Russia's mining sector is set to grow slowly over the forecast period to 2015, a reversal of the declining output since 2006. We forecast the value of the mining sector will reach US$259bn in 2015 from US$134bn in 2010, marking an annual average growth rate of 2.6%. While we expect Russia to remain the world's largest palladium and nickel producer, we forecast that its share of global output is likely to fall, with faster nickel output growth in Canada and the Philippines and larger increases in palladium production in South Africa.
Modest Growth Across The Board
We expect Russia's nickel production will reach 302kt ('000 tonnes) in 2015, from 274kt in 2010, marking an annual average growth rate of 1.9%. This growth will be driven by Norilsk Nickel which expects to produce 12ktpa at its Skalisty mine in 2012 and 8ktpa at its Gluboky mine in 2013. Besides Norilsk Nickel, Amur Minerals has revealed estimated reserves of 171kt at its Maly Krumkon mine. In addition, we forecast palladium output to reach 3.0moz (mn ounces) in 2015, marking average growth of 2.2% a year, from 2.7moz in 2010.
BMI expects platinum production to exhibit similar levels of growth, increasing by 2.5% per annum over the forecast period, reaching 917koz in 2015, from 810koz in 2010. The growth in platinum and palladium production will also be driven by Norilsk Nickel, which plans to increase output at its Severny and Oktyabrsky mines. Looking further ahead, Urals Alluvial Platinum is developing the Kluevsky and Volchetundra deposits, which could provide a further boon to production.
Regulatory Environment
Russia's mining sector is wrought with bureaucratic obstacles which have restricted a number of foreign investors in the sector. At present, there are no indications that the government will ease these restrictions and thus we expect the sector will continue to be dominated by domestic miners. In 2010, the Russian government reintroduced a 6% gross royalty tax and introduced a 5% levy on nickel exports. The levy on nickel exports has had a negative impact on demand for Russian nickel, as other nickel producers such as Canada and Indonesia have not implemented a tax hike. In addition, there are restrictions on foreign companies developing large-scale resources in Russia. Diamonds, uranium, cobalt, nickel, lithium, the platinum group metals, tantalum and niobium cannot be mined by foreign companies. These legal obstacles, as well as endemic corruption, will continue to prevent overseas companies from investing in the mining sector.
Key Players
Russia's mining sector is dominated by Norilsk Nickel, the world's largest producer of palladium and nickel. We expect Norilsk to maintain its dominance as it has some of the largest expansion plans. That said, growth will be restricted by falling grades at the company's Komsomolskiy nickel and the KaulaRussia Kotselvaara palladium mine. We expect the mining sector to remain consolidated in the future as few new companies have stated an interest in developing resources. However, if metal prices remain elevated, there could be substantial exploration projects in Russia, given the country's size and potential reserves.

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Executive Summary . 5
SWOT Analysis 7
Russia Political SWOT 7
Russia Economic SWOT 7
Russia Business Environment SWOT .. 8
Global Mining Outlook 9
Lower Production Figures, But Large Projects On The Horizon 9
Copper Production: Short-Term Contraction, Long-Term Expansion .. 10
Selected Companies' Q111 Production Results 10
Companies Seek M&A to Diversify 10
Recent Attempted Acquisitions . 11
Increase in Governmental Control . 12
Government Intervention 12
Other Developments . 13
Industry Trends And Developments 14
Main Projects .. 16
Mining Industry Value, 2008-2015 16
Industry Forecast 17
Palladium: Output To Surpass 3.0moz in 2015 17
Largest Expansion Plans 18
Palladium Production, 2008-2015 . 18
Platinum: Norilsk To Marginally Increase Production 19
Largest Expansion Plans 20
Platinum Production . 20
Nickel: Norilsk To Lead Gradual Output Increase 21
Main Expansion Plans . 22
Nickel Production, 2008-2015 . 22
Regulatory Development . 23
Mining Business Environment Ratings . 24
Business Environment Analysis 24
Europe Business Environment Ratings 24
Russia .. 25
Kazakhstan 25
Poland . 26
Mongolia. 26
Ukraine 27
Slovakia .. 27
Russia Business Environment Outlook . 27
Table: BMI Business And Operation Risk Ratings . 28
Institutions . 29
Table: BMI Legal Framework Rating .. 29
Economic Outlook .. 32
RUSSIA - ECONOMIC ACTIVITY . 34
Political Environment 35
Domestic Politics 35
Competitive Landscape .. 37
Table: Key Mining Companies' Operating Statistics, 2010 (Us$Mn) 38
Company Monitor 39
Norilsk Nickel .. 39
Amur Minerals . 41
Eurasia Mining 43
Commodities Forecast . 45
Aluminium.. 45
Copper . 46
Gold .. 47
Lead .. 48
Nickel 49
Tin.. 50
Zinc 51
Global Assumptions Q311. 52
Table: Global And Regional Real GDP Growth And Exchange Rates, 2009-2012 . 52
Table: GDP Growth, Inflation, Interest Rates And Exchange Rates, 2008-2014 . 53
Table: Developed States’ Real GDP Growth, 2009-2012 (% y-o-y) .. 54
Table: Emerging Markets’ Aggregate Growth, 2009-2012 (% y-o-y) 56
Business Environment Ratings Methodology 57
Table: Mining Business Environment Indicators 58
Table: Weighting Of Components .. 59
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