By John Helmer in Moscow
Yury Trutnev, the Russian minister in charge of Russia’s economic relations with South Africa, is visiting South Africa, Angola and Namibia this week, in anticipation of President Vladimir Putin’s visit currently scheduled for the first week of September. Among the meetings Trutnev has arranged, the ministry told Business Day, was one on Tuesday with Tony Trahar, chief executive of Anglo American.
Anne Dunne, Trahar’s spokesman, at first refused to respond to questions regarding the substance of the conversation between Trutnev and Trahar. She then told Business Day the meeting was “private”. In Moscow, Trutnev’s spokesman said she had no additional information about the meeting at Anglo American.
From South Africa, Trutnev moves on to Angola and Namibia.
Anglo American announced earlier this month that it plans to sell its 79% control stake in Highveld Steel & Vanadium for a total of $678 million to Evraz, Russia’s leading steelmaker. However, the deal has been structured in several stages, also involving Evraz financial advisor Credit Suisse, while competition reviews of Evraz’s expansion into the global vanadium market are conducted by SA, the European Commission, and the US anti-trust authorities. The possibility that the SA regulators may not approve Anglo’s sale to Evraz was one of the issues involving both Trutnev and Trahar which Dunne refused to discuss.
Trutnev’s spokesman in Moscow, Yulia Zavzina, was asked if the minister had discussed the Evraz deal at his meeting with Trahar. She told Business Day she has “no information on the topics which were discussed”.
Pretoria’s review of the anti-trust implications of the Evraz bid for Highveld will also depend on whether its offer to acquire control of the US vanadium producer, Strategic Minerals Corporation (Stratcor), announced on May 1 for $110 million, is permitted in Washington. Expert estimates differ of how much of the global vanadium market the two deals could give the Russian group. Michael Kavanagh, a metals analyst with MDM Bank in Moscow, estimates that Evraz is moving toward a 50% to 60% share of “raw” global vanadium production. Leonid Smirnov, director of the Urals Institute of Metals and the all-Russia expert on vanadium, believes that its global share of the vanadium market could be between 30% and 40%. Irina Kibina, spokesman for Evraz, told Business Day the company believes that the two deals will produce a global market share “not greater than one-third”.
Industry sources in SA indicate that Anglo’s attempt to sell its Highveld stake was complicated by falling valuations from bidders, who had earlier announced their interest, such as Mittal, Tata, and the Kermas group, which had earlier bought Samancor Chrome from Anglo and BHP Billiton. Kermas is controlled by Danko Koncar, a London-based Croatian, and holds Russian and other European ferrochrome plants. The Kermas acquisition for a reported $461 million was financed by SA investors.
Dunne was asked what role in arranging the Anglo sale to Evraz had been played by Barry Davison, the Russian dealmaker who retired from the Anglo American main board last year, and is currently non-executive Chairman of Anglo Platinum. According to Dunne, “Anglo does not comment on speculation.” Davidson has been highly critical of SA reporting of the Evraz takeover bid. In Johannesburg, he told Business Day.
Russian minister Trutnev has also been under pressure at home recently, denying and then surviving media reports that he may be replaced. Trutnev has served just two years as the federal Minister of Natural Resources. The rumour of his removal followed the start of sweeping personnel changes, ordered by President Vladimir Putin, in the security ministries, Customs, the General Prosecutor’s office, and the Federation Council, Russia’s equivalent of the parliamentary upper chamber. Four cabinet ministers are believed to be next. They include German Gref, the minister of economic development, who advocated Trutnev’s appointment to his post in March 2004. At the time, Trutnev was governor of Perm, a region in central Russia, where his close ties with LUKoil, one of Russia’s largest oil producers, and Uralkali, a leading fertilizer producer, recommended him for the natural resources portfolio.
Trutnev’s spokesman has told Business Day: “We have no information about the possibility of replacement of Minister Trutnev.”
Trutnev has backed acquisitions by Russian metals magnates in the South African mining sector before. However, the current ownership of Evraz is undergoing a significant change, and the Kremlin’s policy for the transformation of the mining and minerals sector leaves undecided how President Vladimir Putin — scheduled to visit SA on September 5 — will view the vanadium play initiated by former Evraz chairman and controlling shareholder, Alexander Abramov. The privacy, which Anglo American sought for its discussion with Trutnev, confirms the political sensitivity of the Highveld deal for both the SA and Russian governments.