By John Helmer in Moscow

New Russian diamond mine is bigger and better.

Blind Man’s Buff is a game which, in King Henry the Eighth’s time, was played by men at court to grope for ladies.These days it entertains children to hide from the blindfolded one, who plays “it”, and must catchwhoever he can, until no-one is left in the game.

It isn’t customary for respectable stock exchanges to play games with blindfolded shareholders. Nor is it lawful for the management and proprietors of listed companies to treat their minorities as “it”.

As details emerge of the deal that was signed early this week for the world’s largest new diamond mine — the Verkhotina project in northwestern Russia — the terms of the transaction warn of two possible disputes over the equity in the asset. One is whether the Kremlin will agree to the shareholding split, allowing De Beers a 49.99% stake in the project, through its affiliate Archangel Diamond Corporation (ADC); and LUKoil, a 50.01% stake, through its wholly owned subsidiary, Arkhangelskgeoldobycha (AGD).
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by John Helmer - Thursday, April 17th, 2008
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By John Helmer in Moscow

Poor performance and uncertain prospects dog Russian steel and mining magnate Mordashov and management reshuffle not seen as improving the situation.

Severstal, Russia’s third ranked steelmaker, is far from the Titanic, but seat-changing at the steel and mining group has failed to convince steel industry observers and the Moscow stock market that the downward trend of its stock price can be reversed.

So far this month Severstal’s share price has lost almost 7%, the worst performer among its Russian peers. On Monday, it lost 0.4%, following a company reorganization announcement. The share price continued downward on Tuesday, then flattened in midweek trading.

The company announcement claimed that a “new structure, taking effect in April, will reduce the number of reporting lines between individual operations and senior management, ensuring greater operating efficiency and capitalizing on Severstal’s international diversity by providing for the continued growth of the global business.”
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by John Helmer - Wednesday, April 16th, 2008
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By John Helmer in Moscow

LUKoil ends raid against Archangel Diamond’s Russian project, opening up new mine possibility.

Grib is Russian for mushroom, and this isn’t the season for harvesting them. Grib is also the name of a diamond pipe, first discovered in northwestern Russia in 1996 — and the target of a Russian raid ever since.Until yesterday, that is.

According to an overnight announcement from De Beers in London, Nicky Oppenheimer has signed an agreement with Vagit Alekperov, chief executive and controlling shareholder of LUKoil, to end a decade of dispute and litigation over the fate of the Grib pipe, at the Verkhotina prospect, in Arkhangelsk region, in Russia’s northwest.

The signing was blessed at a brief meeting which Oppenheimer and Alekperov had with President Vladimir Putin on Tuesday in Moscow. LUKoil confirmed the meeting with Putin, but the Kremlin is saying nothing. How little or how much Putin meant, by way of endorsement of the proposed new diamond mine remains to be seen.

Oppenheimer told Alekperov at yesterday’s ceremonies that De Beers has bought assets in Russia in the past, but has no experience of developing and operating a mine in Russia. He and Alekperov appear to agree that, for the time being, neither has decided how the Grib pipe will be mined, and with whom.
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by John Helmer - Wednesday, April 16th, 2008
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By John Helmer in Moscow

Potash prices are soaring and the major beneficiary is LSE quoted Uralkali, Russia’s largest producer.

A handful of patience is worth more than a bushel of brains. That is what the Dutch used to say, while watching their tulips grow.

But for the world’s potash miners, meeting this month in Canada, a bushel of grain is another kettle of fish. Referring to the April 3 record of $6 fixed for a bushel of corn on the Chicago Board of Trade’s May contracts, a leading Canadian potash miner said this was a “beautiful chocolate sundae”. The increasing pressure on the corn price of North American ethanol demand, he added, is the “cherry”on the cake.

The mixed metaphors make the point. The global feast of foodstuffs is driving potash demand far faster than the miners can produce it. The result is that the benchmark commodity price being set by Uralkali and its trader, Belarusian Potash Corporation (BPC), the swing producer in the world, is driving up the share prices of the mining companies, which deliver the fertilizer to the market.
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by John Helmer - Tuesday, April 15th, 2008
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By John Helmer in Moscow

Russia’s big copper contest goes on the boil

Russia’s biggest copper contest is going to be a very private affair. Even if there are just two, possibly three contenders, all Russian household names, predicting who will win over the next 90 days of the contest may prove to be more frustrating than it looks.

Forecasting the award of rich state assets like these, over the transition period between the two Russian presidents, should be a reminder of the ancient Harpies. Zeus, the Greek god, was so jealous of Phineas, the man who knew too much, he sent him to an island, sat him down at a dinner-table, and loaded it with food, which the Harpies would fly in to steal, before Phineas had a chance to eat. The Harpies – three winged creatures, with feminine bodices and monster trunks – left their guano behind to make Phineas feel even worse about his appetite.

Udokan, located in the southeastern Siberian region of Chita, near the Chinese border, isn’t made of guano. The largest unmined deposit of copper in Russia, and one of the largest in the world, Russian studies indicated a year ago that its mineable ore reserves break down into sulfides 43%, mixed 40%, and oxides 17%. Official reserves, according to the Russian classification, amount to 1,310.8 million tonnes of ore, 19.7 million tonnes of copper (average grade 1.51%) and 11,900 tonnes of silver (average grade 9.6 g/t). International studies, which include BHP and Bateman, estimate Udokan reserves at 27 million tonnes of copper. At current copper prices, this is a feast worth more than $170 billion, plus another $7 billion for the silver.
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by John Helmer - Thursday, April 10th, 2008
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Norilsk Nickel shareholders ask where the cash for the new deal will come from

Oleg Deripaska and his United Company Rusal were trounced in their bid to elect three directors on the Norilsk Nickel board today. The vote saw Vladimir Potanin’s Interros holding, plus most of the free float of 40%, put a full-stop to Rusal’s six-month ambition to take control of Russia’s largest mining company, and become the largest mining and metals conglomerate in the country.

A brief announcement from Norilsk Nickel said that at voting early in the afternoon, an emergency general meeting of shareholders voted against early termination of the current board of directors, and against new elections. Prokhorov had called the meeting with the proposal to replace his men on the board, with those of Rusal, to whom he was planning to sell his Norilsk Nickel stake. Unofficial reports of the EGM voting indicate that Prokhorov voted his shares (34.5%) in favour of this proposal, but they were outvoted by the opposition (64%). Notwithstanding the way he voted, Prokhorov has changed his mind on the Rusal takeover, and he now argues that Rusal cannot meet its buyout and payment terms.
The outcome is the status quo ante, and so the 9-man board remains. Norilsk Nickel chief executive Denis Morozov sought to portray the result as a vote in favour of “professionalism and outstanding service of the acting Board of Directors… I would like to thank our minority shareholders for their support and active participation in voting in such crucial time for Norilsk.”
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by John Helmer - Tuesday, April 8th, 2008
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By John Helmer in Moscow

Russian miners’ union confident of gaining strike demands as Rusal postpones legal action.

Striking bauxite miners at the Rusal-owned Severuralsk mine, in central Russia, have called off their occupation of one of the mine shafts, on signs that Rusal is ready to make wage, welfare, and other labour contract concessions.

A spokesman for the striking miners, Oksana Sgibneva, told Mineweb that a court hearing, convened last Friday on Rusal’s move to call in police and marshals, was postponed until April 8. “Everything now depends,” she said, “on the condition of the case.”

Severuralsk (“North Ural Bauxite Mining Company”, Russian acronym SUBR ) operates five shafts, and all have been shut down since the day after miners at the Red Riding Hood mine refused to come to the surface, when their shift had ended on March 26. The miners then circulated a list of 11 demands. Rusal warned that the strike was illegal, and promised court action to put an end to the occupation.
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by John Helmer - Monday, April 7th, 2008
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By John Helmer in Moscow

Polyus shareholders give Potanin big win over rival plan to transfer assets.

In Harold Pinter’s play, The Birthday Party, a group of seedy characters in a rundown boarding house, at a miserable English seaside town, arrange a birthday celebration for one of their number. But he denies it’s his birthday, and in the drunken uproar, he tries to strangle one of the women, and rape another. On the morning after, two other characters end the play bv telling the birthday boy that they are going to take him away. In sing-song alternation, they say: “We’ll watch over you. Advise you. Give you proper care and treatment. Let you use the club bar. Keep a table reserved. Help you kneel on kneeling days. Give you a free pass. Take you for constitutionals. Give you hot tips.” Some of Pinter’s interpreters believe this to symbolize the impact of the all-powerful state on the hapless individual.

Russian billionaires tend not to be hapless. But they do crave proper care and treatment, not to mention free passes and hot tips.
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by John Helmer - Monday, April 7th, 2008
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By John Helmer in Moscow

Underground mine costs are pushing Alrosa towards diamond prospects in southwestern Africa

Back in the good old friendly days,one thing was always understood by the senior executives and mine engineers of De Beers and Alrosa, the world’s diamond mining leaders. Alrosa faced serious risks and incalculable costs in trying to mine underground, as its open-pit operations at Mirny and Udachny reached exhaustion.

From the De Beers point of view at the time, that meant that Alrosa’s annual production of rough diamonds was facing inevitable decline — and with that, its global market challenge to De Beers itself.

Alrosa’s annual report for 2006 showed what was happening. Udachny, supplying 35% of Alrosa’s total carat output, had suffered a 13% decline over the prior two years (measured in dollar value, because carat data are not released). Offsetting the decline at the Udachny open-pit operation, the new Nyurba mine grew 29% in value, while Mirny,where underground mining had started, gained 28%. Gain overall, however, was less than 8%, and rising dollar prices for diamonds in the period masked the trouble carat volumes were facing.

Sincedecline remained an unpleasant prospect, Alrosa’s planners and prospectors argued, it stood to reason that it might be cheaper for the company to try to find new diamond pipes in Russia — starting, naturally, in Alrosa’s backyard, Yakutia (Sakha), and in Arkhangelsk, on the western side of Russia.
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by John Helmer - Saturday, April 5th, 2008
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By John Helmer in Moscow

An unprecedented strike by Russian bauxite miners halts Rusal production in Urals

Richard the Lionheart (1157-99) was the greatest of English soldiers; the greatest artilleryman of all time. In laying siege to an enemy’s position, Richard applied the principle of concentrating force at the point of least resistance – bombarding a castle wall at its weakest point, at the same time as sappers dug under the foundation to bring the structure down.

The Independent Miners’ Union of Russia hasn’t read the playbook of Richard’s sieges. They are professional, however, when it comes to undermining a fortified position. Their down-tools strikes at coal pits and rail blockades in 1995 compelled then President Boris Yeltsin to make concessions to wage demands, which no other Russian workforce has been able to achieve since the end of Communist power. The independently unionized bauxite miners have now emerged to wage a week-old strike against Oleg Deripaska’s United Company Rusal in the Urals mining town of Severuralsk, in central Russia.

This is the first organized claim by miners against a Russian metals oligarch for a share in the wealth he has been accumulating in the current commodity boom. It is also the first break by an independent miners’ union to overwhelm resistance from the company-favoured union.
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by John Helmer - Thursday, April 3rd, 2008
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