The facade of Soviet mining

Editor’s note: The president of Toronto-based Franco-Nevada Mining Corp., Pierre Lassonde, wrote about his summer trip to the Soviet Union, extractions of which follow.

On Aug. 1, 1991, I left New York City with 13 other delegates for a visit to the Soviet Far East centred around the city of Magadan where about one-third of all Russian gold is produced; to Norilsk sitting on the 70th parallel which is the site of all Russian platinum and palladium production as well as the bulk of its nickel production and about 40% of its copper production; and finally to Moscow to meet the people and organization in charge of selling Russian metal production.

We flew in a turboprop to Susuman about 150 km north of Magadan to visit three surface mines and one underground gold mine. The province has about 45,000 people, mostly employed in gold mining, in eight different gold mines, six of which are open pit and two underground. We were told that the highest production in the province was reached during the Second World War and that production had declined since but was now stable.

All of this area which was comparable to Alaska was covered with permafrost at

-10C which they have to thaw using a 15C water injection well on a 4×4-metre pattern, and it takes 30-45 days to do so. The overburden would then be removed by a drag line and the gold bearing gravel would either be processed by hydraulicking, followed by a sluice-box, or with a dredge. The first mine we arrived at, there was a drag line set up to remove the overburden but it wasn’t working. When asked about why it wasn’t working, we were told it was down this morning for maintenance, but that it would be up later that afternoon at a time of course that we would be long gone. The next mine, the dredge wasn’t working and interestingly enough, we were again told it was down for maintenance that morning but would be up later that evening. At the third mine there was a hydraulicking plant which curiously enough was also not working; this time we didn’t bother to ask.

None of the open pit mines we saw was producing any gold that particular day (a Monday and a full working day). As a point of interest, the coldest recorded point on earth is located about 200 km due west and the average temperature in January here is -48C. Of course it’s dark 24 hours a day in January — not exactly a pleasant spot to live.

Next we were brought to an underground gold mine that is being developed. The mill was half constructed with what looked like a 200-300-ton-per-day ball mill on its foundation and some of the other tankage was also under foundation. Interestingly enough, there was nobody around building anything or doing anything that particular day. When asked, we were told they were awaiting a shipment of parts — that seems to be the norm in Russia. In fact, throughout the country we must have seen literally hundreds of construction cranes idle as money had run out or there was no construction material available.

The interesting thing here was that they were building a small mine chasing a 6-inch-to-3-ft.-thick wide vein, grading about 0.25-0.35 oz. gold per ton. Of course, there is no way such a mine could be economic in North America, let alone Alaska or the Northwest Territories. In fact, I doubt very much that any of the placer operations we saw would be economic in North America. The only reason they are able to produce is that they are paying slave labor wages.

The following day, we went to another mining hamlet called Karamken, about 110 km north of Magadan. There we visited a gold-copper mine that has been in production since 1978 with a rated mill capacity of about 1,000 tons per day. The mine employs 600 people and is supposed to operate 330 days per year. Talking with the mine manager, we found out, for example, that a bus driver makes about 900-1,000 rubles per month while a full-fledged geologist makes a base salary of 300 rubles and is given a premium of 2.5 times for hardship or a total of 750 rubles.

To return to the Karamken mine, when we walked in the concentrator, nothing was working. Half of the mill was literally torn down with the motors being rewired, the pipes cut in different places and the mill pinion being resurfaced. However, as with some of the other mining operations, there was nobody in sight. When asked about the condition of the mill, we were told that it was being revamped and that it would be working by the end of the week. In my own mind it couldn’t possibly be the end of the week, or the end of the month for that matter, but then it appears they would tell you anything.

As we went on the ground, we realized that there were about 25 veins being worked in that particular area that extends over 5-7 km long. The veins range in width from 10 cm to (we were told) six metres and the average grade again was about 0.25 oz. The mine manager acknowledged that his biggest problem was getting ore and I can believe that as you just can’t get any tonnage out of the size of the vein we saw underground. Again I doubt very much that such an operation would be economic in a market economy.

Norilsk is a city of a quarter-million people well inside the Arctic Circle at the same elevation as Innuvik in the Northwest Territories. The climate is so inhospitable that they have not been able to build any roads or railroads from the mainland so all supplies have to be either flown in or shipped in by ocean freighters that are reinforced for ice conditions. The area is of strategic importance to Russia as it produces 100% of its platinum-palladium group metal as well as 60% of its nickel and 40-50% of its copper. That area produces as much in export revenue as the entire gold industry. As with the Soviet Far East, Norilsk was a gulag until 1958 and in fact was the place where the famous writer, Aleksandr Solzhenitsyn, was sent for internment. We were told that there were 25,000 workers directly involved in metal production while everyone else were support workers. This ratio of 10-to-1 overall is not surprising in Russia. We were also told that the production was pretty well flat and there were no planned increases in output and that reserves were sufficient to see the mine well into the middle of the next century.

After we were exposed to the geology of the area and were given mine tours, I don’t doubt their word for a moment on that score. The total production of the area seems to be 2-2.5 times as large as that of the entire Sudbury complex.

Five of us were given the privilege of visiting the underground operation of the Octobersky mine which is their flagship operation. This particular mine has three different types of orebodies with the bottom one in contact with the gabros having the highest grade ore. In fact, it’s a real jewel box as it stands 45 metres high by about 500 metres wide, and as much as 1,000-1,200 metres long, and it grades on average 26% copper, 2.5-6% nickel, and 1-2 oz. of platinum group metal. If you can’t make money with that, you can’t make money with anything since the average ton would weigh in at about US$2,000 in value per ton or over equivalent 5-6 oz. of gold per ton to these prices.

They were quite proud to show us all of the foreign equipment that is being used in this particular mine. In fact, all of the equipment we saw from the Garner Denver drill to the Mitsubishi transport equipment was foreign. The mine makes so much money that they can afford to bring in foreign equipment. I was particularly amazed at the number of shafts that were sunk to serve this mine: 11.

The mining method used was very expensive as it is a modified room-and-pillar whereby they concrete the entire roof of the stope so as to get 100% extraction. But with the ore being so valuable, I guess we would do the same thing in the West. The mining practices are similar to our own even though there seems to be a great deal of laxity in terms of safety in all of the installations that we saw. One of the problems that surfaced is that the richer the ore, the higher the sulphur content (to as much as 34%). This means that the smelte
rs in total are releasing two million tons per year of sulphur dioxide in the atmosphere killing the rivers and every tree within 100-200 km of Norilsk. The problem here is that there is no current technology to capture the sulphur in anything else but sulphuric acid, and since there are no railroads or roads to the south and it is forbidden to transport sulphuric acid on the ocean, there are no other ways but to release sulphur into the atmosphere.

The bigger question is why they built the smelters in Norilsk in the first place. When asked about all this pollution, the general manager in Norilsk said that it wasn’t their problem but Moscow’s problem. It was a bit of a surprising answer because the third day we were there, there was a bit of an inversion over Norilsk and one could hardly breathe as the air was thick with the yellow fume of sulphur dioxide. But we were told not to worry as they were building two health spas in the south for their workers to rest and rehabilitate themselves, if they can live long enough to enjoy it. Our next visit was that of the larger concentrator located adjacent to Talnak, which is the new producing area in the Norilsk region. Even though the plant was built less than 13 years ago, four out of the 12 mills were not running that day. Equipment availability, specifically Russian equipment, is poor and you can see junk everywhere. There is no doubt the place would be a junk dealer’s paradise.

Of the three smelters, there is an old nickel smelter and a newer one, and a 10-year-old copper smelter which was originally built by Outokumpu of Finland and has always received great attention from the Finnish people. The copper smelter is in fair shape compared with anything else we’ve seen in Russia and the people who run it seem to be the most on the ball. There is still a great deal of automation that can be done but overall I was fairly impressed by the whole thing.

I cannot say anything near that for the old nickel smelter which was originally built 50 years ago by concentration camp workers. The place employs more than 4,000 people to produce what Falconbridge does with about a quarter of that many people, if that much. The manager said the plant should have been shut down as it is extremely inefficient in every respect but they are not allowed to do so because of the dire need of the country for hard currency. However, as the very best ore from the mine gets depleted in 5-7 years, they will have no choice but to shut down one of the nickel smelters. We were also told that the main Russian consumer of both nickel and copper as well as gold is the army — what a surprise.