JOHANNESBURG (miningweekly.com) – While regulatory policies and elevated production costs will continue to pose the greatest challenges for miners operating in Europe to 2020, BMI Research has highlighted Russia as the region's “growth bright spot” in terms of mining industry value (MIV) growth rates.

The research and advisory firm noted on Wednesday that Russia would see yearly growth averaging 2.6% between now and 2020 and that it would continue to account for the lion's share of Europe's MIV – specifically $144-billion, or 71%, by then – despite the mining sector being challenged by European Union- (EU-) and US-imposed sanctions.

This has mostly impacted on project financing, with access to capital becoming more difficult. Foreign direct investment is also expected to remain limited over the coming years.

Meanwhile, the firm explained that the European Commission's keenness to “drastically reduce” regional reliance on coal-fired power plants in a bid to cut emissions, paired with the climate commitments that were agreed at the twenty-first United Nations Conference of the Parties, in Paris, in 2015, was posing greater difficulty to miners.

“Coal power will gradually lose share as a component of the power mix within the EU,” BMI said, noting, however, that the pace of the decline would be spread unevenly between Western Europe and Central and Eastern Europe (CEE).

To this end, Western European countries have had more success in shutting down coal-fired generation than their Eastern European counterparts, owing to their ability to fund energy mix diversification and greater government support over the last decade.

As a result of coal being a “relatively cheap source of power”, BMI further predicts that the CEE region will not be able to introduce an alternative energy mix without governments losing political support.

Nevertheless, BMI remains positive about Europe's mining sector, as a gradual recovery in commodity prices – and an abundance of solid mineral reserves – will support investment over the coming years.