Resources Ministry submits paperwork on Norilsk-1 auction to govt
MOSCOW. Dec 24 (Interfax) - The Russian Natural Resources Ministry submitted paperwork concerning an auction for the southern section of the Norilsk-1 nickel field to the government in December.
"We've submitted the documents to the government. There'll be an auction," Resources Minister Sergei Donskoi told reporters.
Russian Platinum, a member of Musa Bazhayev's Alliance Group, won a tender in June for the Norils-1 license, but its main rival, MMC Norilsk Nickel , demanded that the tender results be canceled and the Resources Ministry backed the company.
A Norilsk Nickel representative told Interfax that the company would bid at an auction. Russian Platinum did not comment.
Russian Platinum and Norilsk Nickel are contesting actions by the regulators in court. Russian Platinum is complaining about the inactivity of the Resources Ministry, which has not issued the licenses following the tender. The court should hear the suit on January 29. Norilsk Nickel is contesting the actions of the Russian Federal Subsurface Resources Agency (Rosnedra) during the tender, and its suit will be heard on January 21.
The Russian government has refused to confirm the results of the June tender held by Rosnedra for the southern section of the Norilsk-1 copper and nickel deposit. The license to the southern section of Norilsk-1 will therefore remain undistributed until a new sale of the rights to its development, probably in the form of an auction.
Following the June tender, Norilsk Nickel appealed to the Natural Resources Ministry and Federal Anti-Monopoly Service (FAS) to declare the decision of the Rosnedra tender commission, which was made up primarily of employees of this federal agency, illegal. The company said its plan for the development of the deposit was more realistic, as it already developing the neighboring, northern section of Norilsk-1, owns the infrastructure and uses the necessary technologies in practice.
FAS did not find any violations in the tender proceedings, but the ministry acknowledged that the proposal of Amur Mining Cooperative, the Russian Platinum subsidiary that won the tender, was not sufficiently rationalized and did not meet requirements for full recovery of minerals and rational use of resources. The ministry said the results of the tender should be reconsidered. After this, Norilsk Nickel filed a lawsuit challenging the legality of the Rosnedra decision, while Russian Platinum filed a lawsuit over the failure to issue a license. The Moscow Arbitration Court will hear Norilsk Nickel's lawsuit on November 26.
The government decided to annul the results of the tender despite the expert opinion of the Russian Academy of Sciences, which was asked to analyse the rival bids. The academy found the proposal of Amur Mining to be preferable, saying that the technology proposed by this company was superior to the archaic technology of Norilsk Nickel. The academics noted that Norilsk Nickel proposes to continue operating the old mine for the first 25 years of developing, bringing its capacity up to 3.6 million tonnes of ore, while Russian Platinum wants to build a new mine with capacity of 6 million tonnes tonnes of ore, with a view to subsequently double capacity to 12 million tonnes.
The minister for development of Russia's Far East and the president's envoy to the Far East Federal District, Viktor Ishayev also came out in favour of Amur Mining. The Prosecutor General's office also became involved in the dispute following a request filed by State Duma Speaker Sergei Naryshkin in response to an appeal from Norilsk city council members.
In addition to Norilsk-1, Norilsk Nickel was unable to secure the license to the western flank of the Oktyabrskoye deposit, the main part of which is also already being developed by the company. The Rosnedra tender for this deposit was aborted and Norilsk Nickel's bid was found to not meet tender conditions.
Russian Platinum planned to invest 78 billion rubles in the Norilsk-1 project over ten years. The company planned to finance the first phase of the project, costing 59 billion rubles, with the funds of its shareholders, which according to Russian Platinum are prepared to invest $4 billion in the next five years "with the goal of creating in Russia a global leader in production of platinum group metals." The company expected to planned to implement the Norilsk-1 project with the help of infrastructure built for the development of the Chernogorskoye deposit, which is 10 km from the new license area and 15 km from Norilsk.
Norilsk Nickel planned to invest 19 billion rubles in the first phase of development at the southern section of Norilsk-1, using existing infrastructure and mining out the Zapolyarny mine at the northern section, and invest another 45 billion rubles in the second phase. Norilsk Nickel planned to mine 3.6 million tonnes of ore annually at the southern section starting in 2016.
The southern section of Norilsk-1 had 78.012 million tonnes of B+C1 and 153.723 million tonnes C2 ore reserves listed on the state balance as of January 1, 2010. Estimated nickel reserves were 273,200 tonnes B+C1 and 578,100 tonnes C2; copper - 378,100 tonnes B+C1 and 836,100 C2; cobalt - 12,718 tonnes (B+C1) and 23,244 C2; platinum-group metals 517.868 kg (B+C1) and 1,121.407 kg (C2); and gold 37.082 tonnes (C2).
The ore grade in the southern section of Norilsk-1 is 0.41% to 2.67% Ni, and 0.57% to 5% Cu. Mining in the southern section of the deposit was previously considered unviable given the higher grade ore in the northern section of the deposit and the discovery of the Talnakh deposit.