Chapter

Chapter V.7 Metals and Mining

Author(s):
International Monetary Fund
Published Date:
December 1991
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1. THE ORGANIZATION AND STRUCTURE OF THE METAL MINING INDUSTRY

The metal mining and smelting operations of the USSR are found at widely scattered and often very remote locations throughout the country. All are state-owned. Individual enterprises are overseen by three types of national organizations with various degrees of control and responsibility for the operations of the industry: ministries, or quasi-ministerial bodies; research institutes; and all-union industry associations.

a. Ministries and quasi-ministerial bodies

(1) The Ministry of Metallurgy

In 1989, the former Ministries of Ferrous Metallurgy and Non-Ferrous Metallurgy were merged into a single body named simply the Ministry of Metallurgy. This Ministry is responsible for virtually all nonferrous mining and smelting activities with the exception of gold, diamonds and most nickel production. Thus, it controls 100 percent of the production of iron ore, steel, lead, zinc and aluminum, about two thirds of copper production and about one third of nickel production, as well as the production of a number of minor metals.

The major responsibility of the Ministry appears to be the formulation of plans, together with Gosplan, and the monitoring of the performance of individual enterprises. Capital investment decisions and the allocation of funds for investment are also controlled by the Ministry. The central planning system imposes on each enterprise state orders, or an annual production target. This determines quantities that are required for delivery to other domestic enterprises, and for export.

(2) Glavalmazzoloto

This body was formed in 1988 and has responsibility for the mining and processing of gold and diamonds. It appears to be the only producer of diamonds in the USSR, but it is not the only producer of gold. The enterprises controlled by the Ministry of Metallurgy produce by-product gold from some copper and lead-zinc deposits and recover gold from concentrates produced by Glavalmazzoloto. In addition, the Ministry of Atomic and Electrical Energy operates the Muruntau gold mine in Uzbekistan, believed to be the largest gold mine in the USSR. According to Consolidated Gold Fields, the Muruntau gold mine was the first in the USSR to use the resin-in-pulp method to recover gold. This process is commonly used in the West for the recovery of uranium, but not of gold. The development of the Muruntau deposit was originally given to an enterprise which is a significant producer of uranium.

In addition to the mining, smelting and refining of gold, Glavalmazzoloto also mines diamonds on a very large scale; it cuts and polishes diamonds and manufactures jewelry; it operates subsidiary companies or enterprises that supply support services to its mining operations in exploration, construction, energy supply and the maintenance of transport and mining equipment. It also operates research institutes concerned with the gold and diamond industries, and has a subsidiary that exports polished stones, jewelry and technical gold products. In short, it is a huge, vertically integrated industrial concern that employs over 300,000 people. An additional 50,000 are employed in cooperative gold mining operations, or “cartels”. These are small groups of individuals who work on an entrepreneurial basis in areas that were considered uneconomic or too remote to be exploited by the state enterprise.

Glavalmazzoloto was separated from the Ministry of Non-Ferrous Metallurgy (and now reports directly to the Council of Ministers) partly to promote efficiency and also, it seems, to enable funds to be channelled directly to that sector of the mining industry which is by far the largest producer of foreign exchange. Glavalmazzoloto reportedly received all the financial resources which it requested in the last five-year plan, and has a constant program of mine development under way, whereas the base metal industry has clearly been starved of investment and apparently has no new mines under development at present. Moreover, production from Glavalmazzoloto is planned to increase in the next five years, whereas base metal production is likely to remain level at best.

(3) Norilsk Nickel

The major base metal mining and smelting project undertaken within the USSR in the last 20 years has been the development of the huge Norilsk mining, smelting and refining complex in Northern Siberia. This was also originally controlled by the Ministry of Non-Ferrous Metallurgy but has now been placed under a new legal entity named Norilsk Nickel, which reports directly to the Council of Ministers. Norilsk Nickel also controls the Krasnoyarsk plant, which produces platinum group metals, and the Pechenga Nickel mine and smelter and the Severonickel smelter and refinery in the Kola Peninsula. It produces about two thirds of the country’s nickel output, almost all the output of platinum, palladium and other platinum group metals, and a large proportion of the output of copper, cobalt and other by-products of the copper-nickel deposits.

Norilsk Nickel was almost certainly separated from the Ministry of Non-Ferrous Metallurgy for the same reason as Glavalmazzoloto, namely to facilitate the direction of funds into a major producer of convertible currency. Norilsk is the source of exports of about 90,000 metric tons per year of refined nickel and very large quantities of platinum and palladium. It has received very substantial capital investment over the last two decades. Norilsk is now considering the construction of a copper semi-fabricating plant which could consume up to 100,000 metric tons per year of refined copper, much of which would be destined for export markets. The significance of this is two-fold: first, it indicates that Norilsk still expects to be able to obtain capital for a major investment at a time when the rest of the base metal industry will probably receive very little; secondly, this investment would mark the first investment downstream into semi-fabricating by a base-metal-producing enterprise. Hitherto, all semi-fabricating has been handled by ministries other than the Ministry of Metallurgy.

(4) Gosplan

Gosplan, the central planning committee, has a Department of Metallurgy which concentrates solely on planning production and investment in the mining and metallurgical sectors. There are three planning horizons: fifteen years, five years, and one year. Fifteen-year plans are developed in conjunction with the relevant ministries, technical institutes, and operating enterprises. They are said to take into account world as well as domestic supply and demand trends, and technical developments. Five-year plans are developed in more detail, with specific targets for production that remain unchanged throughout the five year period, regardless of actual developments. One-year plans are made for each enterprise with the objective of meeting the five-year targets.

(5) Foreign trading organizations

Separate organizations exist to handle foreign trade in metals and minerals. Exports of non-ferrous metals which are planned, and therefore fall within the state orders given to each enterprise, are handled by Raznoexport, which is part of the Ministry of Foreign Economic Relations. Raznoexport is also responsible for imports of minerals, in some cases to make up for production shortfalls at domestic mines.

Since 1988, individual enterprises have had the right to sell for their own account any production in excess of the state order. Foreign exchange acquired from such sales can be retained by the enterprise and used for its own purposes. It is possible for the larger enterprises to conduct such export sales direct with foreign partners. Most enterprises, however, will have small spot lots of various materials to sell, in excess of their planned production, and will not be equipped to handle this trade themselves. For this purpose, a new company, Tsvetmetexport, has been recently created. This is properly described as a company, since it has been set up as a joint stock enterprise, with 47 shareholders. It is the first joint stock foreign trading company operating in the USSR, and employs 42 people.1 Tsvetmetexport sells spot lots of metals and concentrates, almost entirely to trading companies in Europe and Japan. Its clients (in effect 25 out of its 47 shareholders) leave the foreign currency proceeds of their sales with Tsvetmetexport to be used for the purchase of foreign goods. These appear to be predominantly consumer goods, intended to improve the living conditions of their employees.

A separate marketing system exists for gold, which is predominantly exported, and which constitutes a major source of foreign exchange for the nation. Glavalmazzoloto (and presumably the other gold producers also) delivers its gold to the Treasury Department of the Ministry of Finance, and receives a fixed price for it. Exports are then handled by the Vneshekonombank. Exports of diamonds and platinum group metals are handled by Almazjuvelirexport.

(6) The Ministry of Geology

Geological mapping and exploration is the responsibility of the Ministry of Geology. Ore reserves at operating base metal mines have been declining in grade for several years, which implies a lack of successful exploration work, both in enlarging ore reserves at existing mines and in finding new deposits.

The Ministry is offering a collection of 85 undeveloped mineral deposits to foreign investors who may be interested in entering into joint ventures to explore and exploit them. The deposits have been extensively drilled and in many cases metallurgical tests have been carried out. Of the 85, only 25 are metallic mineral deposits. The remainder are industrial or fertilizer mineral deposits and, of those for which data are currently available, most would appear to require considerable investment in infrastructure and communications.

b. Technical institutes

There are a number of technical or research institutes serving individual metal industries or providing expertise in areas such as mine planning or mineral processing that are common to several metal industries. These institutes carry out virtually all work on the design and planning of mines, concentrators, smelters and refineries throughout the USSR, and have also worked in most of the countries of the world that are or were within the former socialist bloc. They represent, therefore, very substantial repositories of technical knowledge and experience, which in market economies are typically dispersed among a large number of operating companies.

(1) VAMI

VAMI (or the All-Union Aluminum and Magnesium Institute) is responsible for basic research and process development on alumina, aluminum, magnesium, carbon and graphite electrodes, and associated materials such as anode paste and fluorides. It has developed its own aluminum smelting technology, which is used in all Soviet aluminum smelters, and also in many others in Eastern Europe and elsewhere. It has also developed processes for the production of alumina (and various by-products) from alunite and nepheline, which are used as substitutes for bauxite in the USSR since bauxite is one of the few minerals with which the nation is not well endowed.

(2) Giproruda

Giproruda designs iron ore mines and also pelletizing and concentration plants. It was established over 60 years ago and was initially responsible for ferrous and non-ferrous metal mining. It has since come to concentrate on iron ore mining and processing alone.

(3) Mekhanobr

Mekhanobr was founded in about 1920 and was originally a department of the Leningrad Institute of Mining. It is responsible for research and design in the field of non-ferrous mineral processing and concentration. It has designed about 200 concentrators, most of them in the USSR, but some also in China, India, Yugoslavia, Iran, Algeria and elsewhere. Plants that it has designed account for about 75 percent of the total non-ferrous mine production in the USSR. It has recently invested about US$8 million in scientific equipment imported from various sources in Western Europe and is well equipped to carry out physical and chemical research connected with mineral processing. Like VAMI and Giproruda, Mekhanobr receives fee income from enterprises for whom it works, and has a turnover of rub 45 million a year.

c. Industry associations

In addition to the Ministry of Metallurgy (and perhaps in place of the Ministry in the future) industry associations exist to represent the enterprises that produce a single metal, or a group of related metals. Sovaluminium, serving the aluminum industry, was created in 1989. Vtormet is responsible for the collection and treatment of ferrous and non-ferrous scrap. Others either exist or are likely to be created for lead and zinc, minor metals, rare earths and ferrous products.

The structure of state control over the mining industry is clearly in a state of flux. The trend is toward decentralization, and may result ultimately in independence for the managers of individual enterprises. The creation of industry associations may be a step towards this goal.

d. National mineral policy

The prime objective of the mining industry according to Gosplan is to satisfy the domestic demand for raw materials and to fulfill the government’s foreign trade obligations. National self-sufficiency in primary raw materials has been a common objective in centrally planned economies, almost regardless of production costs. Any surplus production is exported, but exports in themselves are not a prime objective. The important exceptions to this are the gold, diamond, platinum and nickel industries. In these cases, production is destined largely or even totally for export, in order to generate convertible currency. Capital investment was increasingly biased towards the production of these metals because of the growing demand for foreign exchange, whereas the base metal industries that primarily serve domestic demand have received much less investment than was required to maintain their assets.

The priority given to military and defense-related sectors of the economy has also had some impact on the mining industry. The metal requirements of these sectors appear to have been given priority, but more importantly they have absorbed a large part of the country’s heavy engineering capacity. The production of mining equipment and machinery has therefore suffered and mine development and production and mineral processing are much less efficient than they could be because of the constant shortage of suitable equipment.

e. The allocation of finance and foreign exchange

In the system that existed to the end of 1990, each enterprise received its revenue in rubles, whether from domestic or re-export sales (with the exception of export sales in excess of state orders). Any surplus after the payment of operating costs and deduction of depreciation was regarded as profit, 70 percent of which was taken by the union government, and the relevant republic and ministry. The remaining 30 percent was left with the enterprises, though strict controls were applied to the way in which it could be used. The enterprise was expected to finance its investment from its depreciation funds and retained profits.

In practice, this system has not worked well because prices of inputs and products have typically borne little relation to costs. Many enterprises have therefore been unprofitable, and in these cases capital investment has had to be financed by subsidies from the state. In 1989, according to Gosplan, such subsidies accounted for 40 percent of capital investment in the mining industry.

As from 1991, the share of the operating surplus taken by the state was to fall to 45 percent, divided between the union government and the republics. The relevant ministry would henceforth receive nothing and the enterprises would have a free hand in using the remaining 55 percent. It has also been suggested that enterprises could receive in convertible currency at least part of the proceeds of exports from mines or plants, and that the size of the state order could be reduced to perhaps 85 percent of total planned production, leaving more for the enterprise to sell on its own account.

2. ALUMINUM2

a. Production

The USSR is the second largest producer of primary aluminum in the world, after the United States. Metallgesellschaft’s estimate of 2.3 million metric tons for Soviet production in 1989 compares with 4.03 million metric tons in the United States and 1.55 million tons in Canada, the third largest producer.

(1) Bauxite and alumina production

Bauxite is one of the few minerals which has not been found in the USSR in abundance. Consequently, the aluminum smelting industry is not self sufficient in bauxite; substantial quantities are imported, and the USSR has also developed processes for recovering alumina from alunite and nepheline, which are alumina-bearing minerals that in the rest of the world are considered too low in grade to be worth processing for this purpose. Little information is available on the operating bauxite mines of the USSR. The major mining centers are thought to be in the Ural mountains, but there is also some production in the Ukraine, in the northwestern region of the Russian republic, and in Soviet Central Asia. Alunite is mined in Azerbaidzhan and nepheline in Central Siberia, near Achinsk, and in the Kola Peninsula, where it is produced as a by-product of apatite at the largest apatite deposit in the world.

Production of bauxite and its substitutes is estimated to have declined from 6.4 million metric tons in 1980 to 5.75 million metric tons in 1989. The decline has been balanced by imports which have grown from 2.48 million metric tons in 1980 to 5.17 million metric tons in 1988. The principal source of imports is the Kindia mine in Guinea, which was developed with Soviet finance and technical assistance. Almost the entire output of this mine is shipped to the USSR, in return for the investment in the initial mining project and subsequent expansions. In 1988, Guinea shipped 3.375 million metric tons of high grade bauxite from this mine to the USSR.

Jamaica is the second largest supplier. Soviet imports from this source have risen from 168,000 metric tons in 1983 to just under one million metric tons in 1988. Greece supplied 520,000 metric tons in that year, Yugoslavia 253,000 metric tons and Guyana 27,000 metric tons. Imports from India have recently been increased to about 100,000 tons per year.

The cost of producing alumina from alunite or nepheline is considerably greater than the cost of producing the same product from bauxite, principally because a larger volume of material has to be treated. Typically, about two metric tons of bauxite are required to produce one metric ton of alumina, whereas 4.0-4.5 metric tons of nepheline are required for the same purpose and 6.5-7.0 million tons of alunite. However, processing the latter materials yields useful by-products. For example, 4.0-4.5 metric tons of nepheline also yields 0.6-0.8 metric tons of sodium carbonate, 0.2-0.3 metric tons of potash, and small quantities of gallium. Similarly 6.5-7.0 metric tons of alunite yields two metric tons of sulphuric acid and one metric ton of potassium sulphate. VAMI, which developed both processes, claims that the cost of producing alumina from these sources, net of byproduct credits, is comparable with that of producing it from good quality bauxite. The total capacity of the Soviet alumina refineries now in operation is 4.6 million metric tons per year, which is equal to Metallgesellschaft’s estimate of 1988 production (Table V.7.1). This implies an operating rate of 100 percent, which is unlikely to be correct. It is more probable that true capacity is somewhat higher than the figures shown. For example, it is known that there have been plans to increase the capacity of the Achinsk refinery by a further 450,000 metric tons per year. These plans may well have been carried out. Of the alumina refinery capacity, 29 percent was built before 1945, 17 percent in the 1950s, 20 percent in the 1960s, 12 percent in the 1970s, and 22 percent in the 1980s. Only two plants (both large ones) have been built in the past 20 years.

Table V.7.1.USSR: Alumina Refineries, 1990
LocationCapacity

(thousands of

metric tons

per year)
Raw MaterialsStart-Up Date
Achinsk550nepheline1970
Dnjepr250imported bauxite1933 1
Kandalaksha100nepheline1951
Kirovabad100alunite and imported bauxite1965
Krasnoturinsk350domestic bauxite1939-45
Nikolaevsk1,000imported bauxite1981
Novokuznetsk250domestic bauxite1943
Pavlodar400domestic bauxite1964
Pikalevo300nepheline1959
Sumgait150alunite1955
Tikhvin350domestic and imported bauxite1938
Urals250domestic bauxite1939
Volkhov150nepheline1933
Source: Aluminium Verlag.

Rebuilt after World War II.

Source: Aluminium Verlag.

Rebuilt after World War II.

(2) Primary aluminum production

There has been no growth at all in Soviet primary aluminum production in the past decade (Table V.7.2). Total nonsocialist world production rose by 1.7 million metric tons in the same period, or by 1.4 percent a year, although within this overall growth rate there were major shifts in the distribution of production. Static production in the USSR appears to stem from a lack of recent investment, rather than from any conscious decision to reduce its export surplus or devote its power resources to other applications. The Soviet smelters are scattered throughout the country; all of them use hydro-electric power and are sited close to hydro-power stations (Table V.7.3). These stations are operated by a different government agency but effectively the smelters and power stations can be regarded as integrated units.

Table V.7.2.USSR: Aluminum Production in the USSR and in the Nonsocialist World, 1980-89(Thousands of metric tons)
USSRUnited

States
AustraliaCanadaNonsocialist

World
19802,4204.6543031,06812,767
19852,3003,5008521,28212,308
19862,3503,0378771,35512,234
19872,3703,3461,0241,54012,932
19882,4403,9431,1411,53413,852
19892,3804,0301,2411,55514,462
Annual percent growth rate 1980-89-0.2-1.616.94.31.4
Sources: Metallgesellschaft and World Bureau of Metal Statistics.
Sources: Metallgesellschaft and World Bureau of Metal Statistics.
Table V.7.3.USSR: Aluminum Smelting Capacity
LocationCapacity

(metric tons

per year)
Kilo-

Amperes
Technology 1Start-Up
Bogoslovsk15070-75HSS1945
Bratsk1,000170-175VSS1966-85
Dnjepr7070HSS1933
Irkutsk280160VSS1962
Kandalaksha6075VSS1950-55
Krasnoyarsk800165VSS1964
Nadvoitsy6075HSS1954
Novokuznetsk200160VSS1943, 1970s
Sayansk200255CWPB/PFPB1984-85
Sumgait12070HSS1955
Tajik500165/175/260SWPB1975-85
Ural10070-75HSS1939
Volgograd125150VSS1959
Volkhov3070HSS1933
Sources: Aluminium Verlag, VAMI.

HSS = Horizontal stub Soderberg; VSS = Vertical stub Soderberg; CWPB = Center-worked pre-bake; PFPB = Point-fed pre-bake.

Sources: Aluminium Verlag, VAMI.

HSS = Horizontal stub Soderberg; VSS = Vertical stub Soderberg; CWPB = Center-worked pre-bake; PFPB = Point-fed pre-bake.

(3) The quality and efficiency of the aluminum smelting industry

Of the 14 aluminum smelters operating in the USSR, 12 employ Soderberg technology which has not been installed in new plants in the West for the past two decades. Pre-baked anode technology is universally preferred now, mainly because it permits more efficient emission controls to be installed, and because larger cells have been developed, with higher amperage, which reduce the amount of power required to produce a metric ton of aluminum.

Only two Soviet smelters, representing 19 percent of the 3.69 million metric tons per year of smelting capacity in the USSR, employ pre-bake technology, which gives an indication of the age and obsolete nature of the majority of the Soviet plants. Four plants, accounting for 9 percent of total capacity, were built before 1945, excluding one which was modernized in the 1970s. A further six plants, accounting for 39 percent of total capacity, came on stream in the period 1946-69, and another four plants were commissioned at various points in the 1970s and 1980s. These include the huge Bratsk smelter, which is the largest in the world by a considerable margin, and the 500,000 metric tons per year Tajik smelter. The earlier Krasnoyarsk smelter, at 800,000 metric tons per year, is the second largest in the world. The Sayansk plant is not complete; but it is believed that it will eventually have a capacity of 400,000 metric tons per year.

The production estimate of 2.38 million metric tons in 1989, combined with a smelting capacity figure of 3.69 million metric tons per year, indicates that the industry’s capacity utilization rate is only 64 percent. This is a very low figure by Western standards. Unless they are forced by market conditions to reduce output, Western smelters normally operate at 95 percent of nominal capacity and can, if the market is strong, operate at over 100 percent of nominal capacity for extended periods.

Part of the explanation for the low Soviet figure may be that the Sayansk smelter is only now coming on stream, and was probably not operating in 1989. However, the exclusion of this smelter from the capacity figure would raise the utilization rate only to 68 percent. Restricted supplies of alumina, inefficient working practices in the smelters and the lack of any incentive to maximize output could explain the low utilization rate. The production estimate could also be too low, but the correct figure is unlikely to be large enough to eliminate the gap between the Metallgesellschaft production estimate and the reported capacity figure. It is hard to avoid the conclusion that there is serious inefficiency in the smelting industry.

Power consumption per metric ton of aluminum is a standard measure of the efficiency of aluminum smelters. According to VAMI, the Soviet average is between 15,000 and 16,000 kilowatt hours per metric ton for smelters using 255 KA pots; at the older smelters the consumption figures vary within a wide range, but it must be higher. This compares with an average power consumption of 14,662 kilowatt hours per metric ton in Western smelters. In smelters using the latest technology, power consumption would be about 13,500 kilowatt hours per metric ton and the very best operating practice combined with the best technology could achieve a figure as low as 13,200 kilowatt hours per metric ton. On this measure, therefore, the Soviet industry is distinctly less efficient than Western smelters as a whole, and even the modern Soviet smelters are surprisingly inefficient.

Power consumption per metric ton of metal produced is a function partly of the amperage of the pots used and partly of the operating practice in the smelter. Sixteen percent of the Soviet smelting capacity employs pots of 70-75 KA. Pots of this amperage can still be found in Western smelters but they would be regarded as very out-of-date. Seventy-two percent of Soviet capacity has an amperage of 160-175 KA, which is quite common in Western smelters, although no new smelter would use this technology. Only 12 percent of Soviet capacity is in the 255-260 KA range, which is used in modern Western smelters. Western companies are now experimenting with pots of 300-320 KA.

An important element in good smelter operating practice is the ability to control conditions inside the pot within close limits. Computerized controls are now used for this purpose. No Soviet smelter has a computerized control system. Plans exist to build a new smelter at Baikal with VAMI smelting technology and a Western control system, but construction has not yet started.

(4) Future production

No information is available on the planned production of aluminum over the next five years. There appears to be ample spare capacity, however, and the Sayansk smelter has still to be completed. Smelting capacity, therefore, could support much higher metal production than at present. If enterprises are allowed to retain some proportion of the foreign exchange earned by their exports, this could provide an incentive for some smelters to raise production. However, alumina supplies could place a constraint upon future production. The most reasonable forecast is probably that primary production will remain stable in the coming five years, as it has for the past ten.

b. Consumption and foreign trade

For at least 20 years, the USSR has produced more aluminum than it has consumed, and has exported the surplus to Eastern Europe and to Western markets (Table V.7.4). According to Metallgesellschaft’s estimates, consumption has fluctuated between 1.88 million metric tons (in 1982) and 1.715 million metric tons (in 1989), declining between 1980 and 1989 at around 0.8 percent a year. During the same period, consumption in the nonsocialist world increased by an average 2.2 percent a year.

Table V.7.4.USSR: Exports of Aluminum, 1985-88(In thousand metric tons)
Destination1985198619871988
Western Europe100.889.567.093.2
Hungary162.7198.8189.6197.6
Poland49.653.750.057.8
Czechoslovakia70.066.065.065.0
Japan78.264.778.383.2
Other12.026.012.60.7
Total473.4498.7462.5497.5
Source: Metallgesellschaft and CRU.
Source: Metallgesellschaft and CRU.

The surplus available for export, according to estimated production and consumption data, has ranged from 520,000 metric tons in 1982 to 665,000 metric tons in 1989. Exports from the USSR that can be traced in the import statistics of other countries do not entirely account for these export tonnages. A balance of 90,000 to 120,000 tons per year remains unaccounted for each year. It is impossible to tell whether the export consumption figures should be higher, or whether the production figure should be lower.

Hungary has been the major export market, based on a long-standing barter agreement. Hungary has large bauxite and alumina production, but little smelting capacity. It has therefore shipped around 500,000 metric tons of alumina per year (along with some semi-fabricated products and food) to the USSR and received approximately 205,000 metric tons of refined metal in exchange. The 1986 contract expired at the end of 1990, and a new contract is under negotiation.

The Czech and Slovak Federal Republic and Poland, both deficient in domestic aluminum production, regularly import substantial quantities from the USSR. Bulgaria, which has no aluminum production, almost certainly does the same, although there are no trade statistics to confirm this. (This may help to account for the gap between production and consumption plus exports.)

All the exports to Eastern European countries up to the end of 1990 will have been either barter transactions, or settled in transferable rubles. Patterns of trade are likely to change considerably from the start of 1991. Eastern European countries may well reduce their purchases from the USSR, which will have to look to Western Europe for a larger share of its export sales.

Soviet exports to Japan consist almost entirely of secondary aluminum (which unfortunately increases the proportion of primary production whose destination is unknown). Exports to Western Europe and to other areas (mainly the United States) are made through traders. These sales suddenly increased at the end of 1989, supposedly because export targets had not been met as the year-end approached. It is fairly common for export sales to rise sharply or stop altogether towards the end of the year, regardless of market conditions, in order to ensure that annual targets are achieved but not exceeded.

Until recently, the great majority of Soviet primary aluminum exports were of 99.5 percent purity, although the standard quality now required by semi-fabricators in the West, and the quality produced by virtually every Western smelter, is 99.7 percent. When an aluminum contract was first introduced on the London Metal Exchange (LME) in 1979, the minimum grade was set at 99.5 percent in order to ensure that Soviet metal would be deliverable against the contract. However, the LME has now changed the specification of its contract to 99.7 percent, and Soviet metal must be of this grade if it is to avoid being sold at a discount to the LME price in Western markets. VAMI claims that there is no problem in producing 99.7 percent metal in Soviet smelters.

c. Environmental factors

The major form of atmospheric pollution caused by the aluminum smelting process is the emission of gases from the electrolytic pots. These gases contain aluminum fluoride and other chemicals. The normal way of controlling these emissions is to hood the pots in order to contain the gases, which are then passed through a wet or dry scrubbing system, removing all particles of dust before the remaining air is allowed to escape.

According to VAMI, all Soviet smelters have some form of hooding and gas scrubbing. However, it is impossible to fit effective hoods on Soderberg pots, which are used in the majority of Soviet smelters. The most difficult are the horizontal stub pots, on which only about 40 percent (a very low figure) of the gases are captured.

The efficiency of the gas scrubbing equipment is reportedly poor. Only the Sayansk smelter has a modern and efficient gas scrubbing system, designed by a Norwegian company. The huge Bratsk and Krasnoyarsk smelters both have inefficient pollution controls, and the standards at the older smelters are believed to be even worse.

Another source of air pollution within smelters arises from inefficient alumina feeding systems. In the older Soviet smelters a considerable amount of alumina is lost into the ambient air when the crust on the pot is broken and alumina is fed in by hand. Modern smelters avoid this problem by having a closed feeding system.

A third source of pollution arises from the disposal of spent pot lining materials, which are replaced at intervals of three to five years. A chemical reaction can occur, which results in cyanide leaking from these materials if they are simply discarded on the ground or buried. No information is available on the disposal methods used in the USSR, but this has only recently been recognized as a major problem in the Western aluminum industry, so it is unlikely that the Soviet industry has taken any effective action to control this source of pollution.

Both VAMI and the Ministry of Metallurgy recognize that the environmental standards of the Soviet smelting industry need substantial improvement.

d. Opportunities for investment or cooperation

According to VAMI, the area where foreign capital and technology would be of most use is in the modernization of older smelters, in order to improve their environmental standards and to increase their efficiency. The Soviet engineering industry cannot supply pollution control equipment in sufficient quantity or with the required quality. One option is to retrofit the Soderberg smelters with better gas cleaning systems. The better and more expensive alternative is to replace the Soderberg cells with pre-baked anode cells, and to fit entirely new gas cleaning systems. The latter amounts to almost a complete rebuilding of a smelter’s pot-lines, and therefore would involve a very large capital investment.

Retrofitting a smelter can also include the installation of computerized control systems, closed alumina feeding systems and systems to control the magnetic fields created around pots. However, it makes no sense to install these on a potline whose fundamental design is obsolete. Such improvements, which can yield substantial improvements in operating performance, would therefore constitute part of the process of rebuilding obsolete smelters. VAMI has a list of smelters which it considers most in need of modernization. The first five are Dnjepr, Krasnoyarsk, Ural, Bogoslovsk and Novokuznetsk, although in practice almost all of them require improvement.

VAMI’s second objective is to see downstream integration into semi-fabricating at the site of some smelters. Currently, semi-fabricating is the responsibility of another industry, under the direction of the Ministry of Aviation, and the semi-fabricating plants are not thought to be close to smelters. There is some advantage in physical proximity, since molten metal can be transferred direct to the semi-fabricating plant, which saves the cost of casting metal in one plant and then remelting it at the next. Vertical integration is a feature of many Western aluminum companies, and it is likely that any growth in demand for semi-fabricated products in the USSR could best be met by investments managed by the smelting industry, rather than by the Ministry of Aviation.

3. COPPER3

According to the latest Western estimates, the USSR is the third largest mine producer of copper in the world, after Chile and the United States, and the second largest producer of refined copper after the United States.

a. Production

(1) Copper mine production

There is a very large number of known copper deposits in the USSR, including many that are not currently being exploited (although the undeveloped deposits mostly suffer from either low grades or very remote locations, or both). The major copper mining regions are Kazakhstan, the Urals, the Norilsk region in Siberia, and Uzbekistan. There are about 50 enterprises producing copper concentrates, including some where copper is a by-product of lead or zinc, and about the same number of concentrators.

Kazakhstan, according to the U.S. Bureau of Mines, contains about half the nation’s copper reserves and accounts for 30 percent of total copper production. As of 1987, there were about 23 operating copper mines in the republic, feeding 11 concentrators. The two major production centers are Balkhash and Dzhezkazgan, both of which have fully integrated smelting and refining complexes. There is a much smaller smelting and refining complex at Irtysh. The first two treat about 25 million and 20 million metric tons per year of ore, respectively, according to Mekhanobr. The Balkhash complex is fed mainly by three mines, Kounrad, Sayansk and Vostochno-Kounrad. Since about the mid-1970s, this complex has failed to meet its production targets, and between 1979 and 1985 there was a 25 percent fall in its copper output. The cause is a depletion of ore reserves at the mines in the immediate area of the concentrators and smelter, and concentrates have been transported from other locations in an attempt to make good the shortfall. The Dzhezkazgan complex has also been short of concentrates, partly because some of its output has been shipped to Balkhash. One new underground mine was brought on stream in this area in 1985 and two other mines have been reported to be under construction in Kazakhstan in the late 1980s.

The Irtysh smelting complex is fed by a large number of very small mines. This area contains the one new mine in the whole of the USSR which Mekhanobr identified as having come on stream recently. This is a polymetallic copper-lead-zinc orebody, near Leninogorsk, which is now producing 1.5 million metric tons per year of ore. No other copper (or lead-zinc) mines were under development in 1990.

In the Urals, base metal mining has been in operation for a long period. A large number of medium to small mines feed 12 known concentrators and five smelters. Falling ore grades have been reported in this region too, as a result of the depletion of higher grade deposits and the failure of exploration programs to establish new reserves. One major concentrator is known to be short of local raw materials, and has had to treat ore shipped from other areas, including Dzhezkazgan. Two of the smelters are also known to have operated well below capacity in recent years because of a shortage of concentrates.

The five mines in the Norilsk area all contain copper, with grades ranging from 0.6 to 3.9 percent copper. Nickel is the major product at these mines, but nevertheless the copper grades at two of them are almost certainly the highest in the whole of the USSR. The copper-nickel mines in the Kola Peninsula, also under the control of Norilsk Nickel, have very low copper grades, of less than 0.5 percent. The Norilsk complex as a whole, including the operations in the Kola Peninsula (described in more detail in section 7), produces one third of the nation’s copper output.

At Almalyk, in Uzbekistan, two major open pit mines feed the largest concentrator in the USSR, which in turn feeds a large smelter. Ore grading as little as 0.25 percent copper has been treated at this concentrator recently.

(2) Copper smelter and refinery production

The copper smelting capacity in the USSR is estimated at 1.28 million metric tons per year. This includes at least 150,000 metric tons per year of secondary smelting capacity, but it excludes the smelting capacity of the Norilsk and Kola Peninsula plants (which produce one third of the nation’s copper). Refining capacity totals 1.3 million metric tons per year, again including secondary refining but excluding Norilsk (Table V.7.5).

Table V.7.5.USSR: Copper Smelters and Refineries
SmelterRefinery
CapacityCapacity
(thousands of(thousands of
Start-up/metric tonsStart-up/metric tons
RegionPlantModificationper year)Modificationper year)
KazakhstanBalkhash1940, 19592001962300
Dzhezkazgan1928, 19711801971280
Irtysh1920, 19387050
1949, 1984
UralsKarabash1911, 1925100
Kyshtym… …1908, 1922100
Kirovgrad1913, 193290
Pyshma… …1934-38280
Krasnouralsk1931,1950s90
Sredneuralsk1940100
Mednogorsk195915
RSFSRMoscow1913, 193240192240
(Other)Norilsk1945, 19851951
Nadezhda1982
KolaSeveronikel1939
Pechenga1944
UzbekistanAlmalyk1965, 19692501965250
Source: United States Bureau of Mines.
Source: United States Bureau of Mines.

Western estimates of Soviet copper production vary significantly. Perhaps the most reliable figures are those compiled by Metallgesellschaft, which put smelter production at 1.07 million metric tons and mine production at 950,000 metric tons in 1989. The latter figure, however, may be exaggerated by the failure to allow for some 120,000 metric tons of concentrates imported from Mongolia (see below). The U.S. Bureau of Mines has produced rather lower estimates of both mine and smelter production. There is no agreement as to whether copper production has been rising or falling in recent years.

The Moscow smelter treats only scrap, and the Karabash and Kirovgrad smelters are partly fed by scrap. The great majority of smelters have been in operation for some time; many of them started production before World War II. This is not necessarily a problem; many West European and U.S. smelters are of a similar age. An old smelter may still be efficient, provided it is well maintained and modernized when necessary. However, no recent modernizations are evident, with the exception of the Norilsk plant, where considerable investment is known to have been made during the 1980s (Table V.7.5). An Outokumpu flash smelter has been installed in Norilsk, together with a Soviet-designed furnace known as a Vanykov smelter. This is a fairly modern process, which has also been installed in one other location. An improved version of this smelting process is being tested by Gipronikel in a pilot plant in Leningrad. An Outokumpu flash smelter was also installed in the Almalyk smelter in 1980.

(3) The efficiency and quality of copper production facilities

The weakness of the Soviet copper mining industry lies in its diminishing ore reserves base. According to Mekhanobr, only in Norilsk and in Kazakhstan are copper grades of more than 1 percent copper mined. Elsewhere, average grades are between 0.8 and 0.5 percent copper. Such grades can be mined profitably in the West, but only in very large and highly mechanized open pit mines. There is much evidence that shortfalls in the production of concentrates have prevented several smelters from operating at their planned production rates.

To counter falling grades, the volume of ore mined has been increased, in an attempt to sustain copper production. One unexpected consequence has been that the proportion of oxide (as opposed to sulphide) ore has gradually risen to about 20 percent. This ore, normally found near the surface in deposits mined by open pit methods, might normally be discarded or stockpiled for treatment by leaching. However, it appears to have been mixed in with sulphide ores, in order to make up the necessary tonnages. Oxide ore is more difficult to treat and reduces overall recoveries when mixed with sulphides. Leaching is little used because very cold winter weather causes leaching pads to freeze up and kills the micro-organisms upon which the biological leaching systems rely.

Copper recovery rates in concentrates of 90-95 percent were quoted by Mekhanobr, but the grade of concentrates is very low. Typical Soviet concentrates contain 15-20 percent copper, whereas a typical Western concentrate will grade between 28 and 34 percent copper. This has some impact on transport costs, since some concentrates are transported up to 5,000 kilometers to a smelter. The lower the grade of the concentrate, the greater the volume that has to be shipped. There is generally a trade-off between copper recoveries and the grade of concentrates. According to Mekhanobr, Soviet mines have preferred to aim at high recoveries at the cost of low concentrate grades.

The heavy equipment in use at many concentrators (such as crushers and ball mills) is badly in need of modernization, according to Mekhanobr, which designed most of these plants. Five years is the natural life of most equipment of this type, whereas about 50 percent has been in service for 10-15 years.

All copper smelters in the USSR have sulphuric acid plants (with the exception of the Norilsk smelter—see section 7). However, the efficiency with which sulphur dioxide is captured is low, so airborne pollution levels around the plants are still high. The Alaverdy smelter (not listed in Table V.7.5) closed in 1989 because its sulphur emissions were 200 times the permitted limits; arsenic contamination of air and water was also reported. Gipronikel states that a considerable investment will be required to bring the environmental standards of the copper smelters up to an acceptable level.

(4) Future production

It seems likely that production will fall over the next five years, because of the depletion of ore reserves at most mines. Expansion has ceased at Norilsk, and there are no new mines coming on stream elsewhere, according to Mekhanobr. The only way to expand production of copper would therefore be to increase the tonnage mined at existing mines. This has already been done, and it is hard to imagine that the process can continue at a sufficiently fast pace to raise copper production. The scale of the probable decline, however, is difficult to predict.

b. Consumption and trade

Metallgesellschaft estimates Soviet consumption of refined copper at 1.32 million metric tons in 1989, falling to 1.14 million metric tons in 1989. The U.S. Bureau of Mines, which adopts a lower production estimate, would also give a lower consumption figure. The Metallgesellschaft figure would make the USSR the third largest copper-consuming nation after the United States and Japan.

Nevertheless, the USSR is a net exporter of refined copper. It normally supplies 40,000 metric tons per year to the Czech and Slovak Federal Republic and 10-15,000 metric tons per year to Hungary. Importers in those countries report that the quality of Soviet cathode is excellent, and the price is lower than the price of similar cathodes from Western sources because the Soviet copper delivered to the Czech and Slovak Federal Republic has not been registered as “good delivery” against the LME copper contract.

The remaining Soviet surplus copper production is exported almost entirely to Western Europe. These exports have varied from 49,000 metric tons in 1984 to 29,000 metric tons in 1986 and 75,000 metric tons in 1988. The commercial policy appears to be to sell metal on a spot basis to traders.

In the early 1980s, the USSR started to import copper concentrates for the first time (confirming the shortfall in domestic mine production). In 1980-82, imports from Western sources totalled 29-32,000 metric tons per year of contained copper. However, the Erdenet mine in Mongolia, which was developed by the USSR, began to come on stream at the same time and in recent years has supplied about 120,000 metric tons per year of copper in concentrates to the Kazakhstan smelters. Soviet imports from other sources have now ceased.

c. Environmental factors

The main environmental deficiencies of the Soviet copper industry have been mentioned above. High pollution levels have not only closed the Alaverdy smelter, but have also caused the Karabash smelter in the Urals to operate at a reduced level. In addition to sulphur, the noxious emissions mentioned in connection with the Karabash smelter include tellurium and arsenic.

d. Opportunities for investment and cooperation

The major need identified by Soviet sources was finance, technology and equipment to improve the environmental standards at copper smelters and modernize concentrating plants. There is an urgent need also for more effective exploration work.

An interesting and more specific opportunity exists in the Urals, where tailings discarded at concentrators have accumulated with a copper content of more than 1 percent. This is higher than the grade of ore now being mined in the region. Moreover the material is already on the surface and has been milled. Mekhanobr claims that the technology to recover this copper exists in the USSR; only finance is lacking. Capital costs would not be high and the payback period could well be short.

It is reported that a similar opportunity exists at smelters in the Urals, where accumulated slags have significant metal values (as a result of inefficient smelting practices in the past) and could be profitably reprocessed.

Opportunities to invest in copper mining are few, because of the ineffectiveness of Soviet exploration work. The massive Udokan deposit in Siberia has potential but is probably too large and too remote to attract Western investors.

The semi-fabricating industry could offer some opportunities. Outokumpu has already set up, as a joint venture, a continuous cast rod mill in Moscow. Norilsk Nickel is considering the possibility of constructing a very large plant to produce copper and copper alloy rolled products, with the aim of processing 100,000 metric tons of copper per year. This may require a joint venture, in order to obtain access to technology and to Western export markets.

4. GOLD4

a. Production

(1) Mine production

The USSR is thought to be the second largest gold-producing nation in the world, after South Africa. Its annual production of gold has not been published, however, since 1928 (when the figure was 28 metric tons), and public information on the industry has remained very sparse up to the present day. Western analysts estimate that Soviet gold production in 1989 was about 285 metric tons per year.5 This compares with 1989 production of 608 metric tons in South Africa, 259 metric tons in the United States, 197 metric tons in Australia and 158 metric tons in Canada. In 1990, however, the U.S. production is likely to reach 275 metric tons and Australian production could be 230 metric tons, so the Soviet ranking is now under challenge.

The Soviet gold industry has a comparatively poor record in terms of output, compared with that of the nonsocialist world, where high prices have stimulated substantial growth in mine output since 1980 (Table V.7.6). Soviet production has fallen by 8 percent during the decade, while output has risen by 750 percent in the United States, 1,059 percent in Australia, and 207 percent in Canada. South Africa is the only major Western producing country where mine output has fallen significantly, from 675 to 608 metric tons.

Table V.7.6.USSR: Gold Production in the USSR and the Nonsocialist World, 1980-89(In metric tons)
UnitedNonsocialist
USSRStatesAustraliaCanadaWorld
198031130.517.051.6961.8
198527179.558.590.01,235.8
1986275118.375.1105.71,295.9
1987275154.9110.7116.51,383.2
1988280201.0157.0134.81,550.5
1989285259.1197.0158.41,652.8
Annual percent growth rate 1980-89-1.026.831.213.36.2
Sources: Gold Fields and United States Bureau of Mines for Soviet production data; Gold Fields Mineral Services for nonsocialist world data; and CPM, Consolidated.
Sources: Gold Fields and United States Bureau of Mines for Soviet production data; Gold Fields Mineral Services for nonsocialist world data; and CPM, Consolidated.

There are three gold producing bodies in the USSR: Glavalmazzoloto operates a large number of mines, concentrators and smelters (producing a total of 205 metric tons in 1989); the Ministry of Metallurgy produces 60 metric tons of by-product gold at lead-zinc and copper mines; and the Ministry of Atomic and Electrical Energy operates the large Muruntau mines, which produced 20 metric tons in 1989. A portion (around 60 metric tons) of the output of Glavalmazzoloto consists of ore purchased from artels, or private cooperative mining groups.

Two thirds of Glavalmazzoloto’s output comes from Siberia, and principally from Yakutia and the far Northeast of the USSR. The great majority of this is from alluvial deposits which are generally worked by dredges, and sometimes by open cast methods. The majority of the artels are also located in this region, and work alluvial deposits. The remainder of Glavalmazzoloto’s production is split roughly between open pit and underground mines. The Muruntau mine is a large open pit, and the majority of the by-product gold is derived from underground mining.

In the Northeast, which is the largest producing region in the nation, only about 10 percent of gold production is thought to come from lode (or hard rock) mines. The remainder is derived from alluvial deposits. There is some evidence of declining ore grades, and production is hampered by extremes of climate and shortages of manpower and of electric power. The mining of alluvial deposits by open-cast methods can take place for only seven or eight months in the year, when the ground is sufficiently soft to be worked, although dredges may be able to operate throughout the year in some cases. It appears, however, that development has been favoring hard rock mining at the expense of alluvial mining.

Gold production in the maritime region, near the Eastern seaboard of the USSR, is almost entirely from alluvial deposits; 38 placer workings were identified in 1983, compared with only four hard rock mines. In Yakutia, further inland in Eastern Siberia, production in 1983 was estimated to be composed of 29 metric tons from alluvial deposits and 20 metric tons from hard rock mines. Production in Transbaikal, between Lake Baikal and the Chinese frontier, is predominantly from hard rock mines; eight such mines were identified as being in operation in 1980.

The Lena gold fields are mainly alluvial deposits, one of which is worked by what is believed to be the world’s largest dredge, which weighs 10,300 metric tons and is 230 meters in length. The great majority of by-product gold output occurs in Kazakhstan. In 1980, 46 metric tons were estimated to be derived from copper ores and 15 metric tons from lead-zinc ores.

The major source of production in Uzbekistan is the Muruntau mine. The deposit was discovered in 1985. Economic reserves were estimated in 1969 at 450 million metric tons of ore, containing 1,057 metric tons of gold, with a waste to ore ratio in the open pit area of 5.5:1. The mine is being worked as an open pit whose final depth will be 300 meters. By 1985 the pit was 150 meters deep.

The gold production achieved at Muruntau is a matter of dispute. One estimate places capacity at 22 metric tons per year;6 another estimate was 80 metric tons per year,7 but this is now thought to be much too high. It is, nevertheless a very large deposit, and the grade is reasonably good by Western standards, for an open-pit mine. As mentioned before, the carbon-in-resin extraction process is used, which is more commonly employed in the uranium industry. A very major investment in infrastructure was required to bring the Muruntau mine into production.

Production in the Urals is principally from underground mines and as byproduct from copper mines. Production in Armenia rose in the 1970s when the Zod deposits were brought into operation. A number of high grade deposits have been found in the neighborhood of Lake Sevan. Ore is transported from them to a beneficiation plant at the foot of Mount Ararat, on the Turkish border.

(2) The efficiency and quality of mining and smelting operations

With the exception of the Muruntau mine, which is clearly an attractive deposit, there is little available information on the grades of Soviet gold mines. Glavalmazzoloto reports only that grades generally lie between 5 and 10 grams per ton at open-pit and underground mines. It is difficult to generalize about an industry with so many operating mines, but this figure seems rather high. The average grade at the South African mines, which are all deep, hard rock mines, was only 5.23 grams per ton in mid-1990. The Soviet figures, if correct, would indicate comparatively rich resources, although their locations in virtually every case are unfavorable from the point of view of climate and infrastructure. Glavalmazzoloto suggests that declining ore grades at existing mines have been offset by better grades at new mines.

A common practice is to transport ore from a number of mines to a central concentrator. The distance between mine and concentrator may be up to 100 kilometers. Recovery rates for the industry as a whole are 92-93 percent for the more easily treated ores and about 80 percent for complex ores, giving an industry average of 85-89 percent. This is low by world standards. In South Africa, a recovery of at least 96 percent would be expected.

There appear to be three distinct recovery routes used by Glavalmazzoloto, depending on the mineralogy of the ore, and the ease with which the gold can be liberated. Sulphide ores, which often have a significant arsenic content, are milled and concentrated. The high-arsenic concentrates, which may contain 15-20 percent arsenic, are fed to a roaster, where arsenic is separated out. The roasted concentrate is then dispatched to a copper smelter, where it is blended with copper concentrates and put through the conventional copper smelting and refining process. Gold is recovered from the anode slimes precipitated at the refining stage. The recovery of gold from these roasted concentrates is carried out by copper plants under the control of the Ministry of Metallurgy, on a toll basis for Glavalmazzoloto.

The problem of high arsenic content is particularly prevalent in ores from the Urals and from Kazakhstan. The problem is increasing, and all new production plans now have to include provisions for dealing with arsenic. Glavalmazzoloto has stated that it would be interested in selling gold concentrates with a high arsenic content to foreign companies, which implies that it has difficulty coping with this contaminant at present.

More conventional ores, with no arsenic content, are milled and then subjected to gravity separation. The larger particles of free gold are liberated at this stage, and form a concentrate that can be fed directly to a smelting plant, for the production of dore and subsequent refining. The finer gold particles are dissolved in a cyanide solution. In the case of clay-based minerals, resin absorption is employed. In the case of quartz ores, gold in cyanide solution is deposited on zinc dust. In both cases, the product then passes through a conventional refining process.

With the exception of the arsenic problem, these production processes are in line with Western practice. Gold recovery from ore is low, however, and it is impossible to say how efficient the many dredging operations are. Shortages of heavy mining equipment—particularly large bulldozers and dump trucks, and underground mining equipment—are reported to be a chronic problem. The quality of mining equipment is said to be below world standards and supply is inadequate, although Glavalmazzoloto has been importing some equipment (a luxury which the base metal mines could not hope for). Gold production could increase, if the constraint on equipment was removed.

(3) Future production

Gold production is planned to increase in the next five years. Glavalmazzoloto suggests that there is a constant program of mine development and that ore reserves and capital resources are sufficient to achieve this plan, although the actual increase expected has not been disclosed. However, it is conceded that an industry so widely spread over most of the USSR is vulnerable to possible failures in the supply of energy, fuel, equipment and even food.

It must also be said that the record of gold production during the 1980s is surprisingly poor (if the estimates reported here are approximately correct) in light of the favorable treatment given to gold production in the allocation of capital within the mining industry. It seems likely therefore that production from primary gold mines will at best be stable over the next five years, while by-product is likely to fall.

b. Consumption and trade

Gold is a major source of foreign exchange revenue to the USSR. Export sales are estimated to have been between 250 and 300 metric tons in 1989, essentially equivalent to production for that year. In 1990, as much as 300 metric tons of Soviet bullion was reported to have been delivered to Zurich alone in the first half of the year, including 32 metric tons in one day, though this has not all been sold. Sales of gold were probably running at the same level as in 1989. To the extent that shipments were higher, the surplus is believed to be collateral for convertible currency loans.

Traditionally, the USSR has exported gold by selling to the Swiss banks that from the Zürich gold market. More recently, it has diversified its outlets and has started to sell directly to regional markets in Japan, Singapore and the Persian Gulf. It has also experimented with bullion coins, which have been marketed in the West with moderate success. Soviet bullion bars are of exceptionally high purity and are readily accepted in Western gold markets for this reason.

There is some consumption of gold for industrial and jewelry uses within the USSR, but no reliable figures exist to indicate the size of this market. It is known, however, that private individuals were buying gold jewelry as a hedge against inflation in 1989 and 1990. The domestic price of gold was doubled at the start of 1990, in order to stem this rush, but without success.

The world market price for gold, and even the domestic retail price, has no impact on mining operations. The price that Glavalmazzoloto and other gold producers receive from the Treasury Department of the Ministry of Finance has not been disclosed but it is said to be based on operating costs plus a profit margin. This is sufficient to enable Glavalmazzoloto to finance most of its capital expenditures, but some major capital projects require direct funding from the government.

In 1991, it is expected that gold mining enterprises will receive payment for some proportion of their output in convertible currency, which they will be free to use as they wish. This would also give them some independence from Glavalmazzoloto and would be a further sign of impending decentralization in the mining industry.

c. Environmental factors

The arsenic problem mentioned above is the major environmental problem facing the gold industry. Other problems include the disposal of tailings and of cyanide waste, sulphur dioxide emissions from metallurgical plants, and the burning of fuel oil for heating and electricity generation. The operation of large scale dredges must also contaminate the rivers in which they work. There is apparently now a tendency to favor underground rather than open cast mining when new projects are developed, because the former have a less severe impact on the environment.

d. Opportunities for investment or cooperation

There probably are gold projects in the USSR which could be attractive to Western providers of debt or equity finance, but there is little indication of interest on the part of the gold producing bodies in external finance for any projects. Barriers of secrecy and the strict state control of gold trading would in any event likely be substantial obstacles to foreign investment. It would probably be more rewarding for foreign investors to concentrate on those sectors of the mining industry which have been relatively neglected, and where the marketing of the commodity produced is a less sensitive issue.

5. IRON ORE

a. Production

The USSR possesses the largest iron ore resources in the world. According to U.S. Bureau of Mines ore reserve definitions, between 50-60 billion metric tons of crude ore have been identified under categories A+B+CMDSD1 and a further 240 billion metric tons have been classified by Soviet geologists as being of potential ore grade. The deposits identified cover a wide range of iron contents and mineralogy. According to the most recent Western estimates, the 50-60 billion metric tons of ore conforming with Western definitions have an average iron content of 38 percent, which is low by world standards.

The European part of the USSR is the major iron ore producing region. Production is concentrated in the Russian and Ukrainian republics, which accounted for 90 percent of total production in 1987. Although important reserves have been identified in the Asian regions, industrial development there has been slower and hence the need for locally produced iron ore has been less (Table V.7.8).

Table V.7.7.USSR: Gold Production by Major Producing Region(In metric tons)
19701980
North-East8285
Maritime1417
Yakutia4049
Transbaikal1728
Lena1516
Other Siberia1314
By-product gold (mainly Kazakhstan)4861
Kazakhstan (primary gold)99
Uzbekistan1543
Urals911
Armenia110
Other11
Total264344
Table V.7.8.USSR: Marketable Iron Ore Production and Apparent Consumption, 1980-89(In millions of metric tons)
1980198119821983198419851986198719881989
Total production 1244.7242.4244.4245.0247.1247.6249.9250.9252.0241.0
Of which from:
Ukraine125.4121.9120.3118.0
RSFSR92.4104.0106.3108.0
Kazakhstan25.823.023.624.1
Azerbaidzhan1.10.70.70.8
Exports 146.844.142.842.845.943.846.245.443.142.0
Apparent consumption 1197.9198.3201.6202.2201.2203.8203.7205.5208.9199.0
Fe content 2136.4133.1134.2134.7135.9136.2136.2137.9138.6132.5
Grade (percent) 256555555555555555555
Sources: UNCTAD; Goskomstat.

Natural weight.

Estimates.

Sources: UNCTAD; Goskomstat.

Natural weight.

Estimates.

As a result of its generally low ore grades, Soviet iron ore mining is also accompanied by large enrichment facilities producing iron ore concentrates, sinter and pellets. The Soviet iron ore industry mines around 550 million metric tons of crude ore per year, which is then beneficiated or enriched to produce approximately 240 million metric tons of marketable ore (Table V.7.9). In 1988, Soviet iron ore output represented 25 percent of total world production.

Table V.7.9.USSR: Iron Ore Production by Material Type, 1980-89(In millions of metric tons)
CrudeMarketableDirect
YearOreOreShipping OreConcentratePelletsSinter
1980498.1244.770.0 1175.0 150.9158.0
1985505.0 1247.659.0 1188.865.9147.4
1988580.0 1252.056.0 1195.969.5160.2
1989550.0241.048.0 1192.870.0146.9
Sources: Goskomstat, Giproruda and UNCTAD.

CRU estimate.

Sources: Goskomstat, Giproruda and UNCTAD.

CRU estimate.

(1) Distribution of ore reserves and exploration activity

Over 70 percent of proven Soviet iron ore reserves are thought to be located in the European part of the USSR, west of the Urals; approximately 30 percent are found in the Ukraine, predominantly around Krivoy Rog; and about 28 percent are associated with the Kursk-Magnetic Anomoly in South Central European Russia (Tables V.7.10 and V.7.11).8 At current depletion rates, most iron ore producing regions have over 100 years of reserves; the Ukraine, however, has reserves for the next 60 years and the Kola Peninsula has sufficient for nearly 90 years of production.

Table V.7.10.USSR: Nominal Iron Ore Production Capacity by Region, 1989(In millions of metric tons)
Run of MineMine Site
RegionOrePelletsSinter
NorthWest56.09.1
KMA 195.215.5
Ukraine212.528.717.4
Urals50.03.83.3
Kazakhstan64.89.9
West Siberia7.2
East Siberia21.1
Total506.867.020.7
Source: Giproruda.

Kursk Magnetic Anomaly. The figures given for sinter capacity refer only to the sinter produced at mine sites. In 1989, 112 million metric tons of sinter (76 percent of Soviet production) were produced at, or adjacent to, steel plants.

Source: Giproruda.

Kursk Magnetic Anomaly. The figures given for sinter capacity refer only to the sinter produced at mine sites. In 1989, 112 million metric tons of sinter (76 percent of Soviet production) were produced at, or adjacent to, steel plants.

Table V.7.11.USSR: Estimated Distribution of Iron Ore Reserves, 1990(In billions of metric tons)
ProvenPotential
RegionReservesReserves
Western USSR
KMA15.221.7
Kola Peninsula2.10.3
Urals7.56.8
Ukraine16.54.7
Eastern USSR
Siberia4.31.4
Kazakhstan6.57.6
Other2.11.0
Total54.243.5
Source: Estimates.
Source: Estimates.

The Kursk Magnetic Anomoly (KMA) is considered to have the largest iron ore deposits in the world, with proven and potential reserves of approximately 36.9 billion metric tons. The deposits are found over an area of approximately 200,000 square kilometers but the ore zones are not completely accessible. In the North, ferruginous quartzites are found within 170 meters of the surface, whereas in the south they are found between 300 and 700 meters below the surface. Outside this main section, the depth of overburden is even greater. The richest ores (53 to 63 percent iron) are found in the upper crusts of the weathered quartzites while the other, more widespread quartzites average about 35 to 37 percent iron. Ore zones are usually 30 to 40 meters thick but occasionally 300 meter zones are found. The overburden normally consists of thick sequences of sedimentary rocks, and aquifers within these strata often create difficult mining conditions.

The Ukraine contains four major iron ore deposits but the Krivoy Rog deposits are the largest. The Krivoy Rog basin contains a number of north-south aligned ore fields based on Precambrian sedimentary rocks. Rich ores range from between 51 to 63 percent iron, but overall the Krivoy Rog ores average 37 percent iron content.

The ore resources of the Asian regions have not been fully explored, despite the existence of many years of proven reserves. The Far East and Eastern Siberia contain more than adequate reserves for any steel industry that is likely to be established this century.

In summary, Soviet ore reserves are considered to be of enormous proportions but of mediocre quality, although important deposits of rich ore are found in the Kursk Magnetic Anomoly and the Krivoy Rog basin. In general, rich ore is covered by thick and difficult overburden and is not suitable for normal open-pit operations. Shallow deposits, however, are of low to medium grade and require beneficiation before they can be accepted by steel plants.

(2) Efficiency and quality of mining and enrichment operations

Soviet iron ore mining capacity and production increased rapidly after World War II until the mid-1970s. The increased output came from expansion of existing mines, new mines and the greater use of enrichment facilities. Marketable ore production, however, has been static since 1978 and the amount of ore shipped directly to iron and steel plants has declined from 70 million metric tons in 1980 to an estimated 48 million metric tons in 1989 (Table V.7.9). This is a clear indication of the declining proportion of high grade ore within total production.

(a) Mining operations. In 1989, 86 percent of all Soviet iron ore was produced from approximately 60 open pit mines; the remaining 14 percent came from about 70 underground mines. As can be expected from such a large number of mining operations, the mineralogy and the ore grades of Soviet mines vary considerably (from 15 percent to 63 percent iron content). All iron ore produced at open pits is beneficiated or enriched. Grades as low as 15-18 percent iron content are mined, but ore from open pit operations averages 30-32 percent iron content. Most underground mines are based on higher grade deposits (normally around 50-52 percent iron content) located in the Ukraine and the Urals. The richest underground workings are found in the area of the Kursk Magnetic Anomoly where grades of 60-63 percent iron content have been encountered. However, these richer deposits are not amenable to open pit mining, as overburden depths of 500 meters are common. Many underground iron ore mines are around 1,000 meters deep and are facing falling grades.

Collectively, Soviet open-pit iron ore workings represent an enormous earthmoving operation. CRU has calculated that each year nearly 1 billion tons of iron ore and waste rock has to be excavated and moved to beneficiation plants and waste dumps. Many of the open pits are several kilometers in length and on average about 200-300 meters in depth, which means that the industry has to place great reliance on heavy equipment to excavate, transport and process this material.

Ore and waste are frequently hauled long distances to beneficiation plants and dumps; distances of 400 kilometers between mine and enrichment plant are not uncommon. Rail transport of mine materials is more in evidence in the USSR than in comparable operations in the West. Trucks are used to move material from shovel areas to transfer points where ore is loaded into rail wagons for transport to the primary crushers and the waste dumps. Where haulage distances are less than 5 kilometers, trucks take material to primary crushers. At some locations, conveyors are also used as an alternative to rail and truck haulage. Normal procedure in these cases would be to use trucks to transport material to a crushing plant, at which point preliminary crushed material is loaded onto wide conveyors.

The greatest difficulties faced by the mines reflect a combination of declining ore grades and the limited capabilities of their heavy equipment. The declining ore grades mean that ever more material has to be excavated and transported to the enrichment plants to maintain production. But the necessary equipment is frequently old and operating at capacity. Imported equipment requires convertible currency (which is limited), while domestically manufactured equipment is in extremely short supply.

(b) Enrichment plants. Modern iron and steel manufacture requires high quality ore and concentrates in order to cut the costs of transportation, smelting and slag disposal. In general, concentrates must have an iron content above 60 percent and have controlled silica, phosphorous and sulphur contents. Since 1940, the proportion of Soviet high grade ore suitable for shipping directly to iron and steel plants has declined considerably; in 1940, 85 percent of ore went straight to the blast furnaces whereas by 1989 this share had fallen to 20 percent. The remainder (approximately 500 million metric tons in 1989) was processed into sinter and pellets.

It has been estimated that the Soviet iron ore industry has approximately 90 concentrating plants, 29 sintering plants and 9 pelletizing plants. All of the pelletizing plants are situated at mine sites and can be considered as extensions to the concentrating plants. Nearly all of the sintering plants are located within iron and steel complexes but at least three, with a total capacity of 20.7 million metric tons, are located at mine sites. Feed for the sintering plants can be ore or concentrates.

Concentrates are prepared by crushing and grinding; run of mine ore is crushed by use of cone and occasionally jaw crushers for primary, secondary and tertiary crushing. Grinding is mainly by ball mills of between 80 and 140 cubic meters capacity. Some autogenous mills are used and some rod mills are used at the primary crushing stage. Nearly all the grinding takes place in closed circuits using classifiers, cyclones and magnetic separators; the magnetic separators use magnetic fields having a force of between 1000 to 1500 oesteds. After grinding, the feed is then filtered and thickened to produce a concentrate having a particle size of 74 microns (minus #200 mesh) and an iron content of 64-66 percent. Transport over long distances during the severe winter cold means that moisture contents of concentrates have to be reduced in driers down to about 1 percent in order to maintain free-flowing characteristics.

Sintering is the most important method of upgrading Soviet ore. After some form of concentrating, ore is mixed with coke dust and ignited to produce a clinker of high quality furnace burden. The ignition phase also drives off impurities such as sulphur, phosphorous and arsenic, which can cause environmental problems. Most of the sintering plants were built during the period 1955-70 and are considered inefficient. One plant in Western Siberia uses a two stage sintering plant to produce sinter of 50-55 percent iron content. In North America, a plant would be expected to produce sinter of 60-62 percent iron content after a single stage of processing. Furthermore, many sintering plants are fed from mines located hundreds of kilometers away and under normal operating conditions must be expected to have high operating costs.

The most significant operation that has taken place in Soviet iron ore enrichment plants has been the development of pelletizing technology. The first plants were established in 1965 and were based on American technology developed just after World War II. In pelletizing, fine iron ore particles produced during the grinding stages are balled into marble-sized pellets with a binding agent such as bentonite. The pellets are fired in a calcining plant and shipped with an iron content of 60-68 percent. The calcining plants are designed to produce pellets with self-fluxing properties which have several advantages over iron ore concentrates. Most Soviet pelletizing plants are regarded as being of reasonable quality, with the exception of their sulphur dioxide emissions, as they use the best in American, West German and Finnish technology available at the time. Pellet production has increased steadily since 1980, but all nine plants are now operating at close to capacity.

(3) Future production

The current condition of the iron ore industry means that it will be extremely difficult to increase present production levels. The major problems are declining ore grades and an insufficient supply of all forms of heavy equipment. Market forces will also have a great bearing on production over the next five years. First, the Soviet iron and steel industry is expected to contract, as part of a program to increase efficiency. Demand for material, particularly from many of the poorer-quality and remotely-located mines, will therefore be expected to decline. Second, increased efficiency also means using less ore per ton of steel, so fewer iron ore concentrates and pellets will be required for domestic steel production. Third, the USSR has traditionally supplied the CMEA countries under bilateral trade agreements, and many of these countries are forecasting severe declines in their own domestic steel production as they make the transition to a market economy. Furthermore, as their future iron ore purchases will have to be made in convertible currency, the USSR will now have to compete with superior ore supplies from Brazil, Canada and Australia. The outlook for the demand for Soviet iron ore is therefore far from buoyant.

On the positive side, the untapped reserves of the Far East and Eastern Siberia could be developed for the expanding far eastern market. However, taking all factors into consideration, production might fall to around 200 million metric tons of marketable ore per year by 1995.

b. Consumption and trade

Over the past decade, iron ore exports have represented 17-18 percent of marketable ore production (Table V.7.8); the USSR does not import iron ore. Figures obtained from the amount of iron ore used for the manufacture of pig iron (1.74 tons of ore for 1 ton of pig iron) are comparable with Western consumption. However, average grades are low by world standards and, at reasonably efficient conversion rates, Soviet pig iron production would be expected to use approximately 1.92 tons of ore per ton of pig iron.

c. Environmental factors

(1) Mining operations

The most important environmental questions associated with iron ore mining operations relate to the large open pits. As mentioned earlier, approximately 60 Soviet pits excavate almost 1 billion metric tons of rock every year. Over 400 million metric tons of this material is waste rock which has to be dumped in the general vicinity of the minesite. The waste dump of a typical Soviet pit can spread over tens of square kilometers. Visually, vast areas of the landscape are destroyed and both the open pits and the waste dumps can cause instability for adjacent villages and towns. Watercourses are destroyed and groundwater becomes contaminated by the leaching of the dumps. Open pits are therefore a major eyesore when they are operating and a continual hazard once they have been abandoned. In the West, the rehabilitation and landscaping of old mining areas is now mandatory but in the USSR the sheer scale of some of the operations must put the feasibility of such reclamation schemes in doubt. Environmental pressure groups are beginning to force state enterprises to mine deeper at existing pits rather than to close one operation and start another.

(2) Enrichment plants

The most important problems associated with the enrichment plants center around the disposal of waste and tailings as well as from dust and sulphur dioxide generated in the sintering and pelletizing operations. Discharges of tailings and gangue add to the waste disposal problems. For example, at Abugur in Western Siberia, 28 million metric tons of tailings are discharged each year in the processing of concentrates and sinter, after ore has been transported from the nearby mining operations. The ore has a 1.5 percent sulphur content which means that 100,000 metric tons of sulphur are released directly into the atmosphere on sintering. Soviet fuel oil, used in the furnace systems of pelletizing plants and for sintering, also has a high sulphur content, which leads to even higher sulphur emissions. Levels of air and waterborne pollution are reportedly monitored throughout the industry but it is not known whether any iron ore operation has had its activities curtailed as a result of its environmental impact.

d. Opportunities for investment or cooperation

Giproruda has indicated that within several open pits, rock suitable for high quality building materials and clays suitable for ceramics are sometimes encountered which could be developed commercially. In the Kola Peninsula, massive deposits of granite and gabbro suitable for the facing and decoration of buildings have been found within or adjacent to the open pit workings. If suitable cutting and polishing equipment were purchased, it is possible that markets could be found for the products both within the USSR and in the West. Similarly, high grade kaolin deposits have been found which could be developed for the paper and ceramic industries.

6. LEAD AND ZINC9

Lead and zinc mineralization generally occur together, so mining, beneficiation, smelting and refining operations are nearly always connected. Soviet lead and zinc production is also closely linked with the production of copper, particularly in Kazakhstan and in the Urals. The production of lead and zinc ores and concentrates is predominantly located in the southern parts of the USSR, in the republics of Kazakhstan, Kirgizia, Armenia and Azerbaidzhan.

a. Production

(1) Recent production and capacity

(a) Lead. The USSR is the second largest producer of refined lead, producing approximately 14 percent of a total world production of 5.8 million metric tons in 1988. In 1989, Soviet mine production came from 23 mines, 22 of which are lead-zinc mines; eight of these mines also produce other metals, of which copper and gold are generally the most important by-products. Soviet mines produced approximately 66 percent of total Soviet refined lead production, the balance coming from imported concentrates (18,000 metric tons of contained metal in 1989) and domestic scrap (Table V.7.12). Nearly 50 percent of Soviet lead smelting and refining capacity is located in Kazakhstan (Table V.7.14). Details of the individual capacities of the secondary smelters and their sources of scrap are not available.

Table V.7.12.USSR: Production and Apparent Consumption of Lead, 1980-89(In thousands of metric tons of contained metal)
1980198119821983198419851986198719881989
Production
Mine580570575560570580520510520500
Secondary1902402502602321
Smelter780800800790800810790775795750
Imports
Concentrates35.540.326.647.822.326.226.214.211.917.9
Refined lead58.731.167.657.256.862.011.78.937.10.8
Exports
Refined lead36.027.024.117.018.019.926.510.933.152.5
Apparent consumption
Concentrates615610602608592606546524532518
Refined lead802804843830839852775773799698
Source: Metallgesellschaft, International Lead Zinc Study Group, Minemet.

Estimate.

Source: Metallgesellschaft, International Lead Zinc Study Group, Minemet.

Estimate.

Table V.7.13.USSR: Production and Apparent Consumption of Zinc and Zinc Concentrates, 1980-88(In thousands of metric tons of contained metal)
1980198119821983198419851986198719881989
Production
Mine1,0001,0101,0201,0259801,000970950960940
Smelter1,0601,0601,0501,0601,0501,0501,0651,0201,0351,020
Imports
Concentrates52.469.469.366.176.270.875.666.260.9
Slab zinc58.226.144.129.528.429.116.638.859.8
Exports
Slab zinc22.422.925.835.728.124.619.518.426.9
Apparent consumption
Concentrates1,0521,0791,0891,0911,0561,0711,0461,0161,021
Slab zinc1,0951,0631,0681,0541,0501,0541,0621,0401,067
Source: Metallgesellschaft, International Lead Zinc Study Group, Minemet.
Source: Metallgesellschaft, International Lead Zinc Study Group, Minemet.
Table V.7.14.USSR: Lead and Zinc Smelting and Refining Capacity, 1988
LocationProcess 1Capacity

(thousands of

metric tons

per year)
A. Lead
Chimkent, KazakhstanF-WJ
FR250
Leninogorsk, KazakhstanF-WJ
FR150
Ordzhonikidze, CaucasusF-WJ
E150
Tetuika, East SiberiaF-WJ
FR75
Glubokoye, KazakhstanKv60
Ust Kamenogorsk, KazakhstanKv54
Karlyuk, UzbekistanF-WJ
FR40
FR10
Konstantinovka, UkraineF-WJ
FR25
Secondary smelting capacity260
Total1,074
B. Zinc
Ust Kamenogorsk, KazakhstanE300
Cheliabinsk, UralsE200
Ordzhonikidze, UkraineE180
Belovski, KazakhstanHR130
Almalyk, UzbekistandE110
Leninogorsk, KazakhstanE100
Konstantinovka, UkraineE80
Chimkent, KazakstanE30
Total1,130
Source: Minemet.

E = electrolytic refinery; HR = horizontal retort; F-WJ = smelting of concentrates by waterjacketed furnaces; FR = primary fire refining; Kv = Kivcet process.

Source: Minemet.

E = electrolytic refinery; HR = horizontal retort; F-WJ = smelting of concentrates by waterjacketed furnaces; FR = primary fire refining; Kv = Kivcet process.

(b) Zinc. Soviet zinc smelter production in 1989 has been estimated at just over 1 million metric tons, or approximately 14 percent of a total world production of 7.2 million metric tons of slab zinc. On these estimates, the USSR is the largest zinc producing nation in the world by a considerable margin (Table V.7.13). Zinc mining is predominantly located within the southern republics, namely Kazakhstan, Kirgizia, Uzbekistan, Georgia, Azerbaidzhan and Armenia. Other important areas of production are situated in the RSFSR, around Magnitogorsk and in the Ural mountains. In 1989, mine production came from 27 operating mines; 14 were associated with lead mineralization, 8 with polymetallic deposits and 5 were located within major zones of copper mineralization. Approximately 54 percent of all slab zinc was produced in Kazakhstan; 26 percent was from the Ukraine and the remaining 20 percent was produced in the Urals.

As in the case of lead, the USSR is also an importer of zinc ores and concentrates, implying that the 26 operating mines are working at their current effective capacity. Detailed capacity figures for each mine are not available. Zinc smelter and refinery capacity in 1988 was estimated at 1.1 million metric tons (Table V.7.14).

(2) Ore reserves and exploration

In common with lead and zinc mineralization elsewhere in the world, Soviet lead and zinc deposits are generally polymetallic and found in association with copper and small amounts of precious and rare metals. The most important source of lead and zinc ores in Kazakhstan has traditionally been the Altai area (near Leninogorsk and Ust Kamenogorsk). However the area in the south of the republic, adjacent to Kirgizia and Uzbekistan (near Chimkent and Amalyk) is also an important zone of lead, copper and zinc mineralization. Improvements in the recovery of zinc as a by-product from copper operations during the 1960s have made the Urals another important source of zinc concentrates.

Ore grades quoted by Soviet sources are between less than 1 percent and 2 percent for both lead and zinc, which is extremely low by world standards (Table V.7.15). Most mineralized areas also contain trace elements of cadmium, arsenic, bismuth and mercury which are well known for the difficulties that they create in smelting and refining processes.

Table V.7.15.USSR: Lead and Zinc Ore Grades(In percent)
RegionZincLeadOther

Mineralization
Altaj, Kazakhstan1.5.05Cu 0.2
Almalyk District2.01.0Pt, Hg
Dalnigorsk, Far East2.02.0Hg
Urals<1<1Cu
Source: Soviet authorities.
Source: Soviet authorities.

No recent details of Soviet ore reserves are available. The latest estimates relate to 1975, at which time 17 million metric tons of contained lead and 22 million metric tons of contained zinc had been identified. Over 75 percent of these reserves were located in Kazakhstan. At past rates of depletion, the figure of 22 million metric tons for zinc indicates that overall there should be sufficient reserves to last until 1997. But lead reserves could be very seriously depleted if new material has not been identified since the estimates were made. As mines, concentrators and smelters are frequently separated by long distances, reserve life estimates are complex. Furthermore, the lead and zinc mining industry is closely associated with copper extraction, so the life of current reserves is also dependent on viable reserves of all three metals. Too little information is available to assess whether there are sufficient reserves to support Soviet smelter output for the next five years.

Ore grades in all the non-ferrous mining industries are declining, mainly as a result of the extraction of the highest grade zones first, without the development of fresh reserves or new deposits. Mines in the Urals which supply 200-250,000 metric tons of by-product zinc in concentrates are believed to be based on small, uneconomic deposits. There are therefore indications, admittedly from information that is not recent, that zinc and lead ores could be in short supply by the beginning of 1995 (and it could be earlier), particularly if there is any rationalization of the copper mines in the Urals.

(3) Efficiency of mining and smelting operations

(a) Mining and beneficiation operations. Over 50 percent of Soviet lead and zinc ore production comes from underground mines, which indicates that mining is unlikely to be economic at the grades quoted. The production of concentrates is below operating smelter capacity due to declining ore grades, low efficiency of concentrators and a shortage of mining equipment. Furthermore, substantial amounts of zinc present in copper ores mined in the Urals and Kazakhstan are known to be lost, as several concentrators do not have zinc recovery circuits.

Most of the mines and concentrators were established before World War II and many have been expanded or modernized in the period 1950-75. However, most crushing, milling and classifying equipment is considered to be beyond its normal operating life. By comparison with similar Western process plants, Soviet lead and zinc plants must be regarded as inefficient because of poor maintenance and primitive ore dressing technology. Zinc concentrates of 50-55 percent for both lead and zinc are produced. Recoveries averaging 80-85 percent for zinc and 78-80 percent for lead are quoted. The ore dressing processes used are not suitable for some difficult ores, so only a small amount of clean concentrates (without problem trace elements) is produced, which creates serious smelting problems.

(b) Smelters and refineries. Soviet lead and zinc refining operations generally use primitive roasting equipment, though refining operations, particularly for zinc, are reasonably modern. Lead and zinc is obtained from the processing of slags as well as from the direct treatment of concentrates. Refined lead is also obtained by the processing of scrap. The processing of slags uses very old technology; serious vaporization losses of lead occur together with the direct venting of flue gases. The roasting of concentrates also causes problems, as dust suppression and gas scrubbing systems are either non-existent or seriously inefficient. Sulphur dioxide emissions are high and sulphuric acid plants, based on recovered flue gases, are not found at every facility. There is a general shortage of lead concentrates, which has been made more acute by shortfalls in lead scrap collection and recovery. Primary lead production in 1989 was approximately 60 percent of capacity.

The recovery of precious metals and the ability to remove cadmium, bismuth, arsenic and mercury are important indicators of the efficiency of smelting and refining operations and product quality. With the exception of the Belovski plant, all the Soviet zinc refineries produce electrolytic quality metal. There is only one electrolytic lead refinery. Lead produced under the brand YKCUK is deliverable under the LME lead contract. Zinc under the brands YKCUK and U, B was deliverable under the High Grade Zinc contract, which has now been withdrawn by the LME.

(4) Future production

The availability of concentrates will continue to limit Soviet slab zinc and lead production. Sources within the industry expect ore grades to continue to fall; in the short term, mining equipment and process plant cannot cope with the increased volumes of lower grade ore that need to be handled in order to maintain lead and zinc production.

Pressure from environmental groups on smelting and refining operations is reaching a point where it cannot be ignored. Recent reports from Ust Kamenogorsk and Cheliabinsk have specifically mentioned damage from lead and zinc smelting, and local citizens have demanded that some installations be closed. According to some reports, conditions around the smelters are appalling and cannot be tolerated in their present form for much longer. Over the next five years, therefore, it appears reasonable to expect that Soviet smelting capacity will decline in response to demand for improved living and working conditions.

Economic and financial constraints will also continue to limit future production and consumption. First, the import of concentrates and metal requires convertible currency, which will limit the degree to which domestic supply can be supplemented. Second, the lead, zinc and copper industries have not been regarded as areas of priority for investment in the Soviet non-ferrous metal sector. As total funds available for the base metal mining and metals industry are likely to be small, any increase in lead and zinc production is most unlikely. Social and political unrest could also seriously affect lead and zinc production. Several southern republics with important production facilities are currently centers of ethnic and religious conflict.

b. Consumption and trade

Consumption of lead concentrates has declined steadily since 1985, largely as a result of decreased mine production (Table V.7.12). Consumption of refined lead has remained close to 800,000 metric tons throughout the past decade, with the exception of 1989 when lower smelter production and an increase in exports of nearly 20,000 metric tons reduced consumption to 698,000 metric tons. The difference between the apparent consumption of lead concentrates and refined metal production is accounted for by the processing of scrap in secondary smelters.

Since 1980, Soviet exports of slab zinc have represented approximately 2.5 percent of production (Table V.7.13). Overall, however, the USSR has been a net importer of both slab and concentrates. Apparent consumption of zinc slab has been stable throughout the 1980s but, somewhat surprisingly, it has exceeded concentrate consumption since 1986.

c. Environmental factors

The most important environmental problems associated with Soviet lead and zinc production are related to its roasting, smelting and refining operations. In common with many other Soviet roasting and smelting operations, most lead and zinc is produced from difficult concentrates in old metallurgical plants. Lead and zinc are relatively volatile metals, which vaporize easily and are readily transported by smelter flue gases. Without efficient dust control and scrubbing equipment, metal dusts can be deposited throughout the smelter and downstream of the stack. Most plants are reportedly in appalling condition for this reason, and the problem is further compounded by the sulphur emissions and other impurities present in the concentrates (antimony, arsenic, bismuth, cadmium, mercury and several rare metals).

d. Opportunities for investment and cooperation

It is clear that the Soviet lead and zinc industry could benefit from measures to improve the performance of its smelters and concentrators. The prime objective should be to eliminate the need for imported concentrates. Improved performance could come from more modern mineral dressing equipment, which could raise the quality and quantity of concentrates produced. However, as many concentrators are producing copper concentrates as well, any improvements will probably have to be considered in conjunction with the requirements of the copper industry. It is also likely that the production of sufficient concentrates will require further exploration and development of ore reserves.

7. NICKEL10

a. Output and reserves

(1) Recent production

The USSR is the largest producer of refined nickel in the world; it is estimated that production in 1989 was 251,000 metric tons, or nearly 30 percent of world production. Nickel exports to Western markets have increased from 26,000 metric tons in 1985 to around 80,000 metric tons in 1989. More than 80 percent of Soviet nickel production is produced by one state enterprise, Norilsk Nickel, which reports directly to the Council of Ministers. Although the enterprise is responsible for some of the most serious pollution, it is in other respects probably one of the most efficient producers of metal in the country. It has a significant proportion of modern mining, smelting and refining plant and equipment and does not appear to have suffered from the lack of investment that has typified the rest of the Soviet base metal industry. It is a major exporter of refined metal to the West and therefore an important generator of foreign exchange.

The figures for nickel production in the USSR include the production of primary nickel, nickel contained in ferronickel, nickel oxide sinter and other intermediate products (Table V.7.16). Production of nickel is concentrated in three areas: Norilsk in Siberia, Monchegorsk in the Kola Peninsula, and the Urals. A small ferronickel smelter is located at Pobuzskoye in the Ukraine. The Norilsk Nickel Combine, as distinct from the Norilsk production area, has smelters and refineries in Siberia and the Kola Peninsula (Table V.7.17).

Table V.7.16.USSR: Production, Imports and Exports of Nickel, 1980-89(In thousand metric tons of contained nickel)
1980198119821983198419851986198719881989 1
Production
Mine143150170172180190185195205256
Smelter165170190192193198195210215251
Imports
Ni-Co Matte16.018.819.0
Exports to Western markets
Ni Cathode24.033.360.065.080.0
Ni Matte8.010.0
Reported consumption
Refined nickel130130138145140138137135130130
Sources: Cuban Bureau of Statistics, Metallgesellschaft, CRU, Minimet.

The figure for smelter production in 1989 is provided by CRU, and an estimate of mine production has been derived from this figure. The series for earlier years (produced by Metallgesellschaft) are probably underestimates, and the figures therefore exaggerate the likely increase in output in 1989.

Sources: Cuban Bureau of Statistics, Metallgesellschaft, CRU, Minimet.

The figure for smelter production in 1989 is provided by CRU, and an estimate of mine production has been derived from this figure. The series for earlier years (produced by Metallgesellschaft) are probably underestimates, and the figures therefore exaggerate the likely increase in output in 1989.

Table V.7.17.USSR: Soviet Nickel Production by Plant, 1989(In metric tons of contained metal)
PlantEnterpriseProductProductionCapacity
Norilsk, SiberiaNorilsk NickelCathode140,000
Monchegorsk, KolaNorilsk NickelCathode208,000
Orsk, UralsUral NickelCathode,
Nickel oxide,39,000> 40,000
Sinter
Pobuzskoye, UkraineUral NickelFerronickel30,000
Svetly, UralsUral NickelFerronickel4,000
Total251,000
Source: Gipronickel; CRU; industry estimates.
Source: Gipronickel; CRU; industry estimates.

In the Norilsk areas, there are five underground mines and one open pit; a primitive nickel-copper smelter producing nickel matte; and a refinery with a capacity of approximately 140,000 metric tons of cathode per year-also located at Norilsk. The enterprise has two smelters of more recent technology, an Outokum-pu flash smelter located at Nadezhda and a smelter using the Soviet Vanykov technology a few kilometers outside Norilsk. Ore from the Norilsk area is smelted into matte at Norilsk; 30,000 metric tons of contained nickel in ore is also sent to Pechenga and Monchegorsk for smelting. Approximately 75,000 metric tons of nickel in matte is sent from Norilsk to Monchegorsk for refining. The USSR also currently exports around 10-15,000 metric tons of nickel matte from Norilsk to the Falconbridge refinery in Norway. In the Kola Peninsula, there are three mines at Pechenga, nickel and Yapolyarny. Ore is smelted at a small smelter at Pechenga and at the smelter/refinery complex at Monchegorsk.

In the Urals, there are 10 nickel mines which exploit low grade lateritic deposits. Smelters are located at Verkhni Ufalei, Rezh and Orsk and employ a technology very similar to processes used in New Caledonia. The refinery at Orsk takes feed from the Urals smelters and also nickel-cobalt matte from Cuba. Most of the nickel is refined to cathodes in this region, but nickel oxide and sinter is also produced. Ferronickel is produced in a separate plant at Svetly. The remaining nickel producing area, the Ukraine, has two mines, one at Pobuykoye and one at Kirovgrad, which feed a small ferronickel smelter located at Pobuykoye.

(2) Ore reserves

In 1975, the latest year for which data are available, Soviet nickel reserves were estimated at 25 billion pounds (11.4 million metric tons). On the basis of the 1975 estimates, sufficient reserves exist for approximately 30 years of production at current levels.

The Norilsk orebody is one of the largest nickel orebodies in the world, comparable with the Sudbury area in Ontario, Canada. It is a large copper-nickel-platinum group metals deposit, containing both rich and low grade zones of sulfide mineralization. The rich ores contain 7-10 percent combined copper and nickel and the low grade ores average 0.5 percent for both nickel and copper. The rich ores contain chalcopyrite pentlandite and pyrrotin (containing 2 percent nickel, platinum group metals and gold). Rich ores do not need concentrating and are sent direct for smelting.

The ores in the Kola Peninsula are also mixed copper-nickel sulfide but of lower grade, averaging 0.5-1 percent nickel, and less than 0.5 percent copper. The oxidized nickel ore in the Urals averages 0.9-1.1 percent nickel.

(3) The efficiency of mining and smelting operations

The underground mining operations at Norilsk are believed to be in reasonable condition. The mine ventilation systems are effective and production efficiency is said to compare well with Western mines. Norilsk is still operating a cut-and-fill mining method, which was used in Sudbury, Canada, about 10 years ago. Canadian nickel companies are now using vertical cratering techniques for bulk underground mining. Equipment in use at Norilsk is well suited to the mining conditions, examples being large scoop trucks, large underground haul trucks and jumbo drills for multiple blast-hole drilling.

Not all of the ore is beneficiated and little information is available on the conditions of the concentrators. The general consensus is that they are rather antiquated. The major metallurgical problems are associated with the pyrrotin ore, which contains high platinum group metal values. A hydrometallurgical process is used to treat this ore, which has the benefit of avoiding sulphur emissions, but metal recoveries are low, at 80-85 percent for copper, nickel and platinum group metals. Higher recoveries are achieved in the pyrometallurgical smelting processes.

The Outokumpu and Vanykov smelters in operation at Norilsk are considered to achieve satisfactory metal recoveries. The smelting operations in the Kola Peninsula are considered to be antiquated. It has been announced recently that a new Outokumpu flash smelter is to be built at Norilsk Nickel, which will replace the smelters at Pechenga and Monchegorsk. The operations in the Urals date from 1935 and smelting operations are regarded as primitive. The smelter at Verkhni Ufalei was the first nickel plant to be built in the USSR and is still in operation.

(4) Future production

Production until the end of the century is expected to remain fairly stable. High grade ore reserves, which represent approximately half of current Norilsk ore feed, will decrease in quantity as the mines become deeper and will supply only one third of total feed by the year 2000. Exploration is planned to maintain ore reserves and enable the tonnage milled to increase. Imports of nickel cobalt matte from Cuba are expected to decrease in the short term, but these currently represent less than 10 percent of Soviet nickel production.

b. Consumption and trade

Data on imports of Cuban matte before 1987 and on exports of cathode to Western markets before 1985 are not available. In addition, the lack of data on exports of nickel products to Eastern Europe, and to other socialist countries, precludes the calculation of an apparent consumption figure for the USSR (Table V.7.16). Current Western estimates suggest that Soviet refined metal exports to Western markets during 1990 were in the range of 85-90,000 metric tons, and exports of nickel matte were close to 20,000 metric tons.

c. Environmental factors

Norilsk is probably the most heavily polluted area in the USSR. The worst pollution problems in the area are caused by the emissions of sulphur. Ores in Norilsk and the Kola Peninsula have a high sulphur content. The Outokumpu flash smelting process produces a gas with a high concentration of sulphur dioxide and the same is believed to be true of the Vanykov process. This gas is highly suitable for conversion into sulphuric acid, which is the conventional way of removing sulphur from smelter emissions. However, no sulphuric acid plant has been constructed at Norilsk because it is claimed that the acid cannot be transported safely from the site to any location where it could be used.

An elemental sulphur plant recovers about 60 percent of the sulphur released in the roasting of copper-nickel ores but furnace gases containing about 3 percent sulphur are simply released into the atmosphere. In this way, the Norilsk complex emits about two million metric tons of sulphur dioxide into the air every year. The effect on the Arctic tundra and vegetation is disastrous. Acid snow and rain spreads for many kilometers from the smelters. When snow melts in the spring, the sulphur is released onto the vegetation and into rivers and lakes, causing serious damage. A study of the sulphur emission problem at Norilsk is under way but Gipronikel estimates that any solution would cost at least rub 1 billion. In current circumstances there is little chance of any significant improvement being made.

Norilsk ore is also smelted in the Kola Peninsula, together with high sulphur ore from mines in the latter region. There is one sulphuric acid plant in the Kola Peninsula, but the estimated sulphur recovery is only 39 percent, so pollution is a serious concern here too. Conditions should improve when the new smelting plants are installed since these will include sulphuric acid plant. Sulphur recovery should then reach 98 percent. Sulphur dioxide emissions are also serious in the Urals.

In the nickel refineries there are further environmental problems. The pregnant solutions that are treated by electrolysis are carcinogenic and pose a threat to workers in the plant. The dispersion of nickel oxide dust is also a source of danger to the workforce.

d. Opportunities for investment and cooperation

Norilsk Nickel is highly profitable (in Soviet accounting terms) and appears to have privileged access to foreign currency. It has received a large amount of investment in the past two decades and is still making investments. These are principally designed to maintain nickel production (by establishing further ore reserves) and to improve environmental conditions (by replacing the Kola Peninsula smelters). The enterprise maintains that it has sufficient resources to fund its own investment programs.

The one area where improvement is vitally needed, and where no progress is imminent, is the reduction of sulphur emissions. The technology of sulphur recover is well known; the problem lies in the disposal of the acid, and this is likely to require expensive imports of equipment from the West.

8. SOME GENERAL ISSUES

a. The recovery of secondary metals

The scrap industry, recycling ferrous and non-ferrous metals, is controlled by an industry association called Vtormet. Ferrous scrap is sorted and delivered to iron and steel plants, where it is used as raw material along with iron ore or pellets. Non-ferrous scrap is smelted at plants controlled by Vtormet, or delivered to semi-fabricating plants which can use certain grades of scrap without prior smelting and refining.

According to Gosplan, about 55 million metric tons of ferrous scrap are recycled every year. This implies that the ratio of primary raw material to scrap in the production of steel is about 1.9:1 in the USSR (assuming no scrap is exported). This is comparable to Western practice in blast furnace production of iron and steel.

Gosplan sets annual targets for the recovery of non-ferrous (and probably ferrous scrap also) by calculating the total volume of metal in use within the entire Soviet economy, and then determining that a certain percentage of that shall be recycled each year. This is an extraordinary procedure. It is highly unlikely that data exist to determine accurately the volume of every type of metal in use in every form at any point in time; nor is there any reason to suppose that regular proportions should become available for recycling every year. Even in metal applications that can be fairly easily measured and where failure rates can be estimated, such as the use of lead in batteries for vehicles, Western companies have great difficulty in predicting the volume of scrap that will arise in any one year, and fluctuations occur as a result of changes in prices, technology and even weather conditions. In short, the centrally-determined targets are unlikely to bear any relationship to the quantity of scrap that could be economically recycled. Artificially low metal prices also operate as a barrier to the collection of scrap.

The partial liberalization of the Eastern European economies in 1990 has shown that there are substantial accumulations of non-ferrous scrap in these countries that were lying idle, either for lack of smelting facilities or for lack of any financial incentive to recycle them. Large quantities of copper and copper alloy scrap were exported to Western Europe from Eastern Europe in 1990, and scrap or scrap-based ingots have also been exported from the USSR in greater quantities. There are no statistics available yet to indicate the size of these flows, or the size of remaining reservoirs of scrap, but the latter could be very substantial.

The non-ferrous scrap industry could probably expand rapidly, given freedom to trade and to use world market prices. Scrap collection is not capital-intensive, and even the sorting and treatment of scrap is less capital-intensive than primary metal production. Scrap production can respond very quickly to any increase in price. In an economy where metal prices have been held at artificially low levels for many years, the price incentive has been almost completely absent. If higher prices brought out greater supplies of scrap, they could relieve some pressure of demand on primary production, which is facing severe difficulties. Increased recycling is also environmentally attractive, since it turns unpleasant or even harmful waste into valuable industrial raw materials. And if adequate facilities do not exist to use an increased supply of scrap within the USSR immediately, scrap is a product that can readily be exported for convertible currency, if it is properly sorted.

b. The marketing and pricing of metals

(1) Marketing

Within the domestic economy, the concept of marketing metals does not exist. Producers simply deliver products to other factories, according to state orders. Because deliveries are often erratic or unreliable, much wasteful stockpiling appears to take place, as the managers of plants hoard materials for fear of future shortages.

Export sales are handled by Raznoexport, which sells non-ferrous metals produced in accordance with state orders; Promsirjeimport, which performs the same function for ferrous metals; and Tsvetmetexport, which sells quantities produced in excess of state orders. In addition, some enterprises are starting to bypass Raznoexport and sell direct to export markets. It is not clear whether they are selling material covered by state orders. Norilsk Nickel, which admittedly has greater independence than any base metal producing enterprise, through its status as an organization on the same level as a ministry, has indicated that it intends to ignore Raznoexport entirely and handle all its own export sales.

A major change in foreign trading practices thus appears to be under way, not entirely by accident but not fully by design either. The change is in the right direction since it gives producing enterprises more control over their own affairs, but the process has its risks too. Very few Soviet managers outside the state trading companies have any commercial experience, so the scope for confusion, inefficiency and expensive mistakes in export transactions is great.

(2) The pricing of metals

In theory, the prices of metals in the USSR are determined on the basis of production costs plus a profit margin. They tend to remain fixed for periods of many years, until a major review of a wide range of industrial prices takes place. World market prices appear to have little or no influence on domestic metal prices. For refined metals, it appears that a single price is used throughout the country. For intermediate products such as concentrates or iron ore, however, the practice is to take an average of the operating costs of a group of mines in one area, and add a 6 percent profit margin to this. The result is that there are different prices for copper concentrates from Alamlyk, Kazakhstan and Norilsk. Gosplan data indicate that about 20 different prices exist for iron ore from different mines or regions. There is no concept that these intermediate products are also commodities, or that the price of copper concentrates should be based on the value of the contained copper minus the cost of smelting and refining.

Operating costs are said by Mekhanobr to be low, mainly because labor and energy costs are low. Energy prices and all other physical input prices are also subject to state control, so these apparently low operating costs are no indication of efficiency; they simply reflect state subsidies applied to input costs. The low price of metals, in turn, is a form of subsidy that is passed on to all users of metals. The official exchange rate is equally artificial, and cannot be used to convert Soviet prices into any meaningful equivalent in Western currencies. When expressed in terms of the equipment which a given volume of metal can buy, Soviet metal prices are about one third of world prices.

The consequence of this regulated and inflexible pricing system is that prices give no proper signals to the producers or consumers of metals. Rising demand, or shortage, does not result in higher prices that would stimulate greater production. Instead, artificially depressed prices have contributed to a lack of investment in most of the base metal industries, which now threatens their continued ability to meet demand.

At the same time, the underpricing of metals has led to wasteful consumption.11 Prices provide no incentive to use metals economically, through improved design, nor to substitute more plentiful materials for scarce ones. The central planning system reinforces these effects by the way in which it sets targets. The planned output of heavy industrial equipment is set not in terms of units but in terms of tons; the larger and heavier the equipment, the easier it is to meet the target. This introduces a positive disincentive to introduce improved design in order to achieve the same performance from a lighter, smaller or more efficient piece of machinery.

(3) Opportunities for Western assistance

There is an urgent need for advice and training to be given to managers of Soviet enterprises who may find themselves engaging in international trade in metals and minerals with little or no experience or world markets, contract terms and commercial practice. If world prices, even in some diluted or modified form, are introduced into the Soviet metals industry, managers will also need to be instructed in how to respond to changes in prices by altering their rates of production or consumption; and how to take fluctuating prices into account when making budgets and planning new investments. Purchasers and sellers of metals will need advice on the use of world prices in domestic sales contracts; on the incorporation of metal prices into the price of other products such as concentrates or semi-fabricated products; and on the management of price risks. Some of the latter needs may not arise immediately, but it is a matter of urgency to adopt market prices for metals produced and consumed within the USSR, in order to reverse the adverse effects of under-pricing.

9. CONCLUSIONS AND RECOMMENDATIONS

a. Industrial structure

The Soviet mining industry is a paradigm of how mineral resources should not be exploited. Its structure and organization is overloaded with bureaucracy and highly inefficient. The industry needs to be freed from centralized control so that a competitive, entrepreneurial culture can develop. To this end, the Ministry of Metallurgy should be abolished and regional enterprises should become autonomous, commercial concerns. Norilsk Nickel, though large, is probably capable of operating efficiently as an independent commercial unit and should be established as such. Glavalmazzoloto, on the other hand, should be abolished, and managerial authority should be devolved to its major components.

b. Pricing

The undervaluation of metals in the Soviet economy has led to wasteful and inefficient consumption, insufficient recycling and a lack of finance for reinvestment. The liberalization of metal prices, in the context of trade liberalization, would result in substantial price increases. This would confront metals using industries with higher raw material prices which would either have to be absorbed or passed on to their product prices. The shock of higher relative prices is one that will be shared by many sectors of the economy under a general liberalization of prices (see Chapter IV. 1), however, and cannot be avoided. Consumers of metals would be obliged gradually to modify production techniques to use metals more efficiently through better design, as well as to recycle to a greater extent. Metal producers would face a possibly sustained drop in domestic demand. Some would be able to step up exports of their products; others would close, particularly since market prices would apply to their inputs also, which would make some producers uneconomic. This is inevitable if the industry is to be rationalized and made more efficient; it is a process that should not be resisted.

c. Investment

Lack of investment is a theme that recurs consistently in every metal industry, with the partial exception of gold and nickel which have been given priority in access to investment funds because they generate large quantities of foreign exchange. Capital investment in the base metal and gold industries totaled rub 15 billion in the 1986-90 Five Year Plan; for 1991 and subsequently it is unlikely, on current plans, that this level of investment can be sustained.

Using convertible currency loans to increase production for export is not an adequate solution, and by itself would probably worsen the distortions that now exist in the mining industry. The emphasis should instead be on establishing autonomous, profit-maximizing enterprises that can generate, retain and deploy their own investable resources. The creation of functioning capital markets (see Chapter IV.5) would also help to finance viable projects that might currently be excluded by the planning authorities. It is difficult to predict, in the new environment, where enterprise managers might choose to invest first. One possibility, however, would be to step up modernization and maintenance of smelting and refining capacity, which appears to be considerably underutilized at present (though this partly reflects a shortage of ores and concentrates too).

d. Exploration

Mine production has been hampered by falling ore grades because the higher grade areas of existing mines have been depleted, while new reserves have not been found or proved up at the same rate. It seems likely that a decentralized, profit-oriented industry would direct and manage exploration activity more effectively than the existing bureaucracies.

e. Technology

Technology employed in mining and smelting is often out-of-date, but this is generally because finance has not been available to install more modern technology, which does exist within the USSR. The standard of training within the technical institutes appears to be quite high. A major weakness is in environmental control technology. Little or no effort has been directed towards developing these technologies. Nor has much use been made of computers, either in the planning and design of mines, plants and processes, or in the control of mining and smelting operations. Soviet managers have made up for this by employing very large numbers of people to carry out the same functions, but this practice is no longer able to keep up with what can now be achieved in the West through computerization.

f. Environment

Very low environmental standards exist at most Soviet smelters and at many mines. There is some recognition within the USSR that a significant improvement is essential. The rest of the world, and particularly parts of Western Europe, suffer from the effects of some of this pollution. However, both the finance and the technology to address this issue are lacking in the USSR.

g. Trade

There is a trend towards granting enterprises the freedom to export directly, bypassing the traditional state trading organizations. This is to be welcomed, but it highlights the need for assistance and training of enterprise managers in commercial practices and financial management. Freedom to trade between enterprises inside the Soviet economy is also necessary. Commercial independence will create a need for training in every aspect of financial management.

h. Opportunities and conditions for foreign investment

General principles and preconditions regarding the feasibility of foreign direct investment in the Soviet economy were discussed in Chapter IV.4. These apply in metals and mining, as they do in other sectors. Clear ownership rights and freedom from government interference in pricing and other commercial decisions are perhaps the most important. For their part, investors should expect to conform to substantially tighter environmental standards than have prevailed in the USSR in the past (see Chapter V.l).

NOTES

Raznoimport is soon expected to be constituted as a joint stock company.

Data on the capacity of aluminum smelters were obtained initially from a data base published by Aluminium Verlag, in the Federal Republic of Germany, and were subsequently checked and corrected by VAMI.

In the absence of any published production or consumption data from the USSR on copper, the statistics published by Metallgesellschaft have been used. Other data on the copper industry were obtained from Gosplan and the Ministry of Metallurgy in Moscow, and Mekhanobr and Gipronikel in Leningrad. The major Western sources used were the United States Bureau of Mines (in particular Strishkov (1984)), and Copper Studies, published by CRU, April 1987.

This section relies on information provided by Glavalmazzoloto, and on data published in a number of Western sources. These include the Mining Journal (which carries annual surveys of the USSR mining industry prepared by the U.S. Bureau of Mines), the annual publications of Consolidated Gold Fields (now produced by Gold Fields Mineral Services), and a substantial chapter on the Soviet gold mining industry in Jensen (1983).

Kaser, in his contribution to Jensen (1983), estimated the gold production of the major regions of the USSR in 1980 at 344 metric tons, which is higher than the figure of 311 metric tons which is more widely accepted now (Table V.7.7). The difference, however, is tolerable, given the uncertainty that surrounds this subject.

Consolidated Gold Fields, in 1979.

The estimates in Table V.7.11 are based on 1975 calculations and subsequent production rates. There are indications that iron ore exploration throughout the 1980s was concentrated on confirming reserves in preference to seeking new deposits. The estimates are therefore regarded as a conservative estimate of the Soviet ore reserve base.

The statistics used in this section have been compiled mainly from Western sources. Official production figures were not made available on the grounds of confidentiality. However, the USSR reports regularly to the International Lead Zinc Study Group, which has provided important information. The Mekhanobr Institute of Leningrad also provided information on the mining and processing of zinc concentrates.

Detailed information on the nickel industry has been difficult to obtain, but over the past year important statistics have begun to emerge. The information presented in this section has been obtained from a number of sources in the West; and from Gosplan, Gipronikel and Norilsk Nickel.

For a detailed discussion of this issue, see Dobozi (1988).

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