Russia to tighten control over its mineral wealth
March 8, 2006
By Vlasta Demyanenko and Yelena Kokhanovskaya
Moscow - Russian metals firms were likely to merge with or acquire rivals as they sought a bigger share of world markets, and the Kremlin would play a key role in any major deals, industry executives and investment bankers have said.
Growing state influence over Russia's mineral assets would also restrict access for foreign investors keen to exploit low-cost mining, surplus power and vast reserves of gold, nickel and other metals, they said.
"Any Russian or Commonwealth of Independent States company that wants to count among the global leaders will pursue both size and diversification," said Sual Holding president Brian Gilbertson.
"We will see a stream of merger and acquisition activities over the next few decades as the vast mineral resources of the region are positioned to achieve maximum value in the financial markets."
A merger between Sual and larger rival Rusal, the world's third-largest aluminium producer, is one such possibility - and one that neither company is ruling out.
Another would be an alliance between Norilsk Nickel and Alrosa, which mines a quarter of the world's rough diamonds.
In January the governor of the Krasnoyarsk region said both firms had held talks about a possible union.
Analysts said such a merger would signal Moscow's intention to increase its participation in the minerals sector through the state diamond monopoly.
Gilbertson said: "Minerals are close to the heart of a nation. This is the case not only in Russia but in most mineral-rich countries.
"Accommodating, indeed embracing, such government aspirations - possibly in state and private enterprise partnerships - will be an essential part of future Russian and Commonwealth of Independent States mergers and acquisitions."
But some analysts, citing similar circumstances in the oil and gas sector, said they doubted whether key Russian assets would fall under the control of international firms.
"Western companies are very interested in Russian metals but given current policies it's unlikely they would be able to acquire even 50 percent of a Russian company," said Vladimir Tatarchuk, the director of Alfa-Bank's corporate sector.
Large Russian firms are themselves looking to expand abroad. Rusal signed a deal this year to acquire Nigeria's Alscon, while steel firms Severstal and Evraz Group have purchased assets in North America and Europe.
Peter Blight, the director of Rusal's information research department, said consolidation was not a prerequisite for aluminium firms in Russia, which have a lower cost structure than rivals with assets in North America and Europe. - Reuters
busrep.co.za |
