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Article Excerpt
IN BRIEF
Editor's Choice
*** Three subsidiaries of MMC Norilsk Nickel this week adopted resolutions that allow them to deposit free cash with Rosbank and other institutions that will use the money to purchase shares in the Arctic mining and smelting giant. The three - Norilsk Kombinat, Kola MMC and OGK-3 - may deposit a combined 42-plus billion rubles in free cash with financial institutions under trust management agreements allowing them to acquire Norilsk shares. The move has anger blocking stake holder UC RUSAL. Under Russian law, Norilsk's board is not required to approve the deal, leading to the aluminum giant declaring the move "a blatant violation of the principles of corporate governance and the rights of minority shareholders." The move strengthens Norilsk's managements position in the ongoing conflict between Vladimir Potanin's Interros - in control of the board - and UC RUSAL.
*** The board of directors at Polyus Gold, Russia's leading gold producer, this week voted against a share buyback. Polyus, whose shares trade on the LSE, has not officially distributed any reports on the board meeting. Onexim Group justified the decision by saying it thought it better to save funds for the realization of other projects as the value of the company's shares had recently grown by more than 40%. The board also unanimously approved the purchase of KazakhGold, which Onexim believe will turn Polyus Gold into a leading gold producing company. Polyus is seeking a 50%+1 share stake in the Central Asian miner.
*** Mikhail Prokhorov said this week that if agreement cannot be found with his former business partner and fellow billionaire Vladimir Potanin ending the pairs protracted asset split during the financial crisis, his Onexim group will take independent steps to withdraw from the assets, either by pulling out of them of selling them. Prokhorov earlier looked set to get Potanin's stake in Polyus Gold, the country's top gold miner, but speculation this week has linked Suleiman Kerimov's Nafta Moskva with the stake. Kerimov and Prokhorov are understood to have good personal relations. Vedomosti cited a source as saying that Kerimov's offer price was about $25 per share, or $1.6 billion for the whole 35% stake.
*** MMC Norilsk Nickel assured Russian buyers this week that it is prepared to meet all domestic demand for cobalt and palladium. Norilsk also voiced surprise at the levels of FAS scrutiny concerning production, sales, domestic market shipments and export volumes of ores containing the two metals during the last two years. Norilsk has also been requested to disclose information about its cobalt and palladium reserves in Russia. Norilsk deny having received the enquiry, but admit that RUSAL, which is a minority shareholder and in dispute with the majority shareholder Interros, has. A Norilsk source speculated that RUSAL might be attempting to divert attention from its own dealings with the antimonopoly bodies.
*** Anglo Platinum will increase its stake in a joint venture with Eurasia Mining that is searching for platinum group metals on the Kola Peninsula to 60% in the third quarter of 2008. The JV covers the Monchetundra, Volchetundra and West Imandra properties. Meanwhile, Eurasia has extended the license for the Volchetundra field for another three years, though it will relinquish the one for West Imandra. In addition, Eurasia Mining has plans to finalize a feasibility study in 2008 for the development of a platinum field in the Urals.
*** The Russian Economic Development and Trade Ministry this week asked the government's commission on foreign trade safeguard measures and customs tariff policy to consider lifting import duty on ferrous and nonferrous metal scrap and waste. Also proposed is the scrapping of import duty on feedstock for large-diameter pipes, ferroalloys (excluding manganese alloys) and galvanized sheet. The proposals have been cleared with the Industry and Trade Ministry and Federal Customs Service.
*** Vladimir Yakunin, the president of Russian Railways (RZD), which last week lost out on the right to develop the giant Udokan copper field in the Chita region to Alisher Usmanov's Metalloinvest, has wished his former competitor good luck in developing the field. Yakunin went on to say that he was happy for Mikhailovsky GOK, adding that the rake was now in their hands. He did, however, decline further comment when asked if RZD was prepared to cooperate with the winner of the Udokan tender, including on issues related to railroad infrastructure, which will be vital to ensuring the viability of production at the difficult-to-develop deposit.
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Norilsk Nickel subsidiaries buying 8.7% of company's shares
MOSCOW. (Interfax) - Three subsidiaries of MMC Norilsk Nickel - OJSC Norilsk Kombinat, OJSC Kola MMC and OJSC OGK-3 - have adopted resolutions that allow them to deposit free cash with Rosbank and other institutions that will use the money to purchase shares in Norilsk Nickel, the metals giant said in a press release on September 29.
"OJSC Norilsk Kombinat and OJSC Kola MMC deposited with Rosbank up to 8 billion rubles free cash and 12.64 billion rubles, respectively, and OJSC OGK-3 may deposit free cash up to 22 billion rubles with other financial institutions. The cash deposits are made under trust management agreements which authorize the financial institutions to invest such cash at their discretion in accordance with the investment declarations in common and preferred shares, depositary receipts and bonds of Russian issuers. The financial institutions, exercising their discretion provided under the trust management agreements, have determined to acquire shares in Norilsk Nickel," the press release says.
"OJSC Norilsk Kombinat, OJSC Kola MMC and OJSC OGK-3 have adopted resolutions - in accordance with their charter documents - to approve the acquisition of the shares in Norilsk Nickel in amounts of up to 4,000,000 shares, 6,500,000 shares and 6,000,000 shares, respectively. These shares may be voted or sold by the financial institutions," it says.
"Under Russian law and the charter of Norilsk Nickel, its governing bodies, including its Board of Directors, are not required to consider, and did not consider, such transactions for approval," according to the press release.
United Company RUSAL (UC RUSAL), which acquired a blocking stake in Norilsk Nickel last spring, denounced the move, calling it "a blatant violation of the principles of corporate governance and the rights of minority shareholders."
"Board chairman Vladimir Potanin and general director Vladimir Strzhalkovsky are exploiting loopholes in Russian law and utilizing their unchecked power at Norilsk Nickel to demonstrate once more their contempt for the interests of other shareholders and their readiness to violate any principle in order to retain total control over the company," a RUSAL representative told Interfax.
RUSAL had foreseen this turn of events, he said. "Having received signals from the market, several weeks ago RUSAL sent Strzhalkovsky a letter saying that use of cash resources at Norilsk Nickel and subsidiaries without consulting with the other shareholders was unacceptable. But that letter, just as many others before it, was simply ignored," he said.
A Norilsk Nickel representative told Interfax: "Company management supports the decision taken independently by the subsidiaries and considers them correct and timely given the current market situation."
"We note that the shares, having been bought by Norilsk Nickel subsidiaries, are not recognized as treasury stock and, hence, will be voted for by management of Norilsk subsidiaries, which is fully controlled by Vladimir Potanin. The move will increase Potanin's effective stake in Norilsk Nickel from 29.9% to 38.6%, and will strengthen his position in the battle for control with UC RUSAL. Moreover, Potanin will increase his stake in Norilsk Nickel above 30%, but will not have to make a buyout offer to Norilsk minorities," UralSib said in an analytical note.
Bank of Moscow analyst Yury Volov said he, too, thought that the "purchase of such a large block of shares by subsidiaries would strengthen Interros's effective control." He said Interros could end up with more than 40% of Norilsk as the result of the share purchase by the subsidiaries, the company's official offer, which is in progress, and the asset split with Mikhail Prokhorov. "Given the turnout at shareholders' meetings, this would be quite enough to gain a majority on the board of directors, irrespective of the positions of RUSAL and other minorities," he said.
Unicredit said it thought Norilsk's latest actions were part of the on-going conflict between RUSAL and Interros and that Norilsk's management would use the block of shares to vote at shareholder meetings and thereby strengthen its position.
Norilsk said at the end of August that it would buy back up to 4.17% of its stock for up to 49 billion rubles. The shares will be repurchased on a pro-rata basis at 6,167 rubles ($254) per share, which is the average price at which they traded on the MICEX Stock Exchange between February 15 and August 15.
Shareholders wishing to sell can tender their shares for repurchase between September 29 and October 28 this year, and the shares will be repurchased between October 29 and November 27.
As at May 26, 2008, Interros chief Vladimir Potanin owned 29.78% of Norilsk Nickel. Potanin was the beneficiary of 41.74 million shares and 150.32 million depositary receipts. RUSAL was the second largest beneficiary owner with 25% or 47.66 million shares as of May 26.
Boardroom strife at Norilsk intensified in the spring of this year, when RUSAL became a shareholder. In August, RUSAL said it intended to convoke an extraordinary shareholders' meeting with the aim of electing a new board and enlarging the board to 13 from nine members, and electing new independent directors. The stance adopted by the independent directors and their votes can be decisive, as demonstrated by the two most recent occasions when the board voted for a new general director: it approved the candidates put forward by Interros, despite opposition from RUSAL. The board also approved the buyback, which RUSAL opposed. However RUSAL did manage to block a proposed method for spinning Norilsk Nickel's power industry assets off in September.
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Polyus Gold board votes against share buyback, approves KazakhGold purchase
MOSCOW. (Interfax) - The board of directors at Polyus Gold, Russia's leading gold producer, on September 30 voted against a share buyback and approved the purchase of Kazakh gold producer KazakhGold, the Onexim Group said in its blog on the Internet.
Polyus Gold, whose shares trade on the London Stock Exchange, has not officially distributed any reports on the board meeting.
The Onexim Group said that a decision was made at the meeting "to not carry out the buyback due to the recent growth in the value of the company's shares by more than 40% and save funds for the realization of other projects."
Polyus Gold CEO Yevgeny Ivanov said earlier that the company's management believes a share buyback on the open market is needed.
"We're looking at a buyback as a means to support the liquidity and value of our shares. Our shares also represent a unique investment opportunity in view of the fact that Polyus is fulfilling all of its investment plans to the letter and its strategy is one of the sector's most ambitious," Ivanov said. The board of directors has not yet approved the time-frame or price aspects of the possible buyback.
The board also unanimously approved the purchase of KazakhGold, which "will turn Polyus Gold into a leading gold producing company," Onexim said. As part of the acquisition, Polyus will pay for 70% of the value of KazakhGold stock with its own shares and will use cash for the remaining 30%, the Onexim Group, which is owned by Polyus board chairman Mikhail Prokhorov, said in a statement.
Prokhorov told journalists that the deal would be carried out by Polyus subsidiary Jenington, whose balance sheet contains 6.6% of the company's treasury shares. An offer will be made in the next few days and the deal is to be closed in ten to twelve weeks, he said.
He also said that a stake of 50% plus one share in KazakhGold would be optimal for Polyus since "big expenditures on the acquisition of this company would lead to the revision of Polyus's plans."
The proposal is drawn up in such a way that Polyus will not be compelled to make a mandatory offer for the purchase of the remaining shares in the Kazakh company. In addition, Polyus will not have the right to increase its stake in KazakhGold for one year, he said.
Prokhorov said Polyus is also considering other projects that would allow the company to expand internationally, although he declined to provide further details.
On September 29, KazakhGold said Polyus Gold had offered 0.298 Polyus shares and $7.95 per share in its bid to acquire the company. Based on the current price of Polyus shares, (570 rubles at the close on MICEX on September 25) the offer amounts to $14.73 per share in KazakhGold. So the whole deal could cost Polyus around $390 million, including a cash consideration of approximately $210 million.
Gold Lion Holdings Limited, which owns 41.7% of KazakhGold shares, is prepared to accept the offer.
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Prokhorov wants to withdraw from or sell joint assets with Potanin
MOSCOW. (Interfax) - Mikhail Prokhorov, the owner of the Onexim Group and the former business partner of Interros owner Vladimir Potanin, wants to pull out of his joint assets with Potanin or sell them.
"If an agreement cannot be reached about an asset split with Interros during the financial crisis, Onexim will take independent steps to withdraw from these assets," Prokhorov told journalists on September 30, explaining that in this case the assets would be sold.
"It is strategically incorrect for the group to be involved in conflicted joint assets," he said.
It was reported last week that Potanin and Prokhorov are closer to finalizing their asset split, announced nearly two years ago, after signing a protocol that gives Prokhorov control of No.1 Russian gold producer Polyus Gold.
A source at Interros told Interfax...
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