MOSCOW. Feb 19 (Interfax) - Despite locally firmer gold prices in January-February 2014, Russian gold miners are seriously considering mothballing inefficient capacity if the price of the metal falls below a certain threshold. For GV Gold (Vysochaishy), one of Russia's top ten gold miners, this threshold is $1,100 per ounce. However, the company's core Irkutsk project will continue to operate even at a lower price, and financing will continue for one of its growth projects - Drazhnoye, GV Gold CEO Sergei Vasilyev said in an interview with Interfax. In order to expand its resource base, GV Gold, like fellow Russian gold miner Nordgold, is considering foreign projects, with a focus on brownfield projects in Southeast Asia and Africa.

Q: At what gold price might the company reconsider financing investment projects?

A: Our two main projects are Ugakhan and Drazhnoye (Taryn ore cluster). We are continuing to build them and do not intend to reduce investment, at least while gold hasn't fallen to $1,100 per ounce. At a price above $1,100 we won't sacrifice our investment program. Taking into account the launch of the mining and processing plant at Ugakhan and the first phase of the mine and processing plant at Drazhnoye, we forecast that production will grow to 228,000 ounces in 2016 (from 178,000 ounces in 2014), and to 424,000 ounces in 2018.

Q: What projects might be halted first of all if the price falls to $1,100? Have any assets been shut down already?

A: We have a plan worked out for every mining asset, according to which certain capacity is retired depending on the price of gold.

At a price of less than $1,100 our Irkutsk project continues to operate. Operating costs at Vysochaishy (Irkutsk project) are up to $700 per ounce, in other words this is the safety cushion that will allow us to not only survive but also develop. But one of the four plants of the Irkutsk project - Marakanskaya - might be mothballed. However, it's the smallest by volume of production. At a price of less than $1,100, the issue of mothballing alluvial assets at Kuranakh will be decided. The construction of a third dredge as part of our Aldan cluster at the Yakutia project has already been mothballed. Financing of Drazhnoye will continue even at lower price levels, but for Ugakhan, where operating costs are at $800, a market price of $1,100 is the cut-off.

Q: What is the threshold price of profitability for the company as a whole?

A: As for the market price, if it goes below $900, "we'll all have it easy and peaceful".

Q: What price is factored into the budget for this year?

A: A price of about $1,250 per ounce is factored into the budget. Now thanks to the devaluation of the ruble, part of the budget has increased and we are ahead on planned revenue.

Q: Are you considering hedging the gold price?

A: No. First of all, right now amid the uncertainty on the gold market it's very hard to guess. There are cases when companies guess right, like Petropavlovsk last year. But the example of Polymetal , which in 2007 hedged its revenue on silver and lost as prices shot up, is still fresh in the memory. After this, the word hedge became derogatory in our industry. The risk is too high - if we make a hedge now and the price returns to $1,400-$1,450 it would be a bit of a shame. Secondly, we benefit very little from fluctuations of plus-minus $50.

Q: Is the company operating at full capacity?

A: Right now with capacity of 5 million tonnes of ore we're utilizing 4 million tonnes. And we will maintain this level because increasing the volume of processing above 4 million tonnes requires additional power capacity. It would be necessary to bring in diesel power plants, which involves higher costs. We don't see the point right now.

Q: What is the amount of capital expenditures planned for 2014?

A: Capex for the Irkutsk project has been approved at 2.4 billion rubles for 2014. This amount includes the construction of the mine and plant at Ugakhan and modernization at Vysochaishy, as well as exploration work, which we are reducing. Right now our deposits are expected to produce gold until 2021-2022. Investment expenditures at the Yakutia project are estimated at about 2 billion rubles.

Q: Are you conducting exploration close to existing deposits or are you looking for new properties?

A: There are problems with new sites in Russia. Basically, for the most part, what is left in Russia is just rubbish. Both we and our colleagues in the industry have repeatedly studied the picture of assets and come to a discouraging conclusion about quality.

Q: But still you acquired the license to Drazhnoye just last year