Russian Oil Millionaires Challenge Norilsk at Platinum

(Corrects to reflect Russian citizenship in headline, first paragraph of story initially published April 24.)

Russian Platinum Plc, part of the Bazhaev family’s more than $1 billion of assets, plans to challenge OAO Norilsk Nickel’s role as the country’s biggest producer of the precious metal.

Russian Platinum hired Bateman Engineering to design a processing plant at the Chernogorskoye deposit in northern Siberia, 15 kilometers (9 miles) from the city which Norilsk Nickel, the country’s largest mining company, is named after, according to an e-mailed statement from the Bazhaev’s venture.

Mikhail Prokhorov, the billionaire former shareholder in Norilsk Nickel who retained some mining licenses in the region, sold Chernogorskoye last year to Russian Platinum, which created out of Artel Staratelei Amur.

“Chernogorskoye may help Russian Platinum catch up to Norilsk in output of the precious metal,” said Oleg Petropavlovskiy, an analyst at Broker Credit Service in Moscow.

Chernogorskoye holds 143 million metric tons of ore resources with an average platinum-group metal and gold content of 3.9 grams a ton, the company said today. Russian Platinum produced 3.77 tons (121,000 troy ounces) of the metal last year in Russia’s Far East, less than a fifth of Norilsk’s 695,000 ounces.

“The processing plant may cost about $500 million, excluding spending on infrastructure, and may be completed as early as in 2015,” Petropavlovskiy said. “Russian Platinum will have to borrow extensively or sell shares to fund its development.”

Nickel-Copper Deposit

Russian Platinum may hire banks including Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) for a share sale, Reuters said April 10. The company’s press office declined to comment on a potential initial public offering or capital spending at Chernogorskoye when called by Bloomberg News today.

The country’s second-largest platinum producer also plans to compete with Norilsk for a nickel-copper deposit in the northern region at an auction in June, Interfax said last month. Chernogorskoye also contains copper and nickel.

Forbes Russia ranked Musa Bazhaev and his 16-year-old nephew Deni Bazhaev’s fortunes at $750 million each in its May 2012 edition. Brothers Musa and Mavlit Bazhaev and Deni owned a 47 percent stake in Stockholm-traded Alliance Oil Co., according to a 2010 prospectus for dollar bonds.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.