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Natalia Lomakina

Mineral resources sector of Russian Far East: results of transformation, prospects and opportunities for sustainable development. Natalia Lomakina Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences, Khabarovsk, Russia.

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Natalia Lomakina

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  1. Mineral resources sector of Russian Far East: results of transformation, prospects and opportunities for sustainable development Natalia Lomakina Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences, Khabarovsk, Russia

  2. Far East in the Russian economy • Unique economic and geographic location: a “window” from Russia to the dynamically growing Asia-Pacific region; • Territory (6.2 mln square km) – 36.4% of Russia; • Population – 6.5 mln people (4.58% of Russia); • ~5% of Russian GDP; • 9 subjects: Republic of Sakha (Yakutia), Primorsky region, Khabarovsky region, Kamchatka region, Amur region, Magadan region, Sakhalin region, Chukotsky automonous district, Jewish autonomous region.

  3. Contents • Far East MRS: current situation and trends (2005-2010) • Conditions and prospects for development of Far East MRS (2010-2030) • Far East mineral resources sector and the international cooperation.

  4. Share of Far East mineral resources in the national economy (estimates of 2005, %)

  5. Share of Far East mineral resources in the national economy (estimates of 2009, %)

  6. 1. Far East mineral resources sector: current situation and trends (2005-2010)

  7. Changes in the Far East Mineral Resources Sector.Extraction of New Kinds of Mineral Resources. • Titan-magnetite ores in Amur Region (deposits: Kuranakhsky, Bolshoi Seiim); • Nickel and kobalt in Kamchatsky Region(experimental-industrial extraction from the Shanuch deposit of kobalt-copper-nickel ores); • Iron ores in Jewish Autonomous Region(Kimkansky and Sutarsky deposits) and Amur Region (Garinsky deposit).

  8. Diamond Extraction in the Russian Federation(Ministry of Finance data)

  9. Changes in the Far East Mineral Resources Sector.Transition to the Underground Diamond Mining

  10. Gold Extraction in the Main FEFO Gold-Extracting Regions, tons

  11. Changes in the Far East Mineral Resources Sector.Transition to the Gold Ore Processing (hard rock mining)

  12. The Eastern Regions’ Share in Russia’s Gold Extraction

  13. Share of the Far Eastern Enterprisesin the Precious Metals Extraction by Large Companies, %

  14. Share of Foreign Companies in the Precious Metals Extraction in Russia and the Far East, %

  15. 2. Conditions and prospects for development of Far East mineral resources sector(2010-2030)

  16. State Programs of Russia’s Eastern Regions Development • Goal:realization of Russia’s national geo-strategic interests in the Asia-Pacific region through development of its eastern regions • National Programs:The Strategy of Social and Economic Development of the Far East and Baikal Area for the Period until 2025; The Federal TargetProgram «SocialandEconomic Development of the Far East and Trans-Baikal Area for the Period until 2013» • Regional Programs:Strategies and Programs of regional development in the Far East Federal District and Trans-Baikal Area

  17. Prospective role of the Far East mineral sector as defined in state documents The State Strategy of the Far East Development until 2025: • «use of natural resources potential is a real competitiveregion’s position in the domestic and foreign markets»; • a structural task– modernizationandholding the leading role of mining industry as a specialization core in the Far East economy The FederalTargetProgram for Development of the Far Eastern Regions until 2013: • «positioning of the Russian Far East economy … is to be implemented on the basis of natural resources extraction and processing development and the region’s transit capacity»

  18. The Driving Factors of the Far East’s Mineral-Resources Sector Development • The major international and national corporations define strategies, quantitative and qualitative characteristics of the mineral sector future development • The Far East mineral sector further development cannot be achieved without considerable technological transformations

  19. Examples of Innovation Approaches in the Far East Mineral Sector Development «Appraisal - Exploration» stage • «Polus Zoloto» (Natalka,Yakutia deposits); • «Polimetall» (Albazino, Maiskoe); • «Kinross» ( Kupol); • «Petropavlovsk» (PioneerandMalomyr)

  20. Examples of Innovation Approaches to the Far Easts Mineral Sector Development «Development & Mining/ Processing» Stage • «Polimetall»: inter-regional project «Albazino -Amursk», «Maiskoe - Amursk» (pressure oxidation technology) • «Petropavlovsk»: inter-regional project «Far Eastern metal works» (direct reduced iron production - ITmk3 technology)

  21. Level of exploitation in the Far East Mineral Sector (as of 2009/01/01)

  22. Return of Government to the Mineral Sector: Institutional and Financial Aspects 1) State participation in reproduction of mineral resources under the market economy (the Long-term State Program of Mineral Resource Reproduction until 2020) 2) Attempt of long-term planning of interrelated development of mineral sectors and territories (strategic creation of local centers of economic development (CEDs) instead of common-purpose financing and random licensing of mineral resource objects)

  23. Federal Financingof ExplorationWorks • 2008 – 22 billion rubles • 2009 – 18.9 billion rubles • 2010 – 18 billion rubles • 2011-2012 – 14 billion rubles • Annual financing benchmark for the implementation of the Long-term State Program of Mineral Resource Reproduction until 2020 - 35-40 billion rubles

  24. Fundamental Characteristics of the Economic Development Centers • availability of diverse mineral resource potential and capability to increase it substantially; • necessity and feasibility of infrastructural transformations in the region by implementation of state development programs; • financing the Economic Development Centers by means of public-private partnership mechanism; • capability to use the above mentioned factors to ensure sustainable economic growth and development of territories.

  25. The Far East Economic Development Centers ready for real investment

  26. Prospective Centers of Economic Development of national level

  27. Example:Correction of exploitation schedule for Natalka deposit

  28. 3. Far East mineral resources sector and the international cooperation.

  29. International cooperation of Far East mineral resources sector.1. Trade Cooperation 1. Export product structure • precious metals and stones – more then 95% • ores and concentrates – about 5% 2. Export geographical structure precious metals and stones: • European countries – more then 70%, • Middle East countries - more then15%, • North American countries – about 4%, • NEA countries – less then 1% ores and concentrates: • NEA countries – more then 75% (China – about 45%, Japan – about 20%, Korean Republic - more then 10%) • European countries – more then 20% • ASEAN – less then 1%

  30. International cooperation of Far East mineral resources sector. 2. Investment Cooperation • According to The Far East Development Strategy until 2025 investments needs for new mining and processing clusters in FEFO (including resource and infrastructure projects) exceed $30 billion. • Ex. 1: In 2007 the rate of the Republic of Korea’s investments to Russian mineral resource industry started to grow. In 2008 Korean investments in this sector were on the 2nd place in the whole structure (24.4%). The potential investment area is metal industry ( Khalaktyrskoe titanium-magnetite sand deposit at Kamchatka). • Ex. 2: Chinese companies activity: The formation of the mining and metallurgical cluster in Amur Area on the first step will be financed by Xuan Yuan Industrial Development (XY Group, China), that will extend credit to Joint Venture “Petropavlovsk” at the rate of about $375 mln for 10 years (70% of all work cost)

  31. International cooperation of Far East mineral resources sector. 3. Technological Cooperation • Ex.: Direct Iron Production (DRI), “Petropavlovsk”. • ITmk3 - innovation developed by Kobe Steel Corporation (Japan). It is the third and the last for nowadays technology for obtaining the raw material for steel production. • ITmk3 technology advantage: possibility to reduce cost, production period (10 minutes) and carbonic acid emissions.

  32. International cooperation of Far East mineral resources sector.4. Joint Ventures Foundation. • Ex. 1: Joint development of Eugenjevskoe apatite deposit in Amurskaya Oblast for providing production of 1.2 mln tons of complex phosphatic manure. The apatite concentration plant building in Amur Area and phosphatic manure plant construction in Hegang City (China) • Ex. 2: The plant building for titanium sponge production in Jiamusi City (Joint Venture “Petropavlovsk”& Chinalco). Facility – 15 000 tons p.a. at the beginning and up to 30 000 tons p.a. then. Investments – approx. $30 mln. Joint Venture: 65% - “Petropavlovsk” and 35% - Chinalco. Employment – 3 000 people. Raw materials – from Kuranakhskiy ilmenite- titanium- magnetite deposit in Amurskaya Oblast

  33. International cooperation of Far East mineral resources sector. 5. «Cooperation program» for 2009-2018 between Far East and East Siberia regions and North-East of China». • Projects with “industrial” potential (Examples: industrial exploitaition of Yagodninsky zeolites deposit, production of heat insulation materials from perlite, Nachikin and Paratun deposit in Kamchatka region); • Projects with significant “industrial” potential but high risk of implementation of raw product output scenario (Examples: exploitation of Kimkan-Sutar iron ore deposit in Jewish Autonomous region); • Projects, planned for implementation of only raw material output scenario (Examples: exploitation of Evgenevsky apatite deposit in Amur region for production of complex phosphate fertilizers in Hegan city area (China); exploitation of Kuranah ilmenit-titanmagnetit deposit in Amur region for supply of raw materials to titan sponge plant in Jiamusi city (China).

  34. Threats of the raw materials production development scenario of Russian Far East, for national and regional economies • Possible threats for national economy: loss of control over supply of strategic mineral resources to russian industry; weakening position of Far East as Russian farpost in the Asia Pacific region • Possible outcomes for Far East: strengthening of resource-export specialization of the regional economy, dependence of regional economy on commodity markets price dynamics, depletion of resource-based growth potential

  35. Some conclusions and key tasks • Far East mineral resources sector will keep its national specialization in near future • Potential for international cooperation of Far East mineral resources sector is quite high • The key question is that of estimating the mineral resources sector contribution to the sustainable regional development. • The high-priority theoretical and practical tasks are: estimation of “full” effects of exploitation of mineral resources for regional development, search of the ways to determine structure (disintegrate private benefits and regional development) and localization (effects inside and outside region/national border) of these effects.

  36. Thank you for attention! Prof. Natalia Lomakina Economic Research Institute, FEB, RAS Khabarovsk, Russia lomakina@ecrin.ru

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