By John Helmer in Moscow

Deripaska and Prokhorov holding companies trade claims over Norilsk Nickel deal contract.

Onexim, the Moscow holding unit for Mikhail Prokhorov, has broken its silence on the troubled sale of a 25% stake in Norilsk Nickel — in a manner of speaking.

Terms for the deal between Prokhorov and Oleg Deripaska, controlling shareholder of United Company Rusal, were first negotiated last August and September; the deal was announced in November. If fully consummated, it represents the largest corporate takeover in Russian history, and the most expensive hostile bid on the Russian record.

Mineweb reported yesterday on evidence of the apparent breakdown in the six-month old bid by Deripaska to take control of Norilsk Nickel from Vladimir Potanin and the Interros group, formerly Prokhorov’s partner:

http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=49850&sn=Detail
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by John Helmer - Thursday, March 27th, 2008
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By John Helmer in Moscow

When T.S. Eliot was summing up what he knew of hollow men, he concluded: “this is the way the world ends/not with a bang but a whimper”. This is also the way Russia’s biggest-ever hostile takeover, Oleg Deripaska’s bid to take control of Norilsk Nickel, is ending.

The contract deadline for deal closing, according to insiders, is next Monday, March 31.

It won’t be clear until then whether it’s Deripaska, or Norilsk Nickel seller, Mikhail Prokhorov, who is doing more of the whimpering. If Deripaska fails to deliver on the terms of their agreement – an 11% shareholding in United Company Rusal, $4.438 billion in cash, and $2.7 billion in deferred cash – then Prokhorov will get to keep his 25% plus one share in Norilsk Nickel. Also, he will not be obligated to pay Deripaska the $300 million break-fee the two had agreed on, if Prokhorov developed cold feet.

Mineweb reported the transaction details last December: http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=41934&sn=Detail
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by John Helmer - Wednesday, March 26th, 2008
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By John Helmer in Moscow

The wind-chill factor this winter in Tajikistan has produced record low temperatures and uncounted miseries for a population struggling with inadequate electricity supply and failing heat. Tajik newborns have been reported as having died from hypothermia while in hospital wards.

But on March 5, a single whistle-blow from the International Monetary Fund (IMF) sent a chill through the one well-heated residence in the country. That’s the presidential palace of Emomali Rakhmonov (aka Rahmon), the head of the land-locked Central Asian country since 1992.

For the IMF revealed publicly for the first time, and at the level of the fund’s board of directors, that the National Bank of Tajikistan (NBT) and the Finance Ministry in Dushanbe have been fiddling the country’s accounts for several years, falsifying the flow of funds and concealing the disappearance of as yet uncounted millions of dollars of international loan funds.

On March 5, the “Executive Board of the International Monetary Fund (IMF) met today to review a report from the Managing Director on noncomplying disbursements to the Republic of Tajikistan and a breach of obligations under Article VIII, Section 5 of the IMF’s Articles of Agreement”.
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by John Helmer - Tuesday, March 25th, 2008
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By John Helmer in Moscow

PR spin battles US recession to hype Russian steel deal

Taylor Rafferty is an international public relations company which works for Alexei Mordashov, the controlling shareholder of Severstal, third ranked Russian steelmaker. Its job is to help Mordashov extricate his foot from his mouth, and his hand from public shareholder pockets.

Mordashov can be a nervous fellow, if he thinks the Kremlin disapproves of what he is doing. In 2006, when Mordashov applied to President Vladimir Putin for permission to buy other Russian steel companies, he was told no. But he was told he would be allowed to stretch his own neck in Europe. This meant Kremlin approval of Mordashov’s attempt in mid-2006 to take over Arcelor, the leading European steelmaker at the time. Mordashov’s bid failed when it was beaten by Lakshmi Mittal, who mobilized more effective investment banking by Goldman Sachs, more cash, and better PR.

Mordashov learned the PR lesson. The market hasn’t. According to Taylor Rafferty’s mission statement, it promises clients “a reality check and sharp focus to the investor relations program”.
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by John Helmer - Monday, March 24th, 2008
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By John Helmer in Moscow

Polyus public shareholders in the dark about proposed new gold mine asset sale

Sixty years elapsed between the first US patents issued for the yo-yo, and 1928, when the wooden axle on a string became a fad in California, and then spread across the US. By 1965, the yo-yo was so common, manufacturers couldn’t preserve their trademarks, even while they promoted competitions to popularize demand for the toy.

In yo-yo competitions, a standard routine is called sleeping. That’s when the axle is made to spin without rising up the player’s string. Another is called walking the dog. That’s when the axle is made to spin along the ground, also without rising up or down the string.

In innovative Russian business, as Mikhail Prokhorov has been practicing it, the trick is to keep assets in motion, earning their proprietor cash as they spin. It can be difficult to know what trick Prokhorov intends to pull at the end of his string. Two years ago, when he bought gold mines and prospects to add to the Polyus portfolio, the rationale was obvious – and so was the payoff, if only to count Prokhorov’s 25.5% stake in Polyus’s growing capitalization. (Market reports indicate that Prokhorov may hold as much as 28% of Polyus’s stock.)
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by John Helmer - Friday, March 21st, 2008
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By John Helmer in Moscow

Uralkali keeps the initiative as potash breaks $600.

A series of Russian government decisions this month, awarding new mining licences at a premium valuation; imposing export duties; and regulating the domestic price of fertilizers for the next five years has triggered fresh forecasts for the direction of Russian potash producers, now the price-setter for the global commodity trade.

The biggest test of the clout of the potash miners began a week ago, on March 12, when the federal mine licensing agency Rosnedra conducted an auction of licences in the Urals region for the mining of new potash reserves. One week later, and the first impression of decisiveness on the government’s part has begun to dissolve, with a fightback orchestrated by the leading producer and exporter, Uralkali.

The official announcement of the March 12 auction said that three licenses to mine potash reserves at the Verkhnekamskoye deposit, in Perm region, had been sold for a total of $2.35 billion. Global reserves of potash are concentrated in Russia, Belarus, and Canada, but all the Canadian deposits have been allocated long since. The Verkhnekamskoye field is one of the largest unmined sources of potash in the world, and the largest ever to be auctioned internationally. When and if mines open in about a decade, the field represents an estimated increase to global potash supplies of 9 to 10 million tonnes per annum. This is roughly equal to the total volume produced in 2007 by Russia’s lead producers, Uralkali and Silvinit combined
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by John Helmer - Thursday, March 20th, 2008
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IMF joins UK High Court in corruption investigations of Tajik aluminium dealing.

“Now is the winter of our discontent made glorious summer by this sun of York”.

That’s the opening of the most vicious dynastic bloodbath on the English stage, spoken by the nastiest of Shakespeare’s royal villains — the hump-back plotter who becomes Richard III, for a short while.

Landlocked in the Pamir Mountains of Central Asia, the ruler of Tajikistan, Emomali Rakhmonov (aka Rahmon), has been desperately hoping for the sun to relieve the very worst winter in recent history for his country — the poorest of the former Soviet states. Instead, he has run into three international fireballs that have fuelled charges circulating in and outside Tajikistan, that its miseries stem, not from the weather, but from the disappearance of the country’s earnings to a tropical haven in the Caribbean.

Directly substantiating the latter, for the first time, is documentary evidence presented in the UK High Court on February 15, before Justice Tomlinson.

But worse was to come for Rahmon. On March 5, in an unprecedented default announcement, the International Monetary Fund (IMF) disclosed that the Fund board had discovered systematic financial misreporting by the National Bank of Tajikistan, and “noncomplying disbursements”. The IMF said it was ordering an immediate “special audit” of the state bank, and calling in a repayment of $47 million.
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by John Helmer - Thursday, March 20th, 2008
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By John Helmer in Moscow

Russia has been locked out of the largest nuclear power contract ever prepared in Africa, despite two years of promises from the South African government that it would invite Russia’s nuclear industry to join a competitive tender with the French and American companies, Areva and Westinghouse.

The lockoutappears to be regional in scope, blocking a bid by the Russians to build a nuclear reactor in Namibia, that country’s first. It also makes unlikely that ambitious schemes to draw Russian investment into uranium mining, ore concentration, and uranium fuel enrichment will materialize in southern Africa.

According to the SA utility Eskom, the first SA reactor to be commissioned would cost an estimated R120 billion ($15 billion); six power stations to produce an estimated 20,000MW would cost more than R720 billion ($90 billion), Eskom officials have publicly estimated.

The circumstances in which SA officials made their decision to exclude the Russians have been kept secret for weeks, while crisis talks were held by officials of the two governments, first in Moscow on February 12, and then in Pretoria on March 10.
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by John Helmer - Tuesday, March 18th, 2008
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By John Helmer in Moscow

Icebreaking is the key to the expansion of energy and mineral shipments in the Arctic.

It is a little early for Russia to begin producing bananas and other soft, sun-dependent commodities. But depending on which global warming forecast you read, there may come a time when it will be cost-efficient to do so, earning the increment in export value of commodities, whose price is moving faster than the oil and gas-fired energy and fertilizers required for them to grow.

And since Russian energy leads the world in volume and value of export trade and reserves, it stands to reason that one Russian strategy for diversification downstream into energy-intensive products, and up the value chain, would be a form of agro-industry that is indifferent to Arctic cold.

Gazprom strategists are already contemplating one set of targets for this strategy. These are to acquire control of major nitrogenous and diversified fertilizers, and the intermediate ammonia producers providing feedstock for urea and nitrate fertilizer manufacture. An immediate target is the EuroChem group of Moscow, currently owned by Andrei Melnichenko, a metals and banking oligarch, who has offered to sell his 96% stake in the company; but who, according to Gazprom, is asking too high a price.
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by John Helmer - Monday, March 17th, 2008
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By John Helmer in Moscow

Norilsk/BHP Billiton “alliance for development of huge Russian nickel deposit raises some questions.

Norilsk Nickel, Russia’s leading mining company, has announced that it has won a regional auction for exploration and mining rights to Russia’s largest undeveloped nickel prospect. The Iisko-Tagulsk deposit, located in the Irkutsk region of southeastern Siberia, was won at an open-auction tender for $30.7million. Exploration and other preliminary prospecting and feasibility work is estimated to cost another Rb2.5 billion ($100 million).

While this task and the amount are clearly within Norilsk Nickel’s financial and technical capacity to manage, the company announcement, issued Thursday, said it has invited BHP Billiton to join in the first phase of the project. The language used was: “the geological [work] will be done in alliance with BHP Billiton.”

This carefully skirts legislative amendments now proceeding through the State Duma, backed by Norilsk Nickel, which would exclude foreign mining companies from the Russian nickel sector entirely. As Mineweb reported early in the week, the list of strategic minerals on the foreign exclusion list are diamonds, uranium, quartz, cobalt, nickel, beryllium, lithium, the platinum group metals (PGM), tantalum, and niobium.

Alrosa, the state owned Russian diamond miner now diversifying into gold and other minerals, was the second, and losing bidder in the Irkutsk auction.
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by John Helmer - Saturday, March 15th, 2008
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