By John Helmer in Moscow

The Novorossiysk Shipping Company (Novoship) disappointed Moscow maritime analysts and the stock market today with FY 2007 financial results, just issued. Reported revenues totaled $615.3 million, 10% above the 2006 figure, but below consensus estimates and projections by transport analysts at Renaissance Capital and Finam. Net profit was reported at $207.9 million, up 37% on 2006. However, adjusting revenues, earnings, and profit for the sale of vessels from the Novoship fleet during the year, the adjusted Ebitda result comes in at $342.7 million, a gain of 8% year on year. Adjusted net profit is $182.7 million, up 8% also.

“The published financials slightly missed our expectations,” reported Finam, “largely due to adverse conditions in the freight market in 4Q 2007. The company’s 9M revenue increased by12% y-o-y, but revenue growth slowed to 9.7% for FY 2007. It is noteworthy that the published results do not paint the full picture of the shipper’s operating results and need to be adjusted for the company’s revenues from the sale of the fleet.” About $53 million was gained by Novoship on its fleet selloff last year.
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by John Helmer - Thursday, April 24th, 2008
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By John Helmer in Moscow

Deripaska is obliged to pay Prokhorov more to leave one uncertainty for a greater one

Oleg Deripaska, owner of United Company Rusal, the global aluminium producer, has invited a small group of reporters to have an Easter luncheon with him at Café Pushkin this Saturday.

The hors d’oeuvre is the announcement, issued this evening, that Rusal has closed its deal with Mikhail Prokhorov to buy his stake in Norilsk Nickel, 25% plus one share, for a 14% stake in Rusal. This is 3% larger than the stake the two had agreed on last December. The change reflects Prokhorov’s concern at the higher risk of holding the unlisted Rusal, with Deripaska in charge.

A press release, just issued by Rusal, did not clarify how much cash Prokhorov will receive in the new deal. The December terms provided him with $4.438 billion on closure, w3ith a deferred payment of $2.7 billion to come on terms that have not been disclosed.
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by John Helmer - Thursday, April 24th, 2008
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By John Helmer in Moscow

At current prices, old King Coal is a merry old soul in Russia.

In the bad old days, when Boris Yeltsin was in charge of Russia, all you had to do to acquire a steelmill on the cheap was to cut off its gas, electricity, iron-ore, scrap metal, or its coking coal. Adapting Honore de Balzac’s maxim just a little, behind every Russian steel fortune there is a raw material crime. Not because they had read Balzac, the Russian steelmakers came to understand that in order to protect their easily taken assets, they were obliged to insure and control their raw material supplies, especially iron-ore and coal.

The resulting interlocking shareholding schemes, by which most of Russia’s coal mines are controlled, and deter raiders, are very difficult to unravel. It’s a condition even PriceWaterhouseCoopers might call non-transparency. But that was in an economy recovering from the damage Yeltsin did to it. Today’s Russian GDP is growing at a rate of 7%, and while state policy can probably sustain that relatively comfortably, accelerating inflation rates pose problems that President Vladimir Putin was not threatened by. Official inflation is running at 1.2% per month, but the price of hot-rolled steel is up 25% over the past month; cold-rolled steel, 29%.
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by John Helmer - Thursday, April 24th, 2008
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By John Helmer in Moscow

Uralkali reports spot price for potash goes above $1,000 a tonne as shortages bite.

Uralkali and its global sales agent, Belarusian Potash Company (BPC), revealed this morning that spot-price cargoes of potash will fetch more than $1,000 per tonne of standard grade, including freight and insurance (CIF). Higher grade granular potash will go up to $1,010. The new price will take effect for shipments commencing on July 1.

The announcement has come sooner than Uralkali executives had been forecasting, or industry analysts predicting. The price charge follows on from BPC’s recent negotiations with India and China, which fixed new contract delivery prices at $625 and $650, respectively. A fortnight ago, BPC’s deputy general director, Oleg Petrov, said the $1,000 price threshold was approaching “rather fast”.
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by John Helmer - Wednesday, April 23rd, 2008
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By John Helmer in Moscow

Russian boom creates beauty contest for European steel investors.

The rapid acceleration in iron-ore and coal costs can be camouflaged on the books of a vertically integrated steelmaker, who supplies his own raw materials to his own blast furnaces. But mineral cost inflation has begun to hurt, even in integrated steel industries fired by 7% annual GDP growth — that is to say, even in the Russian boom, the only one open in the developed economic world.

But the Russian boom isn’t open to foreign steelmakers.

To illustrate how the door can be shut against their expectation, Mineweb has been chronicling the pit and pratfalls of Lakshmi Mittal, whose ArcelorMittal, world’s biggest steelmaker, has stumbled from one promised Russian opportunity to the next, egged on by provincial governors, and Moscow touts. At last count, the Mittal group has closed its acquisition for $720 million of central Siberian coalfields; and it continues to pursue a scrap-fired mini-mill project in the Tver region, near Moscow.
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by John Helmer - Tuesday, April 22nd, 2008
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By John Helmer in Moscow

MOSCOW – The magnitude and growth rate of demand from China still drives global commodity prices. But in the fertilizer sector, where China this month has had to agree to a price for potash more than double what it paid last year, the inflexibility of Chinese demand for food has made it difficult for the country’s negotiators to hang on to the commercial advantages they are accustomed to enjoying from being the world’s largest consumer.

Last year, Chinese buyers of potash lost their traditional discount; that is, the lower price Chinese importers would pay compared with other buyers in the Asian, Latin American, and European markets on account of the larger volumes they contract for recently, the Chinese agreed to pay a premium for their supplies, and they will receive less than they had bargained for.

Chinese buyers also face the shortening of contract terms, canceling their last commercial advantage in the potash market – annual contracts, with prices fixed from one springtime contract agreement to the next.
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by John Helmer - Monday, April 21st, 2008
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By John Helmer in Moscow

Russian energy giant makes gains in Africa and Europe

The days when American journalists wandered around Tripoli, acting as covert target spotters for the US Air Force to target Muammar Qaddafi for assassination, are gone. The maverick Berber has outlived, outwitted, outsourced, and outprofited five US presidents, four Russian heads of state.

He has also just cut a 50% discount out of the Soviet-era debt he ran up for the arms that warded off a land invasion in the 1980s. For the first time, Qaddafi’s long-held dream to place Libya, and himself, at the energy supply crossroads between Africa, the Mediterranean, and Europe has a better than 50% chance of materializing. Qaddafi has also cocked a snook at the pro-American rivals he has always detested in neighbouring Algeria. And all because of President Vladimir Putin and Gazprom.

The state visit to Tripoli by the Russian president this week, accompanied by Gazprom chief executive Alexei Miller, has produced less print than the deals they have consummated would warrant. Resolution of the Soviet debt dispute with Libya is a clever piece of bargaining on both sides. Russian Finance Ministry officials have been reluctant for years to put a figure on exactly how money Libya owed for Soviet arms since US President Ronald Reagan launched his campaign to kill Qaddafi and change regimes in Tripoli. Not even then deputy finance minister Mikhail — Misha Two-Percent — Kasyanov could strike a deal with the Libyans on a number for settling. At one point, estimates ran as high as $10 billion.
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by John Helmer - Thursday, April 17th, 2008
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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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