Gold mining companies opposed the removal of their super-profits

They have already threatened with a lack of gold for external settlements of the country, which in the future can repeat the experience of Iran and North Korea.
15.08.2018
Kommersant
Origin source
On the proposal of Presidential Assistant Andrei Belousov to withdraw super profits from metallurgists and chemists, gold producers also responded, of which only PJSC "Polyus" Said Kerimov was included in the narrow list of promising budget donors. The Union of Gold Miners (industry lobby) estimated the budget losses from seizures in the amount of up to 79 billion rubles. in year. Also, the lobby drew the attention of the Ministry of Industry and Trade to the capital intensity of the industry, its lack of advantages due to external conjuncture and the high importance of gold "under sanctions". As the Union warns, Russia, like Iran and North Korea, may need gold for foreign trade settlements, so it is impossible to reduce its production.

The head of the Union of Gold Miners of Russia, Sergei Kashuba, believes that the seizure of superprofits from metallurgists and chemists eliminates incentives for the development of subsoil use and increase in labor productivity in gold mining. "Kommersant" got acquainted with the contents of his letter to the Ministry of Industry and Trade on August 14. Mr. Kashuba refused to comment. In Minpromtorg not answered "b".

As Kommersant wrote on August 10, presidential aide Andrei Belousov suggested, similarly to the withdrawal of oil and gas subsidiaries, to do this with other industries. PJSC "Polyus" was included in the list of possible donors from the gold mining sector. According to the official, in 2017 metallurgists and chemists received more than 1.5 trillion rubles. EBITDA, but their tax burden is only 7%, while for the oil industry - 28%.

In the letter, Mr. Kashuba points out that the gold mining industry has a high entry barrier, which provides for the dependence of the profitability of companies on capital expenditures. The share of CAPEX in the revenue of the largest companies in the industry in 2017 is 25%, they are used for geological exploration, mining and overburden work, and the construction of new GOKs. Therefore, according to the letter, the EBITDA margin estimation method proposed by Mr. Belousov is incorrect for comparing the industry's profitability with the oil and gas sector.

In addition, the industry did not receive a "significant effect" from the devaluation of the ruble, which amounted to 45% from 2013 to 2017 - it was compensated by inflation costs (39%) and a decrease in the price of gold (5%). The gold mining industry, unlike oil and gas in 2017, did not have an advantage due to the external market conditions, to which Mr. Belousov refers, is noted in the letter of Mr. Kashuba. The increase in the fiscal burden, according to the union, will lead to the failure of investment programs and a drop in production: by 2025, it will decrease by 50 tons per year, and after that the fall may be "even more dramatic". The potential budget losses will amount to 21 billion rubles, and taking into account the shortfall in gold - up to 79 billion rubles. annually.

Earlier, the RSPP prepared its claims to the calculation methodology proposed by Mr. Belousov and the risk assessment. The union also said that the increase in fiscal burden will affect investment programs, and companies may lose leadership in the sectors. Claims to the calculations of Andrei Belousov were with the president of the association "Russian Steel", owner of NLMK Vladimir Lisin (see "Kommersant" on August 14).

Mr. Kashuba specifically notes the special role of gold as a unit of account. Under the conditions of the sanctions load, the document says, gold can become the prevailing component in the country's gold and currency reserves. Moreover, taking into account the possible freezing of Russia's dollar calculations, it may be necessary to use the experience of Iran, North Korea, Cuba, Turkey on gold calculations for foreign trade contracts, which means that it is impossible to reduce gold production, the letter says.

Andrei Lobazov from Aton draws attention to the fact that, although in 2017 the same Polymetal showed 41% margin margin on EBITDA, only Polyus was included in the list (in the letter of Belousov 59% is given). He also notes that "in recent years, gold prices have been more stable than other metals," but the industry does carry fairly high capex.

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