As it became known to Kommersant, Severnoye Olovo controlled by Millhouse (the owner is Roman Abramovich) decided that the development of the largest tin deposit in Russia - Pyrkakaya in Chukotka - would be unprofitable and closed the project, returning the license to the government. Even foreigners, in particular China's Yunnan Tin Group, were invited to Pyrkakaya, but the company decided that the metal content in the ore is too low. The deposit may be of interest to other investors only after the revaluation of the reserves, say market participants.

OOO Severnoye Olovo, which belongs to Roman Abramovich's Aristus Holding Ltd.,  has made a decision on liquidation, as follows from from the USRLE data and Kartoteka.ru, and the corresponding entry to the registry was added on 10 January. Severnoye Olovo owned a license valid mid-2028 for the development of the largest deposit of tin in Russia's Pyrkakay in Chukotka, but as it turned out, gave it back to Rosnedra (the data of the consolidated department roster; revocation of a license was added to the USRLE on November 21) in November 2016.

Tin deposits in Pyrkakay (Chaun district of Chukotka) according to the State Commission on Mineral reserves amount to 228.5 thousand tons of tin (the fourth largest in the world) and 23 thousand tons of tungsten.. The license belonged to Severnoye Olovo since 2009, the start of production was scheduled for 2017, the processing capacity would be about 6 million tons of ore per year with the release of 11.1 thousand tons of tin and 814 tons of tungsten.. The period of stable production was estimated at 20 years.

Capex for the development of Pyrkakaya estimated at $ 300 million; since 2012, Millhouse has been looking for a partner for the development of an asset or a buyer for it. The deposit was offered to the largest global player: China's Yunnan Tin Group (YTG), but it refused, saying the content of metals in the ore (0.25%) was too low and indicating that production at prices in 2012 ($20 thousand per ton on the LME) would be unprofitable. In early 2015, the price decreased to the lowest in 10 years, falling to $13.6 thousand per ton, according to the only Russian manufacturer Rusolovo (part of Russian Funds group). Now a ton of tin on the LME worth $21 thousand per ton. "But even at current prices Pyrkakaya development project would not be profitable," says Kommersant's source, which is familiar with the situation. The Millhouse declined to comment.

Director of investment banking management of Russian Funds, Sergey Ryzhov, said that the industry's problems began back in Soviet times, when amidst tin deficit the government focused upon the volumes of production instead of profitability, which was subsidized. Deposits with extremely low metal content in the ore were on the balanse, and even after the collapse of the USSR the government wouldn't always allow the companies to write off unprofitable deposits. But the revaluation is necessary, insists Mr. Ryzhov. For example, Rusolovo's Pravourmiyskoye field initially was assessed at 130 thousand tons of tin. After the revaluation and changes in the work plan only 85 thousand tons left, but the average metal content in the ore increased from 0.4% to 1%. Now about 1.5 billion rubles are invested in Rusolovo's projects, the volume of production in 2016 was about 700 tons; to increase the production up to 5 thousand tons 7 billion rubles would be needed. 

According to Mr. Ryzhov, Chinese companies do work with tin contents of about 0.2%, but on fields with well-developed infrastructure. Chukotka's field could potentially be interesting in case of a preliminary assessment of profitable deposits, says Sergey Ryzhov. The Ministry for Natural Resources told Kommersant that the new bidding would be conducted only if there was "serious interest from several bidders." According to Rusolovao, Russia's annual demand for tin is 7.5 thousand tons, of which 90% is imported from China, Bolivia and Portugal. The global refined tin consumption, according to industry association ITRI, was 345.7 thousand tons in 2015.

Oleg Petropavlovsky from BCS believes that, given the devaluation of the ruble at the tin price of $21 thousand per ton, the project has the right to life. However, the expert adds, the imported equipment in the ruble equivalent has also risen by half, and, taking into account the lack of aprtners and the volatility of tin prices, it was probably the reason for Millhouse to abandon Pyrkakaya.