By John Helmer in Moscow

There wasn’t much that the two Steptoes could ever agree on in the near-50 year old English comedy series about the scrap business — except that they would have sold out, if anyone was buying.

There is nothing at all comical about the Rashnikov family. But now brother Victor has managed to arrange the sale of his and his brother Sergey’s scrap business, one of the largest in Russia. The buyer, you might say without joking, is in the family.

Magnitogorsk Metallurgical company (MMK), operator of Russia’s largest steelmill, has reported this week that it has “acquired 99.99% of ZAO Profit – the largest metal scrap collector and processor in Russia. The acquisition of the strategic raw material supplier will significantly strengthen MMK security in terms of raw materials supplies.” The deal is reported to have been agreed at a board of directors meeting two weeks ago, on May 20.

The company announcement discloses that Profit’s financial results from scrap trading will be consolidated in MMK’s international accounting standards reports from the second half of 2009. Profit is also reported as supplying 75% of the ferrous scrap volume of about 5 million tonnes per annum, required by MMK.

The announcement omits to disclose the seller, or the transaction price.
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by John Helmer - Friday, June 5th, 2009
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By John Helmer in Moscow

The Russian government and the association representing Russian grain exporters in Moscow appear to have backed down from claims that Egypt wrongfully seized several cargoes of Russian wheat last month.

Until now, the public position, according to Arkady Zlochevsky, spokesman for the Russian Grain Union, was that Egyptian claims to have found weevil infestation in 137,000 tonnes of grain arrested at the ports of Safaga and Damietta, were false. He told Fairplay the affair was an attempt “at internal political manipulation in Egyptian government circles.” He added that Russian grain traders believed the seizures were a form of pressure to lower the Russian price at state grain tenders; and a bid by the Egyptian industry to reallocate shares in their market in favour of domestic or foreign rivals.

Russia provides about one-quarter of Egypt’s annual grain imports, more than double the next largest exporter, India. This year, Moscow has been planning to ship 3 million tonnes of grain to Egypt. But there is acute pressure on the Russian state stocking agency to move the grain out of silos and into the export trade, because this year’s new harvest is expected to be another bumper one.

Last year’s crop totaled 108 million tonnes, a 15-year record. And unless room is quickly cleared in the silos this month, there will be no room to store the incoming crop. Forced and discounted selling is inevitable. This dynamic has convinced some importing countries to defer their purchases until the exporters cut their prices.
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by John Helmer - Thursday, June 4th, 2009
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By John Helmer in Moscow

You don’t have to be a child with an especially good memory to remember this one, which is pre-Mother Goose:

Jack Sprat could eat no fat.
His wife could eat no lean.
And so between them both, you see,
They licked the platter clean.

What four hundred years of nurses, mothers, and cooks have done to twist the meaning shouldn’t obscure the original moral of the tale – when it comes to appetite, rapacity will usually clear the plate ahead of modesty.

What attorneys for a Canadian shareholder in High River Gold (HRG:CN) have told stock market regulators in Vancouver and Toronto recently is that, when it comes to the management of the company and its share price by its Russian owner, Alexei Mordashov, there’s something decidedly unbalanced about the way HRG has been handled since Mordashov’s takeover of last November.

HRG is a Toronto-listed junior with four operating gold mines in Russia and Burkina Faso, and two mine projects in development. It has currently attributable production of about 300,000 ounces per annum, and is cashflow positive. Attributable gold reserves were estimated in February by Dan Hrushewsky, HRG’s investment relations director, at 2.2 million oz, with silver reserves at 5.2 million oz. A subsequent release from the company on March 17 reported a MICON expert audit of gold reserves at the Zun-Holba and Irokinda mines (Buryat region of southeastern Siberia). Altogether, counting the Bissa gold project in Burkino Faso and the Prognoz silver project (Sakha region of fareastern Siberia), and converting silver reserves into gold equivalent, HRG’s gold equivalent reserves and resources, on the Canadian NI 43-101 basis, add up to 6.1 million oz.
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by John Helmer - Tuesday, June 2nd, 2009
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By John Helmer in Moscow

De Beers has agreed to sell its controlling stake in Archangel Diamond Corporation (ADC) to a North American investment fund which aims to intensify the litigation campaign in the US and Europe against LUKoil and Archangelskgeoldobycha (AGD), the two Russian companies charged with raiding the Grib diamond pipe.

At a board session on Friday, a bid by De Beers to call in a $10 million loan, and put ADC into liquidation, was topped by an offer to repay the loan, ADC’s remaining creditors, and conserve the company and its minority shareholders. Had the liquidation plan gone ahead, the latter would have lost everything.

ADC has yet to make an announcement, identifying who has made the offer which the board has accepted, or the terms. It is believed the offer comes from a lawyer-managed US fund, which is well-known as an investor in high-value litigations, with a strong record of winning large settlements for the cases it has taken on.

At this point, the fund appears to be paying about $14 million to clear ADC’s debts, and committing itself to a litigation budget of another $10 million, in order to pursue claims against the Russians of $4.8 billion; this sum includes $30 million in ADC’s direct investment in the exploration and testing of the Grib pipe; $400 million in lost profits according to ADC’s 40% stake in the halted mining venture; $800 million in profits lost from other diamond pipes within the Verkhotina-area exploration and mining licence; and $3.6 billion in triple punitive damages under the Colorado state racketeering statute.

The most recent De Beers valuation of the Grib pipe, based on early 2008 diamond prices, puts the project’s mineable value between $8 and $10 billion.
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by John Helmer - Monday, June 1st, 2009
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By John Helmer in Moscow

Russia’s Chief Prosecutor’s office has acknowleded that putting Somali pirates ashore for trial in Kenya is no longer an option, unless the Kenyan courts are replaced by a fully funded international tribunal.

Responding to questions from Fairplay, Alexander Zvyagintsev, the deputy prosecutor-general, has issued the longest official statement on the piracy issue since the Russian Navy despatched a destroyer squadron to patrol the waters off Somalia last year. According to Zvyagintsev, the 29 pirates captured by the Admiral Panteleyev on April 29, following an armed attack on a Russian oil tanker, included 12 Pakistanis, 11 Somalis, and 6 Iranian nationals; he claimed their excuse of being fishermen is not credible.

But Zvyagintsev did not disclose what has been done with the men. Russia is unlikely to put them on trial in Moscow, he hinted. Sending them to the Kenyan courts is also unlikely, because he said Kenya will have “serious problems” in trying up to 100 men already charged there with pirate offences off Somalia.

Rejecting “extreme unilateralism” as a policy, Zvyagintsev said the pros and cons of an international piracy tribunal have yet to be resolved by negotiation with the African coast states, and the Group of Eight states. Zvyagintsev said that he will be meeting with prosecutors from the other G8 states in Rome over the weekend to consider what is to be done next. Among the legal problems the G8 lawyers are discussing is the problem of sufficient evidence to secure convictions against the Somali pirates. Noting that “the legislation of many states does not provide the possibility of prosecuting the criminal liability of foreign citizens and persons without citizenship for crimes of piracy committed out of the [territorial or juridictional] limits of these states, [and so] there is the issue of how implement criminal prosecution using the mechanisms of international law.”
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by John Helmer - Monday, June 1st, 2009
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By John Helmer in Moscow

In the chapbooks of the medieval Finns, it was reported that pygmies lived in the Arctic Sea regions. The men there were dwarfed, so the Finns and Lapps thought, because of the effect of the North Pole and ice cap as a low-hanging roof over the world that made it impossible for normal-sized men to walk about. What they lacked in stature, though, the Arctic pygmies were suspected of making up for in aggressiveness. If they couldn’t find men to fight, they would attack flocks of cranes, riding on the backs of goats.

Not a great deal is known about a company called CITCO Waren-Handelsgesellschaft except that it has a handsome office in Vienna at number 8, Nussdorfer Platz; and there trades refined gases in liquid form, such as propane and butane; as well as nitrogenous fertilizers, other petrochemicals, and synthetic rubber. The company website reveals that it employs at least 15 people, and in 2007 had turnover of $1.88 billion. A presentation in Monaco last year claimed that CITCO has a 60% share of the liquefied gas trading market in the world.

Does CITCO’s obscurity rate it a pygmy by Arctic standards?

During May, it was reported in more than one Russian news medium that the company had been bought by Sibur, a petrochemical holding which belongs to Gazprom, the world’s largest producer and exporter of gas, and Russia’s largest company. Sibur spokesman Rashid Nureyev refused repeated questions to confirm this fact, or the price Sibur has paid. Sibur’s financial reports run a year in arrears, and its cross-shareholdings and related-party dealings within the Gazprom group, which include Gazprombank and Gazfond, leave open the possibility that the acquisition will never be publicly accounted for.
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by John Helmer - Friday, May 29th, 2009
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By John Helmer in Moscow

Sergei Vybornov, the chief executive of Alrosa since February 2007, is likely to be replaced, sources close to the company have told Polished prices.com. An announcement is expected to be made before the annual general meeting of Alrosa shareholders, scheduled for three weeks’ time, on June 20.

Vybornov’s spokesman has been refusing to answer his telephone, or respond to questions about the replacement, although Russian diamond industry figures have been speculating about it for weeks.

On Tuesday, Vybornov summoned reporters from Bloomberg to his office in a demonstration that he is still at the helm. He was not asked, and he didn’t say, whether he intends to remain at his post.

Bloomberg reports that Vybornov repeated an earlier announcement, following the last round of executive and shareholder meetings this month, that Alrosa has cut mine output so far this year by 4% from last year’s level. Vybornov was also reported by Bloomberg as saying that about two-thirds of this year’s production will be offered to the state stockpile agency, Gokhran. The state’s buying price has not been disclosed, but it appears to be close to cost.

If this sales plan holds, the sale to Gokhran would represent about $1.6 billion in target value. Altogether, the Alrosa Supervisory Board confirmed on May 14 that it plans $2.1 billion in production value this year; the company does not issue output figures in carats, nor releases an average per-carat price supporting its announcements of production and sales targets.
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by John Helmer - Friday, May 29th, 2009
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By John Helmer in Moscow

The Federal Antimonopoly Service (FAS), Russia’s anti-trust watchdog, announced this week that it has opened an official investigation of the State Customs Service (FTS).

The head of the FAS, Igor Artemyev, is a careful St. Petersburg apparatchik, who has made a 5-year career of running the anti-trust agency without getting out of step with his superiors. So it is surprising that the trust-busters have opened fire on the Customs men; it is understandable that it has taken them six months for them to pluck up the courage. The Customs agency is headed by Andrey Belyaninov, whose first career was in the KGB; and who came to the FTS in 2006, after running Russia’s arms export monopoly.

The target is an action the FTS ordered late last year to close down most of Russia’s customs clearance points at ports shipping ferrous scrap for export abroad. This measure has brought Russian scrap exports to a virtual halt in the Russian fareast, and cut the volume of exports to a trickle on the Black and Azov Seas.

Citing a provision of the antimonopoly legislation which bans administrative orders that hinder competition and limit free trade, and also a complaint from a scrap industry lobby organization, FAS issued a release this week, announcing it will commence its proceedings on June 10. A public statement by FAS, dated May 26, noted that the agency “suspects that FTS Russia violated the Federal Law «On Protection of Competition» by adopting acts that lead to restricting competition on the market of export of ferrous metals and limiting the rights of economic entities for selling, buying, otherwise acquiring or exchanging goods in the Russian Federation.”

Dmitry Kotikov, chiefspokesman for the State Customs Service, told CRU Steel News: “I can’t comment on the spot. We are aware of this information. I think our official position will be presented [on June 9].”
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by John Helmer - Thursday, May 28th, 2009
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By John Helmer in Moscow

The Mechel steel and coal group has failed for the second time in two months to agree with its bankers on repayment of a year-old $1.5 billion loan. The news, first issued in Moscow as trading commenced on the New York Stock Exchange, where Mechel is listed, dropped the share price by 2% by mid-afternoon.

The obligation was first undertaken for a one-year term in March of 2008, when Mechel bought the chrome miner and refiner, Oriel Resources. The debt became overdue on March 20, and was extended for 50 days until May 15.

Before that deadline, the company told Reuters it was thinking of issuing unsecured bonds worth a total of 45 billion roubles ($1.35 billion). This was not announced officially by the company, which also did not tell Reuters the purpose of the bond issue.

On May 14, a press leak by the company to Reuters claimed that Mechel would meet its refinancing deadline by paying $500 million in cash, and rolling over the balance of $1 billion on a longer-term arrangement. The cash outlay was reported as coming from Gazprombank. This indirectly state-owned bank has been reported, again without confirmation from Mechel, as having loaned Mechel $1 billion some time in the first quarter.

A report by Renaissance Capital to brokerage clients on May 15 claimed “we expect an official announcement from the company on the debt restructuring situation today.” No disclosure materialized. At the time, according to Renaissance Capital analyst Boris Krasnojenov, the reported claim that Mechel had resolved its refinancing problem was “positive for Mechel provided the refinancing is actually agreed upon… we identified successful refinancing of Mechel’s $1.5bn bridge loan as one of the key drivers of the stock. Mechel’s ADRs on NYSE were up 5.5% yesterday [May 14]. The positive impact of the news will largely depend on the details of the refinancing scheme.”
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by John Helmer - Tuesday, May 26th, 2009
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By John Helmer in Moscow

Following the weekend European Union (EU) summit meeting with Russia in Khabarovsk, Gazprom chief executive Alexei Miller warned yesterday in Moscow that if the Ukraine cannot pay the tab for past-due bills for gas, or for future deliveries for winter storage, and if the European Union won’t lend the money, Gazprom may cut off the supply once again.

Miller is reported Tuesday in a Moscow newspaper as acknowledging that Ukrainian payment delays are currently “very, very difficult”. He adds that Gazprom doubts that the Ukrainians can cover the arrears, or the cost of filling the gas storage. The costs were estimated during the EU session as between $4 billion and $5 billion.

If the arrears aren’t cleared, Miller said the supply agreement between Moscow and Kiev signed last in January provides for Gazprom to require new gas to be paid for ahead of delivery.

To European leaders, President Dmitry Medvedev said it was up to the EU to help the Ukrainians finance gas imports, if Brussels wants to resolve the conflict over gas movement. “There are no problems on our part,” Medvedev said. ” Let the one who pays for the gas offer assurances.” In parallel, Prime Minister Vladimir Putin meeting Ukrainian Prime Minister Yulia Tymoshenko, said: “We have applied to the European Commission with this question [of providing financial support to Ukraine]. We got the answer through a minister of finance, ‘We have no money for Ukraine.’ ”

by John Helmer - Tuesday, May 26th, 2009
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