Russia 090820 Basic Political Developments

Amur soars on reserves estimate submission

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Amur soars on reserves estimate submission

Thu 20 Aug 2009

LONDON (SHARECAST) - East Russia-focused exploration and development company Armur Minerals pleased shareholders Thursday with details of a reserves estimate that it has submitted for regulatory approval.

The total contained metal value for its Maly Krumkon (MK) deposit is $1.8bn, the company said. This figure is based on the current spot market prices of $20,000 per tonne ($9.07 per pound) for nickel and $6,200 per tonne ($2.81 per pound) for copper.

The estimate has to be approved by he State Committee on Reserves (GKZ). Upon approval and final adjustments as recommended by the GKZ, Amur will then be in a position to submit a mining application for the three deposits located within the Kun-Manie nickel copper licence.

Based on the prices mentioned above, a total metal value of $6.9bn is contained within the three Kun Manie deposits.

‘The addition of Maly Krumkon to the previously certified reserves provides Amur with the largest possible reserve base currently available to us for inclusion in the application for mining. It will also contain the majority of the metal we have drilled to date,’ said Robin Young, Amur’s chief executive officer.

UPDATE 1-Amur upbeat on Maly Krumkon estimate, shares jump
Thu Aug 20, 2009 4:07am EDT

* Maly Krumkon estimate for contained metal worth $1.8 bln

* In ground reserve value of Maly Krumkon is $6.9 bln

* Amur shares soar 124 pct to 4-month high

(Adds details)

LONDON, Aug 20 (Reuters) - Amur Minerals (A7L.L: Quote, Profile, Research, Stock Buzz) said a new reserve estimate for its Maly Krumkon deposit, part of its flagship Kun-Manie nickel copper project in Russia, values the contained metal at $1.8 billion, lifting its shares 124 percent. The AIM-listed company said on Thursday it submitted the reserve estimate to the State Committee on Reserves for review and approval, a necessary step before it can submit a mining application for the three deposits within Kun-Manie.

It said the in-ground reserve value of Maly Krumkon is $6.9 billion.

The shares soared as much as 124 percent to 6.27 pence, a four month high, valuing the company at 9.5 million pound ($15.6 million).

(Reporting by Julie Crust; editing by Matt Scuffham)

TMK Borrows $450M

TMK has taken out a $450 million loan from VTB Bank, the pipe maker said in a statement Wednesday.

TMK will use the loan to refinance $600 million in three-year notes issued in July 2008, it said. (MT)

St. Pete Investment Falling

St. Petersburg lured 33.5 percent less foreign direct investment in the first half as the credit crisis deterred investors, the city said Wednesday.

Direct foreign investment fell to $358.7 million, the municipal government said in a statement. Overall foreign investment, including credits and flows into the securities markets, was $1.5 million, or 33.1 percent less over the year-ago period. (Bloomberg)

Kerimov Purchases Rebuilt Voyentorg
20 August 2009By Anton Filatov / Vedomosti

Suleiman Kerimov’s Nafta Ko holding has become the main owner of the legendary Voyentorg department store in central Moscow.

A source in the real estate consulting market said nearly 100 percent of Torgovy Dom TsVUM, or Voyentorg, belongs to Nafta Ko. Alexander Ilyichyov, Nafta Ko’s financial director, confirmed the information, saying the deal was closed last fall.

In October 2008, the Federal Anti-Monopoly Service approved a request by Tandum Limited to purchase Fayard Limited, which owned 99.58 percent of Voyentorg. It was not previously known in whose interests Tandum Limited was acting.

Voyentorg previously belonged to Telman Ismailov’s AST Group, which was not immediately available for comment. A co-owner of AST Group, Alexander Ismailov, told Vedomosti in May that his company and Nafta Ko each owned half of Voyentorg.

Ilyichyov said the information was inaccurate.

The consulting firm source noted that all of the AST representatives had left the TsVUM board of directors. On April 4, four of the board’s five seats were taken by Nafta Ko officials: Ilyichyov, his deputy Mikhail Freidkin, head of the legal department Irina Pavlikova and deputy chief executive Alexander Ulyanov.

The chairman was Svyatoslav Golitsyn, who represented AST’s interests. But in second-quarter results published Monday, Golitsyn was listed as having left the chairman post, which was taken by Ilyichyov. The fifth board seat was taken by the deputy head of Nafta Ko’s legal department, Yelena Korovina.

Golitsyn retained his post as chief executive.

Ilyichyov declined to comment on the size of the deal, saying only that it was at the market price. The owner of another project in which Nafta Ko is interested in taking a stake said he thought that the department store went for about $300 million and that the two sides agreed that Kerimov’s company would only enter the project once its reconstruction was completed.

Before the crisis, the property was worth about $650 million, although now it’s probably worth about $300 million to $350 million, said Mikhail Gets, managing partner of Novoye Kachestvo.

The store has a prime location in central Moscow, so space in Voyentorg will always be in demand, Gets said, adding that once the crisis is over the property’s value will only appreciate.

The Voyentorg building on Ulitsa Vozdvizhenka was built from 1910 to 1913 and designed by architect Sergei Zalessky. Following its recent reconstruction, the building has five underground levels and eight stories above ground. Of its 70,000 square meters of space, 22,000 square meters are for offices.

The building also has 4,000 square meters of sales space and 30,000 square meters of parking — room for 540 cars. The reconstruction cost $140 million.

AUGUST 18, 2009, 2:14 P.M. ET

UPDATE: Russian Investor's Ally Dormann In As Sulzer Chairman
By Goran Mijuk


ZURICH (Dow Jones)--Russian billionaire Victor Vekselberg on Tuesday tightened his grip on Sulzer AG (SUN.EB) after his investment firm Renova succeeded in getting Juergen Dormann elected as the Swiss machinery maker's new chairman.

The appointment of Dormann at the firm's extraordinary meeting in Winterthur is seen by many as a crucial move in Renova's attempt to fully acquire Sulzer, in which it holds a stake of more than 30%.

But the chances of a quick merger with Swiss peer Oerlikon AG (OERL.VX), in which Renova holds about 40%, slimmed after Dormann told shareholders that he wouldn't support such a move.

Analysts had expected cash-rich Sulzer to soon merge with troubled Oerlikon.

A vast majority of shareholders, meanwhile, backed Dormann's appointment to the company's board. Shareholders also elected Klaus Sturany to join the firm's board, replacing Thor Hakstad and Louis Hughes.

Vekselberg earlier this year was able to oust long-term Chairman Ulf Berg, saying he had lost trust in the manager, who previously led Sulzer as chief executive. Shortly after Berg's dismissal, Vekselberg persuaded Dormann to join Sulzer.

Dormann, 69, is one of Europe's most experienced managers. From 2002 to 2006, the trained economist helped turn around Swiss engineering company ABB Ltd (ABB).

Dormann was also key in one of Europe's first cross-border pharmaceutical deals. His merger of Germany's Hoechst and France's Rhone-Poulenc to Aventis SA - which later merged with Sanofi to Sanofi-Aventis (SAN.FR) - turned into a well-documented success story.

At the meeting in Winterthur, Dormann said he expects Sulzer to continue to grow fast despite the current difficult market environment.

The company, which was profitable in 2008, has recently started to face increased economic pressure, prompting Sulzer to cut more than 10% of its staff base of about 12,000 employees.

Dormann said he wouldn't back a possible merger with Oerlikon, adding that a merger of the two Swiss companies wouldn't create added value.

Analysts, who still see the possibility of a merger at a later stage, had said they expected that two companies to merge soon because of their complementary product portfolio.

Company Web site:

-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47;

Russia Construction Industry To Contract By 15.8% In 2009, To Reach US$67.5bn

New report provides detailed analysis of the Construction market

Published on August 20, 2009

by Press Office

( and OfficialWire)

LONDON, ENGLAND In the Q409 Russia Infrastructure Report we have revised down our forecasts for 2009 following worse than anticipated Q109 results. We are now forecasting Russia’s construction industry to contract by 15.77% y-o-y in real terms in 2009, to reach a nominal value of RUB2.24trn (US$67.5bn).

Data released by Russia’s statistics agency, Goskomstat, revealed that in the first quarter of 2009, Russia’s construction industry contracted by 10% y-o-y in nominal terms. This has led us to revise down our forecasts for the year. Still assuming that the second half of the year will be stronger than first half, we now believe that instead of achieving nominal growth over 2009 (and a -7.5% real contraction), there will be a nominal contraction of 4.12% y-o-y in Russia’s construction industry. With high levels of inflation expected in Russia for the year (consumer inflation expected to average at 11.7% for the year) this will push real growth in the industry down to -15.77%.

As previously mentioned, we are still optimistic for an improved second half of 2009, and recent developments in the country’s infrastructure sector substantiate this. The biggest news from the sector over the last quarter is the awarding of the tender for the Pulkovo Airport in St. Petersburg. The US$1.3bn contract to upgrade the airport was awarded to the Northern Capital Gateway (NCG) consortium, which consists of Fraports AG, VTB Europe PLC – which is the UK-based division of Russian bank VTB Group – and Horizon Air Investments, the airports arm of Greece’s Copelouzos Group. The contract can be seen as something of a bellwether for Russia’s infrastructure sector, and a good indication of private investors’ attitudes to the country’s business environment. The message seems to be a mixed one.

A number of major players dropped out of the bidding, but three secure bids made it through, and although it was somewhat delayed, the project was successfully tendered. The true test will come at the financing stage, as access to credit is still limited in Russia. However with early commitments of funding offered by the European Bank for Reconstruction and Development, the World Bank’s IFC and Russia’s VEB Bank, this may prove a less challenging obstacle than expected.

In the utilities sector, majority state-owned hydropower company RusHydro is driving investment in renewables (including hydropower) and has partnered up with Japanese companies Mitsui and J-Power for the construction of a wind farm on Russky Island and a hydropower plant in Russia’s Far East.

Despite ongoing activity, it is still clear that overall activity in the infrastructure sector is reduced compared with last year, with investment budgets being cut over the short term, state-funding unpredictable and private investment scarce.

Russia Infrastructure Report Q4 2009:

Activity in the Oil and Gas sector (including regulatory)

PetroVietnam to Build $1 Billion Gas Pipeline, Thoi Bao Says

By Nguyen Dieu Tu Uyen

Aug. 20 (Bloomberg) -- Vietnam Oil & Gas Group, the state oil producer, will spend about $1 billion to build a natural gas pipeline in the country’s south, Thoi Bao Kinh Te Vietnam newspaper reported, without saying where it got the information.

Vietsovpetro, a joint venture with Russia’s OAO Zarubezhneft, will start construction of the 398-kilometer (247- mile) pipeline this year, Thoi Bao said.

The pipeline will supply between 16 and 18 million cubic meters of gas a day from a field off the southwest coast to power plants in the southern province of Can Tho, the Vietnamese-language paper said. The report didn’t say how the project will be financed

PetroVietnam, as the company is known, may sell at least $1 billion of bonds next year to fund new projects, NguyenNgoc Su, deputy chief executive officer, said in an interview in June.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at

Last Updated: August 19, 2009 22:45 EDT

Gazprom, Rosneft to gain from tax shift
Published: August 19, 2009, 23:24

Moscow: Gaz-prom and Rosneft, Russia's largest energy producers, will attract investors as the government shifts the tax burden to the steel and potash industries to plug a budget shortfall, Troika Dialog said.

"The oil and gas sector in Russia is extremely highly taxed relative to the rest of the economy, and we believe that forthcoming tax changes are likely to benefit oil and gas companies at the expense of other exporters," Kingsmill Bond and Andrey Kuznetsov, analysts at Troika, said yesterday.

The government will probably overhaul the tax system in the next few years by raising domestic energy prices, lowering the burden on so-called greenfield investments in oil and natural- gas projects and levying higher taxes on other exporters, the analysts said.

The economy of Russia, the world's biggest energy exporter, slumped 10.9 per cent last quarter as the global slowdown eroded demand for its oil and gas and banks restricted lending. Oil producers face the highest tax burden at 78 per cent of profit, while other industries pay as little as 17 per cent, Troika said.

Russia's fiscal gap may reach 8.9 per cent of gross domestic product this year, the nation's first budget deficit in a decade, as the government ramps up spending, the Finance Ministry said. The shortfall will narrow to 7.5 per cent next year, 4.3 per cent in 2011 and 3 per cent in 2012, it said.

Gas companies such as Gazprom and Novatek pay 56 per cent of profit in taxes, Troika said, using an estimated period between 2006 and 2010.

Levies on oil and gas producers accounted for more than two-thirds of corporate tax payments to federal and regional budgets last year.

Oil shipping gives growth for Northwest Russian ports

The sea ports in Northwest Russia in the first half of the year had a total growth in turnover of 2,1 percent. That is thanks to the bigger amounts of oil shipped in the region.

While ports like Arkhangelsk and Kaliningrad had a downturn in turnover of respectively 36,9 and 24,8 percent in the period, the ports of Murmansk, Kandalaksha, Ust-Luga and Primorsk had major growth, Regnum reports.

That is thanks to oil shipments. Lukoil’s new Varandey oil terminal in the Pechora Sea has since it started operations last fall boosted exports. That has lead to increased turnover also in Murmansk, the place where the oil is reloaded into bigger tankers.

As BarentsObserver reported, a new report from Akvaplan-Niva and the Norwegian Barents Secretariat estimated that a total of 15 million tons of oil will be shipped through the Barents Sea this year. That is an increase of three million tons from 2008.

Lukoil installs Yuri Korchagin SBM
8/19/2009 9:45:10 PM GMT

RUSSIA: Lukoil has completed assembly of the single point mooring (SBM) that is part of the site structures and facilities for Yuri Korchagin field in the Caspian Sea.

The SBM is intended for oil transshipment from the subsea pipeline to the floating storage unit and shuttle tankers. The maximum oil transshipment volume will reach 2.3 million tons annually.

The SBM jacket weighing 915 tons was towed offshore. It was installed at a depth of 67 feet (20.5 m) by means of a floating derrick and fixed to the seafloor with five piles, each with the diameter of over 6.6 feet (2 m). Then the topside weighing over 240 tons was assembled onto the SBM.

The SBM topsides were manufactured in the Netherlands by Dutch company Bluewater. The jacket was manufactured at the shipyard of Russia's Astrakhansky Korabel plant.

The Yuri Korchagin field is expected to be commissioned this December. The estimated 3P reserves of the field are 570 million BOE. The maximum annual production rate is 2.3 million tons for oil and gas condensate and 42.38 Bcf (1.2 Bcm) for gas.

Tatneft blamed for overpricing its oil while selling it to its shareholder

Alfa, Russia

Thursday, August 20, 2009

According to an interview with Albert Shigabutdinov (CEO of TAIF Group) published in today's Vedomosti, from January to April 2009 Tatneft has been selling its oil to TAIF at a price three times higher than the market average.

This claim was denied by a Tatneft official. According to the CEO of TAIF, the company controls around 3% of Tatneft's shares.

According to an unidentified source close to TAIF, the reason behind the discrepancy in prices is the presence of a long-term agreement between the companies with an embedded formula of oil pricing. According to the same source, the contract terms have been revised and the price is now close to the market average.

We treat this news as NEUTRAL for the company's shares as it is not clear if this issue will eventually attract the attention of the State's tax administrations.

Even if it does, it will have hardly any effect on Tatneft.

Chirvani Abdoullaev
Rosneft - Putin may visit Rosneft's Vankor field in August

Citibank, Russia

August 20, 2009

(ROSN.RU - 2L: Hold/Low Risk, Target Price: USD6; Current Price: USD5.58)

Several Krasnoyarsk region newspapers reported recently that PM Vladimir Putin was expected to visit Rosneft's Vankor field in August. It is possible that his visit could mark the official launch of the field, although we believe Rosneft has already started commercial production at Vankor. The most recent CDU TEK data show that Rosneft's daily production rose to 2,414kbpd on 18 August, +4.5% and +5.7% vs. July and June average numbers. Assuming that production at the rest of Rosneft's fields has remained flat over the past three months, we estimate that Vankor's production is 130 kbpd and, at this rate, its FY09 output could reach 2.7mt.

However, with the official launch of the field Rosneft's management may provide some more guidance on the field's production and economic outlook. According to the company's earlier guidance, Vankor should produce up to 3 mt of oil in 2009 and about 15mt in 2010.

Alexander Korneev


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