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| Polymetal Will Cut Investment in 2009
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Polymetal, the country's biggest silver miner, will cut investment in exploration and modernization by 30 percent to 40 percent next year because of the financial crisis, chief executive Vitaly Nesis said Tuesday.
The Albazino and Amursk smelting projects, which are the company's highest priority sites, will not be affected, Nesis said at a mining conference. Polymetal has said it was planning to invest $30 million for exploration this year and another $30 million on modernization. Nesis declined to give figures for 2009.
Polymetal, which is also the country's third-biggest gold producer, will not cut production and will try to save jobs, Nesis said. He added that a devaluation of the ruble would "very much help mining companies" because it would help them keep costs at lower levels.
"It would be logical for Polymetal to cut exploration costs," said Tim McCutcheon, a partner at DBM Capital Partners, an asset management company that specializes in mergers and the acquisitions in the precious metals market. "The company has been very aggressive in its strategy of opening up greenfield projects. Now, it's time to go more conservative."
"It would be better for Polymetal to buy the assets around its current mines to get a synergy effect," McCutcheon said.
Polymetal's shares dipped 0.4 percent on the MICEX on Tuesday.
Nesis also said he expected that many of the country's small, inefficient producers would soon be forced to close.
"As a result of the crisis, a lot of the companies that mine from 500 to 1,000 kilograms of gold per year will be closed because of the lack of financing in the next six to nine months," Nesis said in an interview on the sidelines of the conference. "Nobody will want them, because the quality of their work is very poor. So I call this process a rationalization."
Polymetal, by comparison, produced 3 million tons (2.7 billion kilograms) of silver and gold last year, and Polyus Gold, the country's biggest producer of the metal, had output of 9.4 million tons.
"Afterward, the strongest and most qualified companies will remain on the market," Nesis said.
The 20 largest miners control around 95 percent of the market, while about 500 smaller producers are also operating in the country, McCutcheon said.
"Those 500 are mainly alluvial miners, highly inefficient, and sometimes even criminal. They have been leaving the market anyway," McCutcheon said. "The crisis has only sped up the process."
But McCutcheon also cautioned that the closures would not result in a consolidation of the market — just a thinning.
"No one wants to spend cash, because they don't know whether there will be any more," McCutcheon said.
The Moscow Times
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| Russian Copper Freezes '09 Investment |
The Russian Copper Company said Monday that it was freezing all its investment projects for 2009 and planning to optimize production costs because of the global financial crisis and falling metals prices.
"These decisions have been made in order to use the existing production assets most efficiently, to switch to financing the group's activity internally, to form stable cash flows and to honor obligations to external creditors in time," it said in a statement.
Earlier this month, Russian Copper said it had shelved separate projects to expand into nickel and build a zinc plant with a rival miner.
Russian Copper controls 14 percent of the Russian refined copper market and unites 12 metals and mining enterprises. Last year, the company said its two main plants were expected to produce a combined 191,000 tons of cathode copper in 2007. It had planned to invest $550 million to raise cathode output to at least 295,000 tons by 2010.
The Moscow Times
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| Ufaleynickel Suspends Production |
YEKATERINBURG -- Ufaleinyckel, the country's third-largest nickel producer, said Monday that it had stopped production of the metal because of a fall in world prices and planned to sack some 400 employees.
Pavel Kovalenko, the spokesman for the plant's owner, the Industrial and Metallurgical Holding, said the plant had already sent some 300 employees on partially paid holiday and intended to do the same with another 1,000 this week.
"We have started negotiations with the plant's trade union and employees on laying off some 400 staff," Kovalenko said.
"The cost of the plant's production is significantly higher than the price of the metal on the world markets. It costs us $26,000 to produce a ton of nickel, and its current exchange price is around $8,000."
Nickel fell by 6.5 percent in London on Monday to $9.350 per ton.
The Moscow Times
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| Gazprom, RusAl Sign Vietnamese Deals |
Gazprom and United Company RusAl signed deals Monday to participate in natural resources projects in Vietnam as the Kremlin aims to triple annual trade between the countries to $3 billion.
President Dmitry Medvedev presided over the signing of the deals, which will involve Gazprom exploring for oil and gas off the Vietnamese coast, during the visit to Moscow of his Vietnamese counterpart, Nguyen Minh Triet.
"The negotiations confirmed the framework for strategic partnership between Russia and Vietnam," Medvedev said after the meeting.
Russia still enjoys close ties with Vietnam, formed during the Soviet era. Medvedev said talks had focused on increasing annual trade between the countries first to $3 billion, and subsequently $10 billion, from more than $1 billion in 2007.
He said the countries were prepared to conduct joint "geological exploration in Vietnam, Russia and third countries."
Gazprom signed a 30-year agreement with Vietnamese state oil monopoly group Petrovietnam to explore four blocks of Vietnam's continental shelf. Gazprom said in a statement that it would finance initial exploration work.
The companies' existing joint venture, Vietgazprom, will carry out the work. It is already exploring off Vietnam's coast.
Separately, the two sides created a new joint venture, Gazpromviet, to work in Russia and third countries. Gazprom subsidiary Gazprom Zarubezhneftegaz will own 51 percent and Petrovietnam 49 percent of the joint venture, which will work at the Nagumanosvkoye deposit in Russia's Orenburg region.
The blueprint for Russian-Vietnamese partnership in energy is Vietsovpetro, a joint venture between Petrovietnam and state-owned Zarubezhneft from the 1980s, which produces more than 150,000 barrels of oil per day on average from the Bach Ho field.
RusAl signed a memorandum of understanding with Vietnamese company An Vien to build an alumina refinery witha a capacity of 1.5 million tons per year to run on bauxite mined from the Binh Phuoc deposit in southern Vietnam, which RusAl estimates to contain about 700 million tons of bauxite.
RusAl chief executive Alexander Bulygin said at the signing ceremony that investment in the bauxite and alumina project was estimated at $1.5 billion. RusAl would hold 51 percent of the joint venture and An Vien 49 percent, he said.
Construction is scheduled to begin in the first quarter of 2012 after a preliminary feasibility study is conducted next year and in 2010, RusAl said in a separate statement.
Vietnam has the world's third-largest explored reserves of bauxite, the raw material from which alumina and aluminum metal are made.
Vietnam is also prepared to invest at least $750 million in a $1.5 billion joint venture to build a fertilizer plant in the republic of Kalmykia, the republic's president, Kirsan Ilyumzhinov, said after the signing ceremony.
The plant would be built next year and would generate $1 billion in annual sales at current prices, he said.
The Moscow Times
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| Mechel To Request Share Issue
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Mechel, the country's largest coking coal miner, said Friday that it would ask shareholders next week to approve a plan to revive a preferred share issue and that it would more than double the amount of shares on offer.
Mechel said it planned to issue up to 138.8 million preferred shares with a nominal value of 10 rubles each. Shareholders will vote on the plan at an extraordinary general meeting Monday.
The company, also Russia's sixth-largest steelmaker, did not say how much it hoped to raise if it made another attempt to list the shares, which it plans to issue as Global Depositary Receipts.
Likewise, it did not say when it might carry out the placement, and a company spokesman declined to comment on details of the issue.
In August, Mechel postponed the offering indefinitely, shortly after attacks by Prime Minister Vladimir Putin on its coal pricing policies and accusations of tax evasion wiped out half the company's value in three trading days.
The miner had originally planned to place up to 55 million preferred shares on Aug. 11 to raise more than $2.5 billion. Mechel's stock has fallen 88 percent since peaking in May.
Following Putin's comments and a subsequent anti-monopoly probe, Mechel agreed to cut domestic coking coal prices by 15 percent from Sept. 1 as part of a settlement with regulators, who also ordered the company to pay a fine equivalent to 5 percent of its 2007 coking coal revenues.
The Moscow Times
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| Deripaska's Miner Will Postpone IPO |
The global financial crisis dealt Oleg Deripaska another blow Friday, when his mining company, Strikeforce Mining and Resources, postponed a Hong Kong share float because of the market downturn.
SMR, which accounts for 4 percent of the world supply of steel-hardening alloy ferro-molybdenum, will delay the proposed IPO until markets recover or stabilize, the company's chief executive, Geoffrey Cowley, said Friday.
"In the current conditions of the global financial crisis, it is not rational and economically justified to sell a share in such a promising company as SMR," Cowley said in a statement.
Deripaska, Russia's richest man on paper, has been forced to sell his stakes in auto parts maker Magna and German builder Hochtief after facing margin calls from banks when the value of his shares used as collateral plummeted.
Russian stocks, down more than 70 percent since peaking in May, have fared worse than other emerging markets recently. Investor flight, exacerbated by the war in Georgia, has wiped billions of dollars from company valuations and eaten into the fortunes of its business elite.
Deripaska has also deferred a $700 million tranche of his debt to fellow billionaire Mikhail Prokhorov, accrued to purchase a blocking stake in Norilsk Nickel.
SMR, which stands for SoyuzMetallResurs in Russian, is a relatively small part of his business. The company had planned to float at least 25 percent of its shares in Hong Kong in a listing that one source in June said could raise about $200 million.
Hong Kong has been courting listings by foreign companies, although some bankers have expressed doubts about investor appetite for companies without a strong connection to China. Most Russian overseas listings have taken place in London.
The source familiar with the matter said in June that SMR had tapped BOC International and Morgan Stanley to underwrite its offering.
The company, which is also exploring for gold and other minerals in Mongolia and Kyrgyzstan, was in compliance with listing requirements and ready in principle to float shares, Cowley said.
He said several companies within Deripaska's Basic Element holding, which posted revenues of $26.8 billion last year, had set the objective of being ready for an IPO by 2010.
"SMR is IPO-ready now," he said. "Unfortunately, it does not make a lot of sense to discuss a potential listing in the nearest future.
"We could discuss the terms for listing only when we have clarity on the consequences of the financial crisis and understand how long it would take for the markets to recover and stabilize."
SMR owns the Sorsk ferro-molybdenum plant in the republic of Khakassia and the Zhireken plant in the Zabaikalsky region.
Basic Element's resources division, which includes a timber business as well
The Moscow Times
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| Norilsk Cost-Cutting Group
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Norilsk Nickel aims to cut costs as the financial crisis erodes demand for nickel.
"We have created a working group, which will meet Oct. 27 to discuss the proposals from our units on cutting costs," spokeswoman Erzhena Mintasova said Thursday.
Bloomberg
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| MMK redeems Eurobonds |
Magnitogorsk Iron and Steel Works (MMK) has bought back its $300m issue of Eurobonds, which matured on Tuesday, the Russian steel producer said in a statement today. The Eurobonds were redeemed by the company's subsidiary MMK Finance S.A.
The securities were placed at a coupon rate of 8 percent in October 2003, and coupon payments totaled $120m. MMK used the funds raised from the issue for general corporate purposes, including the funding of the company's modernization program.
RBC-News
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| Norilsk Open to Offers for U.S. Asset |
Norilsk Nickel is open to receiving offers to buy its only North American asset and is revising its investment program for next year because of pressure from the economic crisis, chief financial officer Oleg Lobanov said Tuesday.
Lobanov, speaking at a conference of finance executives, said Norilsk would consider offers for its stake of 55.4 percent in Stillwater Mining Company, the only platinum and palladium producer in the United States. It bought the holding for $257 million in 2003.
The Montana-based company on Tuesday had a market capitalization of $415 million on the New York Stock Exchange, valuing Norilsk's stake at $230 million.
The global economic downturn has a led to declining demand for industrial goods, including cars and construction materials, leaving metals companies faced with plummeting prices and mounting losses.
Severstal, Russia's largest and United States' fourth-largest steelmaker, said earlier this month that it was cutting output at its North American plants by 30 percent. It also slashed its production in Italy by 30 percent and at its main Russian mill, in Cherepovets, by 25 percent.
Novolipetsk Steel, another Russian steelmaker, was sued earlier this month for missing a deadline to complete a $3.5 billion deal to buy U.S. steel-tube maker John Maneely Co.
Lobanov said Norilsk, the world's largest nickel and palladium producer, expected to finish drafting its investment program for 2009 by mid-December. "We are prepared for a hard year," he said, adding that Norilsk was for now not planning to reduce production but was considering an "optimization" of salary levels.
"In a crisis situation, cash is king," Lobanov said. "And we have to prioritize our projects," he said, adding that Russian projects took precedent over foreign ones because of differences in production costs.
Lobanov also said Norilsk had on hand the $400 million it needs to pay off a loan due in November, its last major debt payment until September.
The company, which said last week that it would halt operations at the Cawse mine and plant in Australia because of increasing costs, has seen its capitalization fall by nearly three-quarters from its high this year. The company on Tuesday had a capitalization of 374.64 billion rubles ($14.1 billion) on the MICEX.
"We have been hoping for a synergy with our palladium assets in Russia and the United States, but it hasn't worked out," Lobanov said. "The crisis has aggravated the situation with Stillwater Mining."
Prices for palladium have fallen 56 percent in the third quarter, and they dropped 34 percent last month, Bloomberg estimated. Palladium futures for December delivery cost $184 an ounce in New York on Tuesday.
"Stillwater Mining has always been a marginally profitable asset due to its environmental sensitivity and the cost of labor," said Michael Kavanagh, a metals and mining analyst at UralSib. He said Switzerland-based metals giant Xstrata and South Africa's Empala Palladium were potential buyers of Norilsk's stake.
The rest of the Stillwater Mining's shares are free-floated in New York.
Xstrata spokeswoman Claire Divver declined to comment on a potential purchase Tuesday. No one answered the phone at the Empala Palladium's office in Johannesburg on Tuesday evening.
Stillwater Mining's press office did not respond to requests for comment recorded on an answering machine.
n Norilsk Nickel has named Oleg Pivovarchuk a first deputy chief executive, the company said in an e-mailed statement Tuesday.
Pivovarchuk, who has served as a deputy director for foreign economic operations at carmaker AvtoVAZ, will have a seat on Norilsk's management board and will be in charge of the company's foreign economic operations, the statement said.
The Moscow Times
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| Polymetal steps up gold production |
Polymetal's gold production grew 18 percent from 179,000 ounces in January-September 2007 to 211,000 ounces in the first nine months of 2008, the Russian precious metals producer's press office said in a statement today. Silver output rose 4 percent to 12.6m ounces, gold sales climbed 18 percent to 201,000 ounces, and silver sales increased 6 percent to 12.2m ounces. The company's revenue surged 73 percent to $383m.
Polymetal expects its gold production to reach 260,000-280,000 ounces and silver production 16.5m-17.5m ounces in 2008, while the forecast for 2009 stands at 280,000-300,000 ounces of gold and 17m-18m ounces of silver.
RBC-News
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