Base Metals Mining in Russia: Economic and Legislative Overview

SUMMARY

As the world's industrial and consumer economies fluctuate, producers, investors and buyers of mineral resources, metals, chemicals and petrochemical products demand more concise information to ensure profitability, practice effective business planning, and to maintain an economically healthy supply/demand relationship. The entire spectrum of interconnected variables - price analysis and forecasting, production capacities and costs, trade patterns, socio-political factors, governmental regulation, emerging technologies, material/feedstock supply - all play into cyclical scenario of the world's mineral resources, metals, chemicals and petrochemical products sectors. We track all trends in production, mining and processing, export-import activities, financial standing, rehabilitation projects, new regulations relevant to production companies and changes in structure and ownership of the companies producing aluminum, copper, lead, zinc, nickel, cobalt and other base and minor metals, enterprises of ferrous metallurgy, producers of industrial minerals, chemicals, and products of petroleum and petroleum processing in all of the CIS countries. The information available in InfoMine's wide range of commercial studies and client services includes:

• Raw materials supply-demand and availability;
• Geographical market analysis;
• Economic and price forecasting;
• Process technologies and process economics;
• Production/process facility information;
• Production capacity data;
• Structure and ownership pattern of enterprises;
• Producer information, including organization, addresses, ownership and key personnel;
• Maps, charts, graphs and electronic media to present and deliver the information concisely.

TABLE OF CONTENTS

1. General Political and Economic Tendencies in Mining Industry

• 1.1. Governmental Policy for Nonferrous Ores Mining
• 1.2. General economic tendencies
• 1.3 Market tendencies in mining industry.

2. Projects

• 2.1. Udokan copper deposit (Chita oblast)
• 2.2. Chineisky deposit of copper and titanomagnetite ores (Chita oblast)
• 2.3. JSC MMC Norilsk Nickel

3. Legislation: Russian Legal Regulations of Mineral Resources Use

• 3.1. Nationality requirements
• 3.2. The system of licensing of the subsurface use
• 3.3. Grounds for issuing licenses
• 3.4. Legal aspects of transferring the right to use mineral resources
• 3.5. The system of payments for mineral resources use
  • 3.5.1. Mineral mining tax
  • 3.5.2. Rates of the Tax
  • 3.5.3. Payments for the use of mineral resources
  • 3.5.4. One-time payments
  • 3.5.5. Fee for participation in bidding (auction) and license fee
  • 3.5.6. Regular payments for the use of mineral resources
• 3.6. Withdrawal of licenses
• 3.7. Recent the Subsurface Law amendments: Two-key to one-key, and more
  • 3.7.1.Context/Fundamentals
  • 3.7.2.The new one-key principle: specific rules affected
  • 3.7.3.Other amendments introduced; prospects of further change
  • 3.7.4. Further Developments.
• 3.8.The New Draft Law On the Subsurface
• 3.9.Practical aspects

4. Review of Taxation System.

• 4.1. Russian Taxation System Framework
• 4.2. Corporate Profit Tax
• 4.3. Contributions in Kind to Charter Capital of LLC - VAT and Duty Exemptions
• 4.4. The Current State of VAT Deductions in Russia
• 4.5. Tax-Related Aspects of Russian Customs Practices
• 4.6. Dividend tax
• 4.7. Law Enforcement in Tax Disputes

5. Foreign investments

• 5.1. Legal regulation of foreign investments
• 5.2. Establishing a Legal Presence with foreign capital affiliation
  • 5.2.1 Representative Office or Branch
  • 5.2.2. Legal Entities

6. Legal regulation of natural environment protection in Russia applicable to mineral resources exploitation

• 6.1. Institutional framework of natural environment protection in Russia
• 6.2. Ecological Licensing during Life Cycle of an Industrial Target
• 6.3. Existing Mechanisms of Environmental Compliance Enforcement, Encouragement and Control
  • 6.3.1. General Principles of Environmental Enforcement
  • 6.3.2. Environmental Violations (non-compliance cases) and Respective Sanctions
  • 6.3.3. The Economic Mechanism of Preservation of the Environment

7. Health and Safety Regulation in Russia

• 7.1. State Policy and Institutional Framework
• 7.2. State Regulation of Industrial Safety of Industrial Objects
• 7.3. Legislation for dangerous industrial objects
• 7.4. Obligatory Certification of Work Conditions

8. Labor Regulations

Conclusions and recommendations

List of Tables

• Table 1. Key parameters of social-economic development of Russia
• Table 2. Large deposits of nonferrous metals
• Table 3. Production of alumina in the CIS.
• Table 4. Mining of nickel in ores in Russia for 1991-2003, kt
• Table 5. The main nickel deposits in Russia
• Table 6. Dynamics of PGM mining in Russia (conventional units)
• Table 7. Distribution of predicted reserves (P1, P2) of PGM by Russian regions
• Table 8. Dynamics of Russian PGM balance reserves (B+C1, C2) change in 1991-2003 (by the end of year, conditional units)
• Table 9. Pattern of ore mining in the Polar Division of MMC Norilsk Nickel in 2002-2004 (by mines), mln tonnes
• Table 10. Pattern of ore production (by quarries and mines) of KMMC in 2002-2004, mln tones

List of Figures

• Figure 1. Dynamics of GDP (bulk (1) and corrected by seasonal and calendar components (2) (January 1995 (2) -- 100%)
• Figure 2. Dynamics of metallurgical production and production of finished metal articles compared with December 2001
• Figure 3. Commodity structure of Russia exports to extra-CIS countries for the first 9 months of 2005 (2004)
• Figure 4. Commodity structure of Russian imports from extra-CIS countries for the first 9 months of 2005 (2004)
• Figure 5. Dynamics of capital investments, corrected by seasonal and calendar components (January 1995 -- 100%)
• Figure 6. Russian Ruble (R)/USD and R/EUR exchange rates (1997 -- 100%)
• Figure 7. Structure of production flows of Ni-containing products at Russian enterprises of MMC Norilsk Nickel
• Figure 8. Procedure of Transferring Deposits in Use
• Figure 9. Major Areas Available for Exploitation
• Figure 10. Pattern of accumulated foreign investments in Russian economy by the end of March, 2005