By John Helmer in Moscow

LSE regulators and US government investigations trigger strategy differences on getting Rusal to market.

US and European banks are fighting among themselves over the terms of the proposed initial placement offering (IPO) of shares of United Company Rusal, the Russian owned bauxite miner and world’s no.2 aluminium producer.

The conflict between the bankers, and between shareholders in Rusal, is so intense, the Financial Services Authority (FSA), regulator of the UK market and the London Stock Exchange (LSE), has already appointed a team of specialists to analyse the disclosures, litigation, and lobbying documents that have been presented by advocates for and against Rusal, and its controlling shareholder, Oleg Deripaska.
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by John Helmer - Thursday, August 30th, 2007
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By John Helmer in Moscow

For the hundred and fifty years between the Opium Wars and the end of World War II, the China Discount was notorious in the Shanghai Bund, on the bank of the Huangpu River. It represented the gap between the little western traders would agree to pay for Chinese-made goods, and the best their Chinese sellers hoped to fetch.

These days, China’s commercial demand has reversed the trading advantage. Since Chinese demand represents such a large share of the global market, especially in minerals and metals, the China Discount is now the gap between the price western sellers offer for their commodities, and what China agrees to pay. Converting the China Discount into a premium is the dream of all commodity exporters, but it is a commercial fight that requires nerves of steel.
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by John Helmer - Saturday, August 25th, 2007
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By John Helmer in Moscow

Norway is one of those countries, inhabited by one of those peoples, which have exercised some of the greatest comedians in the English language – to little avail.

John Cleese once explained his assignment on behalf of the Norwegian Tourist Board, as he stepped out of a wet summer fjord wearing a business suit and snow-shoes. He said the only way to interest tourists in Norway was to make them laugh at the place. Much earlier, Saki had told the tale of a rich Londoner who paid a group of kidnappers, not to return his wife, but to keep her as reliably away from him as he thought possible — on a Norwegian island, above the Arctic Circle.
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by John Helmer - Friday, August 17th, 2007
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OPINION AND ANALYSIS

“It’s pleasant to be here, you feel comfortable, and you don’t feel people are watching you,” Roman Abramovich on buying Chelsea Football Club in London, for equity and debt totaling $240 million.

Russian villagers like to say that if you drink you die; and if you don’t drink you die, so it’s better to drink.

This is a characteristically pessimistic twist to Russian bravado. But among the Russian oligarchs who don’t lack chutzpah, it begs the question of whether their spending is as reckless as their drinking; and whether the recent behaviour of the oil plutocrats – men like Abramovich, whose source of wealth is the top-5 oil producer Sibneft, or Platon Lebedev and Mikhail Khodorkovsky, the controlling shareholders of number-2 oil producer Yukos – reflects optimism, or pessimism, for their own futures. (more…)

by John Helmer - Tuesday, August 7th, 2007
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By John Helmer in Moscow

Harry Lime was the character invented by novelist and one-time intelligence officer Graham Greene, who understood how an investment banker should operate when the breakdown of government makes the black market the only source of supply, trade, and profit. Lime’s racket in post-war Vienna, then occupied by the allied armies, was to steal penicillin from military hospitals; adulterate it by half; then sell it back at double the official price.

In the famous Ferris wheel conversation, high above the Vienna fairground, Lime is asked by his journalist friend about the morality of making a profit this way. Pointing to people on the ground, he responds: “If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare?”.
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by John Helmer - Monday, August 6th, 2007
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By John Helmer

Armenia plans revocation of Zod gold mine licence, as Georgians push for bargain-priced asset flip

The Armenian Government goes to court on Monday of this week to revoke the gold mining licence issued in 1999 to the Ararat Gold Recovery Company (AGRC). This is the local operating affiliate of Sterlite Gold, which in turn is controlled by London-based Vedanta Resources and controlling shareholder, Anil Agarwal. The Armenian gold assets include two mines, Zod and Meghradzor, and an ore-processing plant at Ararat.

Officials in the General Prosecutor’s Office in Yerevan, the Armenian capital, have confirmed the legal action also seeks a judicial order cancelling all operating permits for ARGC, and freezing the company’s bank accounts and moveable property. The prosecutors are also seeking payments by AGRC into the court of 4.6 billion Armenian drams ($14 million), plus another $10 million, to cover claims the Armenian government alleges are owed by the mining company to the state budget.

Vardan Vardanyan, AGRC’s chief executive, is quoted in the Armenian media as saying the company is aware of the suit, but had no information yet about the specifics of the government’s claims.
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by John Helmer - Saturday, August 4th, 2007
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By John Helmer in Moscow

The torch that Oleg Deripaska, controlling shareholder of United Company Rusal, is trying to pass to Alexander Bulygin, Rusal’s chief executive, is proving to be a hot potato.

The Wall Street Journal reported this week that in its strategy for listing Rusal shares later this year on the London Stock Exchange, Bulygin has been designated to draw attention away from Deripaska in public, and is now identified by a company spokesman as “a key strategic decision maker for the company”. Watch that indefinite article.

The Journal also reported that Bulygin is having difficulty dealing with two gaffes which Deripaska made in an interview with the Financial Times early in July, when he claimed that Michael Cherney “had no relation to my business”; and that “if the state says we need to give it [Rusal] up, we’ll give it up.” Deripaska was responding to the two risks which industry analysts and financial advisors to Rusal have flagged as the principal obstacles to a successful LSE listing of the company — Cherney’s claim, currently in litigation in the UK High Court, that he owns 20% of Deripaska’s stake in the company; and the possibility that the Kremlin may have its own claim on Rusal.
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by John Helmer - Thursday, August 2nd, 2007
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MOSCOW –

A press statement this week from the southeastern Siberian town of Irkutsk revived hopes that Russia’s El Dorado, and one of the world’s largest unmined gold deposits, may be about to go on the market.

Sukhoi Log (“Dry Gulch”in Russian), according to Nikolai Suslov, deputy head of the Irkutsk region agency for natural resources (Irkutsknedra), may be put up for public auction “ïn the next few months” — “by the end of 2007, or the beginning of 2008”. Suslov’s timing was initially reported by Interfax, and then Bloomberg picked up the story. The full report of Suslov’s remarks indicate that his focus was on two relatively minor prospecting licences to be put on the block in September and October — the Isko-Tagulsky nickel prospect, and the Uryahsky gold deposit.
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by John Helmer - Friday, July 27th, 2007
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MOSCOW –

The Armenian government ordered prosecutors last week to put a stop to an attempt by the Vedanta group in London to auction off its rights to the Zod gold mine to the highest bidder.

Two weeks ago, following six months of investigation, the Armenian prosecutor’s office in Yerevan went to court on behalf of the Ministry of Natural Resources, to seek a ruling to revoke the Zod licence, which has been held since 1998 by Vedanta’s Canadian-listed subsidiary, Sterlite Gold (ticker SGD). The judge deferred his ruling on the procedural ground that the due diligence, which had been undertaken by the prosecutor’s office since January, lacked the appropriate order from the government. The Armenian prime ministry then arranged for the ministerial resolution to be drafted and issued, and an accelerated investigation has already begun.
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by John Helmer - Tuesday, July 24th, 2007
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MOSCOW –

One of the oldest friends of Rusal owner, Oleg Deripaska, still calls him by the nickname, zaichik; that’s Russian for hare. The surname of Alexander Bulygin, Rusal’s chief executive, suggests the Russian for a cobble-stone (bulizhnik), but nobody calls him that for short.

The ancient fabulist Aesop didn’t think well of either hares or stones. He composed almost no fables with the former, and in those, the hare is too arrogant, or stupid, to avoid getting beaten, or eaten. As for stones, to Aesop they meant misfortune. Aesop’s animals have plenty to say about that. The hare he made immortal was the one who was out-run by a tortoise.

The big question for United Company Rusal, and its promoters, is whether the hare can carry the stone, or vice versa, across the finishing line represented by the first public sale of shares, due in four months’ time. There are already hints from the Rusal camp that they have begun arguing with each other over what’s best for getting there. That they are unable to agree is evident from the most recent series of presentations of Rusal, which Bulygin led for analysts of leading international banks in Boston, New York, Frankfurt, and London. Other presenters included Vladislav Soloviev, the chief financial officer; Oleg Mukhamedshin head of capital markets; Artem Volynets, head of strategy and development; and Valery Matvienko, head of engineering and construction. They spoke from a presentation kit running to 33 pages of colour slides, which have been obtained by Mineweb.
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by John Helmer - Monday, July 23rd, 2007
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