Alexander Boguslavsky, General Manager of the Prioksky Nonferrous Metals Plant, which celebrated its 20^th anniversary from the date of its first output, gave the following interview to Rough&Polished.

After the financial turmoil of the recent past many countries began to build up their gold reserves once again. In your opinion, to what extent may the role of gold in Russia’s financial system change?

For me it is difficult to discuss the financial system of Russia, but I can say that gold was a reliable source to keep the country’s budget replenished both at the time of global reforms – like those initiated by Peter the Great, Prime Minister Stolypin or the Soviet government - and at the time of great wars.

Who are major suppliers of raw materials for your enterprise?

Being a refinery we are completely dependent on our suppliers and we value very much any producer of raw materials, but our major suppliers include such mining companies as OAO Severstal Group, OAO Polyus Gold , OAO Seligdar, OAO Polimetall UK, OOO Russdragmet and OAO Yuzhuralzoloto Gruppa Kompaniy, our long-time and reliable producer of precious metals.

Does your plant manage to cope with those amounts of raw materials which you get from suppliers or you feel the supply is running low?

Our plant’s operating capacity is essentially underutilized. Therefore, we conduct negotiations seeking additional deliveries of raw materials. We have several negotiating teams which are studying new contracts both in the Russian Federation (for example, in the Magadan area) and in the CIS countries (for instance, in Kirghizia), as well as further abroad.

Are there any problems interfering with your plant’s operation?

I will not be original if I say that these problems include some outdated legislation norms, such as the VAT for sale of measured ingots and import duty for ore concentrates. At the same time I would like to make a special emphasis on that the Ministry of Finance of the Russian Federation as the major industry regulator did quite a lot in this respect excluding gold from the list of foreign exchange assets, depriving the state of gold monopoly, cancelling  licensing and state secret regime related to precious metals circulation.

What is your opinion of the unallocated bullion accounts?

Yes, I know about the discussions going on between Flun Gumerov, CEO of Almaz-Holding, and the Central Bank of the Russian Federation. I am not a financier (I am working, as they say, “out in the field”) and for me it is difficult to analyze this problem. However, I would like to say one thing: I trust the Central Bank of the Russian Federation.

Gold is the best macroeconomic indicator – what are your forecasts in this respect in view of the world crisis?

It will be very complicated for the European Union and United States to recover from the crisis and it means that their authorities will continue to pump addition financial resources into their economies bringing about higher inflation. At the same time the emerging economies will increase the share of gold in their foreign exchange reserves to hedge the risks of depreciation facing major reserve currencies.

Besides, it should be taken into account that according to the forecasts made by the majority of industry analysts, gold output will not increase significantly within the next 5 years.

All this promises a rise in gold prices in the near future. As always, seasonal fluctuations are possible in the process.

Vladimir Teslenko for Rough&Polished