Alrosa to Invest Over 0M in Underground Diamond Mine Construction

Alrosa to Invest Over $250M in Underground Diamond Mine Construction

Russia's state-owned diamond producer, Alrosa, plans to increase its budget for mine construction and will spend over $250 million on underground diamond mines in 2011, the company has announced following a meeting of its Executive Committee.

In addition to investing in diamond mine infrastructure, Alrosa also plans to put more money into prospecting for diamonds and expects to spend over $128 million on diamond exploration this year.

Alrosa expects its 2011 sales of rough and polished diamonds to hit $4.7 billion, and the company is seeking to reduce its consolidated debt to $2.73 billion, compared to its 2010 debt of $3.13 billion.

The Executive Committee also examined Alrosa's iron ore project in South Yakutia and looked into ways of optimizing the management structure of its projects in Africa.

http://www.bne.eu/dispatch_text16081

Renaissance Capital
July 5, 2011

Event: Severstal's NordGold subsidiary announced yesterday (4 July) that it had received a mining licence for the Bissa Gold Project in Burkina Faso. Bissa's JORC resources amounted to c. 2.9mn oz of gold as of 1 November 2010. Obtaining the new licence should not have significant implications for Severstal's financials in the short and medium term. NordGold aims to start mine construction at Bissa this year, with first production in 2013. Production guidance is 93k oz and 161k oz for 2013 and 2014, respectively. Thus, we think, vs previous NordGold production guidance of 1mn oz for FY13, the figure could now be closer to 1.1mn oz following the Bissa Project production plan. Severstal continues to implement an aggressive development strategy in the mining segment across the globe.

Action: This is positive for Severstal and NordGold, in our view.

Rationale: We view the Bissa acquisition as another step in the development of NordGold before a potential IPO. A decision on the NordGold division may be expected in September 2011, although this does not necessarily spell an IPO. Severstal may consider other strategies to separate NordGold. In 2010, NordGold delivered about 12% of Severstal's consolidated EBITDA line and we expect it to bring another 15% of EBITDA in FY11 ($600-630mn). The production target for FY11 is 800-840k oz.

Boris Krasnojenov


Yandex to enter Polish market and list on WSE

http://www.bne.eu/dispatch_text16081

bne
July 5, 2011

Yandex plans to enter the Polish market and also list on the Warsaw Stock Exchange, Polish News Bulletin reports. The Russian search engine has been attracted to the Polish market by Google's rising revenue in the country, which hit PLN700m last year with growth of 25% y-o-y, the daily Puls Biznesu comments.

Bogdan Wisniewski, Yandex's director business development in Poland, admitted that the company has been working on a concept for a Polish search engine for several weeks, and is preparing a business plan for its market entry. The float on the WSE might even take place this year, the newspaper adds.

Yandex is one of four search engines worldwide that was able to beat Google in its domestic market, handling 65% of all searches in Russia. Wisniewski told Puls Biznesu he was confident the attempt to enter Poland's market would not end like eBay's failure.

Activity in the Oil and Gas sector (including regulatory)

http://www.bne.eu/dispatch_text16081

Aton
July 5, 2011

Russia is considering introducing an export duty for volumes sold to Turkey and delivered via Blue Stream (Vedomosti, 5 July). To date these volumes have been exempt from export duty according to an intergovernmental agreement between Russia and Turkey. Gazprom delivered about 13bcm to Turkey last year, so based on this volume, the government would earn about $1.3bn if a duty was imposed.

The implications are that higher export duty collections could lower the government's appetite to increase MET. We estimate that in order to collect RUB150bn in additional taxes (necessary to plug the budget gap in 2012, according to MinFin estimates) it would be sufficient to increase MET to about RUB400/mcm, but not to RUB480/mcm as most recently discussed.

Bottom line
It is not yet clear whether the export duty would result in a Turkish price increase or would be paid by Gazprom. In the first case, which we believe is more likely, the news is positive for Gazprom as it would facilitate lower MET rate growth. If however lower MET rate growth is compensated with a higher export duty, this will make little difference to Gazprom.

TNK-BP Holding: CEO-to-be may quit

http://www.bne.eu/dispatch_text16081

UralSib
July 5, 2011

Maxim Barsky still not appointed. Maxim Barsky, who was approved as CEO by TNK-BP's (TNBP RU - Buy) Board of Directors and who was to have taken up his duties in January, has still not been appointed, and may resign from the company.

Still no consensus between BP and AAR. Barsky was nominated CEO of TNK-BP in November 2009 and given a year to gain experience at BP's production departments and at its London office. In an interview to the press, he stated that the reason for the delay is that shareholders from BP and AAR still cannot agree about his contract and are unhappy with his proposals for a new management structure.

New tensions between BP and AAR may arise. This development may pressure TNK-BP's Holding's shares, as Barsky's appointment was long-awaited by investors and there were many expectations regarding the company's future. We believe that Barsky may decide to pursue other opportunities if shareholders continue to postpone his appointment, and that the company may face another escalation of conflict between the British and Russian parties. We have a Buy recommendation on TNK-BP Holding and a target price of $3.8/share.

Alexei Kokin