By John Helmer in Moscow

Despite a brace of judicial rulings from the English courts against blackening reputations as a business tactic, United Company Rusal has reacted to the defeat of its candidates for the Norilsk Nickel board with this blistering ad hominem attack:

“Moscow, 8 July 2008 – UC RUSAL, the world’s largest aluminium and alumina producer and 25% shareholder in Norilsk Nickel, is issuing the following statement in relation to the results of the first meeting of the new Norilsk Nickel Board of Directors which was held on 7 July 2008. The decisions made at this meeting demonstrate that the Board is controlled by Interros and does not represent the interests of all shareholders.

“The election of Sergey Batekhin, deputy CEO of Interros, as the CEO of Norilsk Nickel was made without any search being carried out to establish a shortlist and was not supervised by a Nomination Committee. Indeed the candidacy of the new CEO was presented by Interros at the meeting of the Board right after Vladimir Potanin, owner of Interros, had been elected as the Chairman. Members of the Board were denied the opportunity to have meetings with the candidate or study his biography and professional track-record. Mr. Batekhin has no meaningful experience in metals and mining sector and has never served as the CEO of a public company. Furthermore there was no proper discussion as to why Denis Morozov, the current CEO who proved to be truly independent, was no longer suitable. It is thus not surprising that the vote to appoint Mr. Batekhin passed by a margin of one director.
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by Editor - Saturday, July 12th, 2008
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By John Helmer in Moscow

Russian government gears up to open new, and old, foreign investment deals.

The new Russian legislation to supervise foreign investment in the mining and resource sectors is already taking gold miners by surprise.

According to a Russian junior, which is planning to list on the domestic stock market shortly, it has discovered that, before its shares can be sold to foreign portfolio buyers, the Federal Service for Financial Markets (FSFM) must determine whether the foreign buyers are eligible. That requires a government listing of all Russian companies holding gold reserves above the 50-tonne (1.6 million ounce) threshold. That threshold was fixed in the law defining strategic reserves, from which foreign miners and investors are excluded.

The new legislation sets out the list of strategic sectors and metals, and also thresholds for oil, gas, copper and gold. However, there is no government list of companies working with reserves that has been officially verified. As the gold miner has just discovered, the FSFM doesn’t have such a list, because it hasn’t been compiled yet. So the miner cannot get clearance from the market watchdog to sell its shares on the market.
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by John Helmer - Thursday, July 10th, 2008
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By John Helmer in Moscow

The proverb that good things come to those who wait has recently been used to sell a brand of ale that takes a long time to pull into the glass.

An older version makes the waiting less optimistical. “Wait, thou child of hope,” coined the 19th century aphorist, Martin Tupper, “for Time shall teach thee all things.” But then Tupper was that special type, the London lawyer, for whom time is money. Tupper’s best known aphorism is the one legal opinion he didn’t manage to charge for. On his gravestone, it is claimed – “Although he is dead, he will speak.”

The time the Russian government is taking over policy towards the domestic cost of steel and its raw materials, coking coal and iron-ore, is instructive, as the policy debate runs now into its third month. There have already been several misleading announcements of decisions that have yet to be finalized. As a tussle between the Russian oil and gas industry, which consumes the steel in pipe form; the steel industry, which supplies the steel for pipes; and the mining industry, which fills and fuels the blast furnaces, the length of time the contenders and decision-makers require to resolve their differences indicates how unprepared the new government is to make the difficult choices.
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by John Helmer - Wednesday, July 9th, 2008
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By John Helmer in Moscow

Oleg Mitvol, Deputy Head of Rospriradnadzor, looks to be on the way out, perhaps for stepping on too many toes

In the first days of aerial warfare, during World War I, pilots had no tactical guidebook to help them plot their offence or defence. Attackers could fly unexpectedly out of the blinding light of the sun. Or they could lurk in cloud banks, waiting for an ambush. Those who survived describe their learning experience as akin to an animal instinct. In anticipating what the enemy might be likely to do, they imagined where and how they would conceal themselves for the attack. To defend themselves, they would then watch the sky for their alter ago.

Oleg Mitvol, deputy chief of Rospriradnadzor, Russia’s environmental protection and resource inspectorate, has been flying blind since he took his post several years ago. He has no alter ego, but he hasn’t lacked for enemies waiting in ambush. In the short history of post-Communist Russia, Mitvol is the first, and the only, federal government official to pursue the major and junior mining companies working in Russia for licence violations. He has also attacked major metal producers, like the steel group Evraz, for waste water violations, imposing the largest individual fine in the brief record of Russian environmental enforcement.
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by John Helmer - Wednesday, July 9th, 2008
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By John Helmer in Moscow

Oleg Deripaska is not having a good week.

On Monday, he revealed he was at maximum stretch to garner just enough shareholder votes for two seats on the Norilsk Nickel board, plus a seat for his highly unpredictable and unreliable shareholding ally, Mikhail Prokhorov.

On Thursday, Justice Christopher Clarke issued a 63-page ruling, granting the application of Deripaska’s former patron and business partner, Mikhail Chernoy (Michael Cherney), the right to a High Court trial of his $6 billion claim to his stake in Rusal, and in Deripaska’s holding, Basic Element. For the first time in an international court, Deripaska has been defeated on the issue of jurisdiction, and must now accept service and stand trial for the partnership agreement he allegedly signed with Cherney at the Lanesborough Hotel in London in March 2001.

According to Clarke’s ruling, “the two most important witnesses are the parties themselves. A substantial proportion of the relevant material (e.g. as to company structures, instructions to lawyers and accountants and movement of funds) must be in writing. Several witnesses, such as the representatives of Syndikus and Mr Philipides, Mr Mishakov and others are likely to be seasoned travellers. Neither party has suggested that they will suffer significant prejudice if the trial takes place here.”
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by Editor - Thursday, July 3rd, 2008
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By John Helmer in Moscow

“The cleverest subtlety of all is knowing how to appear to fall into the traps set for us,’ is the maxim coined by La Rochefoucauld, one of the cleverest of the 17th century French courtiers. His wounds as a soldier, and the even more serious ones he took in politics, qualified him for early retirement, which he spent making sophisticated ladies nod in agreement at his bitter apophthegms. “People are never caught so easily as when they are out to catch others.”

The outcome of the voting this week by 77% of Norilsk Nickel’s shareholders indicates that although Oleg Deripaska has won a seat for himself on the board, plus one for his chief executive, Alexander Bulygin, and a third for his shareholding ally, Mikhail Prokhorov, he’s in a trap of his own making, from which it will take time to extricate himself.

The stock market reaction to the vote at the AGM of Norilsk Nickel (GMKN:RU) initially misunderstood the result, and cut the share price by 4% to $242; that was decidedly worse than the RTS index as a whole for the day. The pessimism appears to have stemmed from the view that there had been no decisive outcome — neither for controlling shareholder, Vladimir Potanin, nor from hostile takeover bidder UC Rusal, the Deripaska company.
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by John Helmer - Thursday, July 3rd, 2008
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By John Helmer in Moscow

Trojan horse in reverse — Vekselberg & Potanin attack Rusal

Laocoon the Trojan is on record as warning not to trust the famous wooden horse; nor the Greeks bearing gifts. But he, Homer and Virgil can’t help with the corporate raider’s version of the Trojan Horse ploy. This is –if you are planning to attack with the horse, make sure all your men inside are on your side.

Vladimir Potanin, co-owner of Norilsk Nickel, Russia’s dominant mining company, may be going into the June 30 AGM, with one vote no-one had anticipated, least of all his adversary and attacker, Oleg Deripaska, the controlling shareholder of United Company Rusal. That vote is Victor Vekselberg’s, who (with partners) controls 18.9% of Rusal; and who, for the time being, is chairman of the Rusal board.

Potanin has begun negotiating with Vekselberg for a transaction that may exchange the latter’s unlisted, unpriced Rusal shares for the former’s much more valuable Norilsk Nickel stock. First word was leaked publicly last week by Alisher Usmanov, who has also thrown his 50% stake in Metalloinvest – an iron-ore mining and steelmaking group – on to Potanin’s side, and against Deripaska’s attempt to seize control of Norilsk Nickel. Sources at Interros, Potanin’s holding, have told Mineweb: “We don’t hide that there have been consultations with Vekselberg regarding the creation of the joint company.”
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by John Helmer - Sunday, June 29th, 2008
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By John Helmer in Moscow

In the old days, before artillery fire could be directed with precision, the only way an attacking force could breach a fortified gate or wall was to manually deliver a large package of gunpowder; fix it to the target; light the fuze; and run away. Our word for the modern mortar, and the French word for this medieval device, are related. But the French has a double-meaning, because it also refers to the breaking of human wind.

It was Shakespeare’s Hamlet, who appreciated both, when he dispatches two men he knows to be plotting to kill him with altered letters that will seal their doom, instead of his. As Hamlet expresses the famous thought: “tis sport to have the engineer/Hoist with his own petar.”

In all the meanings Hamlet meant can be found the predicament in which British Petroleum (BP:PZ, LSE; BP:US, NYSE) ) is now hoist in Moscow. What chief executive Tony Hayward and TNK-BP CEO, Robert Dudley, thought was the brilliant stroke of making an alliance with Gazprom, and President Dmitry Medvedev, to rid themselves of three Russian oligarchs, has turned into an embarrassment for Gazprom and the new men in the Kremlin; a boon for Prime Minister Vladimir Putin and Rosneft; and the one thing BP dislikes most about Mikhail Fridman – a boost to his ability to shake a second fortune out of the pockets of a mark he’s already scored once.
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by John Helmer - Friday, June 27th, 2008
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By John Helmer in Moscow

The share price of Polyus Gold started tumbling on the Moscow exchange even before the votes were counted at today’s Annual General Meeting of shareholders in Moscow. At the Moscow bell, Polyus was down more than 3% on the day to $60 per share.

Since May 21, when the share price spiked on shenanigans already reported, the Polyus price has dropped 25%. There was still time for the London exchange to keep the price tumbling, which it did through the afternoon, dropping more than 6% as this was being written. Almost $4 billion in market capitalization has evaporated in a month; $106 million per day, and that includes weekends.

The results of voting on the new board of directors indicated that Mikhail Prokhorov has retained his own and four other seats. These are to be sat on by chief executive Evgeny Ivanov and Valery Rudakov, beneficiaries of a lucrative and lawful share options scheme reported in Mineweb early this month. In addition, two other sitting directors, Yekaterina Salnikova and Yevgeny Braiko, have been re-elected to positions backing Prokhorov. Prokhorov’s holding Onexim declined to characterize the outcome of the board vote, and spokesman, Igor Petrov, told Mineweb: “We don’t have a position. Please read the Polyus statement.”
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by John Helmer - Thursday, June 26th, 2008
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By John Helmer in Moscow

Russia tries cooling steel prices.

The Russian government has postponed a decision on whether to impose export duties of up to 20% on steel products, despite a flurry of press and brokerage reports claiming the government’s senior industry minister has already promised not to levy new taxes.

A meeting between steelmakers and Deputy Prime Minister Igor Sechin on Saturday last, June 21, did not reach a policy conclusion, both government and industry sources report.

The duty scale proposed by the government may parallel the regime recently adopted by the Indian government — 5% for zinc-galvanized products; 10% for cold-rolled and hot-rolled products; and 15% for semi-fabricated slabs.
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by John Helmer - Wednesday, June 25th, 2008
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