|
Article Excerpt
IN BRIEF
Editor's Choice
*** The owners of virtually all of Russia's largest metals companies this week joined a government commission that will handle issues related to the development of the metallurgical industry. The commission will be chaired by Deputy Prime Minister Igor Sechin. Representatives from Evraz, NLMK, Severstal, RUSAL, Metalloinvest, TMK, MMK, UMMC, OMK, Norilsk and Mechel will all sit on the commission, which will be in charge of coordinating the actions of the executive authorities in drawing up and realizing the main areas of the government's policy in the metals industry. The commission members will be involved in writing legislation concerning regulation in the industry as well as raw materials markets.
*** MMC Norilsk Nickel, the world's biggest nickel and palladium producer said following a board meeting held this week that it closed Q408 with net losses of almost 34 billion rubles to Russian Accounting standards. It also said it expects its Russian units to close 2009 with EBITDA $1.8 billion on sales of $6.3 billion. No decision was reached on the fate of the Arctic mining and smelting giant's electricity assets, most notably OGK-3. Fitch ratings this week downgraded Norilsk's outlook to negative on the back of falling credit metrics.
*** UC RUSAL this week announced it plans to put off repaying the principal part of its debt to foreign banks, $7.4 billion, for up to two years from the expiry moment of a moratorium agreement that has been signed by more than 90% of creditors and took effect on March 11. The company had earlier deferred paying back the principal for the next three months. In repaying the principal, which is to take five to ten years, UC RUSAL plans to follow a schedule linked to aluminum prices at the London Metal Exchange.
*** Archangel Diamond Corp, the core owner of which is De Beers, this week said it is resuming litigation over the rights to the Verkhotina diamond field and seeking damages following the termination of a deal to acquire 49.9% of Lukoil subsidiary Arkhangelskgeoldobycha (AGD). The ownership of the Verkhotina license had been the subject of a long-standing dispute and Archangel has resumed its efforts to establish jurisdiction over Lukoil in the State of Colorado. A decision on the jurisdictional issue is expected by a court in Denver in late Q3 or Q4 2009 after. ADC claimed $4.8 billion, including $1.2 billion in losses and $3.6 billion in penalties, in 2005, when the Colorado court last heard the case.
*** The government of Yakutia this week suggested that the Mechel coal and steel group issues infrastructure bonds to raise funds to continue building a rail road to the Elga coal field. The internal republic's president said that because Mechel was on the list of backbone enterprises, the Yakut authorities had asked the federal government to help raise funding for the project. Infrastructure bonds are a new instrument: Russian Railways (RZD) is currently rounding off the placement of seven issues worth a total of 100 billion rubles to fund its 2009-2011 investment program. Reports say Transneft and Gazprom are also considering this. Mechel has said the company will need $1 billion-$1.5 billion over five years to complete its coal industry projects.
*** The board of directors of Polyus Gold this week approved a feasibility study for the development of the Natalka gold deposit in the Magadan region, one of the largest in the world. Russia's biggest gold miner plans to launch the gold recovery mill at the deposit in 2013, as previously planned and the mill will initially produce 10 tonnes of gold per year, which is the maximum amount that can be produced in 2013 given the region's energy capacity. Capacity will be increased in future, and the mine is projected to produce 40 million tonnes of ore annually by 2022.
TOP STORIES
Sechin, owners of metals giants to draw up state policy in metals industry
MOSCOW. (Interfax) - The owners of virtually all of Russia's largest metals companies have joined a government commission that will be handling issues related to the development of the metallurgical industry.
As expected, Deputy Prime Minister Igor Sechin will chair the commission. Under a March 26 governmental decree, Deputy Trade and Industry Minister Andrei Dementiev was appointed deputy chairman.
The commission will also include Alexander Abramov from Evraz, Vladimir Lisin from Novolipetsk Steel, Alexei Mordashov from Severstal, Oleg Deripaska from United Company RUSAL, Alisher Usmanov from Metalloinvest, Dmitry Pumpyansky from TMK, Vladimir Rashnikov from Magnitogorsk Iron & Steel Works (MMK), Andrei Kozitsyn from Urals Mining and Metals Company (UMMC), Anatoly Sedykh from United Metallurgical Company (OMK) and Igor Zyuzin from Mechel coal and steel group, which became the target of harsh criticism from the government last summer due to its pricing policy.
MMC Norilsk Nickel CEO Vladimir Strzhalkovsky and Russian Technologies Chairman Sergei Chemezov received seats on the commission's board in addition to representatives of academic circles, lobbying structures (the Pipe Industry Development Fund) as well as ministries and agencies (the Federal Antimonopoly Service, the Natural Resources and Ecology Ministry, the Economic Development Ministry, the Federal Customs Service, the Education and Science Ministry, the Transportation Ministry, the Finance Ministry, the Federal Tariffs Service, the Energy Ministry and the Industry and Trade Ministry).
The commission will be in charge of coordinating the actions of the executive authorities in drawing up and realizing the main areas of the government's policy in the metals industry. The commission members will be involved in writing legislation concerning regulation in the industry as well as raw materials markets. The commission must determine measures to bolster the production of metals in shortage, provide the domestic market with high technology metals products and analyze the activities of the executive authorities and organizations in the development of the industry's raw materials base and infrastructure.
TOP STORIES
Norilsk Nickel posts Q4 net loss of 33.8 bln rubles
MOSCOW. (Interfax) - MMC Norilsk Nickel, the world's biggest nickel producer said following a board meeting held March 26 that it closed Q408 with net losses of almost 34 billion rubles to Russian Accounting standards. It also said it expects its Russian units to close 2009 with EBITDA $1.8 billion on sales of $6.3 billion. No decision was reached on the fate of the Arctic mining and smelting giant's electricity assets, most notably OGK-3.
Q4 losses
MMC Norilsk Nickel closed the fourth quarter of 2008 with net losses of 33.898 billion rubles to Russian Accounting Standards (RAS), the metals giant said in a statement.
Net losses were 56.249 billion rubles in the third quarter.
The results are non-consolidated and only include Norilsk Nickel's Arctic Branch. They do not include Kola Mining Company in Russia, assets based in Finland and Australia, the company's stake in Stillwater Mining in the United States or assets bought from Canada's LionOre.
Net losses fell 49% in Q4 compared with Q3 due partly to a decrease in the negative revaluation of financial investments and a reduction in profit tax, due to lower revenue from the sale of metals resulting from the drop in world prices for nonferrous and precious metals.
Net losses to RAS were 52.2 billion rubles in the nine months ended September 30, so net losses for the year were approximately 86 billion rubles, compared with profit of 170.2 billion rubles in 2007.
EBITDA
Norilsk Nickel expects its Russian units to close 2009 with EBITDA (earnings before interest, tax, depreciation and amortization) of $1.8 billion on sales of $6.3 billion, Norilsk Nickel expects its Arctic Branch and Kola MMC to produce at least 220,000 tonnes of nickel in 2009.
Copper and platinum-group metal production could fall 4%-5% and 3%-4%, respectively, due to lower metal content in ore.
The approved 2009 budget assumes nickel will average at $10,000 a tonne, copper at $3,300, platinum at $850 per Troy ounce and palladium at $190 an ounce. These are the prices that were forecast in December, and the company has worked on the basis of that forecast in the first quarter, the press release said.
Planned investments, including long-term financial investments and an investment reserve, are approximately $1 billion, including $600 million for capex and another $200 million for equipment purchases.
Sales-related expenditure is scheduled to fall 60%, and expenditure on sport by more than 40%. Spending on the head office will be cut considerably, and the construction of non-core assets in the city of Norilsk will be put on hold. Staff cuts of approximately 4%, mainly affecting geological and office staff, are expected. All of these measures should enable Norilsk Nickel to reduce production costs to $6,700 per tonne at Russia-based enterprises on average.
The 2009 budget also assumes that the ruble will average at 35.1 rubles/$1 in 2009.
Norilsk earlier forecast it will produce 290,000-305,000 tonnes of nickel in 2009 (298,000 tonnes in 2008), 385,000-400,000 tonnes copper (420,000 tonnes), 600,000-620,000 ounces platinum (625,000 oz) and 2.61 million-2.625 million oz palladium (2.764 million oz).
OGK-3
The board of directors at Norilsk failed to pass a final decision on the fate of its energy assets, which include Wholesale Generating Company No. 3 (OGK-3), a source close to one of the company's shareholders told Interfax.
The source said the board took a report on the company's energy assets "under advisement" and issued instructions "to further draw up all possible options."
As reported earlier, there are two main options for the future development of the mining giant's energy assets. One proposes to carve out OGK-3 under a scheme similar to the earlier spin-off of Polyus Gold. Another possibility is to sell this power company.
Norilsk's two largest shareholders - Vladimir Potanin's Interros and Oleg Deripaska's UC RUSAL - are in favor of spinning off energy assets into a separate company. Norilsk management, meanwhile, is proposing to sell OGK-3, and newspapers Vedomosti and Kommersant have named Inter RAO UES as a potential buyer.
The issue of the energy assets is a fairly complex one, as a "proportional division would worsen the financial indicators of Norilsk Nickel itself and make creditors uneasy," while a sale is not supported by company shareholders, a source familiar with the situation told Interfax.
A number of Norilsk Nickel deals, including the issue of spinning off energy assets, have again drawn attention this month from Metalloinvest co-owner Alisher Usmanov, who controls about 5% of shares in Norilsk, as well as from banks VEB and VTB, who hold shares in the mining company has collateral.
VEB and VTB, which hold 25% and 16.7% of Norilsk Nickel as collateral, respectively, wrote to the board of directors last week warning it and the company itself against any decisions to dispose of any assets as this would reduce the value of the collateral.
Transactions approved at February's board meeting - the sale of the shares that had been repurchased and the OGK-3 spin-off - are not to Alisher Usmanov's liking, and Farhad Moshiri, Metalloinvest's board chairman and representative on the Norilsk Nickel board, has already set down his arguments against these deals.
It was reported this week that Deputy Prime Minister Igor Sechin has demanded information from the metals giant about a number of transactions involving the company.
Norilsk Nickel at the end of 2007 made a proposal to shareholders to carve out non-core energy assets, not involved in supplying the company's Arctic branch, into the independent company EnergoPolyus, as Norilsk had previously spun off its gold mining assets into Polyus Gold. EnergoPolyus was to become one of the biggest independent investors in Russia's electricity sector, owning about 6% of installed electricity capacity in Russia.
In early February, the Norilsk board approved in principle divestiture of the generating assets. However, so far only a 1.7% stake in...
|
