Major deal signed with China to explore gold deposits

Russia's main gold producer has signed a deal with a major Chinese company to explore the country's largest deposits in the Far East.

The agreement between Polyus Gold and the China National Gold Group Corporation (CNG) will see the two working together at Natalka on Kolyma, in the Magadan region.

According to Polyus Gold they will 'cooperate in multiple areas including the procurement of equipment and consumables; engineering, design and construction; and the development of new projects in the gold mining industry.' The agreement was signed in the presence of the President Vladimir Putin and Xi Jinping, the Chinese President, as part of the leader’s visit to Russia.

When it is operational Natalka mine will become one of the largest mines in the world, with production of gold expected to top about 15 tonnes per year. Construction of the mining and processing plant is still ongoing, with the exact launch date expected to be known in the summer, with hopes it will be late 2016 or early 2017.

The partnership with the Chinese company, and the pooling of resources, should allow the exploration of the gold deposits at a relatively low price.

Pavel Grachev, chief executive officer of Polyus Gold International, said: 'We are delighted to have signed this agreement with CNG. It will bring together two of the world's leading gold companies, each with a strong track record of operational excellence and project development.

'This platform will enable us to leverage off each other's expertise and pursue multiple business opportunities together. As Russia's largest gold producer and the lowest cost top 10 gold producer, Polyus Gold can provide CNG with an excellent foundation to build its business interests in Russia and the CIS region, and we look forward to a long mutually-beneficial relationship.'

Despite the positivity surrounding the project, the plant has faced serious obstacles in recent years none more so than the falling price of gold. Initially Polyus Gold had planned launching the first phase of Natalka in December 2013, but this was moved back until this summer.

An audit of the project development earlier this year found reserves at the site were half previously stated, amounting to about 504 tonnes. Changes had to be made to technical documents with a focus placed on more progressive ways of processing gold.

Vladimir Putin has actively tried to engage countries in Asia, particularly Singapore, China, and India, to overcome the impact of Western sanctions and stimulate the economy.

As evidence of the growing cooperation between Russia and China, 50 agreements were signed during a meeting between Mr Putin and the Chinese President in May last year.