Why Eurasia offers a great deal when it comes to gold
7 December 2014 |
Investors in gold mining should be looking not only at Russia, but the wider Eurasian region as well for opportunities to increase production and create synergies between companies.
Eurasia consists of the land lying between Europe and Asia, with gold reserves and resources in this region fetching about 860 million ounces.
Denis Alexandrov, CEO of Auriant Mining (left), says: “In Eurasia, the first priority should be Russia as half of the gold reserves, 420 million ounces out of the 860 million, are found in this area. You cannot ignore Russia.”
There is also the potential for additional discoveries to be made in Russia. Max Yacoub, deputy CEO of Auriant Mining, explains Russia at the moment is still coasting along on exploration which has been done in previous decades, mostly during Soviet times. It is possible there is a lot more potential than the current resource base in the country.
But that does not mean ignoring wider Eurasia as many countries in this region are on the same geological belt as Russia. Alexandrov explains companies producing gold in these countries by consolidating could achieve better economies of scale.
According to Alexandrov, the countries that Auriant Mining would look at for consolidation opportunities would be Turkey, Armenia, Azerbaijan, Georgia, Scandinavia, Sweden and Finland. “In each of those countries there are companies who are producing 30,000 or 60,000 ounces of gold, which is small in industry standards,” he says. “If you can combine two or three companies then you achieve 150,000 to 200,000 ounces production which is an intermediate player which can be managed from one place, have one board of directors and one management team.
“We all work under English law. It is much easier to consider consolidation opportunities in the Eurasian market than going somewhere across the ocean.”
Alexandrov believes Auriant Mining has an opportunity to play the consolidation game in Eurasia. It has the benefit of being listed on the Swedish stock exchange, a strong international recognised board of directors as well as strong corporate governance practices in place.
There are also a lot of prospects in Russia, Alexandrov says, because “there is absolutely no presence of the government. The government welcomes investments in the gold mining industry. They recently introduced new tax legislation which gives you significant tax breaks if you start new deposits.”
Companies who want to undertake cross border business could also use net smelter royalties to achieve this. This allows them to exchange deposits without cash.
Recently Auriant Mining acquired Kara-Beldyr project in the Tyva Republic, and will pay Centerra Gold, a net smelter royalty of 3.5 per cent on any future mineral production.
He says these sorts of agreements are important for the industry as it is a very attractive way of gaining deposits when there is a lack of equity finance in the market.
There is a lot of potential to be had in Russia and the Eurasian market. By companies looking cross border they can create synergies between each other and turn themselves from a small player into an intermediary.
Max Yacoub, Deputy CEO, Auriant Mining
Tel: +7 495 660 2220