Investment prospectives

The government of the Okrug will be doing its best to attract Russian and foreign investment to industrial development of the biggest deposits and exploration of prospective gold-ore deposits. Ore deposits are of high priority as the most productive, but they are in need of big investment.

Creation of favourable investment environment in this industrial branch can be confirmed by appearance of such companies as Highland Gold-Mining (Maiskoe) and Bema Gold Corp. (Kupol).
Foreign investment in the Kupol deposit in 2004 amounted to $44.5 million, in 2005 - $140 million. As the 30th of April, investment in Maiskoe was $82.6 million. Before the end of 2006 the total volume of investment will reach $96.2 million.

Comparing major economic figures in industrial exploration of gold deposits of the Chukotka Okrug with a series of Russian locations in other regions with similar geographic and economic infrastructure conditions and similar (in size and quality) foreign gold deposits one comes to the conclusion that the main economic parameter, specific capital investment, production costs and profitability of capital investment are very much alike. Speedy preparations for exploration of the Kupol and the Maiskoe deposits done recently also confirm this.

Total costs of exploration of the Maiskoe, Kupol and Valunistoe deposits are estimated by the experts at $285-310 mln, profitability being 11,1-34.4%, which for gold deposits in the CAO look very attractive. The norm of profitability of exploration gold deposits in Russia usually reached 10-15%.

Ten deposits with possible annual gold turnout of about 50 tons are considered to have the most attractive profitability, over 10%. These objects have good safety margin in case the price for gold fluctuates. Industrial exploration of those objects prepared in positive results of geological works will allow reimbursing after 2015 of all capacities of goldmining enterprises of the Okrug being built.

According to Strategika Ltd volumes of extracted gold by 2008 will increase as much as 4-5 times only because of the ore. By 2020 gold-mining will reach a steady level of 25-30 tons/per year, annual profit being $600-650 million (the rate being 27.5 rubles for a dollar; price of one ton of gold being $21.8 million).

Sufficiency placer gold resources: estimated 20 years.
For companies that mine lode deposits this provision will last for up to 9 years.

Revaluation of deposits and their processing with improved streaming equipment will secure steady levels of placer gold-mining.

Attractiveness of the branch is also motivated by quick growth of world prices for gold. This is caused by demand exceeding supply, by decrease in purchasing capacity of the dollar and general political instability. If these tendencies will still prevail in 2020 the price for gold will reach the figure of $600-650 per ounce.

Attractiveness of the Okrug is supported by growing investment into geological exploration works (GEW). The budget of geological exploration organizations of the Okrug is up to 80 million rubles a year. According to long-tem state programme of studying and reproduction of mineral raw stuff basis between 2005 and 2020, investment into GEW of Far Eastern Federal District will reach 28.1 billion rubles in 2002-2010, and 61.8 billion rubles in 2011-2020.

Increase in investment potentials of the branch is connected with big infrastructure projects of the Government of the Chukotka Autonomous Okrug. This first of all implies building and reconstruction of high ways leading to developed precious metals deposits. Since 2001 a number of programmes have been accomplished aimed at development of communication means. Development of social infrastructure and raising the level of quality of life have positive influence on potential personnel of the Okrug.

Table. Estimation of costs of industrial explorations of forecast lode gold deposits of CAO

№	Forecast deposits	Category of forecast resources	Gold, ton	Mining	Investment Million $	Annual productivity		Specific costs of one unit of annual productivity	Profitability
№	Forecast deposits	Category of forecast resources	Gold, ton	Mining	Investment Million $	ore, thousand tons	gold, tons	$/t	Profitability
1.	Sovinskoe deposit	Pi	10	underground	55	150	1.5	396	2
2.	“Prizrak” deposit	Pi	5	н	22	30	1.5	722	30
3.	Palyangai ore deposit	Р₂	30	м	90	250	4.0	364	15
4.	Sypuchenskoe ore deposit	Pi	5	н	43	90	1.0	479	0
5.	Severo-vostok deposit	Pi	5	м	84	83	1.2	494	1
6.	Zapadnyi and Nizkiy deposits	Р2	5	м	38	75	1.2	513	2
7.	Burgakhchanskaya prospec- tive area	Р₂+Р_з	100	open	200	600	9.0	331	20
8.	Central Aluchinskiy ore Deposit	Рз	20	underground	188	200	2.3	445	5
9.	Kapelka ore deposit	P₂	77*}	open	140	350	9.0	402	33
10.	Prikup ore deposit	P₂	5]	underground	30	50	1.2	592	7
11.	Ozernoi, Peledon of Vylvyveemskaya area	Р₂+Рз	170		200	600	17.0	331	54
12.	Levo-Envyvaamskoe deposit	P₂	10		50	83	2.2	617	12
13.	Televem ore deposit	P₂	66Р)	open	200	600	7.4	331	9
14.	Gornoe ore deposit	Pi	17	1!	90	200	2.7	445	5
15.	Zhilnoe ore deposit	р2	10		66	125	1.7	530	2
16.	Osennee ore deposit	р2	35	м	105	250	3.6	425	8
17.	Ergouveemskoe ore deposit	р2	37	underground	74	150	4.2	493	25
18.	Natouetkin-Nytymoki Nskoe ore deposit	р2	40		140	350	4.8	402	10

* including silver counted as conditional gold

Anadyr

4:36 -14°C

COMMENTS

The program of economic development in Chukotka can be carried out, considers vice-premier of government CHAO M. Sobolev.

First of all, the long-term program leans on resources of peninsula. Let’s begin that geological resources of Chukotka are explored today on 10 %-17 %. The next regions are explored much better. And even on these, tentative estimations resources here can be found. The proved resources of gas on the Priosernoe deposit - 7,3 billion cubic meters. Oil resources are estimated approximately in 10 million tons, the proved stocks make 4 million tons of them. They are dispersed on small Fields, such, as Hatirskoe, where extraction is conducted by "Sibneft" company. But it is not necessary to dismiss a shelf – it’s insufficiently studied yet, but there are data, that it’s resources can make up to 14 billion tons of conditional fuel. Exxon Mobile Company in similar ice conditions, in Baffin bay has constructed 7 platforms. What prevents to construct them here?
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Reindeer breeding can be profitable: E. Marochkin acting on the head of agriculture and foodstuffs department makes comments.

There was a moratorium on an industrial slaughter of deers in district till 2006. But now it is removed, farms have allocated a contingent for commodity slaughter this year. It is planned to hand over in a trading network about 9 thousand deers this year. Within the limits of national project the agrarian and industrial complex have got slaughter area on terms of financial leasing which is assembled in Kanchalan. Basically its value is in that correctly cut production will receive a trade look and will answer all established norms. The livestock of deers for September, 1st - from above 183 thousand. It’s below the level of 1990 (490 thousand heads), nevertheless, in Chukotka a livestock grows on faster rates, than on Yamal, and it’s our main competitor. Potential market - not only Vladivostok, but also Japan, Korea, China. Reindeer breeding is, at least, preservation of a traditional way of life of native people and food safety of region and when sales volumes become great enough, branch can turn in profitable.
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