Gold mining in volcanic Russian wilds

PETROPAVLOVSK-KAMCHATSKY, Russia Sun Jul 15, 2007 7:13pm EDT

Rock towers stand in the sea off the coast of Russia's far eastern Kamchatka peninsular June 17, 2007. Gold miners on Russia's Kamchatka peninsular contend with volcanic eruptions , floods and poor infrastructure, but due to high metal prices the hard work pays off. REUTERS/Olesya Dmitracova

Rock towers stand in the sea off the coast of Russia's far eastern Kamchatka peninsular June 17, 2007. Gold miners on Russia's Kamchatka peninsular contend with volcanic eruptions , floods and poor infrastructure, but due to high metal prices the hard work pays off.

Credit: Reuters/Olesya Dmitracova

PETROPAVLOVSK-KAMCHATSKY, Russia (Reuters) - Gold miners on Russia's Kamchatka peninsula contend with volcanic eruptions, floods and poor infrastructure, but high metal prices mean the hard work pays off.

Unearthing the precious metal could also ease economic hardship in a remote region no longer propped up by Moscow, generating jobs and millions of tax dollars to the area.

"No doubt, the rise in gold and nickel prices is one of the reasons we can attract investment," says Viktor Lopatin, deputy head of the Kamchatka division of the state mining licensing agency.

But the region's remote location brings specific challenges.

"The infrastructure in Kamchatka makes it very difficult to mine. The main kind of transport is air transport -- planes and helicopters -- and the costs are very high," Lopatin says.

A helicopter ride in Kamchatka costs 50,000 rubles ($1,935) an hour. There are very few roads on the peninsula, which is twice the size of Britain but home to fewer than 400,000 people.

Up to 2,500 people work in the exploration and mining of Kamchatka's mineral wealth. Platinum, copper, gold and nickel are extracted from its fiery earth.

The region's only active gold mine, Oginskaya, employs 554 people. Numbers would swell if more mines were started, Lopatin says, adding employing one new miner creates six or seven jobs for builders, drivers and service staff.

Gold has risen more than 50 percent in value in the last two years, hitting a 26-year peak last year and enticing miners to develop deposits across the world that would previously have been deemed uneconomic.

GOLD POTENTIAL

Kamchatka has about 200 tonnes (6.43 million ounces) of gold in proved and probable reserves, and Lopatin says there could potentially be three times as much in the ground.

Only a tiny fraction is being extracted. Kamchatka produced 1.2 tonnes of gold last year, 0.7 percent of Russia's total.

This year output is expected to rise to 2.5 tonnes as the operator, Kamgold -- run by Koryakgeoldobycha, part of UralPlatinum Group -- improves efficiency.

Russia, which ranks sixth in terms of gold output but has deposits second only to South Africa's, produced 164 tonnes (5.27 million ounces) of gold last year.

Lopatin estimates mining firms would potentially pay 120 million rubles ($4.64 million) in taxes per tonne of gold, with 60 percent of that sum going into the regional budget.

He adds there are very few mining specialists among the sparse local population, while attracting experts from the mainland is difficult because of a housing shortage.

In Soviet times there was little pressure to develop Kamchatka, then a militarized area heavily reliant on subsidies from the centre. But unemployment shot up in the 1990s and a quarter of the population now earns less than the minimum wage.

"There are no jobs, only fish in Kamchatka," said Igor, a resident of Ust-Bolsheretsk, a hotbed of salmon poaching. He declined to give his second name.

TREMBLING, GURGLING LAND

Kamchatka's unique environment can be a curse when it comes to the nascent gold sector. The peninsula has as many as 29 active volcanoes -- their eruptions and frequent earthquakes can destroy roads and airport runways.

In warm months, it is forbidden to cross most rivers, which are important spawning areas for the region's most profitable resource, fish. Miners must wait for winter and stop working again when the ice melts in spring.

In winter, miners often have to pave trails through 2-3 meters of snow. When this melts in spring, it floods the few existing roads.

The peninsula's remoteness from the capital of a highly centralized country does not help. The name Kamchatka, 12,000 km (7,500 miles) and nine time-zones east of Moscow, is an informal synonym in Russian for a faraway place.

Kamgold deputy director Valery Grigorenko agrees gold mining in Kamchatka is difficult: "But where can you have it easier? Nowhere." He adds if all the correct procedures and techniques are observed, the difficulties can be overcome and harm to the environment avoided.

Lopatin says mining might be the only way to make Kamchatka more self-sufficient now that poachers are rapidly exhausting the region's fish and crab resources.

Environmentalists are less convinced.

"Gold mining is a way of making quick money," said the World Wildlife Fund's Kamchatka director, Laura Williams.

"It would jeopardize salmon-spawning areas and areas where eco-tourism could be promoted."

Her colleague in Moscow, Alexei Knizhnikov, suggests a compromise: "This could be our call for responsible industrialists to start consultations at as early a stage as possible."

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.