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*** Russian President Dmitry Medvedev and his Mongolian counterpart Tsakhiagiin Elbegdorj this week signed several documents after talks in the Mongolian capital. Medvedev said Russia plans to develop relations with Mongolia both in the traditional businesses, such as at the giant Erdenet copper deposit, and in the new infrastructure and energy projects, including nuclear energy and in uranium ore processing. Rosatom head and Russian delegation member Sergei Kiriyenko said the deals, particularly on establishing a uranium extraction JV, sent out an "important political signal." However, Medvedev said this does not mean Russia does not welcome Mongolia's cooperation with other countries, indeed, Japanese companies could enter into the uranium projects. Ulaanbaatar also said investors and partners for the development of the large Tavan Tolgoi coal field could be selected in the near future, and several Russian companies are believed to be high in the running for selection.
*** Russian hydrogenerating company RusHydro is together with aluminum giant UC RUSAL looking to speed the opening of the Boguchanskaya HPP, part of the BEMO project, in an attempt to meet the electricity deficit incurred when an August 17 blast at the Sayano-Shushenskaya HPP in Khakasia struck 4.5 gigawatts from Siberia's energy balance. The two companies will now be seeking state support for the BEMO project and will be looking to bring three power generating units on stream per year at Boguchanskaya in 2010-2012. Meanwhile, watchdog Rostekhnadzor will carry out several unplanned inspections at companies, including RUSAL's Khakas, Saynogorsk, Novokuznetsk, and Krasnoyarsk smelters, due to the accident.
*** Russian Prime Minister Vladimir Putin this week pledged up to 35 billion rubles in state support for the country's diamond industry. Putin, attending the launch ceremony for a deep mine at the famous Mir diamond pipe, said state-owned diamond monopoly Alrosa would get help restructuring its debt to Russian and western banks as it struggles to fund investments at a time when diamond sales have plummeted. The state has already decided to increase rough diamond procurement significantly in order to support the sector and Alrosa plans to sell $196 million in cut and uncut diamonds on the market in August. In addition, Alrosa will start supplying rough diamonds on a monthly basis to the Kristall cutting plant in Barnaul in September.
*** Kristall of Smolensk, Russia's biggest diamond cutting enterprise, closed the first half of 2009 with net losses but expects to break even in the third quarter, the state-owned company announced this week. It called last year a nightmare thanks to changing terms for bank loans and the ruble's devaluation, but said that a very good tendency is emerging as sales pick up and that continued cooperation with Alrosa would limit its need to look to De Beers and Rio Tinto. Kristall is asking the state, via the Finance Ministry, to increase its capitalization and also discussing zero VAT with the Ministry, to solve what it said is a 'transit problem' which ties up the money it pays and then has returned in VAT for months on end.
*** KRU-Trade, which exports coal produced by Kuzbassrazrezugol Coal Company, or KZRU, one of Russia's biggest coal producers, paid $876 million to consolidate 35.6% of the company's shares, almost 2.5 times the stake's market value, Vostok Nafta Investment, which owns 2.19% of KRU, said in a report this week. The fund believes this might mean the company has abandoned transfer pricing, which will result in a considerable increase in KZRU's cash flow and long-term benefits to minority shareholders in the coal industry, as the producers themselves rather than offshore companies would generate more profit. The Russian Audit Chamber earlier established that more than 80% of Russia's coal was being exported via offshore firms at 30%-54% below world prices.
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Russian, Mongolia sign number of documents in "important political signal"
ULAANBAATAR. (Interfax) - Russian President Dmitry Medvedev and his Mongolian counterpart Tsakhiagiin Elbegdorj signed several documents after talks held in the Mongolian capital Ulaanbaatar on August 25.
Medvedev said Russia plans to develop relations with Mongolia both in the traditional businesses, such as at the giant Erdenet copper deposit, and in the new infrastructure and energy projects, "We will develop cooperation in nuclear energy and in uranium ore processing," he said.
Rosatom head and Russian delegation member Sergei Kiriyenko said the deals, particularly on establishing a uranium extraction JV, sent out an "important political signal." However, Medvedev said this does not mean Russia does not welcome Mongolia's cooperation with other countries, indeed, Japanese companies could enter into the uranium projects.
Ulaanbaatar also said investors and partners for the development of the large Tavan Tolgoi coal field could be selected in the near future, and several Russian companies are believed to be high in the running for selection. Russia is already involved in copper mining JVs in the country and the Erdenet copper mining joint venture between Russia and Mongolia could have net profit of $100 million in the second half of 2009. Other areas of cooperation include rail, and the sides are seeking to take better advantage of lending mechanisms in order to expand and diversify mutual trade.
Uranium
Russia and Mongolia have reached an agreement to set up a joint venture to extract natural uranium, head of Russia's state nuclear corporation Rosatom Sergei Kiriyenko said.
"We are signing an intergovernmental agreement to form a joint venture to develop, extract and process uranium. Russia is the first country to have signed an agreement with Mongolia on joint uranium operations. It is an important political signal," Kiriyenko said in Ulaanbaatar.
The joint venture is being formed under "party-of-interests arrangements," he said.
On March 17, 2009, Mongolia's Nuclear Energy Agency and Rosatom signed an interagency agreement, saying that such ventures will operate on a 50-to-50 basis, Kiriyenko said.
The joint venture to be formed will be primarily interested in developing the Dornod uranium mine, as well as uranium fields in Mongolia's Eastern Gobi region, he said.
"Dornod is interesting to us, among other things, because Russia's Priargunsky mining enterprise is located about 200 kilometers from it, which allows us to form a single infrastructure and draw our specialists," Kiriyenko also said.
Besides that, "we are confident that the reserves of the Dornod field can be increased," he said.
Kiriyenko did not say how much Russia is prepared to invest in the development of the Dornod field, saying only that "hundreds of millions of dollars could be involved."
Asked when the joint venture could start working, Kiriyenko said that this could happen in the very near future. "We think that the bulk of the work to form the joint venture could be done this year," he said
The project will involve the company AtomMon on the Mongolian side and Atomredmetzoloto on the Russian side, Kiriyenko said.
Russia does not rule out the possibility of Japanese companies taking part in trilateral uranium extraction projects on the territory of Mongolia, Kiriyenko said.
"We have good interaction with Japanese companies, and therefore our projects in Mongolia can well be trilateral. It's quite acceptable to us," Kiriyenko told reporters in Ulaanbaatar.
Kiriyenko recalled that Rosatom has "some strategic projects, including nuclear" with its Japanese partners.
When asked whether Rosatom is ready to build nuclear power plants in Mongolia, Kiriyenko said that "Mongolia still has to do a lot besides making the appropriate decisions in order for that to happen."
"Obviously, nobody needs nuclear power plants with a capacity of 1,000 megawatts in Mongolia. For this reason, I believe the most we can talk about is the construction of small and medium capacity plants, like those we build in the Far North. That should interest Mongolia," Kiriyenko said.
Coal
The development of the big Tavan Tolgoi coal field in Mongolia, in which some major Russian companies have expressed an interest, could begin next fall, the CEO of Erdenes MGL, which represents the Mongolian government in strategic mineral resources projects, told the Mongolia Today newspaper.
"An investor and partner for this project could be selected this summer or fall. I think it might be possible to started developing Tavan Tolgoi by next fall," CEO Enebish told a special edition of the paper, published to coincide with Medvedev's visit.
The investor will be selected by tender, the first round of which has taken place. A consortium of Russia's Basic Element, Renova and Severstal bid in the first round.
However Severstal said just over a month ago that it was pulling out of the consortium. "I don't know for sure, but Russian Railways (RZD) will probably take its place," Erdenes MGL's Enebish said.
The Russian consortium formed in November 2006, submitted its investment proposals to the Mongolian government in January this year. RZD is also interested in the project, and plans to form a joint venture in Mongolia to develop the coal deposit.
Tavan Tolgoi is in southern Mongolia, 250 km from the Chinese border and 540 km from Ulan Bator. It is estimated to contain 6 billion tonnes of coal - 40% of it coking coal.
Copper
Russia is already involved in copper mining JVs in the country.
The Erdenet copper mining joint venture between Russia and Mongolia could have net profit of $100 million in the second half of 2009, Sergei Chemezov, head of the state Russian Technologies (Rostekhnologii) corporation, told reporters in Ulaanbaatar.
"I'm hoping that overall, net profit will amount to $100 million in the second half," Chemezov said.
Russian Technologies has held Russia's 49% stake in the joint venture since January 1.
Chemezov did not say what profit Erdenet may have made in the first half of 2009 because its earnings report is not yet ready.
But he did say the anti-crisis programs that have been adopted ought to have had a favorable impact on the figure.
Asked whether Russian Technologies would be involved in the projects to develop the Tavan Tolgoi coal field or the Oyuu Tolgoi copper field, Chemezov answered in the negative.
Asked about the possibility of the copper concentrate that is mined in Mongolia being delivered to Russia, he said: "This is being discussed. A specific decision has yet to be reached."
"It would be desirable for the copper concentrate that we are currently shipping to China to be delivered to Russia," he said.
Erdenet has said it closed 2008 with sales revenue of $765.2 million, down 10% from $850.8 million sales achieved in 2007. Profit before tax plummeted nearly 85% to $39.5 million while production costs soared 34% to $756.9 million.
Copper concentrate production fell 3% to 525,264 tonnes.
Erdenet is Mongolia's biggest copper concentrate producer. It develops the Erdenet ore belt, which includes several deposits.
Rail
Another existing Russian interest is in the rail sector.
Medvedev said he had signed a decree to hand 50% of the shares in the Ulan Bator Railway joint venture with Mongolia over to the five-year trusteeship of Russian Railways (RZD).
The Kremlin website said this was done "in order to improve the efficiency of managing the federally owned shares in JSC Ulan Bator Railway.
The government has up to six months in which to effect the transfer.
The joint venture, based in Mongolia's capital, was set up in line with an agreement that the Soviet and Mongolian governments signed back on June 6, 1049. Each country owns half the equity.
RZD got two representatives elected to the joint venture's management board in 2009.
The Ulan Bator Railway itself stretches almost 2,000 kilometers. It carries up to 80% of Mongolia's domestic freight and all of its export-import cargo and has some 16,000 employees.
Lending
Russia and Mongolia should take better advantage of lending mechanisms in order to expand and diversify their mutual trade, Medvedev said.
"We now have all opportunities for it. It is simply necessary to use the existing instruments correctly, including loans, which will help make the structure of trade turnover between our countries more optimal," Medvedev told a news conference in Ulan Bator...
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