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THE RISE OF THE GULAGS AND NORILSK
The Soviet years of central control and direction saw a major push to develop the vast country into an economic powerhouse to match the West. These were the Stalin years and the expansion of the mining industry was often achieved by the use of labour transported to the Gulags of the eastern USSR. In these transportations dissident professional and manual workers alike were settled in camps, often for decades, until the death of Stalin in 1953 led to most of them being closed by 1960.
The Gulags had a number of key political functions, but economically they played an important role in the establishment of heavy industrial complexes for steel, manufacturing and mining, including mining of coal, iron ore and base metals. Gold production was also an important activity given that the rouble was unconvertible and the USSR was not a major manufacturing exporter like Germany or the UK, but was from time to time a heavy importer of food stuffs and advanced machinery, and therefore in need of convertible assets.
One of the largest gold areas discovered then was in the Kolyma region in the far northeast of the USSR. The initial finds were in the early years of the 20th century and sparked a mini rush to the region by prospectors. It was not until 1928 that mining in the area began in earnest, with geologists and miners provided by the start of Stalin’s mass transportations. By 1937 official figures for output showed annual gold production from the Kolyma region of around 1.6 million ozs and during the Second World War production rose further to 2.9 million ozs or about half of the output of the USSR.
Living conditions for all Gulag workers were very tough and few survived the camps. The climate of the region also made mining a very difficult activity as the winters were long and extremely cold. The mines were primarily surface placer operations in nature and were extensive and many were high grade. The gold- bearing earth had to be dug up and then melted before the process of washing, panning and separation could begin. The introduction of expensive mechanical technology was often trumped by the fact of an almost limitless supply of slave
The mines, whilst many in number, were often very small, although high grade, and did not lend themselves to mechanisation in any case. The gold was transported through the port of Magadan, which was used to bring supplies in and transport minerals out, and had been established as the administrative hub for the region. It is estimated that as much as 1,000 tonnes of gold (32 million ozs) was produced in the whole region in the peak years of the Gulag, 1930-1953, as well as substantial quantities of tin and the key strategic metals, tungsten and cobalt.
In the years between the two World Wars the push to build up the USSR’s mineral production led to further major discoveries and developments and new Gulags were established across the Soviet Union’s northern regions to service these discoveries. Additional copper discoveries were also made in the Urals and in Siberia. Bauxite was discovered in the 1930s, in the Urals as well, and aluminium plants were built in Severouralsk – a town with a mining tradition derived from the establishment of iron ore and copper smelters there in the mid-18th century.
In 1934 tin was discovered in the far east of the USSR in Primorye, an area of the country where coal, lead/ zinc, tungsten and gold mines were also developed. This geological push in the 1930s led to the opening up of the huge Upper Kama potash and potash magnesium salt deposits to the west of the Urals, leading to the establishment of processing plants in the city of Solikamsk which had a centuries- old tradition of salt mining.
One of the largest mining complexes discovered and developed during Stalin’s era was the Norilsk nickel, copper, platinum and palladium deposit in northern Russia on the Taimyr Peninsular above the Arctic Circle. Like many regions in Tsarist Russia the Peninsular had been known as prospective for minerals for at least three centuries so this provided the USSR with a target list of areas suitable for the establishment of Gulags. Exploration and feasibility planning started in the mid- 1920s and like most Soviet mining and metal projects of the time its labour came from the transportation of dissidents and others to the camps of the Gulag.
Rather sinisterly, control of the Norilsk project was passed to the NKVD, the USSR’s secret police, in 1935, when the NKVD assumed responsibility for the Gulags. This also gave the secret police primary influence over Norilsk’s production targets, important due to the strategic sensitivity of the mines with their output of high-tech metals. Production of nickel and copper began in early 1939.
During the Second World War nickel production rose from 4,000 tonnes to 10,000 tonnes in 1945, largely reflecting military weapons demand. At the end of the Stalin era in 1953 Norilsk was producing 90% of the USSR’s PGMs, 35% of its nickel, 30% of its cobalt and 12% of its copper. Today annual output from Taimyr includes 120,000 tonnes of nickel and 340,000 tonnes of copper.
Norilsk was developed as an underground mine, sensible in such a cold climate, and after 60 years of operation still contains as much as 2 billion tonnes of ore to be mined with present treatment grades of 0.8% nickel and 2.2% copper. Access by decline has been added to increase operating efficiency. The mine, unfortunately, is a dirty operation overall with environmental damage high, something that has been with the mine since inception. Much of the damage comes from the onsite smelter; the surrounding area is significantly polluted with heavy metals as a result of the inefficient smelting process at the site. Around the same time nickel and copper were also found near Murmansk, on the Russian side of the border with Finland in the northwest, and in due course after the war the mines developed became part of the Norilsk group.
In more recent years Norilsk has experienced considerable change, particularly in the corporate area and also in its strategy of acquiring complementary mining operations both in other parts of Russia and overseas. At the start of the 1990s with the fall of the Soviet Union there was a major restructuring of Norilsk Nickel and in due course in 2003 private capital was introduced with the controversial Oleg Deripaska of RUSAL and Vladimir Potanin of Interros International each acquiring a 25% stake.
The relationship between the two oligarchs has been a difficult one and legal disputes over control have rumbled on for years. One of Norilsk’s most high profile diversifications was the acquisition of a 55% control stake in the only significant PGMs producer in the US, Stillwater Mining, in 2003.