Discord between Russia's two billionaires fighting for control of nickel and cobalt erupts again

Russian billionaires have long been vying for control of giant natural resources companies, and the reasons for the battle may go back to Russia from the Soviet era to this day. The object of the battle, MMC Norilsk Nickel PJSC, for MMC is more intense than ordinary commercial operations because it will determine who will own the right to develop one of the world's largest nickel-cobalt deposits. The deposit's minerals are widely used in battery products, including ipad and Tesla cars.

1. Who is the discordant?

Vladimir Potanin and Oleg Deripaska, two billionaires vying for control of Nornickel, are controversial about the company's future development strategy. Potanin, the company's chief executive and second on Russia's rich list, wants to expand his business and develop new resources to maintain the company's leading position in the industry. (United Co., a Russian aluminum conglomerate that ranks 16th on the rich list and is about to leave Deripask, president of Rusal, is more interested in maximizing shareholders' profits because it will help him repay Rusal's debt. Potanin owns about 30.5 per cent of Nornickel and Rusal 27.8 per cent.

2. why is this fight so important?

The outcome of this struggle could have a direct impact on the increase or decrease in the supply of large quantities of demand metals. Nornickel is the world's second largest nickel producer and the world's fifth largest cobalt producer.

Demand for batteries for electric cars, electronics and solar cells has soared, and prices for both metals have risen over the past two years. The price of cobalt has more than tripled, given that demand for electric vehicles will grow exponentially. According to Nornickel, more than 40 per cent of high-grade nickel (currently mainly used in stainless steel) will be used in battery raw materials by 2025.

3. how does the source begin?

The dispute dates back about a decade when Rusal President Deripaska bought a stake in Nornickel. But Rusal was unable to repay its debt to buy the stock as aluminium prices plummeted.

In 2009, after Deripaska made the largest $17 billion debt restructuring in Russian corporate history, Potanin pushed for Nornickel's share buyback, depriving Rusal of much-needed dividend income. After that, the two sides engaged in a fierce struggle on corporate governance. The intervention of Russian President Vladimir Putin and the acquisition of a 6 per cent stake in Nornickel by another billionaire, Roman Abramovich, led to a truce in 2012. It also means that neither Deripaska nor Potanin can dominate control of the company.

4. why not erupt again?

The truce, which lasted only until December, coincided with Abramovich's announcement of plans to sell some of its shares. Interros Holding Co. held by Potanin Showing intent, Deripaska's Rusal holdings have also shown strong interest, with both sides seeking to maintain their influence. However, Rusal then raised its opposition to the Abramovich sale, saying it would upset the balance of interests that had stabilized relations between the two countries for five years.

5. what happens next?

Rusal is currently seeking an injunction to block deals to be heard in London's High Court. Another possible way to resolve the dispute is for Deripaska and Potanin to offer to buy the other party from the market at a premium, while the lower price is obliged to sell to the other party. This initiative, which was proposed in the 2012 peace agreement, is a high-risk strategy that will lead to significant fiscal changes for either side. More feasible is a new shareholder agreement that raises dividends and sets the conditions for Rusal's exit, provided it wins Deripaska approval.

Translated by SMM Xu Huimei from Bloomberg