Rosgeo Was Concerned about the Lack of Investment in Geological Exploration
The lack of investment in geological exploration (GE), observed against the backdrop of the need to replenish the mineral resource base (MRB) of scarce and import-dependent types of minerals, is of concern. This statement was made by Deputy General Director of Rosgeologia Arthur Uzyunkoyan during a meeting of the Federation Council Committee on Agricultural and Food Policy and Environmental Management.
“The industry’s total need for financing the state geological exploration program for the purpose of SME reproduction (…) is estimated at up to 360 billion rubles for the period until 2033, in order to discover new deposits for strategic scarce and import-dependent types of mineral raw materials. Sources of financing for this program have not been identified. The current strategy for the development of SMEs in Russia provides for a complete cessation of state funding for exploration exploration for solid minerals (solid minerals) within the framework of the state program “Reproduction and use of natural resources” from 2025,” he said.
Uzyunkoyan recalled that mining companies make the greatest contribution to geological exploration, but their investments are often aimed only at the most liquid industrial and precious metals, depend on market indicators, and are also concentrated in local industrial areas where the mining infrastructure of existing enterprises is developed.
“Already today it is necessary to look for alternative sources of financing, and first of all, it is necessary to involve market sources of investment, in particular from the real sector, as well as the largest financial institutions, including those with government participation, in the chain of financing for exploration at the early stages, in order to prevent the realization of risks loss of raw material potential,” he emphasized.
In particular, to increase the investment attractiveness of exploration projects, Rosgeo proposes to use a portfolio approach similar to venture funds.
“As Russian statistics show, 37% of projects in which funds are invested in early stage exploration become industrially significant deposits! This figure clearly exceeds technological and other startups and has only two key risks – geological and market, which can also be solved by quality selection objects and the use of hedging instruments,” Uzyunkoyan emphasized.
The state holding also proposes to use co-financing instruments within the framework of public-private partnerships, to create special companies or funds involving public, private capital and the financial sector.
Other necessary measures include the provision of state guarantees to stimulate and attract capital from institutional investors and financial institutions: “This measure will not create an additional burden on the state budget for a period of up to 5 years, but will provide comfortable conditions for attracting capital for investors and developing methods for correct risk assessment and their applications at the portfolio level.”
In addition, it is important to use tools that allow each co-investor to recoup the invested capital, taking into account the stage and risks: “There should be no investment distortions in terms of the nature of risks and economics within the life cycle of geological exploration and further production projects.”
Rosgeo assumes that the creation of such an institution for co-financing geological exploration will reduce and diversify project risks, as well as increase investments through the collaboration of private capital and government spending on geological exploration – attracting at least 4 rubles of private investment per 1 ruble from the budget within the framework of the VIPR .
