By Eugene Gerden
Russia aims to become one of the worldâ€™s largest producers of platinum group metals (PGMs) in years to come, due to the planned increase of production both within the country and abroad, according to recent statements, made by representatives of some leading mining companies and senior officials of the Russian Ministry of Energy.
Regarding the domestic market, so far, local mining company Russian Platinum, has announced plans for the development of some of the worldâ€™s PGMs in the Russian Taimyr Peninsula.
As part of these plans, the company will focus on the development of the Chernogorsky region, the Norilsk-1 field as well as the neighboring Maslovsky field.
Annual ore output from Chernogorsky is expected reach 7 million tonnes. For all three fields, overall output will reach 21 million tonnes after achieving design capacity by 2030.
The lifetime of the project is estimated at 50 years. Overall production of PGMs for these regions is forecast to reach 120 tonnes per year.
According to initial plans of Russian Platinum, implementation of the project should have been carried out jointly with the Norilsk Nickel, while the overall cost of the project totalling RUB 250 billion rubles (US$4.4 billion). However, at the end of last year Musa Bazhaev, head of Russian Platinum, told the Russian President Vladimir Putin that overall investment increased up to US$15 billion.
According to Bazhaev, the establishment of full-scale PGM production from the three fields noted above will allow Russia to produce up to 50% of the PGMs in the world within the next several years.
The majority of funds for the projects are expected to be allocated from the sources of Russian Platinum; however, there is a possibility that part of them (up to US$1 billion) may be provided by the National Wealth Fund, Russia’s sovereign wealth fund.
There was also the possibility of attracting Middle Eastern investors, primarily those from the UAE and Saudi Arabia; however, after the breakup of an agreement to reduce oil production between Russia and Saudi Arabia this March and associated of oil wars, these plans were postponed.
Most Russian analysts consider the project of Russian Platinum as highly profitable, which could bring its investors annual revenues of US$7 billion with a net profit of US$3.7 billion. According to some preliminary estimates, payback period of the project will not exceed four years.
This is not the only big platinum project which involves the participation of Russian investors.
At the end of last year, Russian investment company Vi Holding, owned by Russian businessman Vitaly Maschitsky, announced plans to invest up to US$500 million in the development of Darvendeil, which is the worldâ€™s second largest platinum region in Zimbabwe. As planned, the project will be implemented in the form of a joint venture with the local partner of Vi Holding â€“ Landela Mining Venture. Overall investment in the project is estimated at more than US$3 billion.
Most of analysts believe both projects could be very profitable for its investors, taking into account the recent growth of global prices for platinum itself and other PGMs, particularly palladium.
At present, most global palladium output is supplied for automotive production (primarily for automotive catalytic converters) while prices range between US$1,500â€“2,000 per ounce and, according to analysts, will continue to remain in this range to at least 2025, when current environmental standards for car manufacturers will continue to be in effect.
However, there is a possibility that global demand for the metal will face stagnation after 2025 and a steep decline starting in the 2030s would be mainly due to the expected reduction in producing traditional fossil fuel powered vehicles. That may lead to the decline in the value of palladium in the range of US$500 to 1,000 an ounce.
Prior to the pandemic, the global palladium market had been characterized as in a deficit. In 2011, the shortage estimated at 0.2 million ounces, while in 2016 reached 1.2 million and about 0.5 million ounces at present.