Russian Copper Company may buy 50% of Chelyabinsk coal company

Nadezhda Ivanova's picture

The Russian Copper Company (RMK) of Igor Altushkin has received a permit to purchase 50% of Chelyabinsk coal company, which develops the Korkinsky coal mine. This deal is needed by Russian Copper Company to begin the construction of Tominsky GOK: it is planned to store waste of the copper production in the hollowed-out space of the open pit. The project will allow RMK to increase the copper production one and a half times, but until now the seller was "not very constructive in the negotiations".

The FAS has approved the request of the RMK’s structure Tominsky GOK on acquisition of 50% of voting shares of the Chelyabinsk coal company, controlled by the Uzhuralzoloto gold mining group of Konstantine Strukov. The fact that Russian Copper Company planned to become a shareholder of the Chelyabinsk coal company, which owned the Korkinsky coal mine in the Chelyabinsk region, was reported by president of the copper company Vladislav Levin in October 2016. Then it was planned to close the deal within a month. But, according to and the Unified State Register of Legal Entities, the joint-stock structure of the Chelyabinsk coal company hasn’t changed yet: 100% of the company are owned by Timofeevsky stone quarry, co-owned by Cyprus Carintia Properties Ltd (49%) and three individuals.

RMK needs the deal for the construction of the Tominsky GOK. It should use ore of the deposit of same name, the processing capacity will be 28 million tons per year with the output of about 100 thousand tons of copper (500 thousand tons of concentrate). In 2016, the cost of the project was estimated at the level of up to $1.5 billion because of large expenditures on the environmental component (project financing is planned). RMK was going to build a tailings pond, but the local population opposed it, so the governor of the region Boris Dubrovsky advised an alternative option: to use the hollowed-out space of the Korkino open pit for the waste (the production is about 1 million tons per year, in January 2016, the Chelyabinsk coal company emerged from bankruptcy). According to RMK, the Chelyabinsk coal company itself estimated the reclamation of the open pit at 28 billion rubles. At the same time, the only remaining mining license of the Chelyabinsk coal company, according to the Federal Agency on Subsoil Usage, is valid only until January 31, 2018.

The Kommersant’s source, close to RMK, told in summer of 2016 that "the coal company is not very constructive in the negotiations". Local mass media reported that the management of the Chelyabinsk coal company was against the storage of waste from the Tomino GOK in the open pit, stressed that in case of endogenous fires they would have to be extinguished for "about 23 years", while the life of the GOK would be 25 years. Acting financial director of Uzhuralzoloto Maxim Kharin yesterday refused to discuss the situation with the Kommersant, the Chelyabinsk coal company didn’t reply to the request. RMK only said that "it is premature to talk about the details of the planned transaction".

The launch of the Tominsky GOK (the construction of the first stage may take about two years) will allow RMK to increase the production one and a half times. Copper is a kind of indicator of the global economic growth, and in a few years its price will depend on many factors, including the state of the Chinese economy and the success of implementing infrastructure projects in the USA, says Andrei Lobazov of Aton. In the coming years, it is planned to increase the production at large projects in South America, so the forecasts for the price dynamics are rather cautious. Norilsk Nickel (360 thousand tons in 2016) expected that in 2016-2017 the global copper market will be surplus by 100-120 thousand tons. Analysts of Societe Generale in their industry review dated March 6 noted that in 2017 the copper market would move towards a balance after the surplus of 280 thousand tons in 2016. The success of the Tominsky GOK, Mr. Lobanov concludes, will primarily be affected by the prime cost of the production. Russian Copper Company doesn’t disclose the actual assessment of the open pit remediation cost, saying that "the project is under development".

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