Recently, a new bill authorizing extraction of placer gold by individual entrepreneurs was presented to mass media in Moscow. On behalf of those who developed the document the changes in the federal legislation on precious metals and gems (excluding diamonds) were introduced by Members of the Federation Council Victor Orlov, Chairman of the Federation Council Committee on Natural Resources and Environmental Protection, and Alexander Matveev, Chairman of the Federation Council Committee on Northern Territories and Indigenous Minorities. The senators, who have a wide experience of work in the gold and diamond industries, tried to explain the necessity and urgency of this bill, whose fate remains unclear.
The senators were prompted to present Bill No. 429535-5 “On Amendments to the Law of the Russian Federation ‘On Subsoil’ and to other legislative acts of the Russian Federation (on mining placer gold by individual entrepreneurs)” by their fears for its fate. The truth is that the history of this legislative initiative is distressing. As it was noted by Victor Orlov, the northern provinces of this country spent over 10 years raising the issue aimed at allowing placer miners to work individually. And in April 2003 an attempt to adopt such a bill was made. At that time, the State Duma after consultations with the Government of the Russian Federation passed the Federal Law “On Amending the Federal Law ‘On Precious Metals and Gems’” (Project No. 122473-3) and then on May 8, 2003 it was submitted by the Federation Council to the President of the Russian Federation, who decided to reject it on May 21, 2003.
On January 25, 2011 the present bill, No. 429535-5, too, was adopted by the State Duma on its first reading. However, its enactment was equally postponed for several months because the government is to develop by-laws. Besides, the delay was due to emerged disagreements with other government ministries and agencies, which makes the authors of the new law worry about its prospects for final approval and coming into effect.
The new legislation allows individual prospectors to recover placer gold in the areas of mineral resources, which are by their quantity and quality exempt from industrial development, for up to 5 years. The bill stipulates that gold mined by individuals should be sold in the manner determined by the Government of the Russian Federation. For example, it may be bought by “gold collecting pay-offices” established by authorized banks or sold to gold mining agencies which send their products to refineries on a regular basis. Thus, Russia will be able to restore the tradition of "free gold delivery" that existed in the country for more than a hundred years, and was banned in 1954.
According to the senators, the need to return to the historically coined type of business in the field of mining for precious metals and gems (excluding diamonds) was caused by several key factors.
In the first place, the structure of gold mining in this country has changed dramatically over the past 20 years. As a result of long-term development, the number of placer gold fields containing over 100 kg of gold reserves was reduced several times.
“Earlier the country’s gold reserves accounted for 70% of ore gold and for 30% of placer gold,” explained Victor Orlov in his opening speech. “So, mainly miners developed placers (also about 70%). And while the structure of gold mining was brought into line with the structure of the reserves, all the large, medium and small alluvial deposits were depleted. Officially, the confirmed reserves of placer gold will be sufficient for 7-8 years of work at maximum. Gold mining companies, which continue to operate, have already switched to beneficiation of poor placers containing from 200 to 500 milligrams of metal per one ton of ore.”
However, according to the senator, in the abandoned areas of former large-scale gold mining there remained tailings which still contain gold due to imperfect processing technologies used in the past. Over time, the dumps were enriched in a natural way. For decades, rain and spring water gradually washed residues of the old workings freeing up precious metal. But this kind of rock refuse has a low content of gold and it is inefficient to extract it industrially. However, the number of such sites where gold reserves run at 10 kg or less is counted by the thousand. Therefore, their development, according to the authors of the bill, is economically viable if only done by individual entrepreneurs under a simplified procedure of access to mineral resources and preferential tax treatment.
"The idea of a simplified taxation ran into incomprehension at the Finance Ministry and other agencies dealing with taxation. They are afraid there will be lower budget revenues,” Viktor Orlov said describing major counterarguments against this bill. “But today, there are no budget revenues generated by artisanal mining at all! And if our proposed changes come into force, the state will receive taxes and, most importantly, gold to the treasury.”
Furthermore, the developers of the law estimated that ideally a prospector will be able to pan 2 kg of gold in a season, or 10 kg in five years, which is equivalent to 12 million rubles a year. In accordance with the applicable law, such an income will automatically allow any enterprise to pay taxes under a simplified pattern. In reality, according to the estimate voiced by the Russian Union of Gold Producers, individual prospectors will be able to pan about 500 grams of gold per season working the tailing of former gold mines. Thus, the objections set forth by the Ministry of Finance against the simplified pattern of taxation for such prospectors appear to be unfounded.
“It would be better to cancel taxes altogether for individual prospectors, as it was practiced in the Soviet Union until 1954,” Alexander Matveev said.
Another counter-argument, according to the senator, was that the renovated legislation would put gold mining companies on unequal footing with regard to individual prospectors. In response to this it was said that gold mining teams would be operating on industrial-scale reserves, while individual prospectors would be working on tailings.
Alexander Matveev refuted the idea that the initiative put forward by the authors of this bill may cause an increase in illicit trafficking of precious metal and resurgence of corruption. From their point of view, if artisanal gold mining will be allowed, then no one would want to run unjustified risks trying to steal at industrially run gold mines or illegally confiscating the stolen stuff.
“In fact, people were stealing, are stealing and will be stealing gold. However, this bill will give us a chance to reduce the scale of illegal gold mining in a significant way,” Senator Alexander Matveev summed the review of counter-arguments.
The urgency to give a legislative permission to individual persons for mining precious metals and gems has increased due to the fact that in recent time we see mass-scale bankruptcy raging among small artisanal teams of miners. Actually, one half of the total number of small gold mining companies operating in 2008 ceased to exist. Consequently, the country’s North and Far East are facing rising unemployment and an aggravated criminal situation. This happens because former employees of artisanal gold mining teams, who were unable to escape from the North and were left there without a livelihood, are now being insistently involved in illegal gold mining and gold trafficking. And, as it is stated in a memorandum to the bill, according to various sources in Russia, individual prospectors working alone are illegally extracting from 15 to 20 tons of gold every year (about 10% of legal output).
"To solve this problem and allow people to honestly make a living the way they know best, we have developed this bill,” Viktor Orlov said. “This will give an opportunity to use the tailings of mineral resources in the most efficient way and to supplement budget revenues at all levels.”
Fielding mass media questions, the senators stressed that effectiveness of the pending bill lies precisely in that it will create thousands of new jobs without investments and save many villages in Siberia, the Far North and Far East from poverty without additional cost to the federal budget.
The bill’s developers hope that since the new provisions do not allow individual gold prospectors to hire workers, but do not prohibit assistance from relatives, the artisanal mining may become a family business. According to Victor Orlov, it will be very difficult for one person to work the tailings in those circumstances. Such a person will have to shovel tons of rock. So, for instance, it will be of great help to the head of the family if he will be joined by his children to cope with hard physical work, while his wife will provide for their proper nutrition and will organize their everyday life in the field. Thus, ideally, during a gold panning season their family will not be divided, as it usually happens on a rotational work basis. Everyone will be busy, rather than rust in virtually destroyed villages.
The developers of this law hope that it will come into force as soon as possible, so as not to miss the upcoming gold panning season and give people a chance to start working honestly and calmly.
“Of course, in the initial period a lot of people will try their golden luck. But this "foam" will quickly subside leaving only those for whom this bill was drafted. Obviously, some stock of illegally concealed gold will enter the market and join open circulation. The only thing we fear is to repeat the situation of 2003 when the prepared bill was not passed. Today as well there may pop out opponents who will say: "Let it take some more time." But time is running out. People who are able to mine gold are leaving. And leaving are those who have long adapted to this kind of work but were left today without anything. Time is working against them and against the state, which will not be able to save money on unemployment benefits for tens of thousands of people and will not additionally receive any taxes or tens of tons of gold to the treasury,” summed up the meeting with journalists Viktor Orlov.
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