Norilsk Says VTB to Gain Right to Siberian Copper-Mine Stake

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OAO GMK Norilsk Nickel, Russia’s largest mining company, said OAO VTB Bank will gain the right to a stake in a Siberian copper project after agreeing to provide as much as $1 billion to help finance its development.

“We agreed with VTB on $1 billion intermediate project financing for the Bystrinsky copper field,” subject to approval from Norilsk’s board, First Deputy Chief Executive Officer Pavel Fedorov said at a meeting. “VTB also will get an option to buy 25 percent in the project.”

Norilsk in 2013 switched its focus to developing long-life, profitable mines in Russia while disposing of less lucrative international holdings. The Moscow-based producer, which completed the sale of its assets in Africa and Australia last year, is now deciding what to do with smaller operations at home.

The company said last year that investment in the Bystrinsky project was estimated at $1 billion from 2014 to its planned startup in 2017. VTB’s funding will last 10 years, the bank said Monday by e-mail, without commenting on the copper-mine option.

Norilsk said last year it would develop Bystrinsky, in the Zabaikalsky region bordering Mongolia and China, as soon as it got project finance. The company is still in talks with Russia’s state development bank, Vnesheconombank, to obtain longer-term funding, Fedorov said.

Investor Negotiations

Norilsk is also in negotiations with investors from Asia about selling a minority stake in the project and may sign an agreement at the same time as confirming the VTB deal, according to the executive.

The company will this year consider what to do with aging assets such as its nickel concentrator in the northern town of Norilsk, as well as the nearby Medvezhy Ruchey open-pit mine and Lebyazhye tailings dam, which together account for as much as 4 percent of its annual mining output. The producer is also discussing the future of its natural-gas holdings.

The company must decide whether to spin off, sell or overhaul the assets or find partners to develop them, Fedorov said.

At its OAO Norilskgazprom and OAO Taymyrgas gas businesses, production far outstrips consumption in the regions where they operate. The company plans to consolidate Norilskgazprom, buying the shares it doesn’t already own from OAO Gazprom, Fedorov said. It will subsequently split the management of gas infrastructure and exploration projects.

Finally, the company plans to sell the Arkhangelsk Sea Port this year.

Dividend Payouts

By divesting assets, Norilsk has been able to pay $7 billion in dividends earlier than planned, according to Fedorov. The company still plans to make payouts equal to half its annual earnings before interest, taxes, depreciation and amortization.

Norilsk held a meeting with investors in London on Monday, during which its head of strategic marketing, Anton Berlin, said the company sought to work more closely with customers to tailor products to their needs rather than selling standard cathodes.