|
Article Excerpt
IN BRIEF
Editor's Choice
***Russian President Dmitry Medvedev this week rebuked the country's biggest gold miner, Polyus Gold, telling it "not to whinge" about red tape and bureaucracy at the big Natalka gold mine in the Magadan region. Share prices dipped on the comments on fears that they were an echo of Prime Minister Vladimir Putin's earlier comments against coking coal producer Mechel, which saw billions wiped off its trading value. However, Economic Development Minister Elvira Nabiullina was quick to make assurances that the government has no plans to strip Polyus of its license and that the president's comments were intended to encourage the miner to tie business and state interests to one another. Mikhail Prokhorov, a large shareholder in Polyus Gold and the chairman of the company's board of directors, reacted swiftly to the criticism, calling a board meeting for September 30.
*** Billionaires Vladimir Potanin and Mikhail Prokhorov this week were reported to have moved a step closer to finalizing their drawn-out asset split after signing a protocol that gives Prokhorov control of No. 1 Russian gold producer Polyus Gold, receiving an approximately 33% stake in the No. 1 Russian gold producer in exchange for Potanin receiving 2% of MMC Norilsk Nickel and stakes in Rusia Petroleum and agribusiness group Agros.
*** The Russian Federal Financial Market Service (FFMS) this week instructed Interros chief Vladimir Potanin to submit documents concerning his share holdings in MMC Norilsk Nickel in response to a complaint filed by UC RUSAL concerning "possible violations of the law on stock companies on the part of Interros Holding Company in acquiring shares in Norilsk Nickel." The conflict between Norilsk Nickel shareholders has intensified since RUSAL's arrival this spring. RUSAL has already blocked a spin-off of the world's biggest nickel and palladium miner's electricity assets. Despite a strong bounceback by Russian stocks following last week's record falls, Norilsk shares still fell, with concern that a major shareholder had offloaded stock due to the ongoing dispute.
*** MMC Norilsk Nickel has objected to the classification of nickel compounds as hazardous materials in the European Commission's ATP 30 - Addition to technical progress - published on September 15. Norilsk, the world's biggest nickel miner, called the classifications an obstacle to cooperation between Russia and the European Union. Prime Minister Vladimir Putin voiced similar concern. Materials classified as hazardous are subject to special requirements on packaging and transportation.
*** MMC Norilsk Nickel said this week it is prepared for further talks with the Russian Technologies (Rostekhnologii) state corporation on its possible inclusion in a consortium that will develop the giant Udokan copper field in the Chita region and to discuss the terms of joint operations. MGOK was officially declared the winner of a tender for the rights to the Udokan copper field on September 20 and intends to develop the field in conjunction with the state Russian Technologies (Rostekhnologii) corporation. Mikhail Prokhorov said he has not yet received an offer from the consortium of Alisher Usmanov's Metalloinvest and Rostekhnologii to join them in the development of the large and demanding deposit.
*** Directors at the state Russian Technologies (Rostekhnologii) corporation expect to consider finalized plans to set a Titanium Valley up in the Urals soon, and may submit the project to the Russian Economic Development and Trade Ministry for consideration next week. Rostekhnologii controls titanium producer VSMPO-Avisma, which would be pivotal to the project, and this week said the current financial crisis would not allow it to increase its share in it. Under the Titanium Valley project, the city of Verkhnaya Salda, where VSMPO-Avisma's main production site is located, would host facilities to mill titanium for the aircraft, space, shipbuilding, automotive, energy and medical industries, as well as producers of engines and would cost an estimated 12 billion rubles to set up.
*** Russian President Dmitry Medvedev and his Kazakh counterpart Nursultan Nazarbayev this week oversaw the opening ceremony of the Mechel coal and steel group's Voskhod chromium ore mine in Aktobe, Kazakhstan. Russia's Mechel announced plans to build a ferroalloy smelter in Kazakhstan, capable of producing 240,000-250,000 tpa of ferrochrome at a cost of $500 million-$800 million by 2012-2013, at the deposit. Mechel will also explore and acquire licenses to new fields in Kazakhstan.
TOP STORIES
Medvedev advises Polyus Gold not to whinge about red tape and mine gold
MOSCOW. (Interfax) - Russian President Dmitry Medvedev criticized remarks by some Russian business leaders at a September 24 meeting on the development of the Magadan region.
"I appreciate it isn't easy for businesses to operate, that there's still a lot of bureaucracy, but there's no need to whinge about it," Medvedev said, after hearing Yevgeny Ivanov, the chief executive of No.1 Russian gold producer Polyus Gold.
A Polyus Gold subsidiary holds the license to the Natalkinskoye gold deposit, one of the world's biggest, in the Magadan region. Commercial development has not yet started at the field.
"You are aware of what's going on in the world gold market. If gold mining is marginal for you then stop doing it. We'll find somebody else. If you want we can take the license back," Medvedev said, addressing Ivanov.
At the same time, Medvedev said the local authorities and ministry officials ought to adopt a more serious and considerate approach towards business.
The criticism that Medvedev leveled at Polyus does not mean that the government intends to strip the country's No. 1 gold producer of its license to develop the big Natalkinskoye deposit in the Magadan region, Economic Development Minister Elvira Nabiullina told reporters.
"The president's criticism of the company does not mean that the government intends to strip it of the license to develop the deposit," Nabiullina said.
"This was the head of state's firm invocation for the company to work more lucidly and to tie business interests in with state interests," she said.
Ivanov said back in January this year, when the Polyus board was considering the Natalka investment program, that he expected an application for funding by the state Investment Fund to develop the field's external infrastructure to be considered before long, however no decision has yet been reached.
It was this issue that Ivanov raised at the meeting with Medvedev. Ivanov said the delay with putting the necessary energy infrastructure in place could put the construction of the Natalka mine behind schedule.
Natalka's JORC compliant reserves are 40.8 million oz at an average grade 1.13 g/t. The Natalka mine will be the largest gold mine in Russia with annual capacity of 40 million tonnes of ore and annual gold production of over 40 tonnes (1.3 million oz), which is higher than initially planned. Total investments into the project will amount to $2.5 billion.
Mikhail Prokhorov, a large shareholder in Polyus Gold and the chairman of the company's board of directors, reacted swiftly to criticism of the company by Medvedev.
A source at the Onexim Group, which manages Prokhorov's assets, said the businessman has called for the Polyus Gold board of directors to meet on September 30. The source said the board "plans to consider management's proposals on concrete actions in relation to the Russian president's criticism of the activities of companies in the gold industry."
In addition, the board will consider the company's international expansion, the source said without providing more specific details.
The source was unable to say if the board would consider the buyback of Polyus stock as management has proposed. A source close to Polyus Gold itself said the board would discuss the buyback of shares.
Polyus Gold confirmed that the board of directors will meet on September 30, but declined to comment on the meeting agenda.
A Polyus Gold subsidiary holds the license to the Natalkinskoye gold deposit, also known as Natalka, which is one of the world's biggest. Commercial development has not yet started at the field.
"You are aware of what's going on in the world gold market. If gold mining is marginal for you then stop doing it. We'll find somebody else. If you want we can take the license back," Medvedev said, addressing Yevgeny Ivanov, the chief executive of Polyus Gold.
At the same time, Medvedev said the local authorities and ministry officials ought to adopt a more serious and considerate approach towards business.
Analysts said the gold producer benefited from news that its core shareholders, Vladimir Potanin and Mikhail Prokhorov, were close to finalizing their asset split. They have signed a protocol which would give Prokhorov formal control over the gold producer, reducing the risk of shareholder disputes.
PRECIOUS METALS
Medvedev orders Finance Ministry to re-consider VAT on gold
MAGADAN. (Interfax) - Russian President Dmitry Medvedev ordered the Finance Ministry to re-address VAT exemption for retail gold.
Delegates at a conference that Medvedev chaired in Magadan heard that gold ingots were not in demand, even though gold prices are climbing while the financial markets are in decline, because 18% VAT is payable when buying the gold, and this is not refunded when the gold is sold.
"Please go back to the VAT issue," Medvedev told Deputy Finance Minister Anton Siluanov.
Vladimir Putin had raised this issue while he was Russian president. "The president's instructins have to be carried out," Medvedev said.
Putin said in Magadan back in November 2005 that members of the public wishing to invest in gold should get tax relief. The Finance Ministry said it did not see the need to cancel VAT on retail gold purchases in full because existing laws exempted those with savings in gold from VAT in a number of cases.
Members of the public and corporate bodies alike are exempt from VAT when buying gold from banks if the gold is kept in certified vaults, and depositing gold with banks is also exempt from the tax.
PRECIOUS METALS
Chukotka bets on gold, fossil fuels for growth
ANADYR. (Interfax) - Russia's Far Eastern Chukotka region will boost gold and fossil fuel exports production in a bid to quadruple the size of its economy by 2020, Roman Kopin, the region's governor, said at a meeting with Russian President Dmitry Medvedev in Anadyr.
Kopin said two industrial hubs would be developed: Chaun-Bilibino, where the emphasis will be on gold, silver and copper mining and the development of new ore fields; and Anadyr, where coal and hydrocarbon deposits will be targeted.
Chukotka could be producing more than 30 tonnes of gold and up to 250 tonnes of silver per year by 2020. Kopin said the Chaun-Bilibino province hosted an estimated 950 tonnes in geological gold resources.
He said the Berengovskoye coal field in the Anadyr district should be producing 2 million tonnes of coal per year and that this would in time be exported to adjacent regions and countries from the Asia-Pacific rim.
The district could also be producing around 500,000 tonnes of oil and 70 million cubic meters of gas by 2020, Kopin said.
But he said some 134 billion rubles in state investment would be needed to pull all of this off, and that 80% of this would be spent on road construction.
Private investment could exceed public investment by 2020 and total 150 billion rubles, he said.
Kopin said the core industrial sectors and agriculture only accounted for 12% of gross regional product, compared with almost 70% in the Nenets Autonomous District, and Chukotka was not therefore collecting enough tax to fund its own budget spending.
PRECIOUS METALS
Three Norilsk managers join Polyus Gold
MOSCOW. (Interfax) - Three managers at MMC Norilsk Nickel have joined Polyus Gold, the No. 1 Russian gold producer said on September 22.
Oleg Ignatov, previously deputy director for economy and finance at Norilsk Nickel's Polar Division, was appointed to the same position at Polyus Gold. He replaced Dmitry Glotov, who recently accepted an invitation to join Onexim Group.
Nikolai Morozov and Yury Ryndin, both from Norilsk Nickel, were appointed as deputy general director for internal control, and Deputy general director for supplies of materials and machinery, respectively.
PRECIOUS METALS
Peter Hambro Mining boosts H1 revenue 57%, earnings down a third
LONDON. (Interfax) - Peter Hambro Mining (PHM) plc, which produces gold in Russia, boosted sales revenue 57% year-on-year in the first half of 2008 to $146.4 million, the company said on September 22.
Net profit, though, fell one-third, to $14.36 million.
Revenue from the sale of gold grew 53% to $107.4 million, partly due to an increase in the averaged realized sale price of gold, to $901 per ounce in the first half of 2008 from $652 in the same period of last year.
Earnings before taxes, depreciation and amortization (EBITDA) grew 35% to $59.5 million. EBITDA rose, despite higher energy and input costs, PHM said.
Gold production in the half rose 9% year-on-year to 147,000 ounces. Production at the company's flagship Pokrovsky Rudnik mine in the Amur region grew from 116,800 oz to 127,800 oz. The cash cost of mining gold at Pokrovsky grew 28% to $215/oz, but this was still almost half the average for the gold industry, which was $454/oz.
PHM commissioned the Pioneer mine in May, producing 3,600 oz of gold there. It expects to produce 72,000 oz at Pioneer this year as a whole.
Production at the Omchak mine, operated by a joint venture with OJSC Susmanzoloto, fell 26% year-on-year in the half to 8,400 oz due to resource depletion.
PHM said it still expected to mine a targeted 350,000-400,000 oz of gold this year.
PHM is not making a financial forecast for the year because it cannot accurately forecast gold prices," Peter Hambro, the company's board chairman, told Interfax. The company will significantly increase gold production in the second half of this year compared with the first half, partly because its operations depend a lot on the weather conditions. Consequently, the company will be able to increase its sales revenue and profit if gold prices stay at today's levels, Hambro said.
Hambro said he was expecting gold prices to rise in 2008-2009 because gold is a splendid means of protection from financial market risks, he said.
PHM said in its financial statement that the launch of its Malomir project had been delayed by six months until the first half of 2010 due principally to the late arrival of a SAG mill from the group's supplier and the necessity to undertake further exploration.
PHM said it expected mining operations at the Novogodnee Monto and Petropavlovskoye deposits in the Yamal-Nenets Autonomous District would commence towards the end of 2009. "At present we anticipate selling the first aggregates in late 2009. The Group is monitoring the progress and implementation of new legislation on strategic assets in order to determine what steps will be required to be taken and what effect it may have on the current and/or future operations of the Group."
PHM's Yamalzoloto subsidiary, which holds the Novogodnee Monto license, has started to design a recovery plant, an earlier report said.
Peter Hambro told Interfax that the company was still keen to acquire new assets in Russia, but he did not say which ones, or whether any talks were in progress.
Petropavlovsk Mining Company brings Peter Hambro Mining's Russia-based gold assets together. The group's gold segment includes OJSC Pokrovsky Rudnik, LLC Odolgo (a joint venture with OJSC Priisk Solovyevsky) and CJSC Unchal Gold Company (a joint venture with OJSC Susmanzoloto).
PRECIOUS METALS
Highland Gold concentrates financing on priority projects
MOSCOW. Sept 25 (Interfax) - Market volatility has compelled Highland Gold Mining (HGM), which produces gold in Russia, to focus financing on priority projects.
"Due to continuing market volatility and given the intensive schedule and demand for funding our development projects, the board of directors and management have identified priority projects in Highland Gold's portfolio in order to ensure the most productive and effective use of resources," the company said in its financial report.
HGM is not planning to sell any of its assets, HGM CEO Henry Horne said in a conference call on Thursday. The company's strategy calls...
|
