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Article Excerpt
IN BRIEF
Editor's Choice
*** Banks agreed this week extend their standstill on debt repayments by Oleg Deripaska's UC RUSAL until July 28. Talks with an advisory committee of creditors are on-going, with international banks seen waiting for a major decision by Vnesheconombank (VEB) regarding the rescheduling of credit liabilities. Once the talks have ended, the banks, which number more than 70, will have to secure approval for the main terms of the restructuring from their own credit committees, and this is why the standstill has been extended.
*** Metalloinvest co-owner Alisher Usmanov said this week that he has no plans to divest his MMC Norilsk Nickel holdings, which amount to 4% according to the most recent information, and instead may consider increasing his stake. Usmanov also said the project to create a mining and metals giant around Norilsk, RUSAL, Metalloinvest and Russian Technologies may have become less pressing, but is still relevant for the future. Meanwhile, Bonico Holdings Co. Limited, the beneficiary of which is Vladimir Potanin, increased its stake in Norilsk to 15.39% this week and Vnesheconombank acquired a 3.68% stake in the Arctic mining and smelting giant as part of its investment of money from the National Welfare Fund.
*** Steelmaker MMK this week posted financials showing it closed 1Q09 with net losses of $110 million to IFRS, compared with profit in the same period of last year. Sales revenue fell 54.5%. Revenue in Q1 2009 was $217 million less than in Q4 2008, and net losses were $390 million lower, with fluctuations in the dollar's rate blamed in part. Despite the volatile nature of the steel industry at present, MMK is continuing to invest in capex, with long-term investment up from $138 million to $399 million during the quarter. MMK said the instability of the global capital and credit markets was causing uncertainty over the accessibility and cost of borrowing, which could affect the company's profitability. It also said uncertainty regarding the interpretation of tax legislation could expose MMK to additional taxation, fines and penalties.
*** A special committee of independent directors at High River Gold (HRG), which owns Russian gold producer Buryatzoloto and interests in other Russia-based gold and silver mining projects, has recommended that its board of directors accept an offer of 71 million Canadian dollars by Severstal to buy outstanding and new shares. HRG said that it would conduct a 10%-share issue and that Severstal would buy it for C$0.18 a share Severstal will up its stake 57.3% of HRG as a result. Severstal will buy the remaining 42.7% of HRG for C$0.22 a share. The proceeds from the share issue will be used to clear Buryatzoloto's debt of $10 million, due for repayment on June 12.
*** Russian gas giant Gazprom said this week that it is not planning any new purchases in the power industry, but is prepared to consider the acquisition of coal assets. Gazprom already utilizes coal generation among its current assets and is on the look out for proposals of interest. Gazprom has long been interested in increasing its coal sector portfolio and had a potential merger with Russia's biggest energy coal producer, SUEK, denied by regulators last year.
*** Coal producer SUEK this week said that it believes demand for coal, which plummeted in the fall of 2008 owing to the global financial crisis, is beginning to stabilize, but warned it is still a long way form a total resurgence. Metallurgical demands are seen normalizing, and the irregularly deep decline in demand witnessed in the electricity generation sector is expected to correct soon. It also said there have been some signs of improvement.
*** Alrosa plans to sustain last year's diamond production in 2009, despite a 15%-drop in world diamond prices, the Yakutia-based diamond monopoly said this week. Diamond sales on the world market resumed in March and stones are currently being sold at 2007 prices. The Alrosa board suggested that overall diamond output, including by the Alrosa-Nyurba subsidiary, might be $2.631 billion this year. The previous forecast stated that diamond mine output might be $1.87 billion in 2009. Regarding its involvement in the Luo-Kamachia-Kamajiku joint venture in Angola, Alrosa is thinking of pulling out as it does own a direct stake and the project is currently running at zero capacity.
PRECIOUS METALS
Commission clears Nafta Moskva to buy Polyus Gold shares
MOSCOW. (Interfax) - The Russian government's commission for foreign investment oversight cleared an offshore company controlled by Suleiman Kerimov's Nafta Moskva to buy shares in Polyus Gold.
"The Polyus Gold request has been granted," Federal Antimonopoly Service chief Igor Artemiyev told reporters on June 8.
The commission approved seven deals, including the acquisition of shares in Tver Railcar Construction Works (TVZ). He said half the applications were from Russian investors operating via offshore companies, and half from foreign investors.
PRECIOUS METALS
High River Gold accepts Severstal offer
TORONTO. (Interfax) - A special committee of independent directors at High River Gold (HRG), which owns Russian gold producer Buryatzoloto and interests in other Russia-based gold and silver mining projects, has recommended that its board of directors accepts an offer of C$71 million (US$63.9 million) by Severstal to buy outstanding and new shares.
Severstal already indirectly owns 53% of HRG.
HRG said in a statement that it would conduct a 10%-share issue in a few days and that Severstal would buy it for C$0.18 a share (C$10.6 million in total). Severstal will own 57.3% of HRG as a result. The proceeds from the share issue will be used to clear Buryatzoloto's debt of $10 million, due for repayment on June 12.
Severstal will buy the remaining 42.7% of HRG for C$0.22 a share, representing a premium of 13% over the average price of the company's shares over a 20-day period ended May 21, which was the date before Severstal posted its initial offer to buy the minority shareholders out. It could therefore cost Severstal C$61 million to buy the outstanding shares in HRG.
HRG currently has 590,193,673 issued shares.
Severstal informed HRG's board of directors on May 19 that it intended to offer to buy minority shareholders out for $0.18 a share. The committee of independent directors was set up to examine the offer.
High River announced at the end of March that it discussed a possible share offer to minorities, provision of project financing or debt relief, but the sides were unable to reach agreement.
Standard Bank ceded creditor rights to Severstal at the end of April to $27 million in loans to High River Gold.
High River Gold owns 84.9% of Buryatzoloto, 50% in the company that holds the license to the Prognoz silver deposit in Yakutia, and 99% of the company that owns the license to the Berezitovoi.
PRECIOUS METALS
KazakhGold enters into $9.4 mln loan agreement with Gold Lion Holdings Limited
LONDON. (Interfax) - KazakhGold Group Limited (KazakhGold) announced on June 5 that it has entered into a $9.375 million loan agreement with Gold Lion Holdings Limited in order to fund the outstanding coupon payment on its Eurobond, issued 31 October 2006, which was payable no later than Friday, 5 June 2009.
Gold Lion Holdings Limited holds 22.1 million shares in KazakhGold for the benefit of the Assaubayev Family.
In accordance with the terms of the Eurobond, the loan from Gold Lion Holdings is subordinated and cannot be redeemed until 12 months after the redemption of the Eurobond, due 6 November 2013. The loan will bear interest of 10%.
As reported earlier, Fitch Ratings has downgraded KazakhGold Group Limited's (KazakhGold) Long-term Issuer Default Rating (IDR) to 'C' from 'CCC' and downgraded KazakhGold's senior unsecured rating to 'C' from 'CCC', due to KazakhGold's failure to make a coupon payment of $9.375 million on its $200 million senior unsecured notes which was due 6 May 2009.
PRECIOUS METALS
Fitch Upgrades KazakhGold to 'CC' from 'C'
ASTANA. (Interfax) - Fitch Ratings on June 11 upgraded KazakhGold Group Limited's (KazakhGold) Long-term Issuer Default Rating (IDR) and KazakhGold's senior unsecured rating to 'CC' from 'C', respectively.
According to a press release, the agency has simultaneously placed both ratings on Rating Watch Negative (RWN). The Recovery Rating for the senior unsecured debt is 'RR4'.
"The upgrade reflects the announcement by KazakhGold that it has borrowed USD9.375m from Gold Lion Holdings Limited in order to fund the coupon payment on its Eurobond which was due on 6 May 2009. As such, the coupon payment was paid within the bond documentation's 30-day cure period," Fitch said in the statement.
Gold Lion Holdings Limited is an investment vehicle which holds 22.1 million shares in KazakhGold on behalf of the controlling Assaubayev family. Fitch understands that the loan to KazakhGold is subordinated, bears interest of 10% and can not be redeemed until after 12 months after the redemption of the Eurobond, due 6 November 2013.
"The RWN reflects Fitch's concerns about the company's near-term operational strategy and financial performance. The agency expects to resolve the RWN following a meeting with management within June 2009 to review the issuer's operational and financial strategy for the remainder of 2009 and thereafter. The agency is also closely monitoring the progress of KazakhGold's potential acquisition by Polyus Gold and its likely impact on KazakhGold's credit profile," reads the statement.
Further negative rating actions remain a possibility should the proposed Polyus Gold acquisition fail, or should KazakhGold not procure alternative sources of new funding to improve its current financial position.
Fitch also notes that KazakhGold's corporate transparency remains an issue.
NONFERROUS METALS
Usmanov not planning to leave Norilsk Nickel; may consider boosting stake
ST. PETERSBURG. (Interfax) - Alisher Usmanov, the co-owner of Metalloinvest, does not plan to divest his MMC Norilsk Nickel holdings, which amounts to 4% according to the most recent information.
Instead, Usmanov may consider increasing his stake.
"If circumstances allow [the stake may be increased]," he told Interfax on the sidelines of the economic forum in St. Petersburg.
Oleg Deripaska's United Company RUSAL (UC RUSAL) and Vladimir Potanin's Interros are the biggest shareholders in Norilsk Nickel, with 25% + 2 shares and 25% + 1 share each.
Usmanov also said the project to create a mining and metals giant around Norilsk, RUSAL, Metalloinvest and the state Russian Technologies (Rostekhnologii) corporation might not be so pressing today, but it would definitely be relevant in the future.
"Of course all people are thinking about right now is survival. But there is still the need to consolidate the mining and metals sector and the idea to create the consortium will definitely return to the agenda in time," he said.
RUSAL co-owner and board chairman Viktor Vekselberg...
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