Can Cash-Strapped Rusal Hang On To Its Bauxite Mines And Smelters In West Africa?
By John Helmer in Moscow
minesite.com
Clark’s Nutcracker is the name of a bird, a member of the crow family, and one of the most famous in the world for a feat of intelligence few human beings, even certified public accountants, can match. Ornithologists have observed that this fellow can remember hundreds of locations where it has stashed away food. A relative, the American Scrub-jay, is on record as being able to steal from the caches of other birds, and re-hide its own, once it suspects they have been spotted by other birds. All of which puts one in mind of United Company Rusal, and of its controlling shareholder and chief executive Oleg Deripaska. In West Africa all of a sudden commercial rivals, including a Nigerian-American group with South Korean backing, Alcoa, Rio Tinto, and the Chinese aluminium conglomerate Chalco, are doing more than bird-watching. They’re running the rule over Rusal’s mini-empire of bauxite mines, an alumina refinery, and an aluminium smelter. In Nigeria the search for Deripaska’s assets and Rusal’s money has been under way for some time. Pending lawsuits in the Nigerian and US courts accuse Rusal of corruptly manipulating the Nigerian government’s privatization of the local aluminium plant company. The claim in Nigeria is that there is no sign of the money Deripaska and Rusal were obliged to have invested there.
The Rusal-owned asset is known as the Aluminium Smelter Company of Nigeria (ALSCON). Pursuing Rusal in a federal US court, and then by that court’s order, in the federal Nigerian law courts, is a California-based Nigerian-American group called Bancorp Financial Investment Group (BFIG), headed by Reuben Jaja. Rusal has repeatedly denied BFIG’s charges, and reported victory in a US court ruling last November, rejecting BFIG’s claim for US jurisdiction. The text of the US ruling, however, bears re-reading, because it makes the dismissal of BFIG’s suit temporary and conditional – so long as Rusal agrees to having the Nigerian federal court adjudicate the case. That condition was reaffirmed by the US appeals court last November. In Nigeria, the arrival in April 2007 of the new presidential administration of Umuru Musa Yar’Adua, led to reviews of privatization agreements signed by the former government, headed by President Olusegun Obasanjo. The US Embassy in Nigeria also told the Yar’Adua government that it was backing Jaja and the BFIG litigation to overturn Rusal’s takeover.
The core of BFIG’s case, Jaja has told Minesite, is that Rusal conditioned its bid for the Nigerian assets with a series of demands that were illegal under Nigeria’s privatization law, but were nevertheless granted to enable Rusal to take over the plant without making the required payments to the government. Altogether, it has been estimated that the value of these concessions turned out to be greater than the amount the government had agreed to accept from Rusal for the takeover. It is also unclear, according to BFIG, what money Rusal has actually paid. This week Jaja told Minesite that the Nigerian authorities have decided to accelerate their review of what Rusal has done and spent, or allegedly failed to do and spend, at ALSCON. By May 7, Jaja says, the Nigerian Supreme Court will decide whether to grant BFIG’s motion to expedite its ruling on the lawsuit challenge to the original privatization award. “We are very optimistic,” he says.
To the northwest of Nigeria, in the republic of Guinea, Rusal is also facing new enquiries from a new government. This is headed by the junior military officer, Moussa Camara, who took power in a military coup last December, following the death of the long-serving Guinean President, Lansana Conte. According to a public statement by Camara, broadcast by the Guinean media on April 11, "Guinea has to exercise its rights by getting back this factory, which belongs to it." The allegation against Rusal is that the Friguia bauxite and alumina mining and refining complex was under-valued by the Conte administration, and that Rusal underpaid for its takeover in 2006. Camara claims that Rusal paid US$19 million for the assets, while he claims that experts value it at US$257 million. Camara is also alleging that the deal was authorized by the wrong government official, and remains un-ratified by the Guinean parliament.
Rusal declined to respond to direct questions from Minesite. Rusal acquired management rights at Friguia in 2002, and then bought the assets in March 2006. The Rusal website reports that Friguia has current capacity to turn out almost two million tonnes of bauxite, and 640,000 tonnes of alumina per annum. Rusal also says it is planning a costly expansion of production capacity at Friguia to 1 million tonnes of alumina per annum. Friguia is the second of Rusal’s bauxite mining concessions in Guinea. The first is known as Kindia. Rusal didn’t separate the two in its consolidated production results of last October. Altogether for the 9-month period to September 30, Rusal said then it had produced 13.5 million tonnes of bauxite, an increase of 3.4 per cent over the same period of 2007. The Guinean bauxite mines were also operating above the previous year's level, Rusal added. In the global bauxite market, Rusal ranks second with almost 20 million tonnes of annual mine production capacity, behind Rio Tinto with 30 million tonnes.
A leading African analyst in Moscow, Vadim Zaytsev of the Rosafroexpertiza consultancy, thinks Camara is bluffing, rather than preparing to take bids from rivals Chalco, Rio Tinto or Alcoa. “I seriously doubt they [the military government] will dare to change the terms of the original agreement, which was signed and ratified, as this will have serious influence on the investment climate there. Besides, [the Guineans] are not stupid, and know that Rusal has no money to pay. I think this that all has been done to get to a dialogue, and pressure Rusal into more investments for the ecology, water treatment facilities, and the like.”
If the Guinean junta is bluffing, at least one Rusal employee isn’t so sanguine about the outcome. Anatoly Panchenko, head of Rusal’s Guinean operations, has been reported by local radio as having sought the protection of the Russian Embassy compound in Conakry, the Guinean capital. The Russian consul at the Embassy, Anatoly Malishev, told Minesite that Panchenko came to the Embassy on April 8, and is still there. He sought to play down the political implications. According to Malishev, Panchenko is suffering from malaria and complications, and is under the medical care of the Embassy doctor.
Senator Mikhail Margelov, who heads the Foreign Affairs Committee of the Federation Council, the upper chamber of the Russian parliament, told Minesite there is no Russian state interest at stake in Deripaska's predicament in West Africa. Margelov, who was appointed the Kremlin's roving troubleshooter for Africa in December, said this week that the government reviews of Rusal's assets in Nigeria and Guinea are "a commercial matter". Distancing himself and the Russian government and parliament from Deripaska, Margelov told Minesite he is "not surprised" that conflicts and scandals would arise "for young Russian entrepreneurs who picked up their habits of privatization in Russia [in the 1990s]."
"We want to have friendly relations with the African countries," Margelov added. "The Russian national interest is to settle the scandal." |
