RUSSIA: Foreign investment is turning Russia's harsh and far flung corner of Chukotka into a major gold production area

Record ID: 756052

  • Title: RUSSIA: Foreign investment is turning Russia's harsh and far flung corner of Chukotka into a major gold production area
  • Date: 12th August 2009
  • Summary: CHUKOTKA, RUSSIA (RECENT) (REUTERS) VIEW FROM PLANE OF CHUKOTKA LANDSCAPE COCKPIT PLANE PAN OF KUPOL GOLD MINE PIT EXCAVATOR FILLED WITH ORE DRIVING TOWARDS PLANT BUCKET OF EXCAVATOR TIPPING ORE ORE CONTAINING GOLD FALLING INTO PLANT ROCK PARTICLES ON CONVEYOR BELT IN PLANT MILL TURNING ROCK PARTICLES ON BELT PATRICK DOUGHERTY, GENERAL MANAGER AT KUPOL, WALKING T
  • Embargoed: 27th August 2009 13:00
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  • Topics: Economic News
  • Reuters ID: LVA99RRWECWJ8D2ZMKWJL49S60QN
  • Story Text: When the brief summer melts the Arctic ice and turns the vast tundra marshy, there is no way to get around this far flung Russian region except by air. Chukotka, a hardly populated region nine time zones east of Moscow, is at the world's end if there ever is one.
    But for Canada's Kinross Gold Corp, the hardship is worth it. Scattered over land twice the size of Germany is some of the largest gold deposits in the world.
    The company invested 700 million dollars to set up the Kupol mine and is using the world's most advanced technology to extract the wealth from the barren ground.
    "It's certainly one of the more challenging area's that I worked at in my life, and I worked in the Atacama desert and I worked at 15,000 feet in Indonesia, and this is the most severe climate I ever had to deal with," said Patrick Dougherty, general manager at Kupol.
    In winter, which lasts eight months a year here, miners walk the purpose-built Arctic Corridor -- an enclosed, 900-metre tunnel from camp to pit -- to avoid temperatures that drop more than 50 degrees Celsius below zero (minus 58 degrees Fahrenheit).
    In a region where the first mining was done by prisoners of Stalin's infamous Gulag system, the state-of the-art conditions at the Kupol mine awes even the most experienced miners.
    "When we arrived in Chukotka we were amazed to be in such a far-away place, it was like a bare desert, and we were also shocked from the harsh conditions here, there is so much wind, and it is so cold. In Magadan it is cold, but here in Chukotka it is even worse. Also, we were impressed with the scale of the construction and the amount of money that has been invested to build up this mine,"
    said 43-year-old Evgeney Turkoi from Ukraine who has worked more than twenty years in underground mining.
    About 60 percent of Kupol's gold is mined underground. Skilled operators manoeuvre large rock drills. To get to the ore in places vulnerable to rock falls, the miners use remote-controlled excavators.
    "I am happy we work with machines here and not with our hands," said Alexander Puzovets, who works 10-hour shifts at the underground pit face.
    While the gold is a boon for some, extracting it creates an environmental disaster few consumers know about. Open-pit mining, which accounts for three-quarters of the world's gold, produces more waste per unit than any other metal. Extracting a single gram of gold requires the removal of at least one ton of rock, leaving a scar on the landscape. The rock is then leached with cyanide, a highly poisonous chemical to human and wildlife.
    "Not a lot of people are aware that to extract one gram of gold, you need to dig at least one ton of ore. The lower the concentration of gold in the ground, the more waste is created to extract the gram of gold, and this waste contains chemical reagents that were used in the production process such as cyanide," says Olga Moskvina, director of the non-profit Magadan Centre for the Environment.
    Kupol says it adheres to international standards of environmental protection and has built a modern tailings dam that collects the waste from the mine.
    Despite the environmental damage, local government welcomes the investment in gold exploration. Chukotka, a region revived in the last eight years by the $2.5 billion investment of Chelsea soccer club owner Roman Abramovich, produced a fifth of Russia's gold in the first half of this year. Gold is the region's passport to growth after Abramovich quit as governor last July.
    Abramovich's successor, Governor Roman Kopin, says Kupol brings in the biggest tax haul in a region where reindeers outnumber people four-to-one.
    "With a deposit as large as Kupol, mining's contribution to the regional economy is expected almost to double to 37 percent this year. So it is evident this industry sector is starting to play a very important role in the economy of Chukotka," says Kopin.
    Kinross Gold Corp, the Canadian miner which owns 75 percent of Kupol -- meaning dome in Russian -- is unusual among foreign investors for holding a majority share in a major Russian mineral deposit. The government of Chukotka owns the other 25 percent. Russia ranked fifth among the world's gold miners last year with an 8 percent share of output. Gold's safe-haven appeal has lifted its price by 10 percent this year.
    However, current reserves at Kupol will last only until 2016. To extend the mine's life beyond this date, Kinross is scouting for more reserves in the area.
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