Valery Rudakov, Chairman, Polyus JSC

T

he gold mining is becoming one more strategic business for Norilsk Nickel, Russia’s largest producer of base metals and platinoids. Things turned this way after Norilsk Nickel acquired the joint stock company Polyus, which is developing the Olympiadinskoye gold field and which accounts for 15% of all-Russian gold mining. One of the most competent experts on precious metals and stones Valery Rudakov was invited to chair the board of directors of Polyus JSC. In an interview with Eurasian Metals Valery Rudakov told of rather ambitious plans to place Polyus JSC among world leaders in gold mining.

EM: What has changed at Polyus JSC after it has become part of Norilsk Nickel?
VR: Norilsk Nickel is now a 100% shareholder of Polyus JSC. That is the essence of changes but in accordance with the corporate law Polyus JSC remains an independent company. It will serve as a basis of developing all gold mining projects of Norilsk Nickel, including the investment policy. Volumes of investments will depend on those projects or fields that Polyus JSC is going to deal with in the nearest 5 years. A considerable portion of capital investments may come from profits of Polyus JSC itself. But hereafter decisions will be made by Norilsk Nickel.

EM: How will volumes of gold mining change?
VR: In the coming 5 years we intend to raise the annual volume of gold mining from 25 tons up to 100 tons. This is quite feasible and it will let us become one of the world’s ten largest gold-mining companies. Our plans are carefully thought out and well-grounded. I have no doubt that in 2007 we will produce precisely this amount of gold.

EM: Will you obtain licenses on developing other gold fields?
VR: If I mention these fields, then, prices for all of them will skyrocket. Our plans extend to the Urals, the Far East, Yakutia, Chukotka. Besides, the potential of Olympiadinskoye, the major gold field of Polyus JSC, is far from being exhausted: by 2007 it is quite possible to increase the annual volume of gold mining there up to 30 tons. There is one more direction of our development and that is to conduct our own geological prospecting operations in gold fields. Russia’s private business still does not make investments for these purposes. Meanwhile, such world leaders in gold mining, as Newmont and Barrick, are spending annually $50M each on geological prospecting. We will do prospecting in the Krasnoyarsk Territory’s areas, which are neighboring the Olympiadinskoye field, and we hope to raise the production volume by 10 to 15 tons of gold. Also, Norilsk Nickel has licenses for geological prospecting in some sections on Taymyr Peninsula.

EM: In case of successful geological prospecting could you lay your hands on promising sections, i.e. to become their owner?
VR: There are no end-to-end licenses in Russia so far, which automatically permit to get the right for developing fields. By existing laws a company has the right only for minerals extracted within the time period set in the license. What is more, a license can be revoked. Such terms are, of course, unacceptable to serious business. It turns out that you can invest big money, find a field but, at the same time, nobody guarantees that precisely you will develop this field. I want to refer you again to the experience of the West, where the geological prospecting became an independent kind of business: companies are searching for gold at their own risk but, when they find a large gold field, they can sell it at a price many times as high.

EM: Does Polyus JSC intend to invite foreign companies to participate in large projects? There was a talk about your possible interaction with Fleming Family & Partners...
VR: There is nothing impossible in business. I know Roddy Fleming and his partner Mark Garber quite well. We will possibly cooperate with them. But it is also possible that we will become competitors. The same might be said about any potential partner, who is operating on this market. For example, Placer Dome, Barrick, Rio Tinto, Newmont, AngloGold...

Gold-extracting mill, Polyus JSC

EM: How does Polyus JSC intend to market gold?
VR: We market gold through banks because it is more convenient, although we can also sell it to jewelers and ship it for export. We intend to use various financial means, which can ramp up the efficiency of sales: futures, swaps, hedging, etc. Polyus JSC did not use these means before.

EM: And what do you think of entering the jewelry business?
VR: It would be a strategic mistake due to the unjustifiable increase of commercial risks. Also, we are not going to manufacture semifinished products for electronics, to participate in business capital of gold refineries, which are bringing gold concentrate up to a gold bar. Everyman to his own specialization. Ours is gold mining.