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Article Excerpt
IN BRIEF
Editor's Choice
*** Information released by Kimberly Process headquarters this week shows that Russia was the world's biggest diamond producer by carats in 2008, and the second biggest by value. Russian diamond mine output fell 4.5%, but global output rose 6.7%. Botswana held on to top spot in value terms, a place it has held since Kimberley first produced records in 2004. Lesotho mined the world's most expensive diamonds, averaging at $879.97 per carat. Russian diamonds averaged just over $101. Diamond prices climbed rapidly until September last year, when they started to fall as demand shrank due to the crisis. The biggest mining companies cut diamond sales to the market and then output, so the full effects of the crisis in the diamond industry will not be felt until 2009. Yakutia-based diamond monopoly Alrosa has since sold $150 million in uncut diamonds on the market after resuming commercial sales in July.
*** The world's largest aluminum and alumina producer, Russia's United Company RUSAL, this week transferred its blocking stake in Arctic metals and smelting giant MMC Norilsk Nickel from offshore company Gershvin Investments Corp. Ltd., a wholly owned UC RUSAL subsidiary, to Russia-based United Company RUSAL Investments Management. The transfer of the stake to a Russian entity was envisioned in an agreement on a loan from Vnesheconombank (VEB) for which the stake was collateralized. RUSAL, one of the first Russian companies to take advantage of the opportunity to refinance external debt with VEB in fall 2008, when it attracted $4.5 billion to settle a loan with Western banks to purchase the blocking stake in Norilsk Nickel. RUSAL last week agreed to the terms of debt restructuring with a coordinated committee of its creditors, under which it will settle its debt to international banks within seven years. RUSAL has periodical debt reduction targets in place and will seek to repay a total of $5 billion of debt owed to all lenders by the fourth quarter of 2013.
*** The Russian government plans to use funds received from privatizations to cover the budget deficit in 2010, Deputy Prime Minister and Finance Minister Alexei Kudrin announced this week. The deficit, forecast by Kudrin's ministry at being up to 7.5% of GDP, will also be reduced by sales of various reserves, including precious metals. Between the privatization revenue and reserves sales, it is hoped that the budget will receive upwards of 17 billion rubles.
*** Russia's biggest steel makers could substantially increase production in July compared with June, Troika Dialog said in an analytical survey published this week. It said that should this trend continue MMK and Severstal are well positioned and might substantially outperform the other companies in the sector in Q3. MMK boosted its daily production by almost 13% in July, indicating capacity utilization of roughly 75%, up from 60% in the second quarter. Severstal increased daily production at its main facility in Cherepovets by 14%, which puts it on track to exceed production forecasts by up to 6% for the year. Evraz's daily production was up 13% thanks to startup of a blast furnace at ZSMK at the end of June after being idled half the year. The group's Russian capacity is now near 100% utilization, although it reduced its capacity by roughly 1.5 million tonnes a year by taking the open-hearth furnace at NTMK out of service.
*** The Russian Federal Customs Service this week said it wants to authorize 13 regional customs offices to issue permits for processing ferrous and nonferrous metals outside Russia's customs territory. The metals covered by the proposal include iron, steel and manufactures, as well as copper, nickel, aluminum, lead, zinc, tin and other non-precious metals. The FCS had earlier proposed a ban on internal tolling for goods for which an export duty has been established. Processing outside Russian customs territory involves receiving FCS permission to transport a commodity outside Russia for a term of not more than two years for processing, and then bringing it back to Russia with full or partial exemption from VAT and import duties.
PRECIOUS METALS
Highland Gold ups H1 gold production 14%
MOSCOW. (Interfax) - Highland Gold Mining Ltd boosted output of the metal in Russia 14% year-on-year in the first half of 2009 to 78,421 ounces, the company said in a statement.
HGM is currently mining only one field, Mnogovershinnoye (MNV), in the Khabarovsk territory. It said the higher production figures were as a result of stabilised ore feed to the process plant and improvements to the existing processing technology.
HGM continued to prepare new facilities for commissioning. In H1 2009 the company set up the equipment for start-up and operation at the Novoshirokinsky field in the Trans-Baikal territory. At the same time the economic model for the project was reassessed.
As a result of this reassessment and in agreement between HGM and its partner for the project Kazzinc, a decision was made to commission the plant in compliance with license terms which require starting operations by October 1, 2009.
It is planned that by the end of the year the mine will process up to 30,000 tonnes of low-grade ore accumulated in stockpiles. During this period equipment will go through start-up adjustment and the whole technological process will also be fine-tuned. Full scale ore processing will start with the beginning of mining operations in January 2010. Anticipated gold production over the life of mine, 2023, is expected to be 1.5 million ounces in gold and gold equivalents.
In Q2 the State Committee for Reserves (GKZ) approved new C1+C2 reserve figures to be included into the state balance following a review of a revised cut-off grade study submitted by the Company. At a cut-off grade of 1.8 g/t approved C1+C2 in-pit reserves for the Taseevskoye open-pit amount to 3.39 M ounces of gold contained in 20.24 million tonnes of ore with an average gold grade of 5.22 g/t.
The updated reserve figures at Taseevskoye represent a more than twofold increase compared to the previously approved reserves of approximately 44.1 tonnes and are the result of an extensive exploration drilling program conducted in 2006 and 2007 for a total of more than 35,000 metres.
By the end of 2009 the Company plans to complete a bulk sampling programme and develop optimal processing flow sheets for ores from both the Taseevskoye deposit and the ZIF-1 tailings. The results of this work are expected to become available in H1 2010.
Early July 2009, the GKZ passed a decision to approve a C1+C2 gold reserve at the Belaya Gora property which is located 66 km south from its operating Mnogovershinnoye mine. The reserve will be registered with the state balance.
Accordingly, at a cut-off grade of 0.7 g/t the in-pit C1+C2 reserves at Belaya Gora amount to 820,000 ounces of gold contained in 7,286,000 tonnes of ore with an average gold grade of 3.5 g/t. The Belaya Gora deposit is planned to be mined by open-pit which will cover the two adjoining prospects Stockworks and Pologoye.
The company has started a feasibility study for Belaya Gora investigating various options for development.
HGM is owned by Millhouse, representing billionaire Roman Abramovich and his partners; Barrick Gold; and Tremadon Ventures, whose beneficiaries are Evraz Group shareholders Alexander Abramov and Alexander Frolov.
PRECIOUS METALS
Govt to receive use precious metals sales, privatization to cover budget deficit in 2010
MOSCOW. (Interfax) - The Russian government plans to use funds received from privatizations and reserve sales to cover the budget deficit in 2010, said Deputy Prime Minister and Finance Minister Alexei Kudrin on Thursday.
Kudrin said that around 7 billion rubles would be received from privatization.
"In addition, various reserves will be sold, including precious metals, to cover the deficit. However, this will be a small amount coming to less than 10 billion rubles," he said.
In addition, Kudrin said that funds received from returned loans (earlier provided to Russia's regions and other countries) would be used to cover the budget deficit.
NONFERROUS METALS
UC RUSAL agrees to debt restructuring terms with creditors
MOSCOW. (Interfax) - Russia's United Company RUSAL, the world's largest aluminum and alumina producer, has agreed to the terms of debt restructuring with a coordinated committee of its creditors, the company said in a July 30 statement.
Under the agreement, UC RUSAL will settle its debt to international banks within seven years. During the first four years, "RUSAL will focus on maximizing efficiencies across the business and taking full advantage of the recovery in demand," the statement says. RUSAL has periodical debt reduction targets in place and will seek to repay a total of $5 billion of debt owed to all lenders by the fourth quarter of 2013, it says.
"During this period principal repayments will be made on a 'pay-if-you-can' basis based on the performance of the business, thereby ensuring the full sustainability and integrity of its operations. Interest will be paid partly in cash, at a rate ranging from LIBOR + 1.75% to 3.5%, with the remaining portion to be capitalized. Furthermore, in order to preserve cash for lenders and the business, no dividends will be paid until such a time that Net Debt/EBITDA reaches 3x," the company said.
"The second phase of the restructuring will involve the refinancing of the remaining debt by existing lenders for an additional three years. Such refinancing will be at RUSAL's option, as it may opt for an alternative refinancing of the debt on market terms should this prove more favorable to the company," the statement says.
"The Coordinating Committee has also approved the use of the company's cash flows to finance the completion of the construction of the Boguchanskaya Hydro Power Plant, a priority project of strategic importance for the company," it says.
"The restructuring is subject to credit committee approval by RUSAL's international lenders, as well as finalization of relevant legal documentation. RUSAL also expects to reach an agreement with its Russian lenders in the coming months," the statement says.
Sources in banking circles told Interfax earlier that UC RUSAL's creditor banks had approved extending the standstill order on the aluminum giant's debt to September 18.
"The next and final phase of the restructuring is agreeing the terms of the restructuring approved by the creditors' committee and RUSAL in the loan committees of the banks, which will require one or one and a half months," one of the sources said.
Another source said that RUSAL had accepted the creditors' condition concerning the potential sale of its 25% stake in MMC Norilsk Nickel if the stake's market value rises to exceed the value of RUSAL's entire debt. The stake is currently held by Vnesheconombank (VEB) as loan security.
RUSAL has a total of $16.8 billion in debt, including $2.8 billion owed to Mikhail Prokhorov's Onexim group, on which a restructuring deal has already been concluded. RUSAL owes another $4.5 billion to VEB and a total of $7.4 billion to Western creditors.
The major Russian creditor banks are Gazprombank, Sberbank Russia and VTB, which are each owed $600 million-$700 million. RUSAL also owes about $90 million to Alfa Bank.
The coordinating committee includes SMBC, ING, Calyon, BNP Paribas, Societe Generale, Unicredit Group, Natixis and Royal Bank of Scotland.
NONFERROUS METALS
UC RUSAL transfers Norilsk blocking stake to Russian entity from offshore company
MOSCOW. (Interfax) - Russia's United Company RUSAL, the world's largest aluminum and alumina producer, has transferred its blocking stake in MMC Norilsk Nickel from offshore company Gershvin Investments Corp. Ltd., a wholly owned UC RUSAL subsidiary, to Russia-based United Company RUSAL Investments Management, Norilsk Nickel said in a statement.
Norilsk Nickel said it learned of the changes to the status of UC RUSAL's stake on August 3.
The transfer of the stake to a Russian entity was envisioned in an agreement on a loan from Vnesheconombank (VEB) for which the stake was collateralized, VEB Deputy Chairman Anatoly Ballo said earlier.
UC RUSAL was one of the first Russian companies to take advantage of the opportunity to refinance external debt with VEB in fall 2008. The company attracted $4.5 billion for one year to settle with Western banks on a loan it raised to purchase the blocking stake in Norilsk Nickel.
NONFERROUS METALS
Norilsk Nickel posts net profit of 52 bln rubles in Q2
MOSCOW. (Interfax) - MMC Norilsk Nickel posted a net profit of 52.097 billion rubles in the second quarter of 2009 under Russian accounting standards, the company said in a materials.
Norilsk Nickel posted net losses of 7.115 billion rubles in the first quarter of 2009. The profit in April-June can be attributed to "the positive revaluation among revenues of the value of financial investments which are determined by market prices at the end of the reporting period," the company said.
The company had net profit of about 44.98 billion rubles in the first half of 2009, up almost eleven-fold from 4.1 billion rubles in January-June 2008.
The RAS report is unconsolidated and only takes into account the activities of the company's Polar division. It does not factor in the results of the company's Kola division, its stake in the U.S. company Stillwater, assets in Australia and Finland or assets it acquired last year from Canada's LionOre.
NONFERROUS METALS
Udokan copper project partners discussing funding with VEB, VTB
ANKARA. Aug 6 (Interfax) - The partners to the project to develop the giant Udokan copper deposit in Russia's Chita region are discussing funding with Russia's Vnesheconombank (VEB) and VTB, Sergei Chemezov, the head of the state Russian Technologies (Rostekhnologii) corporation, told reporters in Ankara.
Chemezov said the project would need $2 billion-$3 billion of investment in the next two or three years.
He said talks with the Russian banks, including VEB and VTB, were already under way.
The partners, which are Alisher Usmanov's Metalloinvest and...
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