As the clock ticks down towards the 2014 Winter Olympic Games in Sochi, the spotlight is shinning on Russia, perhaps as never before.
So this week seemed like as good a time as any for the Canada Eurasia Business Association to host a Vancouver conference that gave Canadian resource officials the opportunity to discuss the opportunities as well as the challenges associated with operating in Russia.
During a panel discussion on Wednesday, Kinross Gold Corp.
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) senior vice-president Glenn Masterman said two of the company’s richest gold mines – the Kupol and Dvoinoye mines are located in the Chukotka region of the Russian Far East.
With a grade of 17.80 grams per tonne, the two mines are sufficiently rich to support one of the global mining sector’s most sophisticated logistics and procurement operations, even though the mine sites – located about 100 kilometres apart – are in such a remote area of the planet.
“The exploration potential [in the region] is our biggest opportunity because there is no modern history of exploration,’’ Masterman said.
However, attempting to operate in Russia also presents huge challenges, especially for small companies who are attempting to raise money for exploration and development.
Erin Chutter, President of Global Cobalt Corp
. (TSX: V.GCO
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) said there “was no shortage of naysayers’’ when the company acquired the rights four years ago to acquire up to 100% of the Karakul Cobalt project in the Republic of Altai, southern Siberia.
“It was a long and painful road,” said Chutter. She said this was due to the uncertainty that western investors still feel about investing into Russia, even though Karakul is potentially among the world’s largest deposits of cobalt, a free metal that is used in the production of batteries and high performance alloys.
"We had to be enormously creative to secure partnerships to get us over the hump of disbelief,'' she said.
The company met that challenge by securing funding support from the European Bank for Reconstruction and Development, an international financial institution that supports projects in Central and Eastern European countries and is now a Global Cobalt shareholder.
Global also has a strategic partnership with Beijing General Research Institute of Mining & Metallurgy (BGRIMM), a global mining consultancy. Under the terms of an October, 2013, memorandum of understanding, BGRIMM will arrange financing and the selection of a Chinese contractor to develop a bankable feasibility study for the project.
Subject to the approval of Global Cobalt, Beijing Easpring Material Technology Co. Ltd. will arrange offtake agreements with a major Chinese processor. Easpring is a leading battery materials supplier and is publicy listed in China.
These agreements have enabled the company to demonstrate the viability of the project to a skeptical western market.
“They can see that there are some pretty significant players engaged,’’ said Chutter.
Meanwhile, as the eyes of the world prepare to focus on Sochi, Russia is continuing to try and find the appropriate niche in an increasing complex global environment, said John Sloan, Canada’s former ambassador to the Russian Federation.
He also said that with slowing economic growth, Russia could be in for a sustained period of economic stagnation.
It means the Russian government understands the imperative of attracting foreign investment, Sloan said.