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Perspectives for Russian Gold Refiners in Importing Gold Dore

Nikita Knyazev

Russia is one of the largest gold producing countries in the world; in 2017 we approached 300 tonnes. Russian Central Bank is one of the biggest buyers on gold large bars. Our refineries have more than one hundred year’s history of development refining technologies. And now there are 11 refining plants, and 7 among them are accredited by LBMA. We can process low-content materials like tailings, electronic wastes, slugs, spent auto catalysts and others, as well as platinum and palladium concentrates. But all products are usually sourced from Russian mining companies and former Soviet Union due to huge import duty on Dore -12%. Since 1st of January 2017 we first time had experience of purchasing and importing gold Dore outside of Russia &CIS, because import duty was eased, and it was applied 0% rate. Of course, comparing to India, who has been gradually growing in import from 4 tonnes in 2012 to around 150 tonnes in 2017, we are just at the beginning of our own road. The experiment was for one year, but it showed that Russian refineries can import gold, be competitive and add value to Russian economy and our clients. So we expect that Government of Russia will prolong easing for additionally two years soon. But anyway, after this success, we have the opportunity to refine gold Dore in Russia and revert it to our customer under special Customs regime.

Everybody knows that Swiss refineries take big part of refining pie and import materialfrom large scale miners all over the world. Why do they have it? The answer is quite simple - zero import duty, zero value added tax, cheapest financing, stable politic situation and day-to-day application of new technological solutions and best practices. So why choose import to Russia? We see the opportunity to be the best choice for middle scale miners and licensed exporters. Our Dore importing refineries are comfortable with long term sourcing and funding arrangements in procuring their gold Dore and ready to complex cooperation in case of any necessary assistance for tailings processing or laboratory assessments. We have strict government control during customs procedure and the whole refining process. Another step in better work with medium scale business is to pay 85-90% of gold value the same day to arrival flight at our destination airport. We can offer this option, in case our specialist supervised the whole export procedure in the country of origin. After arrival to our airport we are doing XRF before any import supervised by Customs and transportation agent, representative of supplier is also welcome. It means material is under by responsible persons from Customs, Inspectorate Office and secured transport agent since arrival. Another good reason for cooperation with Russian refineries is stable political situation and experience of working under US Sanctions. As conclusion, you become on the safe side, when work with Russian counterparty.

Regarding the sourcing of Dore, the Russian gold refineries are facing several challenges. One of them is being located far from suppliers offering consistent volumes and quality. Absence of direct airline connectivity from Latin American and African sources is a major challenge faced by our refineries. Transhipments often takes time, the nearest air hub usually is Dubai or Zurich. It means work with us may cause extra financial burden on the operating margins.To solve this somehow, we cover these extra costs for our clients immediately after Final Assay results of each shipment. The second important challenge is that wire transfer to Africa and/or Latin America takes longer time than to Europe or Middle East. We prefer to use similar banking group accounts for fast payment and receipt of money to our supplier. The largest obstacle for cooperation with new supplier usually is compliance requirements and adherence to responsible guidance. In many dore exporting countries, actual dore exports are made by the aggregators or government approved export agencies and the dore importing Russian refineries do not have access to the data on their actual ground level sourcing/mining partners, which may create problem under the regulatory framework.Absence of unified export databases and similarity in the documentation causes difficulties in traceability of the metal from mines and decreases transparency of supply chain. It influences to the time needed for on-boarding of new counterparty. We hope that our involvement in Intergovernmental Commissions with exporting countries and promotion of new technologies, open digital databases and IT solutions helps in reducing these costs.

From our point of view industry needs:

·         To decrease compliance costs

·         To facilitate payment infrastructure

·         To develop instruments for financing middle and small scale miners

And we see the great opportunity in application of blockchain ledger and smart contracts for Gold Dore like some companies start doing in Bullion Market.

In case of any questions or ideas of cooperation, you can contact via email: knyazev.n@gmail.com

Disclaimer: Views are personal and not the views of the publisher.