Page 112 - RPTRusFeb17

9.2.10 Metallurgy & mining corporate news
The sale of 12% in Russian aluminium producer Rusal for $700mn is being postponed over the price of the stake, Vedomosti daily reported on February 5. The deal that was expected to be closed in November 2016 is now under question, unnamed sources told the daily. Reportedly, since the value of Rusal rose considerably since the deal was first negotiated , shifting the $700mn price from 17.3% premium to 36% discount. Other difficulties include uncertainties with the deal's financing by Sberbank, and requirements of the Hong Kong Stock Exchange where Rusal is listed. As of 12PM MSK the shares of Rusal declined by 3% in Moscow on the news that the sale of 12% to Sual Partners could be cancelled. Sual Partners, a joint venture controlled by Victor Vekselberg and Leonard Blavatnik that holds 15.8% in Rusal, was supposed to acquire the stake from Onexim, owned by Mikhail Prokhorov, who holds 17% in Rusal. Prokhorov is one of a group of Russian oligarchs who are under increasing pressure by both the Kremlin and the shrinking economy and are starting to sell their assets. Other major shareholders of Rusal are En+ (48.4%) energy major and oil trader Glencore (8.7%).
Alrosa has reported strong January rough diamond sales of $358mn, up 60% y/y , which is above the 32% y/y growth reported by De Beers earlier. The quicker than expected recovery of Indian demand boosted the sales of both companies in January, while we think the start of restocking by diamond jewellers will support the February-March numbers, suggesting that global 1Q17 rough diamond sales might be up in the mid-single digits y/y. As such, we note a 5-10% upside risk to our 1Q17F diamond sales forecast for Alrosa of $1.2bn. Given that we expect the rough diamond market to continue recovering and this to contribute to the stock’s rerating from an undemanding 2017F EV/EBITDA of 4.4x, we are reiterating our 12-month Target Price of RUB 140 and Buy recommendation. January diamond sales strong. R ough diamond sales of $358mn were up around 60% y/y, which is stronger than the 32% y/y rise for De Beers, reported earlier, but can partly be explained by the low base of 2016, as mid-stream restocking began closer to February 2016. Nevertheless, the numbers are still robust, even if compared with 2015 (Figure 1), as they reflect the faster than expected recovery in Indian demand post the demonetisation reform. Meanwhile, combined sales for De Beers and Alrosa in January are up 40% y/y to $1,078mn. As both De Beers and Alrosa highlight the quicker-than-expected return of the Indian mid-stream segment to the market, we do not rule-out that demand from it has largely returned to normal levels in January-February.
Russia’s Eurocement Group Holding is to build a new cement plant in
112 RUSSIA Country Report February 2017 www.intellinews.com