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due to the 7% lower sales volumes and 1.5% higher TCC. The company sold 121koz vs. production of 129koz as it started concentrate sales from Novo to China, while TCC at MNV mine exceeded estimates. Stronger FCFE as capex was muted. Lower EBITDA was offset by the capex of $27mn being 28% below our estimates due to lower spending on Novo and Kekura. As FCFE remained strong, the company announced above-expectations dividends of $25.1mn, 38% of the company's operating cash flow (vs. 20% stipulated in dividend policy) and 24% above the 1H17 dividends. The second half of 2018 outlook is better. The company reiterated its production guidance at 265-275koz, which analysts think is achievable, while it plans to keep TCC around $500/oz in 2018. Hence, lower costs and the pick-up in sales volumes suggest that our FY18 forecasts are achievable. Additionally, the company reduced its 2018 capex guidance 13-20% to $60-65mn, suggesting better FCFE generation in 2018. Capex guidance cut creates risk for on-time commissioning of Kekura. While lower capex leaves a better cash generation outlook, which might help to keep the FY18 final dividend payout above 20%, analysts think delayed capex (which relates primarily to Kekura), might increase the risks of further delays in commissioning Kekura. Given the 42% share in the company's NPV and expected commissioning in 2021F, analysts think this might be negative for the stock.
The US Treasury Department (USTD) pushed the deadline for investors pulling out of debt and equity of Russian aluminium major Rusal and its parent company En+ to November 12 from previous October 23. Rusal and other businesses of Russian billionaire and Kremlin insider Oleg Deripaska were sanctioned by the US Treasury in April, but the initial deadlines for cutting ties with the company were extended several times after the sanctions sent shockwaves through global aluminium supply chains. The deadline for another asset of Deripaska GAZ carmaker remained October 23, suggesting that the USTD is specifically hoping to avoid aluminium market shocks by relaxing only Rusal deadlines. The deadline is postponed to study the proposed changes in governance and shareholder structure of Rusal and En+, the USTD commented. Previous reports indicated that Deripaska’s En+ and Rusal could be getting closer to striking a deal with the USTD. However, the most recent wave of sanction pressure could have even this latest easing postponed. Unnamed sources told Reuters that Rusal's financials will face "further deterioration" should it fail to reach a deal with USTD by the end of August. In the meantime Rusal reportedly sets up a trading unit in China for aluminium and alumina, Reuters reported citing unnamed sources. The new team is supposed to study the imports to China and sell and exports domestically produced metal. Despite the US Department of Treasury most recently allowing past Rusal clients to prolong contracts and sign new ones with the Russian company without fearing secondary sanctions, Reuters claims that most of the European clients will avoid closing new deals for 2019. China, the largest consumer of aluminium in the world could become a lucrative plan B for Rusal, which has its Siberian smelter in relative proximity to the Chinese border. However, Reuters reminds that China is also one of the largest producer of the metal and has negligible volumes of aluminium imports. As another plan B, the company reportedly is preparing to re-register in Russian Special Administrative Districts (SARs) , a domestic offshore zone the Russian government introduced in August on Russky and Oktyabrskiy islands. Government support measures are also being prepared for domestic aluminium consumption .
The Baikal Mining Company that operates Russia’s biggest untapped
107 RUSSIA Country Report October 2018 www.intellinews.com