Russia Prepares To Rival Rio And BHP
Vidya Ram , 01.16.09, 01:15 PM EST
A merger of Russian miners could be unwelcome competition for beleaguered European miners.
BHP Billiton Limited
01/16/2009 3:59PM ET
forbes.com
If plummeting commodity prices haven't been keeping Rio Tinto's Tom Albanese and BHP Billiton's Marius Kloppers awake at night, the latest news out of Russia almost certainly will. Plans to create a super-miner, by merging three troubled miners, seems to be gaining momentum.
Making a big push internationally into the mining sector may not be ideal for the firms, timing wise, but with the backing of the comparatively-deep-pocketed Kremlin, a super-miner could pose a new and un-welcomed threat for the likes of BHP and Rio Tinto (nyse: RTP - news - people ). The super-miner would be in line for a bailout from the Kremlin should it come into existance.
Talks over a possible merger of mining firms Rusal, Norilsk Nickel and Metalloinvest are taking place in Moscow, reported a number of papers, including Russia's Vedomosti. Rusal and Norilsk Nickel were unavailable for comment at the time of publication, while Metalloinvest said it would be responding to requests next week.
That same report suggested that the state could acquire a stake by converting the firms' joint debts into a stake in the new company.
Norilsk Nickel Chief Executive Denis Morozov, which heads the palladium and nickel miner, had previously talked of his ambitions of making his firm the BHP Billiton (nyse: BHP - news - people ) of Russia. However, hopes of any merger in the mining sector had been held up by constant bickering over control, until now. (See "Russian Billionaires Tussel Over Nickel Giant.")
Triggering the merger seems to be the plight of Russian billionaires, who have been losing billions amidst the collapse of commodity and stock prices in Russia (See "Those Poor Russian Tycoons." ). Oleg Deripaska controls Rusal, while Mikhael Potanin is the biggest stakeholder in Norilsk, and Alisher Usmanov controls Metalloinvest.
"The government would not be considering this were it not for a series of overleveraged oligarchs in a disastrous commodities market," remarked Rob Edwards, a London-based mining analyst for Renaissance Capital. |
