Ore is driven from the dungeon – Newspaper Kommersant No. 45 (7490) of 03/17/2023

The Ministry of Finance, which has significantly increased taxes for the metallurgical sector in 2022, may reduce the MET for iron ore, which is mined underground. The ministry admits that the cost of production at such deposits is higher. Potential beneficiaries of this measure are the Industrial and Metallurgical Holding, Severstal and Evraz. Metallurgical companies insist on reducing the tax burden for all ore extraction and linking the MET rate to Russian prices, and not to world quotations.

The Ministry of Finance is not ready to fundamentally change the principles of taxation of iron ore mining, but it can reduce the burden on ore mined underground, Deputy Finance Minister Alexei Sazanov said on March 16. “Perhaps, in terms of underground mining, there will be concessions, because objectively the cost there is higher than in traditional mining, and this must be taken into account. Here in this part – yes, we are discussing with the Russian Steel Association. I think that there will be some solution in the spring, ”he said (quoted from Interfax). From January 1, 2022, an increased MET on iron ore is in effect – the rate was pegged to world quotations and set at 4.8% of the quotation for raw materials in China (Iron Ore Fines).

Metallurgical companies, after the imposition of sanctions in 2022, tried to convince the government to reduce taxes for them, which were increased in 2021 against the backdrop of high global quotations for coking coal, steel and processed products. In the strategy for the development of metallurgy until 2030, approved government in December 2022, states that the MET rates for iron ore and the excise tax for liquid steel, introduced from the beginning of 2022, take into account market pricing mechanisms in the absence of restrictions on sale and transportation. However, now, due to sanctions, actual contracts for the export of metal products to new markets are concluded at a discount to published quotations.

The Ministry of Finance partially agreed with the industry and adjusted the excise tax on liquid steel. If before it was charged if the price of a slab exceeded $300 per ton, then from August 1, 2022, the cut-off price was increased and set at the level of 30 thousand rubles.

However, no agreement has yet been reached on ore. The Association of Metallurgists “Russian Steel” proposed to link the MET on coking coal and iron ore to Russian prices, the discussion of this idea continues.

In Russia, the main volumes of iron ore mining are carried out by open pit, which allows to have a relatively low cost of ore, while the cost of mining by underground mining is usually two to four times higher. Boris Krasnozhenov from Alfa Bank says that deposits are mined underground in case of high iron content (50-60%) and low content of harmful impurities. “The mined ore does not need to be enriched, and after being extracted from the face, it undergoes a minimal processing process. The resulting product is called “sinter ore”. The cost of production in underground mines is usually higher than in an open pit, but it all depends on the depth of the mine and the quality of the composition,” he notes.

According to the information and technical guide to the best available technologies “Iron Ore Mining and Beneficiation” dated 2017 (.pdf), in Russia, underground mining is concentrated mainly at seven enterprises. The largest of them is the KMAruda plant of the Industrial and Metallurgical Holding of Evgeny Zubitsky, which accounts for 20% of all underground mining. Severstal has the Yakovlevsky mine and the Olenegorsky GOK, Evraz has deposits in Western Siberia, which are part of Evrazruda. OMK Anatoly Sedykh in 2022 considered the possibility of participating in an auction for the Prioskolsky iron ore deposit, which was supposed to be developed underground, but in the end no one showed up for the auction.

Evgeny Zainullin