Russia Mining Monthly: Sector Divergence – Coal and Steel in Crisis, Gold and Solid Minerals on the Rise, Automation Sets a New Trend

Bottom Line

June 2026 has definitively cemented a structural shift in the Russian mining sector: traditional coal and steel are plunging into crisis (industry debt has exceeded RUB 1.5 trillion, steel output has fallen to a 15-year low), while gold mining, solid commercial minerals (SCM), and automation are forming new growth points. Consolidation in gold (the purchase of UGC by businessman Baysarov, the UGC auction) and state megaprojects (Rosatom's "Sovinoye," the "Chernogorskaya GRK" mining and processing plant) are creating long-term drivers. Investors are advised to reduce positions in coal and steel companies, increase allocation to gold miners with confirmed resource bases, suppliers of automation equipment, and producers of SCM (lithium, non-ferrous metals). The key action is portfolio rebalancing in favor of assets benefiting from state support and technological upgrades.

Month in Review

June 2026 was the month when previously hidden imbalances in the Russian mining industry came to the surface. The first half of the month was marked by mounting pressure on coal and steel: the Ministry of Energy estimated potential losses for coal exporters at RUB 576 billion, the industry's accounts payable exceeded RUB 1.5 trillion, and steel output in May fell to 5.8 million tons – the lowest level in 15 years. Concurrently, the government lowered its GDP forecast to 0.4%, further compressing domestic demand for ore and metals. These signals prompted investors to reassess their stance on traditional segments. However, starting from the second week, a countervailing trend emerged: private investment in SCM exploration rose by 30% (while declining by 10% in hydrocarbons), and non-ferrous ore production in May jumped 1.8 times. By mid-month, the situation was transformed by news of state megaprojects – Rosatom announced the "Sovinoye" gold mining project (over RUB 12 billion), and the "Chernogorskaya GRK" mining and processing plant received approval for its first phase with a total investment of RUB 1 trillion. The last week of June brought two key events: the conclusion of the UGC privatization saga (purchase by businessman Baysarov) and the large-scale deployment of autonomous haul trucks at the Peschanka and Ozernoye deposits. Thus, the month ended with a shift in the dominant theme – from the crisis in traditional sectors to the formation of a new investment paradigm based on automation, state support for gold and SCM.

Trajectory Analysis

Month-over-Month Change: Better. Compared to May 2026 (when sanctions pressure and uncertainty dominated), June demonstrated a clear divergence: the coal-steel crisis deepened, but simultaneously new growth points emerged (automation, state investment in gold, shift of exploration towards SCM). The overall vector changed from defensive to selectively aggressive.

Key Developments

1. Consolidation in gold mining: purchase of UGC by businessman Baysarov (Week 4) — After a series of failed auctions, the state stake in "Yuzhuralzoloto Group of Companies" was acquired by a private investor who stated an intention to continue M&A in the industry. Portfolio implication: The intrigue surrounding the largest private gold miner is resolved; the removal of uncertainty reduces volatility, but a risk of strategy change appears. It is recommended to hold positions in the sector, as new deals at a premium to the market are possible.

2. Coal industry: losses and debt exceed critical levels (Week 1-2) — The Ministry of Energy forecasts losses of up to RUB 576 billion in 2026, and accounts payable exceeded RUB 1.5 trillion (+26% YoY). The government does not plan support. Portfolio implication: The sector has entered a zone of elevated default risk. Investors should exit coal securities and avoid equipment suppliers focused solely on coal. Forced restructuring or consolidation is possible.

3. Structural decline in steel output (Week 2-3) — In May 2026, steel production fell to 5.8 million tons (-2.5% MoM), and the 2025 annual volume (67 million tons) was the lowest in 15 years. Reasons: sanctions, high interest rates, weak domestic demand. Portfolio implication: Avoid steelmakers without diversification into SCM. Pressure on profits will continue, especially for producers of iron ore and coking coal.

4. 30% growth in private investment in SCM exploration (Week 1-2) — Total investment in exploration will exceed RUB 450 billion in 2026, with RUB 136.5 billion directed to SCM (+30% vs. a 10% decline in hydrocarbons). The declarative principle for subsoil use has been abolished. Portfolio implication: Long-term driver for drilling, geophysical, and service companies. Investors should increase their share in companies holding licenses for critical metals (tin, lithium, rare earths).

5. State megaprojects: Rosatom's "Sovinoye" and "Chernogorskaya GRK" (Week 3) — Rosatom is investing over RUB 12 billion in gold mining in Chukotka (Arctic resident status), and the "Chernogorskaya GRK" mining and processing plant received approval for its first phase with a budget of RUB 1 trillion. Portfolio implication: State support creates long-term opportunities for related industries (machinery, logistics). Shares of companies involved in the projects (Nordgold, contractors) may receive a boost.

6. Large-scale implementation of automation: autonomous haul trucks and Norilsk Nickel's tunneling complex (Week 4) — The government approved an experimental regime for autonomous equipment at the Peschanka and Ozernoye deposits; Norilsk Nickel launched the "Norda" tunneling complex with an investment program of RUB 50 billion. Portfolio implication: Automation reduces operating costs and dependence on personnel. Leaders in modernization (Norilsk Nickel) will receive a valuation premium. Demand for domestic control systems and components is growing.

7. Tightening of lithium mining licensing rules (Week 4) — A government decree requires investors to make significant investments and localize processing, cementing the priority of Russian companies. Portfolio implication: Complicates access for foreigners but provides a stimulus for domestic projects in the Murmansk region. Risks for small subsoil users, but beneficiaries are large integrated players.

Risk Evolution

Risks That Materialized: Coal losses (Ministry of Energy estimate of RUB 576 billion), decline in steel output to a 15-year low, lowering of GDP forecast. All three risks were partially predicted at the start of the month, but the scale was worse than expected.

New Emerging Risks: Risk of forced consolidation in the coal sector (possible debt write-offs or transfer of assets to state banks); tightening of environmental requirements for placer gold could hit small subsoil users faster than expected.

Sector Pulse (Monthly)

Outlook: Next Month

Key catalysts to watch:

• Results of the auction for 67.2% of shares in Uzhuralzoloto (UGC) – if the deal goes through, further consolidation in gold is possible.
• Q2 2026 quarterly reports from coal companies – a sharp deterioration in financial performance is expected, which could trigger sell-offs.
• June data on steel output and SCM production – confirmation of the sector divergence trend.
• Development of automation projects (first test results of autonomous vehicles at Peschanka).

Positioning recommendation: High volatility persists in early July, but the vector remains favorable for gold and SCM. Investors should build up positions in Norilsk Nickel (beneficiary of automation) and companies with projects in the Far East (Nordgold, participants in the Baimskoye deposit). Avoid coal and traditional metallurgy. Allocate a portion of the portfolio to suppliers of automation equipment (control systems, sensors). Profit-taking in speculative stories around UGC following the purchase news is possible, but the gold sector remains attractive long-term.