John Ivany, Executive Vice President, Kinross Gold 
Thank you, Michael.  Mr. Minister, ladies and gentlemen.  It is a pleasure for me to be able to talk about Kinross' experiences in Russia.  What I would like to do is outline how we inherited the ownership of our shares in the Omolon Gold Mining Company.

The Kubaka mine the largest single gold producer in Russia.
Kubaka was acquired by Omolon in the early 1990s when Cyprus Amax, a large U.S. based copper company, was looking in the far east of Russia for copper prospects.  They did not acquire any copper prospects but, in the course of that search, they came across the fact that the Kubaka deposit was going to be tendered, and they formed the Omolon company with a group of Magadan-based shareholders and were successful in tendering for Kubaka.

The mine was built in late 1996 - early 1997, over the winter season.  In May of 1997, Cyprus sold its interest to Amax that was a subsidiary of Cyprus, a publicly traded U.S. gold company.  The Kubaka mine went into production on June 1, 1997, and in June of 1998, Kinross and Amax merged with Kinross as the continuing operating company. As you can see, the Kinross management was not responsible for the investment decision nor was it responsible for the construction, but we have been operating the mine for the last two years. 

The mine is truly a magnificent mine.
It is located in Magadan, a remote region in the far east of Russia.  Let me review for you some of the highlights of last year's operation.  We had no lost-time accidents at the mine.  We had no environmental infractions. 
We produced under 500 000 ounces of gold at a cash cost of US$ 142 an ounce. 
Total capital spending was only US$ 600 000, and mill throughput was 797 000 tonnes or 2185 tonnes a day.  The grade was 20.2 grams per tonne, with 22.2 grams of silver per tonne.  Recoveries averaged 98% for gold, 84% for silver. 
Milling costs averaged US$ 15 per tonne.
9.5 million tonnes of ore and waste were mined during the year.  The average mining cost per tonne of material moved was US$ 1.29. We managed to achieve the completion test in our loan agreements, and the loan went non-recourse to Kinross during the course of the year. 

What we have been focusing on as the main concern for Kubaka for the past year, and for the ongoing years, is a vigorous exploration program in the region to find additional reserves. 

Because, as I will point out to you, in spite of all the positives of this mine, its short life creates most of the problems. What I was asked to do was to review with you our impressions and our experiences as an operator of this mine.  The tendency at sessions such as this is to dwell on negatives and ignore the positives.  Mr. Minister, I would like to assure you that there are several positives our operations in Russia, and I would like to start by enumerating some of those.

The ore body is a fine ore body with high grades, and it is amenable to open pit mining methods. 
It was well delineated long before Cyprus, Amax or Kinross ever became involved, and the in delineating that ore body was first-class and beyond reproach.  That took most of the technical risk out of the decision to put the ore-body into production.  We have a high caliber work force at Kubaka, with a level of education by far exceeding the level of education in any of the work forces at any of our operations around the world.  I think over 30% of the employees at Kubaka have post-secondary education, and all of them are high school graduates and literate.  We managed to be very productive with that work force, and that is one of the great assets of the Omolon Gold Mining Company. 

In spite of what you hear about the myriad of bureaucracy, conflicting laws and almost pedantic application of those regulations and laws, in those few instances where we have had to permits, then licenses, or do similar things to keep the operation going smoothly and accommodate operational changes, our experience has been that we have actually been able to get the attention of senior officials and achieve those permits quicker than we could in a North American context. 
The ruble devaluation, although crippling to most of Russia, allowed us to maintain a very low cost structure at Kubaka.  The last positive I would like to mention is that we have avoided many of the well-known negatives.  We have never been extorted, nor asked for a bribe.  We have never had a dispute an attempt to steal our license, and we have been fortunate that our partners have been and good people to deal with.  Our partners, largely, were decimated by the financial crisis in Russia and several of them, in fact, are bankrupt.  The main partner, Geometall, is represented here by Mr. Rosenblum, who is well known in the mining business in Magadan.  He, up until recently, was Chairman of the Mining Company, and he has been very helpful in guiding us through the methods of doing business in Russia. 

Difficulties we encountered at Kubaka are not necessarily all unique to Russia.  The remote, far northern location presents the same problems that one would encounter in Northern Canada, and we deal with the problems much the same as we would in Canada, the difference because supporting infrastructure in Canada is more advanced, compared to what you would find in Magadan.  Magadan is a very poor region.  It needs development, it needs diversity in its economy and, until that happens, people will suffer from a poor infrastructure in that part of the country. 

What I would like to dwell on this morning in terms of negatives, if you will, are three areas which our experience has led us to believe to be the key in encouraging future investment in the country.  These are in no particular order, but I would first like to talk about the way, under Russian regulations, that a gold producer has to deal with its product.  This creates tremendous difficulties with regards to the initial investment decision.  Kubaka was a very high capital-cost project for such a relatively small operation.  Initial capital costs were about US$ 240 million and, when we took over in 1998, we found there was a deficiency of working capital.  We had inject another US$ 20 million of working capital, so I think the real capital costs were more in the order of US$ 260 million. 

The investment was achieved, planned, and based on the expectation gold span prices would be US$ 375 per ounce and rising.  We all know that that was a very optimistic view of where the gold market was going. 
As part of the licensing process, Omolon was required to first offer its product to Roskomdragmet, which was the agency of the federal government responsible for purchasing precious metals and gems.  It was agreed that, if Roskomdragmet was unable to purchase the product, then the producer was going to get a license to export doré, which would enable him to take the doré abroad, refine it abroad where the refining costs are significantly cheaper than in Russia, and sell the product abroad.  Unfortunately, the protocol allowing the latter was never translated into laws by changing the necessary customs regulation and granting the necessary permits so that, in June of 1998, when we arrived on the scene, Gohkran, which had then succeeded Roskomdragmet as the purchaser of precious metals, had not been funded by the federal government.  Therefore, it was not purchasing gold.  We were unable to export gold because we had no export license, and we had 150 000 ounces of gold backed up in the gold room at the mine site, largely explaining the deficiency in working capital at the operation. 

Therefore, we set out, as our first priority, to find out how we could deal with this product. 
We ourselves in the middle of a bit of a struggle internally in Russia with regard to who would get export licenses, if anybody would get export licenses. 
The banking community had set itself up against the producing community, and the banking community won.  So now that we are a producer, we have this gold in inventory, we have no export license, we are forced to deal with a small number of Russian banks, who in June of 1998 were sitting on the cusp of a default which came to fruition in August. 

So we not only had to go through hoops to export our gold span, we also had to assume some risks associated with those very weak banks, as it turned out.  The upshot of this was that, because you did not have the freedom to deal with your product, you could not put a hedge position into place. 

There was no mechanism to finance Kubaka with a gold loan, and so owners were totally exposed to the falling gold span price.  That is the single biggest reason that Kubaka overall as a project will have an inadequate return to its shareholders.  Had companies been able to secure a price anywhere near the price that was existent at the time the investment decision was made, it would have been quite a different story for the profitability of this project.

I encourage you, Mr. Minister, to review the necessary changes to enable producing companies to protect themselves by either hedging or entering into gold span loans with regard to new projects. 

The second area that we think is critical, and needs review, is the overall taxation burden placed on Russian operations.  We pay approximately 30% of our revenues in taxes and most of taxes (we pay some thirty odd different taxes) all but very few of them are revenue-based taxes
Therefore, in a falling gold price environment where margins are being squeezed, the taxes are becoming an increasingly larger percentage of your costs.  In any North American accounting of profits, we pay far in excess of 100% as a tax rate based on profits

One of the encouraging events was in the last month.
Minister Livshits was in Toronto.  I had an opportunity to meet with him.  We had a very constructive meeting and he indicated government is fully aware that this tax burden is a disincentive to investment in Russia, and he indicated that... in fact, he encouraged us to enter into a dialogue to try and ameliorate the tax burden. 

The last area is more general in nature, is structural to the economic and political overview of Russia, and will be dealt with in detail by the likes of Mr. Brewer.  I would just like to point out that, as a company operating in Russia, the effects of the uncertainties, economic and political, are to dramatically increase costs and risks.  We pay on our loans, principally with the EBRD and with OPIC (U.S. Overseas Private Investment Corporation) LIBOR plus 6 1/2%, which is more than we would pay in almost any other jurisdiction. That is strictly because of their view of the political risks in Russia. 

I heard your comments, and I agree that Russia understands this and is making moves to put lenders at ease.
I would encourage you to stay the path in those reforms because, otherwise, it is not only the high interest rates you pay, it is the few lenders that are available you, so that all of the terms of your loan agreement become very onerous because there is competition amongst lenders. 

The second point is, with an uncertain economic environment, you have a very weak banking system internally in Russia, and the availability of working capital to suppliers, to operations such as ourselves, is difficult.  As a result, we made great strides procuring goods and services within Russia, but we are dealing with very financially weak suppliers and we have to, in order to keep them afloat, make large advance payments to them. 

The Risks, although we have not suffered a loss on account of making those advance payments, are always present, and it would be overly optimistic to think we are never going to suffer one of those losses. 

So, on balance, had we had a gold price anywhere near what had been anticipated when Kubaka was built, our overall experience in Russia would have been very good.  The combinations of a gold price, and some unique high costs associated with the matters I have talked about, meant return to shareholders on Kubaka is inadequate.  However we are, as I said, interested in continuing with the assets we have in Russia, the workforce, the equipment to develop other projects in that part of the country.  Moreover, we are encouraged to hear your remarks this morning. 
Thank you.
 

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2001. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

SUMMARY
After almost a decade of depression, the gold-mining industry in Russia has started to recover and develop. Two-thirds of Russian gold mining is located in Eastern Siberia and The Russian Far East (RFE). The recent statistics show a steady growth in gold production in the RFE. Considerable wear-and-tear of existing equipment and the necessity of introducing new technologies, combined with better access to financial resources provide improved business opportunities to U.S. exporters of mining machinery. This report provides an overview of the gold-mining industry in the RFE, and an insight into prospects for U.S. businesses.

INDUSTRY OVERVIEW
History: Gold-mining has always been one of the traditional and leading sectors in the Russian Far East (RFE) economy. In Soviet times, the gold-mining industry was a total government monopoly, although in the 1970s the first non-government enterprises (the so-called artels) started to appear. But the government still was strictly regulating the extraction, production, and sale of precious metals.

Before Russia started to go through reforms in the 1990s, the largest gold-mining enterprise in the RFE was SeveroVostokZoloto which covered Kolyma (Magadan), Chukotka, and Kamchatka, and produced up to 50 tons annually. Yakutzoloto from Sakha (Yakutiya) manufactured up to 30 tons per year, Amurzoloto (Amur Oblast) - 10-12 tons and Primorzoloto (Primorskiy and Kahabrovskiy Krais, and Sakhalin) - 8-10 tons.

Outdated labor-consuming technologies and equipment, low capital investments, turmoil in the Russian economy, and drop in the gold prices on the world's market nearly resulted in the industry's collapse in the mid 1990s.

The reserves of gold in Western Russia are almost exhausted. But in Eastern Russia (Eastern Siberia and the RFE) there are at least 5 deposits with estimated reserves of over 300 tons, as well as a number of 100-300 ton deposits.

After Russia began shifting to a market economy and the government stopped supporting the gold-mining industry, most of the companies were experiencing considerable financial constraints during 1991-1997. Besides, the seasonal nature of gold production made it very challenging to find financial resources in advance to prepare for the mining season. Banks were very reluctant to provide loans and credit lines, and the interest rates were outrageous – 40-45% in hard currency. The government support through Komdragmet (The State Committee for Precious Stones) was more nominal than practical. Most of the gold-miners found themselves in financial deadlock - - they kept on borrowing money to pay back loans and interest.

Current Situation
The situation in the industry improved in 1998. Like many other export-oriented industries, gold mining has benefited from Russia's August 1998 financial crisis. The ruble devaluation and resulting decreased production costs, improved the development of the RFE's gold-mining industry. Most of the loans taken by gold-miners were in rubles, so with the ruble's collapse and with the world's market prices starting to stabilize, the gold-mining companies were able to pay them back very easily. As a result, the profitability of the gold-mining industry and its attractiveness for the investors grew significantly by the end of 1998.

Also in March 1998 the Russian government adopted a Federal Law "On Precious Metals and Gemstones", and in December 1998 Decree #1419 was issued. These new regulations released the government's strict control over the gold industry and gold exports. Commercial banks started to export Russian gold. For the first time in the history of modern Russia, its gold market became a part of the global market. Another positive factor was that gold prices on the world market started to stabilize and increase after a two-decade period of decreases (in 1998 the lowest price for 20 years was registered).

Extraction of placer gold (which is a seasonal process) always significantly prevailed over mining of ore gold. Over the last few years, however, the structure of the gold-mining industry has been changing, and has started to shift from extraction of placer gold to lode gold mining. Lode gold mining is much more attractive to investors because it is not seasonal and is economically more effective.

Investors and banks started to more extensively finance gold-mining projects and companies. Sberbank became an absolute leader in providing loans and credit lines to gold-miners. Together with Vneshtorgbank it accounts for almost 50% of commercial loans given to the domestic gold-miners. Among other banks, the most active were Moscow-based Alfa-Bank, MDM, Zenit, NOMOS-Bank and Menatep, as well as regional and local banks - - Dalkombank, Regiobank, Neryungri Bank, and Kolyma-Bank. In 2000 the average loan interest rate for gold-miners ranged from 15-22% in rubles, and 15-17% in hard currency. Some banks even provided 3-5-year credit lines.

There are some negative factors impeding development of Russia's gold industry. The gold-mining enterprises still lack sufficient capital to update equipment and technology as required.

The introduction of a 5% customs duty on gold exports in April 1999 disappointed the Russian gold-producers, as well as commercial banks involved in the gold exports. To get around this tax, the Russian gold is now being exported via "gray routes", i.e. through countries that are members of the customs union with Russia. The major route is through Belarus (according to the Russian State Customs Committee estimates, in the first half of 2001 96.5% of the total commercial banks' exports was made via this former Soviet Republic).

Although the current world trend in the gold-mining industry is the merging of smaller gold manufacturers into larger corporations, the rate of small companies and artels in Russia is still very high - - about 70% (although they produce only 11% of the total gold output). Such small entities fail to attract investments and are often unable to maintain financial sustainability. But there is already emerging an understanding in the industry of the necessity for amalgamation to better adapt to the existing situation. The latter requires decreasing production costs, introduction of new technologies, and attraction of domestic and foreign investments. Another reason for merging is the on-going shifting from the placer to lode gold production, which needs considerable initial capital investments.

Recent Gold Production Statistics
In 2000 Russia produced 143 tons of gold, 13.2% more than in 1999. In the first 5 months of 2001 (before the active season started) the growth was already 13.9% more than in the same period of 2000. 

In the RFE the most successful was Sakha Republic (Yakutiya), where gold production increased by 150%. One of the reasons for such impressive growth was the 1-ton "golden loan" given to Aldanzoloto by Komdragmet of the Sakha Republic (Committee of Precious Metals, a state agency), and used for purchasing new equipment. Other leading enterprises in Sakha are Bamskaya, Drazhnik, Zolotinka, Zapadnaya, Nirungan, Ingali, Poisk, Zoloto Yinykchana, and Zoloto Neryungri.

Annual gold production growth in Chukotka was over one ton in 2000. 
Among the leaders are Ruda (35% growth in ore gold mining), Chukotka (300 kg increase), Arctica, Polyarnaya, and Shakhtyor. Severniye Rudniye Tekhnologii produced 600 kg versus 80 kg during the previous year.

According to the statistics of the Magadan Oblast Administration, the volume of gold produced in 2000 was 30 tons, which is 650-kg growth compared to 1999, and the highest results within the last 7 years. There is a slight shrinkage in gold production in 2001. 

Amur Oblast also increased gold production, which reached 11.86 tons in 2000. The best results were achieved by Solovyovskiy Priisk (1.8 tons), Maya, Vostok-1, Zeya, Rassvet, Dalnyaya, Khergu, and Petrovskoye. In the first 7 months of 2001 the region produced 5.18 tons (1.29 tons of lode gold, and 3.89 tons of placer gold). It is 7.4% more than in the same period of 2000. By the end of this year Amur Regions plans to mine about 13 tons.

The growth rate of the gold-mining industry in Khabarovskiy Krai increased 10 times, and was 35% (In 1999 it was 3.5%). In 2000 Kahabrovskiy Krai was in 6th place among the leading gold-mining regions of Russia, and produced 9.2 tons of gold. The projected growth in 2001 is 9%, and the territory plans to mine over 10 tons of gold. Such dramatic increase was the result of the growth of ore gold mining, which now prevails over placer gold extraction. The largest deposits of ore gold are Monogovershinnoye (mined by the company with the same name, which produced 3 tons in 2000), and Ryabinovoye (mined by Amur, which is also one of the largest Russian platinum producers). Other companies with growing production are Vostok, Sever, Zarya, Pribrezhnaya, and Ros-DV.

The results in Primorskiy Krai were much less impressive - - 460 kg. It was mainly because last year was the first for several start-up companies. But in 2001 some growth is expected. Nevada Manhattan, a U.S. license holder for mining Glukhoye lode has not started any site operations yet.

MAJOR DEPOSITS, PROJECTS, and KEY-PLAYERS 

The JV Omolonskaya Zolotorudnaya Kompaniya, the second largest gold-mining company in Russia mines the Kubaka lode in Northeast Magadan. Initially the 50% share belonged to the US company Cyprus Amax, and another 50% was distributed between several local companies (Dukatskiy GOK, Magadanskaya Zolotoserebryannaya Kompaniya, Geometall, Elektrum, and the North-Evenk regional association of Evenk tribes). In 1996 Geometall and Elektrum merged into Geometall Plus, and their mutual share grew up to 28%. Later Cyprus Amax sold its share in the JV to the Canadian Kinross Gold Co., while 85.6% of Geometall Plus was acquired by another Canadian firm Western Pinnacle. Now it is a project with major Canadian participation. A total investment of $250 million resulted in extraction of over 50 tons of gold since 1997. In 2000 the company mined 13 tons of gold.

The Kuranakh gold deposit (about 300 tons) in Yakutiya was expected to be mined by Kuranakh Gold Mining Company - - a JV between the local Aldanzoloto, Sakhazoloto, and Canada's Echo Bay Mines. But now the US Newmont Gold is in the process of purchasing shares from Echo Bay Mines. The Kuranakh is included into the list of deposits that are to be mined under PSA, but the parties have not yet agreed about the terms and conditions (note: the PSA process can be very lengthy, and Echo Bay has been involved in this process for several years).

The Nezhdaninskoye lode was discovered in 1961 and is located 800 km to the east from Yakutsk (Sakha Republic/Yakutiya). Projected reserves are 95 million of ore (494 tons of gold with the content of 5.1 grams per 1 ton of ore). It is the second largest gold deposit in Russia. In 1996 the Irish Celtic Resources Holding PLC together with the Russian companies Finansovo-Promyshlennaya Kompaniya and Sakhazloto formed the JV Yuzhno-Verkhoyanskaya Mining Company. But the gold production can start only after the Russian Duma and the government adopts the PSA on this deposit. Without a PSA specifying favorable terms for foreign investors the low initial profitability and delayed returns on investments make this project unattractive.

The Pokrovskoye gold lode is one of the largest in the Amur Oblast. It is mined by Pokrovskiy Rudnik company, which became famous throughout Russia for its unique experience of year-round production by the method of glomeroblastic leaching, and mined 1.5 tons in 2000. This year the company started to build a new gold-extraction plant with annual production capacity of 4 tons. The company already has produced 1.23 tons of gold in 7 months of 2001. One of the largest deposits in the region deposit Bamskoye (over 150 tons of projected reserves) is being exploited by Apsakan company. In 1-2 years it plans to produce 2-3 tons annually.

The Mayskoye deposit in Chukotka (about 300 t of gold in reserves) has already passed three readings, but was not signed by the president because, according to his advisors, it must go through additional editing to better meet the existing legal requirements. The license belongs to the Fund of Chukotka's Development, Fund of the Development of the Chukotka's Economy, artel Chukotka, and Chaunskiy Mining-Geological Enterprise. If the PSA is adopted, several international investors are interested in participating in this project.

The Mnogovershinnoye lode is located in the north of Khabarovskiy Krai near the city of Nikolayevsk-on-Amur. Its reserves are 105 tons of gold with an average content of 9 grams per ton. Mnogovershinnoye is mined by the Mnogovershinnaya Company. It started development of the lode in 1999, and mined 3 tons of gold in 2000. The company plans to reach projected annual capacity of 5 tons in 2002.

BUSINESS OPPORTUNITIES 

The major share of local gold-mining equipment is outdated, with a high wear-and-tear rate. There is substantial demand for a broad range of machinery for mining both placer and lode gold, as well as ore-dressing and engineering equipment. Due to political, and then economic, reasons, U.S. equipment was rarely imported in the past. Both political and economic changes as well as growing gold production in the RFE present business opportunities for U.S. exporters of mining equipment.

Among the best sales prospects are: trucks, bulldozers, excavators, drilling machinery, ore-dressing equipment, ore-crushing/milling machinery, and ore-recovering equipment.

Further Assistance for U.S. Companies This information is being provided by the U.S. & Foreign Commercial Service in Russia, which offers its services to U.S. companies wishing to sell U.S. products and services in Russia, including identifying distributors and arranging meetings with prospective buyers during business visits. Commercial Service Russia has offices in Moscow, St. Petersburg, Vladivostok and Yekaterinburg. 

Contact: For further information you are welcome to contact the author of this report at CS Vladivostok: Yana Tselikova U.S. Commercial Service Vladivostok 32 Pushkinskaya Street Vladivostok, Russia, 690000 Tel.: (7-4232) 300-093 Fax: (7-4232) 300-092 Int'l Fax: (7-509) 851-1211 E-mail: Yana.Tselikova@mail.doc.gov or Vladivostok.office.box@mail.doc.gov www.cs.vladivostok.com

Companies may obtain information on the Russian market and general counseling on their approach without charge. Intensive individualized services are available through the following customized programs: This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)
 

Chukotka - Moscow Representative Expecting inclusion of Mayskoye deposit in the PSA list in July.
Will be open for tender after that. Lack of legal framework and regulatory contradictions in mining sector.

Half of Chukotka's territory lies above the Arctic Circle. The Region's climate is severe, with long cold winters and short summers. 

Chukotka is located in a permafrost area and is mostly covered by tundra. Due to a short growing season, almost all food must  be obtained externally. Local agriculture is focused on reindeer herding and fishing. Chukotka's main body of  water, the Anadyr River, flows into the Bering Sea.

The Region has no railroads. The majority of cargo is moved by road  with the rest (about 25%) shipped by ocean. Chukotka has two ports,  Anadyr and Pevek, located on the Bering and Siberian Seas respectively.  River traffic is negligible. Anadyr's airport is approved for international  service, dealing mostly with international charters.

Chukotka's population amounts to just 100,000 people, which makes  it the least populated region in the Russian Far East. Russians started  settling the area in the 20th century and presently constitute the  majority of the inhabitants - a situation typical for the Russian Far East.  Natives amount to just 17,000 people, representing the northern nomadic  tribes engaged mainly in reindeer herding. The largest cities are Anadyr,  Pevek and Bilibino.

The main industry in Chukotka is mining. In fact, the area was  settled and developed in the course of exploration and mining of its rich  mineral reserves. The territory produces substantial quantities of gold,  ranking the third after Magadan and Yakutia in gold output. Tin is also  mined in the area.

Chukotka is home to the only nuclear power station in the Russian  Far East installed in the city of Bilibino. It became an independent region of the Russian Federation  in 1992. Prior to this it was part of Magadan. Today the Region has its  own local parliament and government.

Mineral Potential
Chukotka demonstrates a huge mineral potential. Location of the  Region in conjunction of tectonic zones that are quite different in nature,  geological history, age, geological structure, paleovolcanic features, etc.  resulted in formation of numerous ore deposits of various mineral  commodities and geological types. Some of them either had exploration  or were preliminary evaluated and proved to be enormous in reserves of  gold, mercury and tin. Proper exploration of silver occurrences may result  in discovery of new deposit comparable with Dukat. At the same time  developed deposits constitute only 1% of evaluated mineral base of the  Region in gold, 0.9% in tin, 12.9% in tungsten, 16.8% in coal.
Tin and tungsten
Chukotka is one of the world's most important tin ore provinces. Metal  reserves identified there are sufficient to produce 10-15 kt Sn. The bulk  of reserves (80%) is confined to one super-large stockwork deposit.
Gold
Mining of gold from placer and hard-rock deposits is the principal sector  of industry in Chukotka. Early in 1970's the Region produced some 40t Au  a year (mainly from placers). At present three hard-rock gold deposits  are mined in the region. Some ten smaller but potentially economic  deposits demand more exploration works. However, presently, only the  Mayskoye deposit in Chaun district is ready to be developed. The deposit  is attributed to gold-sulfide formation and is super-large in reserves.

The Mayskoye golden ore deposit lies 280 kilometers south-east of Pevek. The exploration of the field has been completed. The ores are refractory and are represented by saturated sulfites and dynamometamorphism zones in rock mass of black shales. The average content of gold is 12 g/t. More than 70 percent of the gold is associated with pyrite and arsenopyrite. 
Gold-sulphide bodies, zones of veinlet-disseminated ores in black-shales formation (Sukhoy Log, Olympiada, Mayskoye Kumtor);

Gravity and floatation concentration is considered to be effective, but the extracted concentrate must be specially enriched. Chukotka administration has sent delegations to Canada, Australia and South Africa looking for technology for refractory ore processing. In January 1999, the Chukotka administration plans to announce a tender for supply of technology for gold ore processing in the Mayskoye deposit.

Other mineral resources
Other mineral resources in Chukotka are coal, oil and gas. Capacity  of two coal deposits under development enables to produce 1.3Mtpa with  coal reserves sufficient for 30 years of mining. The total reserves of five  coal deposits available reach 200Mt while 17% of the reserves are  convenient for open cast mining. The total recoverable oil and gas  resources in Chukotka are 107Mt and 328´109 m3. 

Russian companies Sibneft and Yukos agreed to jointly study exploration zones in the Chukotka and East Siberian seas off the autonomous Chukotka district.    The equal joint venture partners will process existing seismic data from the area. They intend to conduct further seismic studies and may later drill exploration wells.

Sibneft said it is drilling its first onshore exploration well in Chukotka from a site on Molchalivy Island; it is also preparing to develop the West Ozyornoye gas field. 

Sibneft also said the geological structure of the East Siberian Sea and Chukotka Sea basins is similar to that of Alaska's North Slope.
 

The reserves were researched long ago but were not developed due to high costs and difficult weather conditions.  Sibneft believes that the company will be able to overcome these difficulties and solve the energy crisis in Northeastern Russia as well as supply fuel to fishing vessels in the Sea of Okhotsk and the Bering Sea. (Source: Vostok Media Jan 2001)
 

Word to the specialists from trust Dal'morneftegeophysical, which one lay out the concrete data about exploration of oil gas resources of Chukotka. They assert(approve), that the geologic features of region allow to guess availability there of larger patterns, perspective on availability of oil and gas, than found out. The basic hopes search bundle thus to offshore exploration of Bering sea. A main body Anad’yr , Khatyr of basins, and also all Navarinskij basin lay outside a land, where looking ups was not undertaken - ever, although these zones are considered as continuation famous by the jumbo reserves Alaskan oil and gas  province.

The Mineral Management Service of USA (US Mineral Management Service) conducted prospecting east part Long – Chukotka basin on boundary of the Russian economical zone in Bering sea and has estimated geological reserves in the studied region in 2-5 billion tons of conditional propellant. In next Navarin basin the same service predicts availability 160 mln tons of oil and 220 billion cubic metres of gas distillate. In April 1985 the Americans sold licenses for 24 leases in this basin for 150 mln, dollars - with a condition, that the works can begin only after Russia and USA will conduct demarcation of the zones on shelf. In 1990, demarcation was held, and the holders of the licenses have an opportunity to begin prospecting.

The forecasts and expectations
Moreover, to north from Chukotka, on shelf Chukotka and East - Siberian seas the so-called upheavals Dzheralda and Vrangelya are located, and are farther in depth Northern Ledovi (glacial) Ocean - Severo - Chukotka basin. Both regions are perspective from outlook of oil exploration and gas, although climatic conditions for this purpose are extremely adverse.

Under the forecasts of the Ministry of natural resources, the perspective initial reserves of hydrocarbons on continental shelf around Chukotka and on land are valued as follows (in conditional propellant):
The east - Siberian sea - 5583 mln tons
Chukotka - 3335 mln tons
Bering sea - 1075 mln tons on the continental part of a peninsula - 1515 mln tons based on geologic data,
On Chukotka shelf in one only Bering sea is expected discovery 4 oilfields with reserves 100-300 mln tons and more small-sized 9 - with reserves 30-100 mln tons, and also 3 gas fields of 100-300 billion cubic metre, 5 - 30-100 billion cubic metres and 16 - to 10-30 billion of cubic metres.
 

After election of Roman Abramovich governor of Chukotka (and during his campaign) the Russian mass media were not bought up on the gamble that original concern of the oil magnate on Far East appears to be the hypothetical oil and gas resources of the Chukotka peninsula. The deduction, however, was made that poor quality hydrocarbons there were not enough to justify development. At the same time, analysis that is more steadfast demonstrates that with prospecting outlooks and production activity of hydrocarbons in that region is not at all as pitiable as it seems.

The business concerns of the new governor of Chukotka are not confined to Sibneft, which is not too active working on oil fields Yamal-Nenets Autonomous District. If to trust economic publications - according to Roman Arkad'evich treasurer of the Yeltsin family - creator of Russian aluminum acquired the large block of Gorkov car factory shares, and recently negotiations of KutiiSaha Diamonds. At such breadth of coverage, gubernatorial post on edge Ojkumeny seems simply by oligarch whim, which without him has not so dearly to warm and feed during campaign some thousand voters -is quite within the power of such a large financial business corporation.
 

     The belt of shallow water directly adjacent to a shore line of a  marine basin is designated as a "transition zone".  It has long been  inaccessible for marine geophysical surveys and onshore study.   As a consequence the correlation of offshore and onshore information  depended to a great extent on remote sensing methods, largely  magnetic surveys.  For this reason these transition zones have  remained a blank spot on many maps of oil-gas potential.

     Many onshore oil-gas areas  located close to marine basins  extend offshore.  Such shallow-water zones are prime targets  because extrapolation from the onshore is not that much of a  problem.   Even small fields may be economic.  The transition zones  include coastal marshes, embayments, banks, river deltas, shallow-  water reefs, broad tidal zones, littoral zones, and shallow-water  coastal sectors, where water depth is generally less than 10-15 m.  Typical of all of these are conditions that are not favorable for  seismic surveying.

     Some provinces, regions, and fields extend into transition zones.   Such fields as Kharasavey in Yamal and Medyn in the Pechora  Lowland are divided by the shore line into almost equal parts.  The  zone of the Russian Shelf with shallow water depths of 0-20 m  extends over an area of 570,000 sq km, and the Arctic Shelf is  assessed to contain up to 25 percent of the total Arctic offshore  resources.

     In the west of the Arctic Shelf are two large oil-gas provinces, the  transition zones of which have high potential.  One of these is the  broad shallow-water area adjacent to the Pechora Lowland and  Kolguyev Island.  Traps there are small and pay zones have a wide  stratigraphic range.  Density of predicted resources of individual  sectors of this transition zone is commensurate with maximum  values of resources of well studied onshore structures.  The   shallow-water zone of the Mezen depression in the south of the  Barents Sea may also offer good targets.

     Another broad favorable belt of shallow water is in the Kara Sea.   This is a direct continuation of the West Siberian province.  A whole  series of large fields extend offshore from Yamal and Gyda Peninsulas.   In spite of relatively simple and well studied geology, geophysical  investigation of these transition zones is difficult.

     Favorable shallow-water zones are known also in the eastern  Arctic Sea, but they have received little study. The Ust'-Khatanga  and Ust'-Lena shallow-water areas are the most favorable.  The latter  is located on a continuation of the Mid-Atlantic Ridge and conditions  are similar to those of California.  The entire Yano-Indigirka Lowland  along with a broad belt of shallow water is favorable; however, its  development is decades away.  Taken from Verba and others, 2000; digested in Petroleum Geology, vol. 35, no. 3, one map, in preparation.  Copyright 2001 James Clarke.  Earlier News Letters are available at  our web page:       http://geocities.com/internetgeology/   This News Letter is distributed without charge in the interest of our  science of petroleum geology.  To be added to the mailing list,  please send your e-mail address to:     jamesclarke@erols.com