UPDATE 1-Norilsk CEO Dismissive of Potential RUSAL Merger-Shanghai Metals Market

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UPDATE 1-Norilsk CEO Dismissive of Potential RUSAL Merger

Industry News 09:04:32AM May 19, 2010 Source:SMM

LONDON, May 18 (Reuters) - The chief executive of Russia's Norilsk Nickel (GMKN.MM), the world's top nickel and palladium miner, was dismissive of the value to be gained from a mooted merger with debt-laden UC RUSAL (0486.HK) (RUAL.PA).

At an investor day in London, CEO Vladimir Strzhalkovsky said an increase in value from such a merger would be outweighed by a four fold rise in debt.

RUSAL, the world's top aluminium producer, bought a 25 percent stake in Norilsk at the start of 2008 and later suggested the two firms may merge.

About half of RUSAL's market capitalisation is related to its Norilsk stake, said investor relations spokesman Alexey Ivanov. He noted that this would give Norilsk a relatively small gain in terms of asset value while debt would grow to about $12 billion from $3 billion.

At the investor presentation, Norilsk said it plans to reduce its dependence on nickel to 35 percent of revenue by 2025 as it focuses more on high returns from its capital investments and less on production levels.

"We are talking dollars not tonnages," said Ivanov on the sidelines of the investor briefing.

Norilsk expects its copper share of revenue to rise to 35 percent, while its platinum group metals production would remain at about 25 percent.

Earlier on Tuesday, Norilsk posted a return to profit in 2009 that beat forecasts. 

Last year, nickel accounted for 41 percent of Norilsk's total revenue and copper for 22 percent.

Strzhalkovsky said results so far this year were "quite good", but declined to give further details.


DISPOSALS, SPIN OFFS

Strzhalkovsky also said on Tuesday that Norilsk had not ruled out selling its 51.3 percent stake in U.S. platinum and palladium miner Stillwater Mining Co (SWC.N) but he would not say whether it was in talks to sell it. 

The company said it was looking at ways to reduce costs at its Australian nickel assets, which have been idle for more than a year, and might sell some of the operations.

"Most likely we will keep the sulphides and sell the laterites," said Ivanov.

Strzhalkovsky said the group does not expect to be affected by Australia's proposed 40 percent mining tax at this stage, based on preliminary information, as Norilsk is involved in semi-finished products rather than untreated, unprocessed ore.

A number of large companies mining in Australia have warned that the tax could damage the sector. 

Norilsk said it was also considering a sale or spin off of Russian power generator OGK-3 (OGKC.MM), in which it holds a 60 percent interest.

The company did not give any price forecasts for nickel -- it produces about 22 percent of the world's supply -- but said it expected the market to remain in balance in the long-term.

Nickel, a key ingredient in stainless steel, has been the best performing base metal on the London Metal Exchange this year CMNI3.

Elsewhere, Norilsk sees a slight deficit in the copper market in the long term and deficits in platinum and palladium.

The group is also considering the possibility of issuing some debt in 2010 and has carried out preliminary work on a rouble bond, though he said the size would depend on its cash requirements and the market.
 

UPDATE 1-Norilsk CEO Dismissive of Potential RUSAL Merger

Industry News 09:04:32AM May 19, 2010 Source:SMM

LONDON, May 18 (Reuters) - The chief executive of Russia's Norilsk Nickel (GMKN.MM), the world's top nickel and palladium miner, was dismissive of the value to be gained from a mooted merger with debt-laden UC RUSAL (0486.HK) (RUAL.PA).

At an investor day in London, CEO Vladimir Strzhalkovsky said an increase in value from such a merger would be outweighed by a four fold rise in debt.

RUSAL, the world's top aluminium producer, bought a 25 percent stake in Norilsk at the start of 2008 and later suggested the two firms may merge.

About half of RUSAL's market capitalisation is related to its Norilsk stake, said investor relations spokesman Alexey Ivanov. He noted that this would give Norilsk a relatively small gain in terms of asset value while debt would grow to about $12 billion from $3 billion.

At the investor presentation, Norilsk said it plans to reduce its dependence on nickel to 35 percent of revenue by 2025 as it focuses more on high returns from its capital investments and less on production levels.

"We are talking dollars not tonnages," said Ivanov on the sidelines of the investor briefing.

Norilsk expects its copper share of revenue to rise to 35 percent, while its platinum group metals production would remain at about 25 percent.

Earlier on Tuesday, Norilsk posted a return to profit in 2009 that beat forecasts. 

Last year, nickel accounted for 41 percent of Norilsk's total revenue and copper for 22 percent.

Strzhalkovsky said results so far this year were "quite good", but declined to give further details.


DISPOSALS, SPIN OFFS

Strzhalkovsky also said on Tuesday that Norilsk had not ruled out selling its 51.3 percent stake in U.S. platinum and palladium miner Stillwater Mining Co (SWC.N) but he would not say whether it was in talks to sell it. 

The company said it was looking at ways to reduce costs at its Australian nickel assets, which have been idle for more than a year, and might sell some of the operations.

"Most likely we will keep the sulphides and sell the laterites," said Ivanov.

Strzhalkovsky said the group does not expect to be affected by Australia's proposed 40 percent mining tax at this stage, based on preliminary information, as Norilsk is involved in semi-finished products rather than untreated, unprocessed ore.

A number of large companies mining in Australia have warned that the tax could damage the sector. 

Norilsk said it was also considering a sale or spin off of Russian power generator OGK-3 (OGKC.MM), in which it holds a 60 percent interest.

The company did not give any price forecasts for nickel -- it produces about 22 percent of the world's supply -- but said it expected the market to remain in balance in the long-term.

Nickel, a key ingredient in stainless steel, has been the best performing base metal on the London Metal Exchange this year CMNI3.

Elsewhere, Norilsk sees a slight deficit in the copper market in the long term and deficits in platinum and palladium.

The group is also considering the possibility of issuing some debt in 2010 and has carried out preliminary work on a rouble bond, though he said the size would depend on its cash requirements and the market.