in the country, has the opposite problem in that its production track record is good but analysts are uncertain about the conversion of its resources into reserves.

In the past two years Russia’s gold output has declined, ranking the country sixth in terms of world supply.

Traditionally, much of Russia’s gold has been found close to the surface in open-pit alluvial deposits and further exploitation will require deeper digging, which will take time.

Output is expected to decrease by a further 2% to 4% in 2007 and financiers are cautious about Russia’s long-term plans.

Investors have become more conservative recenly, as gold prices steady after rising over 50% in the last two years.