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| Evraz secures Vnesheconombank loan |
Evraz Group has obtained a loan worth nearly $1.007bn from the Bank for Development and Foreign Economic Affairs (Vnesheconombank), the Russian metals and mining group said in a statement today. The company used the first $201.3m tranche of the loan to refinance its short-term debt. According to the statement, Vnesheconombank decided to provide Evraz with two loans, worth some $1.007bn and $800m, respectively, to enable it to refinance its debts to foreign bank syndicates.
In mid-November, Evraz also announced that it had taken out a one-year loan from VTB worth roughly USD 360m.
RBC-News
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| Miners Beg Sechin for Cash
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The country's leading coking coal producers have written to Deputy Prime Minister Igor Sechin to request government assistance as receivables from steelmakers mount.
The coal producers did not say how much money they would like to receive from the government.
They also requested a variety of temporary privileges including changes to the corporate tax code and special rail tariffs.
Reunters
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| Evraz Shares Soar on $1Bln VEB Loan |
Evraz Group shares climbed to their highest level in two weeks after the company got as much as $1.8 billion in loans from state-owned Vneshekonombank to help it refinance debt.
VEB will lend the Moscow-based company $1 billion, with an option for a further $800 million, Evraz said Thursday, without giving the terms.
Evraz Global Depositary Receipts advanced as much as $2.77 on Thursday, or 42 percent, to close at $9.30 in London.
The steelmaker has lost more than half its value this month on concerns over its ability to repay $9.6 billion of debt, equivalent to 75 percent of last year's revenue.
Evraz has spent almost $8 billion on acquisitions in the past two years to expand in the United States, South Africa, China and Ukraine.
"The VEB loan merely delays the situation," said Alexander Pukhayev, an analyst at VTB Capital in Moscow. "Still, I see a seasonal pickup in demand for steel in March, which should improve Evraz's cash flow."
Evraz has used $201.3 million of the lending to refinance short-term debt, it said today. The company needs $800 million this year to refinance a bridge loan for the $4 billion purchase of Ipsco's North American tube business, Pukhayev said.
The company cut output at steel mills in Russia and Ukraine by at least 25 percent in November as demand for the metal slumped. Severstal, a Russian steelmaker controlled by billionaire Alexei Mordashov, said Nov. 18 that its plants were working at half capacity.
Citigroup cut Evraz's rating to "sell" from "buy" because of "high levels of intangibles and goodwill on the balance sheet," analyst Daniel Yakub wrote in a Nov. 17 report. Goodwill is the excess paid in an acquisition above the market value of the net assets purchased.
The Moscow Times
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| Norilsk Nickel halts output at two Australian mines
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Norilsk Nickel Australia, a subsidiary of Norilsk Nickel, has decided to suspend production at its Waterloo and Silver Swan mines in Western Australia, the Russian metals giant's press office reported. The company, explaining its decision, said that the mines had recently operated in conditions of rising operating and production costs, which was only made worse by a drop in nickel prices. However, the decision to halt production will not apply to the company's Black Swan and Lake Johnson mines, which will continue operations according to the plan. Norilsk Nickel is currently considering a range of options for its employees affected by the suspension, the statement reads.
RBC-News
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| Norilsk Nickel not to be nationalized, billionaire says |
The state has never sought to nationalize Norilsk Nickel and will not do so, Oleg Deripaska, chairman of Basic Element's supervisory board and a co-owner of UC RUSAL, told a press conference in Moscow today.
RBC-News
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| Ukrainian Steel Town Tries to Hang On
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MARIUPOL, Ukraine -- Vladimir Boiko has sat in the director's chair of Ukraine's second-largest steel mill for 18 years but now feels the weight of the world as never before.
The Ilyich steelworks has cut production by 70 percent as demand slumps in the global crisis. Boiko is fretting about his 54,000 staff -- 20 percent of the working population in this town on the Sea of Azov.
"With the money we have, we have the possibility to withstand the crisis for five, six months. After that? God only knows," Boiko said.
Ilyich, a sort of co-operative owned by 30,000 of its workers, is one of two steelworks in Mariupol. The other, Azovstal, is the country's third-largest.
Puffing smokestacks from the two plants -- powerhouses of communist and post-Soviet times -- dominate the skyline in the town, a focal point in the heavily industrial, Russian-speaking eastern region of Ukraine.
The economy has grown an average of 7 percent annually since 2000 thanks to higher prices for steel; Ukraine is the world's eighth-largest producer, and the sector contributes 30 percent to the country's gross domestic product. But now people fear a new bout of recession as the global crisis spreads to Ukraine. The hryvnia currency hit a historic low in October, and the International Monetary Fund approved a $16.4 billion loan to shore up the banking system.
The first decade of independence from Soviet rule for Ukraine was chaotic, marked by deep recession, hyperinflation, a currency crisis and a disregard for commercial and political legal norms.
Although Soviet days are a distant past for many, people want and expect the kind of social protection that was offered under communism -- cheap housing, employment and health care as well as sports clubs and children's day care.
In good times, the absence of that safety net was less marked. Disposable incomes in Mariupol rose in the past two years to become second only to the capital Kiev, reported one rating agency.
But residents now feel the impact. Boiko has seen no redundancies but has cut salaries by 40 percent on average, and many workers are now sitting at home.
That creates endless personal catastrophes.
Inflation stands at 25 percent annually. Many took advantage of the retail banking boom by taking out loans to buy new apartments or cars. Adding to their woes, many in eastern Ukraine deposited their savings in Prominvestbank, which spent two months in receivership after rumors of a shady takeover caused a run.
Just when they need cash, depositors are barred from making withdrawals. Ilyich now buys cash in Kiev and makes it available to employees at local Prominvestbank branches.
The slump in the steel sector led to a 20 percent plunge in industrial output in October, and the economy shrank for the first time since 2005. The government cut its steel production forecast to 37 million tons from 46 million earlier.
The country's largest steel complex, owned by the world's biggest steelmaker, ArcelorMittal, and Azovstal owner Metinvest, have both halved production in recent months.
Ministers froze electricity and transport rates to help, but in return producers had to promise not to make any layoffs.
Analysts say any improvement depends on a better financing situation to relaunch the building and infrastructure sectors.
But Mariupol Mayor Yuri Hotlubei is anything but a pessimist. He calls for boosted domestic demand for steel, as he predicts that the Euro 2012 soccer tournament, to be co-hosted with Poland, will be a key driver for building hotels, airports and infrastructure.
Local authorities, he says, could create demand and jobs if the government gives them cheap credit from the IMF loan.
Hotlubei's second plan is longer term. "If before, we were getting enough from our steel mills and machine manufacturers, now the crisis is pushing us toward the process of creating new sectors in the economy of our town."
For Boiko, however, the strategy is "to survive."
"There is no other strategy. Just to live through this," he said.
Reunters
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| Norilsk Owners Finally Bury Hatchet |
The country's ugliest ongoing boardroom battle came to an end Tuesday as metals tycoons Oleg Deripaska and Vladimir Potanin agreed to cooperate in choosing a new board of directors for Norilsk Nickel.
"The conflict between shareholders has been settled," Potanin said at a joint news conference with Deripaska at Norilsk headquarters. "Both sides are withdrawing their grievances, as we have found a common approach to solving all of our problems."
He did not elaborate on specific problems.
The two have agreed to coordinate decisions on major deals, dividend policy, financing, mergers and sales or purchases of the company shares, according to a joint statement released Tuesday by Potanin's Interros and Deripaska's RusAl.
The agreement calls for a new board with neither Potanin nor Deripaska as members. The membership of the next board is to jump to 13, from the current nine.
The two have been feuding for seven months over Norilsk ever since RusAl bought a 25 percent share from Mikhail Prokhorov in an equity-and-cash deal in April. Interros already held about a 30 percent stake.
The two sides have been divided over development plans for the company and have accused each other of trying to devalue Norilsk's stock. Interros and Potanin have favored a strategy of a broad consolidation in the sector, a strategy Deripaska and RusAl have opposed.
RusAl also opposed a decision by the board to spend $2 billion on a 4 percent buyback to bolster its share price.
The conflict came to a head earlier this month when RusAl called for an extraordinary shareholders meeting to oust the current board, which is headed by Potanin.
The agreement announced on Tuesday precludes RusAl from pursuing merger plans with Norilsk for three years. It also leaves open the option for Norilsk to link up with Alisher Usmanov's Metalloinvest, Potanin and Deripaska said.
"We both had to overcome uneasy contradictions, are beginning our relations with a clean slate, a clean page and will be coordinating all deals and actions on a consensus basis," Potanin said, adding that the financial crisis and the 72 percent drop in the company's shares from their high in May were the key factors that pushed the two sides to "overcome their ambition and pride" to help the company.
The new board will be nominated Monday, and voting will be held Dec. 26.
The lineup will include four directors each from Interros and RusAl, current Norilsk CEO Vladimir Strzhalkovsky representing company management, one representing the government and three independent directors.
The two sides agreed that an independent director should head the board.
The government representative will most likely be put forward by Vneshekonombank, which has provided Deripaska with a $4.5 billion loan to help him refinance a loan backed by his blocking stake in Norilsk.
The head of the board should be independent, but could also be a government representative, Potanin said.
To ensure professionalism, Potanin said "reputation and experience in the industry" would be the chief requirements for potential board members.
RusAl chief executive Alexander Bulygin, Norilsk vice president and Interros chairman Andrei Klishas and Norilsk managing director Andrei Bugrov would meet those requirements, added Potanin, who did most of the speaking at the news conference, with Deripaska nodding regularly in agreement.
Potanin said Strzhalkovsky, a former KGB officer and longtime friend of Prime Minister Vladimir Putin's, had been a "positive and stimulating" force in reaching the agreement. Strzhalkovsky was appointed Norilsk CEO in August.
Deripaska made it clear that there was no question of the government trying to take control of the miner.
"The government has not tried to, and will not deprivatize the company," he said.
Potanin said that Norilsk was merely "counting on government support" during the crisis, which he called positive.
"I think the government will be happy with this outcome," said Robert Edwards, a metals analyst with Renaissance Capital. "I don't think the government actually wanted to be involved in the management, although this asset is clearly close to their hearts."
The announcement was greeted positively on the Russian market as the company's shares finished up 3.5 percent on the MICEX after rising by as much as 13 percent on the news.
Norilsk depositary receipts closed down 3.5 percent in London, however.
Edwards said the bump on the Russian exchange would likely be temporary.
"The fundamentals of the stainless steel market, in particular, are still weak and likely to remain so," Edwards said. "There's no doubt the company faces a very tough 2009."
Neither Potanin nor Deripaska offered any specifics on their plans to weather the crisis aside from saying government support was welcome.
"Any commodities company has to have a clear understanding of the supply and demand balance and to cut costs," Deripaska said, adding that some products are already being sold for less than the cost of production.
He also said it would be "profitable" for the government to buy surplus metals, comparing it to the existing practice of grain producers selling to the government to stabilize prices. "It would be the government's decision," Deripaska said.
As for a merger with Usmanov's Metalloinvest, Deripaska said this was now a possibility, saying he had changed his previous position on the subject.
Potanin said that Norilsk has an "open door policy" with Metalloinvest and would consult on possible candidates for the three independent director spots with Metalloinvest, which holds a stake of about 5 percent in Norilsk.
Metalloinvest representatives declined to comment Tuesday on the agreement between Interros and RusAl.
While Tuesday's announcement promised a more peaceful immediate future at Norilsk, skepticism remained as to whether the company would be able to remove lingering shareholder uncertainty.
"It's obviously good that these guys are calling a truce for now, but in terms of moving forward, a lot of questions remain," said Michael Kavanagh, senior metals analyst at UralSib. "We still don't know whether either of them has minority interests at heart."
The agreement creates a mechanism for working out any future clashes between major shareholders, Potanin said, without elaborating.
Deripaska said he was hopeful that the new board and a clean slate would be enough to avoid further problems.
"With us gone, the problems will be gone too," Deripaska said.
The Moscow Times
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| TMK to Cut U.S. Staff
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TMK will cut jobs and overtime at its U.S. unit after a surge of imports to North America crimped sales.
The company did not give the number of jobs cut, saying they would be "kept to a minimum." The imports have hurt sales of TMK's Electric Resistance Welded products, it said.
Bloomberg
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| Metalloinvest Cuts Output on Payment Arrears |
NOVOTROITSK, Orenburg Region — Metalloinvest, the country's largest iron ore miner, has slashed output of the steelmaking raw material as clients have fallen more than $350 million into payment arrears, its chief executive said Thursday.
Metalloinvest, half-owned by billionaire Alisher Usmanov, has managed to retain steel output levels throughout the world financial crisis and expects substantially higher core earnings this year than in 2007, Maxim Gubiyev said.
But the company is running iron ore production in November and December at 65 percent below peaks reached earlier this year, Gubiyev said at Metalloinvest's Ural Steel plant.
Metalloinvest was owed 15.4 billion rubles ($561.2 million) by its clients, of which 10 billion rubles was already late, he said.
"We understand the situation, since we have been working with our clients for many years, and we will continue working with our partners when the crisis is over," Gubiyev said.
Metalloinvest, through its Mikhailovsky subsidiary, would also pursue its plan to enter the copper market by developing the enormous Udokan deposit in eastern Siberia, for which it won a license in September.
Gubiyev said the company had so far paid 4.5 billion rubles of the 15 billion rubles needed to acquire the Udokan license.
The Moscow Times
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| Severstal Buys Canadian Miner
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Severstal has taken control of Canadian miner High River Gold Mines by increasing its stake to 50.1 percent, the company's mining division said Thursday.
Severstal Resurs, which had owned 9.9 percent of High River, said in a statement that it had acquired an additional 282.3 million newly issued common shares for a total of $45 million.
"Additionally, as a partial consideration for the purchase price, Severstal Resurs was issued approximately 40.7 million warrants exercisable for approximately 40.7 million common shares in High River," the company said.
The exercise price for the warrants was 64 Canadian cents ($0.51) per common share.
High River Gold, listed on the Toronto Stock Exchange, has assets in Russia and Burkina Faso.
The Moscow Times
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| Norilsk Profit May Fall 75% in 2009 |
Norilsk Nickel's profit may fall by as much as 75 percent in 2009 as demand has fallen in the midst of the financial crisis, the firm's chief executive Vladimir Strzhalkovsky said Thursday.
Norilsk, the world's biggest nickel and palladium producer, plans to maintain its current level of production but will only invest $1.3 billion in 2009, about $600 million less than this year, and will close its unprofitable plants abroad, Strzhalkovsky said at a news conference.
Norilsk stockholders will not receive dividends this year, Strzhalkovsky said, breaking with a recent tradition of high dividend payments.
In 2007, Norilsk paid 112 rubles ($4) per ordinary share in dividends and 120 rubles per share in 2006, according to the company's web site.
Norilsk, which has seen its MICEX-listed shares plummet by 75 percent since May and nickel prices tumble to $10,250 per ton from $51,600 per ton last year, posted a net income of $2.7 billion in the first half of this year, 33 percent less than in 2007.
Strzhalkovsky, a former KGB officer and former head of the Federal Tourism Agency, started and finished the meeting — in a manner reminiscent of Soviet-style speeches — by quoting the country's leaders.
"The government will help the economy not only by increasing liquidity … but with tax measures as well, [President] Vladimir Putin has told us all today," Strzhalkovsky said.
A 4 percent reduction in the value-added tax, one of the measures Putin backed at the event, will save Norilsk Nickel $240 million, Strzhalkovsky said with a smile.
His mood changed quickly, however, when he was asked about next year's profit forecast.
"Our profit may fall by up to 75 percent," he said, becoming visibly upset.
"But we can live on our own money. We don't need any expensive loans," he said, adding that the company had already repaid a $400 million syndicated loan from BNP Paribas and Barclays Capital that was due in November.
"We will be tightening our belt," Strzhalkovsky said grimly. The company has cut 220 jobs in its Moscow office but said it would not cut any staff at its production spots.
Norilsk had planned to invest $2 billion this year, but Strzhalkovsky said the sum might be cut by 3 percent to 5 percent.
"Norilsk needs $1 billion a year to maintain its production facilities," UralSib metals analyst Dmitry Smolin said. "The rest will be spent on modernizing worn-out equipment, building new refineries, geological surveys and social programs."
n Strzhalkovsky said in an interview published Thursday in Vedomosti that he had suggested to the government that state-owned Vneshekonombank buy United Company RusAl's stake in Norilsk of 25 percent plus two shares.
The Moscow Times
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| Polymetal to Buy Ayax |
Polymetal agreed to buy Ovaca Gold's Ayax unit for $31 million in cash and stock.
Ayax holds Ovoca's interest in the Goltsovoye silver deposit, it said.
The $31 million comprises $11 million in cash and 7.5 million Polymetal common shares, the silver miner said.
Bloomberg
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| RusAl's Venezuelan Deal |
United Company RusAl may set up a joint venture in Venezuela to make 750,000 tons a year of primary aluminum.
The venture with Venezuela's state-owned Venezolana de Guayana would produce the metal along with 1.4 million tons of alumina, Venezuela's Ministry of Basic Industries and Mining said Wednesday.
Bloomberg
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| Alcoa Unit Faces Fine From Regulator
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The Federal Anti-Monopoly Service said Wednesday that the local unit of Alcoa, the largest U.S. aluminum producer, would be fined after "abusing its dominant position in the market."
Alcoa Russia set "monopoly-high prices" on some aluminum products and may be penalized as much as 2 percent of revenue, the service said in a statement on its web site. The unit cooperated with the anti-monopoly service's probe, said Oleg Kalinsky, a spokesman for Alcoa Russia. He declined to comment further until the service makes its final ruling and sets the size of the fine.
The company was investigated after a complaint about prices in 2007 and 2008 from Oboronpromcomplex, a Russian arms maker, the service said. Alcoa bought two Russian plants four years ago. The watchdog will take into account measures the unit has taken to reverse the violation, the statement said.
The Moscow Times
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| Severstal to announce 9M IFRS-based results |
Severstal is expected to publish its financial results under IFRS for the first 9 months of 2008 today.
In H1 2008, Severstal's net profit jumped 69 percent to $1.94bn compared with the same period a year earlier, while revenue rose 36.3 percent to $10.547bn, operating profit increased 34.3 percent to $2.254bn, EBITDA grew 34.4 percent to $2.784bn, and net debt shrank from $1.5bn to $1.337bn.
RBC-News
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| Severstal seeks loan from Vnesheconombank
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Severstal is now in talks with the Bank for Development and Foreign Economic Affairs (Vnesheconombank) on raising a loan to refinance its Eurobonds worth $325m, the Russian steel producer's CFO Sergei Kuznetsov said during a conference call today. Severstal floated the five-year bonds in 2004.
Meanwhile, a number of media sources have claimed today that Evraz Group and Mechel also placed bids for securing loans from Vnesheconombank.
RBC-News
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| Severstal Halves Production |
Severstal has cut its production by half and applied for a $244 million loan from Vneshekonombank, chief financial officer Sergei Kuznetsov said Tuesday.
"Severstal is preparing for a new lower level of demand," Kuznetsov said during a conference call.
The company, Russia's largest steel producer, will reduce its capital expenditures by 20 percent this year and will postpone its $8 billion investment program for 2009 to 2011 "until market visibility and conditions improve," the company said in a statement announcing third-quarter results.
The company's shares fell 5.5 percent on the MICEX, which posted a 3 percent gain for the day.
Kuznetsov said mills in North America and Russia were working at half their levels from August and September. Output at the company's Lucchini plant in Italy has fallen 65 percent.
The request to VEB, the state-controlled Development Bank, for $244 million represents 75 percent of a $325 million, five-year eurobond that comes due in February, Kuznetsov said, dismissing the borrowing as a "cushion." The steelmaker's debt has grown 140 percent to $3.6 billion since December.
The steelmaker posted a nine-month net profit of $3.3 billion, up 112.5 percent from last year. Sales soared 61 percent to $18.2 billion.
"The company's third-quarter results showed no signs of the financial crisis, as steel prices started to depreciate only in September due to weakening global demand for steel products," UralSib metals analyst Michael Kavanagh said in a research note Tuesday.
Kuznetsov, however, was optimistic about the future of the industry. "We have seen the bottom, and we expect the market to start growing," Kuznetsov said.
Severstal also reduced its forecast for 2008 earnings before interest, tax, depreciation and amortization to between $5.1 billion and $5.3 billion, CEO Alexei Mordashov said Tuesday in a statement on the company's web site.
Mordashov said in September that EBITDA would be between $5.8 billion and $6.1 billion.
The Moscow Times
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| Severstal to consider interim dividend
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Severstal's board of directors has recommended its shareholders that they approve the payment of RUB 7.17 (approx. USD 0.26) per common share as a dividend for the first nine months of 2008, the Russian steel producer said in a statement today. The shareholders are expected to hold absentee voting on the matter. The ballots are to be submitted by December 26.
In January-September 2007, Severstal paid a dividend of RUB 2.5 (approx. USD 0.09) per common share. Therefore, the company's dividend may nearly triple in the first nine months of 2008 compared with the same period of the previous year.
RBC-News
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