|
Article Excerpt
IN BRIEF
Editor's Choice
*** Standard & Poor's Ratings Services this week revised its outlook on several Russian metals and mining companies. The world's leading nickel and palladium producer MMC Norilsk Nickel, and steel makers NLMK and MMK have all been downgraded to negative from stable to reflect the sharp downturn in the global metals and mining industry, with Norilsk in particular suffering notably very depressed prices.
*** Precious metals and gemstones exploration in Russia will receive 10.5 billion rubles in funding this year under plans announced by the Natural Resources Ministry this week. A total of 2.5 billion of this figure will be provided from the state budget, with mineral developers themselves providing the rest of the sum, which will be 16% less than last year.
*** Russia's RTS stock exchange plans to launch futures and options on platinum and palladium by the end of March, the exchange's press office reported this week. Like the gold and silver futures that the RTS Futures & Options (FORTS) derivatives market already trades, these will be cash-settled contracts, but based on the London Platinum and Palladium Market fixing.
*** The Russian Bank for Development and Foreign Economic Affairs (Vnesheconombank, VEB) this week announced it has received one representative on the board of directors at each of the Evraz Group's West Siberian (ZSMK) and Nizhny Tagil (NTMK) iron and steel plants, with both boards expanded from five to six directors to accommodate the VEB officers. VEB provided Evraz with $1.8 billion in loans in the fourth quarter of 2008 to refinance earlier loans from foreign bank syndicates.
*** Coal producer Belon said this week that it is still considering the possibility of holding an initial public offering on the London Stock Exchange (LSE) in 2009. The company is planning to float about 15% of its stock on the LSE, despite the current unfavorable economic situation. Belon also said reported that it spent more than $220 million on the development of the Kuzbass coal industry in 2003-2008, and noted that "state regulation as regards natural monopolies will lead to a reduction in coking coal prices with simultaneous growth in rail transport expenses," which has forced the company to develop contractual relations with independent companies that provide rail services.
*** Russian industrial output plummeted 16% year-on-year in January, the Federal State Statistics Service (Rosstat) said this week. This was the biggest drop since October 1994, when output fell 18%, and bigger even than in September 1998, when it fell 15% year-on-year. Industrial output fell 10.3% year-on-year in December 2008 and 8.7% in November. January's drop was bigger than analysts predicted: they said in a consensus-forecast for Interfax at the end of January that they thought industry would fall 11.9% last month. All sectors saw output decline in January. Production fell 3.6% in the extractive industry and a record 24.1% in the manufacturing industry.
PRECIOUS METALS
Precious metals exploration to get 10.5 bln rubles funding in 2009
MOSCOW. (Interfax) - Precious metals and gemstones exploration in Russia will receive 10.5 billion rubles in funding this year.
Alexander Nekrasov, head of the solid minerals geology department at the Russian Natural Resources Ministry, said at a roundtable on February 17 that the budget would allocate 2.5 billion rubles in funding, compared with 3 billion rubles in 2008.
Mineral developers themselves will provide a further 8 billion rubles (down from 9.5 billion rubles last year). Overall funding of 10.5 billion rubles will be 16% less than last year.
Gold reserves grew 508 tonnes in 2008.
This year's federal funding will go towards gold exploration in Tuva and silver exploration in the Magadan region.
PRECIOUS METALS
RTS to launch platinum, palladium futures by end March
MOSCOW. (Interfax) - The RTS stock exchange plans to launch futures and options on platinum and palladium by the end of March, the exchange's press office told Interfax.
Like the gold and silver futures that the RTS Futures & Options (FORTS) derivatives market already trades, these will be cash-settled contracts, but based on the London Platinum and Palladium Market fixing.
The new instruments are designed primarily for major producers and consumers of these metals wishing to hedge against market price volatility. But they will also be of interest to investors wishing to invest in the basket of precious metals and diversify their investment.
The FORTS market has traded gold contracts since June 2006 and silver contracts since July 2007.
It traded 5.9 million gold contracts for a total of 127.2 billion rubles and 177,700 silver contracts for 6.02 billion rubles in 2008.
PRECIOUS METALS
VTB yet to provide regulator with further info on Polyus share deal
MOSCOW. (Interfax) - VTB has not yet provided the Federal Antimonopoly Service (FAS) with further information on a transaction involving shares in Polyus Gold, Russia's biggest gold producer.
"They haven't given us anything yet," FAS chief Igor Artemiyev told reporters on February 17.
A source familiar with VTB's plans has said VTB did not plan to submit further information to the FAS.
The FAS is about to turn down a request by the VTB to buy shares in Polyus Gold, Alexei Ulyanov, the FAS official in charge of industry monitoring, said on February 11. Ulyanov said VTB wanted to buy up to 50% of the shares in Polyus Gold. He said the request would be rejected because VTB did not say who it was buying the stake from.
"The refusal has been drafted, but it has not yet been signed," he said.
Igor Artemiyev said the refusal, related to the lack of information, had still not been signed.
A source close to the bank told Interfax last week that the bank had "been asked to finance [the acquisition of Polyus Gold shares] on behalf of a client." The source did not name the client.
The business daily Vedomosti has reported that Interros might swap its shares in Polyus for debts owed to Prokhorov by United Company RUSAL (UC RUSAL). Potanin could convert the debt into a 5% stake in RUSAL and use the shares to secure a loan from VTB, and thus release 16.8% of shares in MMC Norilsk Nickel held in pledge by the bank. VTB might also receive RUSAL debt obligations.
The Polyus stake that Prokhorov receives in the deal would need to be sold. Nafta Moskva owner Suleiman Kerimov is a candidate to buy the stake. Nafta has already applied for clearance to acquire 25%-50% of Polyus shares.
Interros, which might possibly be the seller in the VTB deal, declined to comment on the bank's application to buy Polyus shares. VTB and Polyus are not commenting either.
Analysts told Interfax they thought VTB was seeking to buy Potanin's stake in Polyus.
PRECIOUS METALS
Polymetal board recommends supplementary share issue
MOSCOW. (Interfax) - The board of directors of Russia's top silver producer Polymetal recommended at a meeting on February 17 that shareholders approve a supplementary share issue at an extraordinary meeting on March 17, the company said in a statement on February 18.
The supplementary shares might be capitalized by transferring in shares in silver miner CJSC Ayaks. Shareholders are to select an appraiser for the Ayaks shares at the March meeting.
Polymetal acquired Ayaks from Ovoca Gold in January 2009. Ayaks owns the license to the Goltsovoye silver deposit in Magadan. Under the terms of the acquisition, Polymetal received 4,166 shares in Ayaks (10.4% of charter capital) and a third party received 35,934 shares (89.6%).
Polymetal plans to place 7.5 million supplementary shares (about 2.4% of charter capital) in exchange for the 89.6% stake in Ayaks, thus raising its stake in Ayaks to 100%.
Shareholders who vote against the supplementary issue will receive the right to buy shares for cash. The board of directors will set the share price for those purchases later.
The resource at Goltsovoye registered with the State Reserves Commission (GKZ) is 81.33 million ounces of silver. JORC reserves are put at 69 million oz. Ayaks planned to begin development of the field in 2008 and complete it before the end of 2012.
PRECIOUS METALS
Kupol mine drives Kinross production growth
MOSCOW. (Interfax) - The launch of the Kupol gold mine in Russia's Chukotka region made a substantial contribution to production growth by Kinross Gold last year.
The Canadian company said in a statement that its worldwide gold production rose 16% last year to 1.838 million oz, including growth of 43% to 550,221 oz in the fourth quarter.
The Kupol mine, commissioned in July, produced 405,000 oz gold and 4.17 million oz silver last year.
Kinross develops 11 fields in various countries, including Kupol. The company may also form a joint venture with Russia's Polyus Gold to develop the Nezhdaninskoye field in Yakutia.
PRECIOUS METALS
GV Gold could raise $50 mln to buy new assets
MOSCOW. (Interfax) - Russian gold producer OJSC Vysochaishy (GV Gold) is considering the possibility of raising funds for the acquisition of new assets, GV Gold financial director Natalya Andreyevna told journalists on February 13.
"We are looking at transactions to acquire new assets. Both internal and borrowed funds amounting to $50 million could be used for these purposes," she said.
The company is mostly interested in assets within Russia, including in the Irkutsk region and Yakutia, where the company is currently carrying out projects.
GV Gold plans to repay a loan for 250 million rubles before July 2009 that it received from Raiffeisenbank in early 2007. The company is also considering the possibility of refinancing this loan, she said.
Andreyevna said GV Gold has no plans to reduce geological exploration. Investment in geological exploration is to total about $10 million in 2009 compared to roughly $3 million in 2008.
The company is planning to produce about 4.3 tonnes of gold this year compared to 4.1 tonnes in 2008. "Growth isn't expected to be very high this year. More considerable growth will occur when we launch the third phase of a gold recovery plant in the Irkutsk region in 2010 and a new deep-water dredge in Yakutia in 2011," she said.
The gold recovery plant will have production capacity of 3.5 million tonnes of ore per year.
The company's ore and placer gold fields are located in the Irkutsk and Amur regions as well as Yakutia.
PRECIOUS METALS
Centerra Gold to maintain 2009 output at 2008 level
MOSCOW. (Interfax) - Centerra Gold Inc. plans to maintain production at the Kumtor gold mine in Kyrgyzstan at 560,000-600,000 ounces (17.4-18.6 tonnes) in 2009, the same as in 2008, the vice president of Kumtor Operating Company (KOC), Andrei Sazanov said at a press conference on February 12.
Production each quarter this year will mirror quarterly output in 2008, he said. The production cycle is such that the first quarter will account for 15% of annual production and the fourth quarter for 40%. The company plans a two-week maintenance shutdown in the third quarter.
"Marginal production costs are calculated at $485-$525 per ounce," Sazanov said.
Production in 2008 was 80% higher than in 2007, because higher-grade ore was mined and recovery rates had risen. The average grading was 5.6 grams per tonne for Au in 2008, up from 2.57 g/t in 2007, and recoveries increased to 83.2% from 72.2%.
Gold sales came to 552,253 oz (17.18 tonnes) in 2008, 84% more than in 2007, and sales revenue to $468.3 million. Sales in the fourth quarter totaled 258,642 oz (8,044.67 kg), almost 130% higher than in the third quarter of 2008 and 260% higher than in the fourth quarter of 2007. Sales in the third quarter amounted to $208.5 million.
Higher prices and volumes drove the sales growth. The average sale price in the fourth quarter was $806 per oz and $848 for the full year, compared with $696 per oz in 2007.
Spending on geological exploration totaled $13.7 million last year, 17% more than in 2007.
Kumtor's confirmed and forecast resource amounted to 4.025 million oz (about 125 tonnes) as of December 31, 2008
Kumtor has yielded a total of 6.706 million oz (208.6 tonnes) since production began in May 1997 through December 31, 2008.
Kyrgyzaltyn, which represents the state interests in gold mining projects, owns a 15.66% stake in Centerra Gold Inc (33.869 million shares).
PRECIOUS METALS
UK firm to pour first gold at Azerbaijan's Gedabek field in April
BAKU. (Interfax) - Britain's Anglo Asian Mining Plc plans to pour its first gold at the Gedabek copper-gold field in Azerbaijan in April, the company said on its website on February 18.
"Gedabek is nearing completion, with gold production scheduled to begin in April. Despite some minor weather-related delays in the spring of 2008, the project will be completed very close to the Company's schedule and essentially within budget," the company said.
The company plans to mine and process an initial 1.2 million tonnes of ore containing gold, silver and copper per year at the 242-hectare site in western Azerbaijan, which is 1,700 meters above sea level. The gold that Anglo Asian Mining produces over a period of eight years will be exported under the Ayrim brand.
The Gedabek field contains an estimated 7.7 million tonnes of recoverable ore, graded at 1.8 g/t Au and 15.9 g/t Ag and with Cu content 0.29%. It will produce 311,154 oz Au, 1,959,109 oz Ag and 17,424,960 pounds of copper over its projected mine life.
Capital costs are $30.5 million and operating costs - $400/oz gold and $200/oz copper and silver.
Anglo Asian Mining, established R.V. Investment Group Services LLC of the United States, is the operator for a number of gold mining and exploration projects in Azerbaijan.
R.V. Investment Group Services signed a contract with the now disbanded state Azergyzyl concern in 1997 to develop six fields: one in Nakhichevan, two in the Gedabek district, and three in the Armenian-controlled Geldabjar and Zangelan districts. Azerbaijan owns 51% and the American company owns 49% of the project.
NONFERROUS METALS
S&P revises outlook on Norilsk Nickel to negative
MOSCOW. (Interfax) - Standard & Poor's Ratings Services has revised its outlook on the Russian metals and mining company OJSC MMC Norilsk Nickel (Norilsk) to negative from stable, the ratings agency said in a statement.
The 'BBB-' long-term corporate credit rating and 'ruAA+' Russia national scale rating were affirmed.
"The outlook revision reflects our view that the sharp downturn in the global metals and mining industry, notably very depressed nickel prices, will substantially affect Norilsk's profits, cash flows, and credit metrics," said Standard & poor's credit analyst Elena Anankina. "Although we have always factored cyclicality of the global mining industry into the rating on Norilsk, the current downturn exceeds historical precedents."
Under S&P's price assumptions, Norilsk's EBITDA could fall to $1.5 billion in 2009-2010, representing an approximate 70% drop from our estimate of 2008 EBITDA. Funds from operations (FFO) will barely cover already reduced capital expenditures. Although working capital inflow triggered by lower prices could help, it is inherently an uncertain source of cash. By comparison, in the first half of 2008 alone, Norilsk generated $1.3 billion in free operating cash flow after capital expenditures. Norilsk's ratio of FFO to adjusted debt could fall to only about 30% in 2009-2010 from well over 100% at the industry peak in 2007-2008.
Nevertheless, the rating on Norilsk continues to be underpinned by very healthy credit metrics before the industry downturn, a strong balance sheet with significant cash balances, and its low-cost position. This improves its resilience to the downturn and reduces external financing requirements in 2009, which is very important in today's tight capital markets.
The negative outlook on Norilsk reflects S&P's view that its profits and credit metrics could drop severely in 2009. It also reflects the uncertain economic environment in Russia. "Although Norilsk may be able to weather the current downturn, thanks to its strong balance sheet and cost position, a downgrade could occur if the downturn proves to be even more severe, if free cash flow were to turn negative in 2009-2010, or if significant 2010 refinancings were to be more challenging than anticipated," Anankina said.
NONFERROUS METALS
Norilsk Nickel not to split economics and finance division
MOSCOW. (Interfax) - MMC Norilsk Nickel has decided not to split its economics and finances division up, a source at the Arctic mining and smelting giant told Interfax late on February 12.
The source said Norilsk Nickel could deal with its financial issues on its own, without making new appointments. Dmitry Kostoyev, appointed deputy general director for economics and investment policy at Norilsk Nickel last week, will be responsible for finances as well.
Norilsk Nickel said on February 6 it had appointed Dmitry Kostoyev, formerly managing director...
|
