By John Helmer in Moscow

Terms of new nickel-iron-ore combination put pressure on Rusal and Deripaska

“Though poverty and want are an irresistible temptation to the poor, vanity and great things are as irresistible to others”.

As she got up from a night of bedding with a high-paying prince in France, this was how Roxana, Daniel Defoe’s least successful hero, philosophized. But in Defoe’s 18th century novel, Roxana was meant to be a practical warning against marriages of convenience; as well as the short-lived allures of sex and cash.

Mikhail Prokhorov, the latest of Russian oligarchs to be moving his fortune elsewhere, is reported to suffer from irresistible temptations, and to have been quite successful at satisfying them. Vanity he is known to have, and great things have come to him, too. Not less can be said of Alisher Usmanov, semi-proprietor of the iron-ore and steel holding Metalloinvest, which yesterday began to pass beyond his control, at a discount he has begrudged having to accept.

Through the keyhole, watch carefully at our two Roxanas, as they climb into and out of their separate beds — I mean, bids.
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by John Helmer - Thursday, May 29th, 2008
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By John Helmer in Moscow

The FSA investigation of Polyus Gold’s affairs hears duck quacking.

Last February, Interros, the Moscow asset holding of Vladimir Potanin, was getting ready to go to the High Court in London to enforce Potanin’s rights in KM-Invest, a special purpose vehicle Potanin controlled with disgruntled partner, Mikhail Prokhorov.

At stake was a 7.4% stake in Polyus Gold, Russia’s leading gold miner, which KM-Invest held for the two men. KM-Invest’s establishment documents provided for UK court jurisdiction, in the event of disputes.

At the time, 7.4% of Polyus was worth about $775 million. Last week, it reached $1.1 billion, before falling again. The gyrations of share value are part of the conflict between Potanin and Prokhorov, as Mineweb has already reported, as Potanin tries to gather the votes himself, and the support of minority shareholders, to stop Prokhorov from carving-out the exploration assets of the company, and starting an entirely new company, Polyus Exploration, under his exclusive control.
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by John Helmer - Wednesday, May 28th, 2008
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By John Helmer in Moscow

Brokers put fingers in the dyke, as Kremlin takes fresh bite out of profit

According to the tale of Hans Brinker, the brave little Dutch boy stuck his finger in the Haarlem dyke to save the Netherlands from being flooded.

In truth, the tale was a 19th century American invention. Until 1950 there was no dyke, no finger, and no little Hans. Then the Dutch Bureau of Tourism thought too many visiting Americans believed the story, so they erected a statue to Hans, and moved the non-existent exploit to Spaarndam, where the statue was.

Brokers and investment bankers are like that; and it’s at volatile times like these that you are bound to see a great many fictional fingers aiming to keep real floods at bay. Take, for example, the reaction of Renaissance Capital, a big Moscow house, to the disclosure last week that the Kremlin is thinking of intervening to hold steel prices down.

What is happening is that domestic steel prices have been going up so fast, traders say their quotes are obsolete within 24 hours. They joke that, after crossing the thousand-dollar level in April, hot-rolled coil (HRC) is now approaching the thousand-Euro mark, with no flattening or downturn in sight.
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by John Helmer - Monday, May 26th, 2008
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By John Helmer in Moscow

South Africa’s Foreign Minister, Nkosazana Dlamini-Zuma, said there has been a breakthrough in negotiations with the Russian government over terms for the Russian space agency to launch a South African communications satellite.

She said she hopes to “see the launch of the satellite by the end of this year.” Dlamini-Zuma headed a delegation of more than 30 South African officials and businessmen in Moscow for a 2-day session of the bilateral intergovernmental committee on trade and economic cooeration (ITEC).

Ronnie Mamoepa, the Minister’s spokesman, told Business Day/Weekender, that resolution of delays and disputes over the satellite launch was the “priority” of this week’s talks.

The Russian text of the protocol, which Dlamini-Zuma and Yury Trutnev, Russia’s Minister of Natural Resources, signed late Friday set a deadline of July “to finish consultations to find the solution to the problems connected to the launch of the satellite ZA-002”. Asked about the reason for the delays, Mamoepa said they were technical ones.

The text of the protocol indicated that problems remain between the two governments and businessmen on both sides, involved in the Kalahari manganese mining project. This involves the Renova group of companies, owned by Victor Vekselberg, who has publicly promised to invest a billion dollars in the project.
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by John Helmer - Friday, May 23rd, 2008
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By John Helmer in Moscow

Volatility in Uralkali share price is no sign of change in value.

A month ago, when Mineweb reported that the spot price of potash had cleared the $1,000-tonne threshold and was continuing to rise, the Russian stock market reacted by lifting the share price of lead potash producer, Uralkali (ticker URKA:RU), by 1% in the first hour of trading, then another 5% in the second hour. That represented $1.3 billion in extra market capitalization for the company — $11 million per trading minute.

The news was real, and that day, April 23, URKA’s share price hit its historic high of $12.40; this represented a market capitalization of $26.3 billion. Since then, with virtually no news to speak of, and negligible trading volumes, the charts show that Uralkali’s share price has been extremely volatile, seesawing down and upwards by up to 17% in value on the day.

Chief executive Vladislav Baumgertner explained the share price increase as the direct result of the commodity price growth, itself driven by the underlying global supply-demand balance, and the relative attractiveness of potash to commodity investment funds. “These price increases,” Baumgertner said on April 23, “are driven by the continuous growth of global demand, historically low inventory levels and unprecedented tightening of the supply for the remainder of 2008 after the agreements reached by the Company in China and India.”

Nothing has changed in the plant kingdom or in the global fertilizer market, so how to explain the instability of the share price in recent days?
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by John Helmer - Friday, May 23rd, 2008
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News analysis in Business Day, Johannesburg

By John Helmer in Moscow

A campaign of smears and innuendo linking Russian Prime Minister Vladimir Putin to powerful Russian oil interests, launched last week by a newspaper in London, has drawn a withering counter-attack by Gennady Timchenko, controlling shareholder of Gunvor, and one of the leading oil traders in the world.

The Geneva-based trading firm is challenging Glencore and Vitol for control of the multi-billion dollar Russia oil export trade, the world’s largest.

In a letter to the Financial Times, published on May 22, Timchenko accused the newspaper of reporting “inaccuracies and false claims…misleading ambiguity…conspiracy theory [and] unwarranted suggestions.” In a hint that commercial rivalry from Glencore and Vitol, who have been losing their Russian positions to Gunvor, are behind the published attacks, Timchenko wrote: “Gunvor is what it seems…When it comes to price — ask our rivals and study our record in open tenders. The truth is there for all to see.”

The target of Timchenko’s reply was a report on May 15 by Moscow-based Financial Times reporter, Catherine Belton. She alleged that Timchenko and Putin have been friends since their service days in Soviet intelligence; and that Timchenko’s business success is due to shadowy political and personal favours, and discount pricing of oil, as it moved from wellhead and refinery to loading port and destination.
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by John Helmer - Friday, May 23rd, 2008
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By John Helmer in Moscow

The fight between shareholders Mikhail Prokhorov and Vladimir Potanin over the future of Polyus Gold, Russia’s leading goldminer, escalated angrily at the board meeting on May 21, when chief executive Evgeny Ivanov called for a vote to eliminate independent director, Lord Patrick Gillford, from the slate to be submitted to the annual shareholders’ meeting next month.

Ivanov also rebuffed board consideration of a proposal to sell a 2.5% bloc of company-controlled shares to the Kazimir group in London.

Details of the board meeting were summarized in an official press statement by Polyus. This sidesteps the conflict, reporting only that Gillford, who has been an independent board member since 2006, was dropped “due to the ongoing investigation initiated by Lord Patrick James Gillford in relation to his status as an independent director.” The language suggests that it had been Gillford, who had initiated the move, not Prokhorov and Ivanov.

Gillford was not available to answer Mineweb questions on what has happened. However, his office in London issued a formal statement. This charges that Ivanov and the board statement had “cynically misinterpreted in a wholly unacceptable way” the independence issue, and Gillford’s earlier request to Ivanov to find out where a press leak, challenging his independence, had come from.
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by John Helmer - Thursday, May 22nd, 2008
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By John Helmer in Moscow

Market cuts $2 billion in capital value from Russian steelmaker as US acquisitions mount up.

In a market of booming coal, coke, iron-ore and scrap prices, and still insatiable Chinese and Indian demand for steel, it stands to reason that the great vertically integrated Russian steelmaking groups, largely self-sufficient in raw materials, should be booming, too.

How then to explain why Alexei Mordashov, owner of third-ranked Severstal steel and mining group, has seen almost $2 billion wiped off the market capitalization of his company in the past week? On May 16, the commodity boom logic lifted Severstal to its historic high — $28.50, ticker CHMF:RU. On May 21, it had fallen below $26, and it is currently at $26.85.

In the interval, Mordashov bought one failing US steelmaker on Friday for $370 million; and on Monday announced a $1.1 billion offer for another.

Sinking ships usually induce exits, but Mordashov has been steadily climbing aboard, while shareholders have taken the jump. If his Monday bid goes through, Mordashov will have almost as much steelmaking capacity in the US as he has in Russia; and he can lay claim to be the fourth largest steelmaker in the US.
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by John Helmer - Thursday, May 22nd, 2008
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By John Helmer in Moscow

Independent director Lord Gillford effectively warns Polyus Board against potential asset stripping plan while emphasising his independence of the warring factions.

Lord Patrick Gillford, the influential independent on the board of Polyus Gold, Russia’s leading goldminer, has warned the board that the company is in danger of an asset stripping scheme devised by chief executive Evgeny Ivanov, and his stakeholding ally, Mikhail Prokhorov.

Gillford issued a letter following a press leak to a Moscow business news service that suggested Gillford had a vested interest in the battle for Polyus Gold with Vladimir Potanin. At present, Potanin and his Interros holding control about 34% of Polyus Gold; Prokhorov and his Onexim holding control 30%. In practice, control of the board remains for the time being with Ivanov and Prokhorov.

Gillford is the sole international independent on the Polyus board, as the two other named independents, Russians, don’t qualify. An old Etonian, Tory advisor, and career PR agent, Gillford took his Polyus seat before the company’s London float in 2006. He runs Policy Partnership Ltd. at an address in southwest London. According to the firm’s website, “we provide expert advice and sound judgement to help our clients anticipate and respond to regulatory, policy and communication challenges, both domestically and internationally.” Gillford does not hold shares or share options in Polyus. The verbatim text of his letter is as follows:
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by John Helmer - Tuesday, May 20th, 2008
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By John Helmer in Moscow

The largest oil concession in the world is changing direction as Glencore may be losing out in Russia again.

Announcements last week from Prime Minister Vladimir Putin indicate that the movement of Russian oil for export is now to be supervised by Putin’s former chief Kremlin aide, Igor Sechin, who was named deputy prime minister in charge of Russian industry on May 12.

Sechin is also to take over the entire maritime policy concession from other officials, in an ambitious bid to concentrate oil trading in Russian hands; create new Russian oil ports on the Baltic; and build a new generation of oil and gas tankers in Russian yards, which have hitherto lacked the technical capacity.

The ambition has already attracted ferociously negative reporting from the international media, which accuse Sechin, as well as Putin, of being in league with Gunvor, the Geneva-based oil trader controlled by Gennady Timchenko, who has influential business, friendship, and family ties in the Russian maritime sector.
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by John Helmer - Tuesday, May 20th, 2008
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