* Trying to turn around unprofitable Lefa mine in Guinea
* Lefa's all-in costs $1,300/ounce, exceeding gold price
* Company's overall all-in costs at $1,071/ounce
By Silvia Antonioli
CAPE TOWN, Feb 6 Russian miner Nord Gold
, which invests in emerging markets, is looking to buy
new projects at low valuations from financially strapped junior
miners after last year's 28 percent drop in gold prices.
The company, controlled by Russian billionaire Alexei
Mordashov, has also started work to turn around the loss-making
Lefa mine in Guinea by improving operations and cutting
infrastructure and supply costs.
"In difficult times you have to be responsible, but you also
have to have the guts to make a move," Chief Executive Nikolai
Zelenski told Reuters in an interview on the sidelines of a
mining conference, adding he thought the gold price was nearing
"Although it is sometimes difficult emotionally to spend
some money in a difficult market, it's beneficial in the long
term. These opportunities may not come back for a few years. So
we are looking at junior companies with good quality resources
that have been beaten down by this market."
The CEO said he would look to buy a project at an early
stage of development, so that Nord Gold could use its expertise
to drive development of the mine. With this strategy, it could
invest a relatively small amount of money to turn an early-stage
project into what could be a highly remunerative mine.
Development of new mines is preferable, because most
existing mines were built based on assumptions of much higher
gold prices, he said.
Nord Gold produced a total of 924,000 ounces of gold in 2013
and earned $1.27 billion from its nine mines in West Africa,
Kazakhstan and Russia.
The Russian company, which spun off of Russian steelmaker
Severstal in 2012, had collected many of its major
assets during the 2008-2009 financial crisis, including its
takeover of Canadian miner High River Gold, with assets in
Burkina Faso and Russia.
"In Burkina Faso we had a very positive experience.
Infrastructure is good, the tax regime is stable and the
government is genuinely cooperative. Guinea is much more
difficult to work with," Zelenski said.
Lefa, which it acquired in 2010, is proving to be a burden.
Its losses are partly the result of poor infrastructure in
Guinea, which is seen as more difficult to operate in than other
countries in West Africa.
"Costs associated with infrastructure are higher and the tax
administration is very difficult in the country and needs to be
improved. I hope that is because the country does not have a
long history of mining and is still trying to understand the
industry," Zelenski said.
Nord Gold's average all-in-sustaining costs, a widely used
measure that includes exploration and other costs, are around
$1,071 an ounce. Its costs at Lefa, however, are around $1,300,
exceeding the current gold price of around $1,260 an
"We are trying to identify deficiencies and take them away.
We are doing it with every mine, but for Lefa it is more urgent
because it consumes cash rather than generating it," Zelenski
"We didn't build the mine, we bought it, and the amount of
problems it has exceeded our initial expectations."
The company may consider other options such as halting
production or selling off the mine, should the plan not be
enough to bring Lefa back to profit, he said.
(Additional reporting by Diana Asonova; editing by Jane Baird)