Russia’s gold and palladium output on rise

The country is meant to become the world’s top gold producer by 2029

Russia’s gold and palladium output on rise
Photo: James St. John

Russia is likely to stay on track to become the planet’s leading gold producer by the end of the decade. Although analysts do not rule out a minor production decrease this year out, the industry is fuelled by strong domestic demand underpinned by Western sanctions.

Despite some disruptions caused by the COVID-19 pandemic, Russia is expected to surpass China as the world’s top gold producer by 2029, says MINING.COM. According to a report by Fitch Solutions Country Risk & Industry Research, strong domestic demand for gold will underpin increasing gold production in Russia in the short-to-medium term. Thus, the country’s average annual gold output is expected to increase by 3,7% year on year between 2020 and 2029.

There is some limited downside risk to the current gold production forecast in 2020, considers Fitch pointing out that one of the world’s largest mines, Polyus Gold’s Olimpiada mine in Krasnoyarsk Krai (Eastern Siberia), suffered a 900-case coronavirus outbreak in May. However, the majority of Russia’s gold mines have not been affected by the pandemic and have remained operational so far.

The analysts believe that other factors are playing in favour of Russia’s gold industry. According to the report, expanding US sanctions and rising tensions between Moscow and Washington have spurred the Russian Central Bank to increase its gold reserves. “Moreover, in early August, the Libya Stabilisation Act is expected to pass through the House of Foreign Affairs Committee, imposing additional sanctions on Russia for its alleged role in escalating the civil war in Libya. The act would allow the Trump administration to freeze funds in American banks, cutting off access to dollar-denominated assets and in turn maintaining elevated domestic demand for Russian gold,” reads the report.

The majority of Russia’s gold mines have not been affected by the pandemic. Photo: Ptukhina Natasha

Russia’s palladium sector has not faced disruptions related to the pandemic, so it is expected to expand in 2020. Fitch points out that most palladium mines in South Africa continue to operate below capacity even after lockdown restrictions are lifted. Thus, South Africa’s palladium production is expected to decrease by 8,7% this year, while Russia is expected to show a growth of 2,5%. “In fact, Russian palladium producers will benefit from supply disruptions in external markets such as South Africa,” believe the analysts. “Top producer Norilsk Nickel will continue to lead the market for autocatalysts, underpinned by smooth operational capacity and its position as a low-cost producer. On April 30, the company confirmed its production guidance will be maintained for the 2020 fiscal year.”

By Anna Litvina