No Gold †but Murmansk hopes for big Barrick mine

No Gold †but Murmansk hopes for big Barrick mine

A disclosure from the Murmansk region of northwestern Russia that a delegation of Barrick officials recently tabled a plan to invest more than $600 million to mine for platinum group metals (PGM) has drawn a sharp denial from Norilsk Nickel, Russia’s dominant PGM miner.

”I’ve never heard of anything regarding this project,” Norilsk Nickel’s spokesman Victor Borodin told Mineweb. Norilsk Nickel has extensive mining operations in the Murmansk region, where its Kola mining division incorporates three mines at four deposits, and the Pechenganickel enrichment and Severonickel refining plants. Pechenga produces copper and nickel concentrates, and these are processed further at Severonickel. Altogether, the Kola operations mined 6.8 million tons of ore in 2005; annual processing capacity at Pechenga is about 500,000 tons. According to Norilsk Nickel’s annual report, the Murmansk operations produced 37,000 tons of nickel for the year from locally mined ores, and another 83,000 tons from ores supplied from Norilsk’s eastern Polar division mines. Copper production was 35,000 tons from local mines, and 56,000 tons from the Polar division.

Substantial reserves, estimated at about 160 million tons of ore, are reported as proved or probable at the Zhdanovskoye deposit in the region. Additionally, in a deal announced in November, Norilsk Nickel will shortly acquire the nickel assets of the OM Group (OMG) of Cleveland. Among other things, this transaction will transfer to Norilsk Nickel a nickel refining operation at Harjavalta, Finland, with a capacity of 60,000 tons per annum. This in turn may allow Norilsk Nickel management to replace existing, but obsolete or costly production capacity at Severonickel, by refining across the border. “Norilsk can shut down and refurbish parts of the Kola-based refining assets at Severonickel if it so chooses, ” reports Rob Edwards, a Moscow metals analyst, “and ship matte and concentrate to Finland, if current moves to relax pgm trade become law.”

In point of fact, Norilsk Nickel managemement has found several times in the past decade that it does not have the free choice it imagines to shut down Murmansk region assets, where the local workforce, unions, and regional government have successfully frustrated earlier attempts.

Suspicion of another Norilsk Nickel move in this direction, following the OGM deal, may have encouraged the regional government to leak advance details of the Barrick talks. According to a Moscow newspaper report of last week, regional mine administrators and a Barrick team had discussed details of a plan to mine PGMs at the Tundra Fedorovo tract, for which Barrick holds an exploration licence, and where it is conducting a mine feasibility study. The area has possible ore resources of 200 million tons of nickel, copper and PGM-bearing ore.

The newspaper report cited a Barrick presentation document estimating capital expenditure on the proposed new project of $639 million, including a mine costing up to $90 million; a concentration plant for $275 million; and the balance on infrastructure. If implemented, this would be the biggest mine investment to date by an international mining company in Russia.

Annual output from the proposed project would be about 150,000 tons of concentrate, with copper and nickel grading at just under 7%, and small amounts of platinum group metals, according to the project documents that have been leaked.

To date in Russia, Barrick has limited itself to indirect participations in largely unsuccessful gold projects, including equity stakes in AIM-listings, Highland Gold and Celtic Resources. A year ago, Barrick failed in a bid to take Polymetal, Russia’s second goldminer.

Between 1997 and 1999, the Canadians had been much more ambitious, aggressively pursuing the licence for the Sukhoi Log gold deposit in southeastern Siberia, with initial assistance from a highly placed federal licensing official. A concerted effort to eliminate the licence held by the Sukhoi Log Mining Company, controlled at the time by Australian junior Star Mining, succeeded.

Barrick then acquired an unprecedented right to drill the deposit for a temporary period. But Barrick’s bid to take control of the deposit failed amid public recriminations from Barrick officials, one of whom attacked the Russian licensing official verbally in front of a visiting Canadian minister.

Barrick has continued pursuing the ghost of Sukhoi Log, while the Kremlin has hung on to the licence, which had been taken in proceedings of dubious legality from Star. With an estimated capex of more than a billion dollars, the Sukhoi Log project would be double the size of the Murmansk project Barrick has now tabled. But Sukhoi Log is indubitably a gold mining project, and there is no indication from the leaked documents that the Tundra Fedorovo tract includes significant gold.

According to Norilsk Nickel’s reports, its Murmansk mines do produce gold; but the total was just 8,000 oz in 2005, and this was down 43% from the 14,000 oz reported in 2003.

For the time being, no-one at Barrick wants to admit there is gold, or any other mineral, in Murmansk; or that the company has put anything on the table with the regional government. No-one responded to telephone calls at Barrick’s Moscow office. The company’s principal spokesman in Canada, Vince Borg, was asked to clarify Barrick’s interest in the deposit, and what commitments it has adopted at this point in time. Borg did not respond.

According to Borodin of Norilsk Nickel, he is aware of the newspaper report, but in the week since it had appeared, and notwithstanding the enquiries Norilsk Nickel has quietly initiated, Borodin is “unaware if any negotiations [with Barrick] are already in process.”

In Murmansk, the spokesman for the governor and regional administration, was also under-informed. Nikolai Sigin told Mineweb “there was a delegation on the investment project for the deposit Fedorovo Tundra from Barrick. It is a really large project for the region, and I think that the outcome on it was positive. Unfortunately, I don’t have any documents from the natural resources department, where this [meeting] was held, so I can’t provide you with the details.” He promised to have more details next month, after the holidays.


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