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copper deposit at Udokan says it will $1.25bn in project financing from a Russian bank by the start of 2019, its chairman, Valery Kazikayev told Reuters . Global copper prices are rising and lead to expectations of increasing demand for use in electric vehicles. The company is expanding production and started preparing the site for construction of a massive plant at the deposit in September, which has remained in limbo in Siberia for almost 70 years. With total reserves of 26.7mn tonnes of copper, Udokan is one of the biggest untapped deposits in the world. However, it remained virgin since its discovery in 1949 due to lack of technology for its unique and difficult ore. The Baikal Mining Company is owned by Russian billionaire Alisher Usmanov, who bought the right to develop Udokan for $500mn from the Russian government right before the 2008 financial crisis. An additional $330mn was spent on creation of a new geological model for the deposit as it turned out that the Soviet estimate did not correspond with the real content of copper in Udokan’s ore, Kazikayev said in a rare interview. A mix of flotation and hydrometallurgy was chosen as production technology for the project, mainly focused on Chinese and other Asian markets. The Baikal Mining Company needs $1.35bn to build a plant able to mine 12mn tonnes of ore a year and produce 130,000 tonnes of copper from it. Half of the product will be cathode copper and the other half copper concentrate. The company plans to invest $100mn in the project and raise the $1.25-bn project financing for the rest of the sum, Kazikaev said. With annual capacity of 12mn tonnes of ore, the project will have an internal rate of return of at least 21%. Udokan, which can potentially be expanded to 48mn tonnes in future, may speed up expansion subject to favourable market conditions for copper.
Russian diamond miner Alrosa reported August rough diamond sales of $283mn, up 11% y/y. Bankers say the number was positive for the stock, with July-August sales of $617mn, up 14%. The company kept a high sales figure despite unsupportive seasonality, with stronger demand for high-quality stones, which has a positive cross-read for the diamond price, in our view. We reiterate our positive view on the company, as the company trades at undemanding 6.1x 2019F EV/EBITDA.
Russia's largest and world's second-largest aluminium producer Rusal is preparing to cut its output as it will be locked out of crucial annual contract negotiations kicking off this week at the Metal Bulletin aluminium conference in Berlin due to ongoing US sanctions, Bloomberg reported on September 10. Rusal and other businesses of Russian billionaire and Kremlin insider Oleg Deripaska was sanctioned by the US Treasury in April, but the initial deadlines for cutting ties with the company were extended several times after sanctioned sent shockwaves through global aluminium supply chains. Previous reports indicated that Deripaska’s En+ and Rusal could be getting closer to striking a deal with the US Treasury Department to suspend or even lift the sanctions in effect from April 2018. However, the most recent wave of sanction pressure could have this 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. The instability at the aluminium market risks repeating as Rusal, that cannot open new contracts under sanctions, will be excluded from the major industry negotiations event, Bloomberg warns. In the meantime the Russian government prepares to support Rusal by absorbing some of aluminium supply domestically. Government officials most recently allowed the possibility of buying the metal for sovereign commodity reserves . On September 7 Vedomosti daily suggested that the Ministry of Industry and Trade also could limit procurement and purchases of imported aluminium
108 RUSSIA Country Report October 2018 www.intellinews.com