Russia’s Mining Challenges

Owing to the vast natural reserves, the mining industry plays a strategic role in the Russian economy. The productive capacity and expansion of the country’s export potential depend on the output of mining enterprises.

Breakthrough technologies and innovative changes in the management of the mines are needed to increase efficiency. Russian companies are constantly striving to improve their effectiveness and modernise production segments from exploration and mining to processing and infrastructure. Increasingly, companies apply innovative systems of automation and operational management, replacing older systems with digital and Internet-connected technologies. In addition to the introduction of new technologies, mining companies improve long-term forecasting processes and use advanced tools to assess market trends.

Russian mining and metals industry is experiencing strong external and internal challenges.  Due to the new economic sanctions imposed by the United States, Canada, Australia, Japan, New Zealand and EU countries, many Russian companies experience difficulties in attracting financing on the international markets. There are also difficulties with the acquisition of some high-tech foreign equipment and technologies. Worldwide trade wars seriously disrupt raw materials prices and demand for metals, which, in turn, creates difficulties for long-term planning and implementation of strategic programs for enterprise development. Long overdue changes in the regulatory and fiscal regime in Russia cause stagnation of much-needed exploration. The gap between education, research, and real business is growing.

Many solutions to Russia’s mining challenges can be resolved by better management of internal resources. Gold and commodity-backed Russian banking and financial system should start providing the industry with “cheap” money and focus on developing local capital market capacity. Creation of innovative technological capabilities can be facilitated by organisation of consortiums with the participation of large extracting companies and leading research institutes. Development of breakthrough technologies in Russia is already facilitated by forward-looking businesses, universities, state-run funds and start-ups who team up within the frameworks of innovation clusters, business hubs, and incubators. Central and Regional Governments are starting to pay attention to the needs of large and developing businesses.

Difficulties in replacing reserves pressure many Russian mining companies to look for flexible approaches to exploration and investment. One of the potential solutions could be the development of the regional exploration clusters where small prospecting and exploration companies would receive technical and financial support from major mining companies in return for the stake in new discoveries. State fiscal and regulatory support is essential to stimulate the flow of private money into geological research.

The leaders of the Russian mining companies understand that, besides technological challenges, new approaches to interaction with stakeholders are required for the transformation of industry and channeling investments to meet the future demand of metals and minerals.

The difficulty is that companies need to demonstrate profitability in the short term. By minimising costs and reducing risk-associated projects, companies often sacrifice promotion of innovation within the industry. For successful development of the industry, a major shift is necessary to transform the thinking of shareholders and managers in assessing the effectiveness of decision-making, the validity of new ideas and determining the risks.

Despite significant contribution of the mining sector to the economy, the reputation of the industry in many regions continues to suffer because of the popular (and often well-founded) view that mining activities are detrimental to the environment, negatively affect the lives of local communities and natural habitats. To ensure sustainable development and to build confidence in relations with employees, investors, local communities, government agencies and public organisations, mining companies need to take proactive measures. Despite the ongoing efforts, still much needs to be done in terms of identifying a clear civic position on corporate social responsibility, voluntary support for sustainable development standards and disclosure of information related to the impact of mining activities on the environment.

The forthcoming 14th Mining and Exploration Forum MINEX Russia organised in Moscow on 2-4 October 2018 will provide opportunities to discuss current problems facing the mining industry in Russia and stimulate a broad exchange of new ideas for their solution.

Reflecting the current industry trend, the Forum is organised under the common theme “Building up Innovative Excellence in Mining and Exploration”.