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IN BRIEF
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*** Vladimir Potanin's Interros said this week that it is happy with the current equity distribution at MMC Norilsk Nickel but would be prepared to buy the stake owned by Oleg Deripaska's UC RUSAL should it be put up for sale. Interros had shown interest in the stake now owned by RUSAL when Potanin's former business partner Mikhail Prokhorov originally put it up for sale last year. Were Interros ever to receive the stake, it would bring Potanin's stake in the world largest aluminum and alumina producer to 50% plus three shares. Sources suggested Potanin could look to bring on partners such as the owners of Uralkali or SUEK, which could revive plans for a consolidated mining industry and a diversified "champion" company to lead it. RUSAL has no plans to abandon its stake, despite currently being involved in debt renegotiations with several banks, and its stake in Norilsk has been pledged as collateral.
*** The Natural Resources and Ecology Ministry this week said that Russia could face problems in the solid subsoil resources sector from 2025, but dismissed claims that there could be a shortfall in Russia's hydrocarbon reserves, dismissing any speculation to this end as premature. The Ministry said it is not planning license "holidays", and that deadline extensions for holders of licenses to subsurface resources will not be provided. The Ministry also noted falling interest in auctions and tenders for subsurface deposits and said budget spending on geological exploration has been cut to 18.9 billion rubles from the planned 22 billion rubles.
*** A source in the nuclear industry told Interfax this week that Russia has expressed interest in diversifying uranium assets abroad. The issue is likely to be discussed during President Dmitry Medvedev's landmark tour to sub-Saharan Africa, in particular during his visit to Namibia. Russia is seen wanting to diversify uranium reserves, through acquiring either licenses for the development of fields or stakes in companies that own fields. The source said current market conditions, such as the falling cost of uranium, mean the situation for acquiring assets abroad is ideal. Assets in Australia are also thought to be of interest.
*** Russia coking coal and steel producer Mechel this week announced it will cut its planned capex for the period 2009-2012 by $1.1 billion. The group said in a statement filed with the U.S. Securities and Exchange Commission that it planned to invest $2.9 billion in the period, including $1.4 billion in its upstream segment, $1.2 billion in steel, $110 million in ferroalloys and $36 million in energy. Mechel said it would continue to invest according to the cash means at its disposal and market conditions, and that its investment plans were therefore subject to adjustment. Steel segment projects are targeted at improving efficiency while maintaining existing output, and will be mainly focused on Chelyabinsk Metallurgical Plant and Izhstal. Meanwhile, Mechel pledged the production assets of its Southern Kuzbass Coal Company, and the Chelyabinsk plant, as security for a VTB loan of 15 billion rubles. Mechel has also guaranteed a $1-billion loan from Gazprombank with 35% of the shares in coal producers Yakutugol and Southern Kuzbass. It has also borrowed 3.3 billion rubles from Sberbank, repayable in 2010.
*** Viktor Vekselberg's Renova Group announced this week that it plans to explore and mine gold and platinum deposits on the Kamchatka Peninsula in conjunction with China National Gold Group Corp (CNGGC). The two companies will work together to bolster reserves and build joint mining enterprises. Renova owns the companies Kamchatka Gold, plans to build several other mining enterprises, and ramp gold production up to 8 tonnes in two or three years and 14 tonnes by 2015-2016, and Koryakgeoldobycha, which mines platinum.
*** Sergei Vybornov, the president of Alrosa, was not elected to the supervisory board at the Russian diamond miner at its AGM this week, due to a government decision to elect independent directors rather than management. Independent directors were elected to the supervisory board for the first time at the AGM. The independent directors included representatives from RZD, VTB, VEB, the Russian Nanotechnology Corporation, and a former Russian antimonopoly policy minister who is an independent director at silver and gold miner Polymetal. The Republic of Yakutia is represented on the new board by its president, prime minister and several other members of its government. As expected, shareholders voted to waive dividends for 2008 and to reinvest the bulk of last year's net profit, which was 1.573 billion rubles.
TOP STORIES
Interros interested in RUSAL's Norilsk stake if this put up for sale - source
MOSCOW. (Interfax) - Vladimir Potanin's Interros is happy with the current equity distribution at MMC Norilsk Nickel but would be prepared to buy the stake owned by Oleg Deripaska's United Company RUSAL (UC RUSAL) if this is put up for sale, a source at Interros told Interfax.
"The current status quo suits us fine, and we're not keen to see any changes in the Norilsk shareholder set-up. But we've always said we're interested in the stake that used to belong to Mikhail Prokhorov [and is now owned by RUSAL], and this is still the case,' the source said.
RUSAL owns 25% plus two shares and Potanin controls 25% plus one share in Norilsk, according to a filing that the businessman himself made with the US Securities and Exchange Commission. RUSAL's stake is held by Vnesheconombank (VEB) as collateral for a $4.5 billion loan that the aluminum giant took out last autumn to refinance an earlier loan from foreign banks that RUSAL used to find the purchase of the Norilsk stake from Prokhorov.
Russia's Vedomosti and Kommersant newspapers on June 23 said Potanin was interested in RUSAL's stake in Norilsk. Most of the Interros stake has also been pledged as loan security, with VTB, and the newspapers did not say how much Interros might be prepared to pay for RUSAL's stake. Interros itself was unavailable for comment.
A source close to Interros told Vedomosti that Potanin was prepared to involve partners - Uralkali owner Dmitry Rybolovlev or Siberian Coal and Energy Company's (SUEK) Andrei Melnichenko and Sergei Popov - in the potential deal to buy RUSAL's stake. If it does, Interros would not own more than 30% of Norilsk: Uralkali and SUEK would buy 20% of Norilsk between them in this scenario, and Potanin would not have to offer to buy minority shareholders out.
Uralkali, which is Russia's biggest potash miner, figured in an earlier plan aired by Potanin and Deripaska to consolidate the Russian mining and metals industry involving Norilsk, Evraz Group, Mechel and the state. The consensus on the market at the time was that this was a "poison pill", intended to derail another option that Alisher Usmanov, the Metalloinvest owner, put on the table, and it has not yet been discussed in detail.
RUSAL, which is negotiating the rescheduling of debt to VEB among other creditors, does not plan to part with its shares in Norilsk. "The acquisition of the shares in Norilsk Nickel is a strategic investment for us, and we are not currently thinking about putting the shares up for sale," RUSAL spokeswoman Vera Kurochkina told Interfax. Kurochkina said Interros had not approached RUSAL about a possible deal.
VEB's supervisory board extended its loan repayment term for RUSAL by a year at the beginning of June until the autumn of 2010.
Viktor Vekselberg, RUSAL's board chairman, said in an interview with Vedomosti at the end of April that RUSAL was not currently thinking about parting with its shares in Norilsk Nickel. "There are interested buyers out there," he said. Vladimir Potanin, who also holds a blocking stake in Norilsk, is just one of them. "There's a lot of interest. People still have faith in Norilsk Nickel," Vekselberg said.
If RUSAL does decide to sell the Norilsk stake it won't be for less than it paid. "Everybody knows how much we paid and we don't want to sell for less. And we won't have to, you'll see," Vekselberg said.
In addition, Sergei Chemezov, head of the state Russian Technologies (Rostekhnologii) corporation, told Vedomosti at the end of May that Rostekhnologii corporation wants to obtain the shares in Norilsk Nickel that the mining and smelting giant's core owners have pledged as loan collateral with VEB and VTB.
"I'll be frank: this asset [the pledged shareholdings] interests us. We already have metallurgical assets, for example the RT-Metallurgy holding," Chemezov told the paper.
Chemezov re-iterated his interest in creating a global mining company around Norilsk Nickel and Metalloinvest, whose core owner Alisher Usmanov is also a minority shareholder in Norilsk Nickel.
Usmanov reached an agreement on strategic partnership with Interros in 2008 and became a minority shareholder in Norilsk Nickel, but as time passed his views on how the company should go forward differed with those of Potanin.
"Should such a deal happen, it would not necessarily be positive for Norilsk minorities. In theory, there should be an offer to Norilsk minorities, however in Russia, these offers seem to be side stepped by legal technicalities," UralSib Capital said in a comment on the June 23 newspaper reports.
"Interros's corporate governance record also leaves much to be desired, as it has systematically stripped Norilsk Nickel of its cash. Apart from corporate governance issues, we believe that Norilsk Nickel's shares have already benefitted from market expectations of higher commodity prices associated with US dollar weakness and a global economic recovery," UralSib said.
"With no clear growth strategy, Norilsk Nickel remains a pure play on the prices of its key commodities, nickel, copper, palladium and platinum, as well as movements in the ruble exchange rate to the dollar. We believe that at current levels, Norilsk Nickel shares are pricing in an overly optimistic price scenario for nickel and copper in 2009 and 2010. Given the weak fundamentals and uncertain shareholder structure, we would not chase the valuation of Norilsk Nickel higher," UralSib said.
"In our view, despite RUSAL's difficult financial position (gross debt of $15 bln), the sale of its blocking stake in Norilsk Nickel is highly unlikely this year since it is pledged as collateral for the VEB loan. Another reason why the deal may not happen soon is the current $4 billion valuation of the 25% stake in Norilsk Nickel, since we do not believe RUSAL would be wiling to sell at this price and may require a substantial premium to the market," it said.
PRECIOUS METALS
Polymetal shareholders back share issue
MOSCOW. (Interfax) - Shareholders in Polymetal, Russia's biggest silver producer and a major gold producer, approved the placement of 84.375 million shares by private subscription to be used as transaction currency at an extraordinary meeting on June 19, the company...
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