The Russian government has adopted a decree allowing general gold and silver bullion export licenses to be awarded to precious metals producers, according to the federal portal of draft laws and regulations.
- Long-term licenses to replace unpopular one-off permits
- Miners look to diversify sales at the expense of banks' share
- Coronavirus trace in decree not as obvious as it seems
According to the decree enacted Monday, the long-awaited policy will enable mining companies to apply for long-term licenses permitting them to export refined gold and silver on a par with commercial banks, with the same rights.
The licenses will be awarded by the industry and trade ministry, allowing precious metals miners and producers to export their own output in the form of pure metal bars, as well as that of other metal owners under commission agreements.
Decision welcomed
Russia's gold miners welcomed the decision to issue general export licenses, which will replace one-off licenses awarded per batch, making them so unpractical that few companies have applied for them, and even then only rarely.
"The liberalization of international sales of precious metals by Russian miners will improve export opportunities and reduce unnecessary bureaucracy," said a spokesman for Polymetal, Russia's second-largest gold producer. The company is holding provisional discussions with several potential counterparties, he said.
Polymetal has exported gold bullion previously as it also operates in Kazakhstan where it has two of its nine production hubs. And those, unlike the company's Russian operations, have had no limitations on bullion exports. In Russia, the company's main buyers were domestic commercial banks.
"The Russian government's decree applies to precious metals produced in Russia, and the sales of Polymetal's other seven mining operations will now be diversified to include bullion exports too," the spokesman said.
It was unclear, though, whether the new system will allow unlimited exports or whether there may still be some restrictions. The exact length of the licenses was also not clear.
"We are studying the procedure for obtaining a general license for the export of gold bullion," a spokeswoman for Nordgold told S&P Global Platts.
Coronavirus impact?
About two weeks ago, the Russian National Finance Association -- representing commercial credit organizations, including major gold exporting banks -- asked the central bank as well as the transport and finance ministries to step in to facilitate the export of precious metals in the face of coronavirus restrictions such as suspended international passenger flights.
To that end, the decree may not be exactly the helping hand banks were hoping for, given that it lets miners export without any middlemen, undermining the benefit to banks of being the country's sole bullion exporters. It also weakens banks' negotiating power due to producers' suddenly having a much wider choice of buyers.
Thanks to the decree, the proportion of miners' direct exports of bullion versus their sales to Russian banks may change sharply unless some companies find the new export system inconvenient, leading them to hold fast to their old schemes and liaisons.
The convenience of the existing order is that gold companies are used to selling on an ex-works basis -- handing over the material at their refineries' gates and being free from insurance costs and other administrative issues associated with exports.
Thus, precious metals producers will have to do a certain of homework before they can make the most of the new license system, including building up a foreign customer base. The process may take a while before the new system has an effect on export volumes, market shares, prices and revenues.
Source: Platts |
