Mining in the Russian Far East.

• Author: Feller, Gordon

Overall, the mining industry represents tremendous opportunities for foreign investors to md undervalued turnaround situations. This is due in large part to the fact that the industry is contracting in the Russian Federation as economic pressures are increasingly felt by both state officials and private managers - the public/private struggle resounds mightily throughout the country's mining industry. The major challenge facing the industry is maintaining high production volumes while closing inefficient mines in an environment of high inflation and persistent but hesitant market reforms.

Competing on price is a major hurdle that must be cleared to enter this marketplace - a marketplace characterized, in part, by a large, and technically skilled domestic equipment manufacturing sector. The mining sector remains a highly politicized segment of Russian industry While economic needs increasingly drive the discrete operating decisions in the field, the overall direction, and health of the sector is the subject of intense political concern. The mining sector plays a pivotal role in supporting the entire Russian economy. However, this by no means eliminates close governmental scrutiny of the Russian mining industry.

Sometimes the obvious is worth repeating: The Russian mining and mining equipment sector is vast. Coal and iron-ore represent 57 percent and 42 percent, respectively, of the total mining activity in Russia - a regional marketplace into which Poland would fit 54 times.

In 1992, Russian coal mines produced 327 million tons of coal: 45 percent from underground mines and 54 percent from surface mining operations. Iron-ore reserves exceed 35 billion metric tons (bmt), and total reserves are estimated by Russian specialists to exceed 200 bmt. Although marketable iron-ore extracted in 1995 may well fall below 200 million metric tons, in 1988, 550 million metric tons of crude iron-ore yielded 240 million metric tons of marketable product.

The largest, actively mined iron-ore deposit in Russia, the Kursk Magnetic Anomaly, holds proven reserves of 15.2 bmt. In addition proven reserves of 7.2 bmt exist in the Urals, 4.3 bmt in Siberia and 2.1 bmt on the Kola Peninsula.

The basic structure of the coal and iron-ore industries - the primary users of mining equipment and services throughout the Russian Federation - mirrors the mixed and fluid condition of the overall regional economy. Eight years into a transitional period from a command to a market...