Sverdlovsk govt does not rule that Russian Magnesium project might have to be restarted
YEKATERINBURG. Aug 2 (Interfax) - The Sverdlovsk Region authorities doe not rule out the possibility of launching a new Russian Magnesium project if the first project, OJSC Russian Magnesium goes bankrupt, the deputy chairman of the regional government, Alexander Petrov told reporters.
"I don't rule out that we'll have to start everything from the beginning, because the objective exists, the problem exists, there is interest, potential investors are emerging. I think that everything is not lost, even if Minmet and Solimag [the shareholders of the magnesium plant being built] pull out of the project. I think that the technology [to mine and process magnesium] can be bought," Petrov said.
The magnesium recovery technology patented by the plant that is being built is currently worth about 900 million rubles. In addition, since the project was begun in 2006, there have been "some thoughts, some developments that will now make it possible to improve this project," Petrov said.
Statements about the possibility of launching a second magnesium recovery project emerged following a dispute between the shareholders of Russian Magnesium.
OJSC Russian Magnesium chief executive Alexei Ginzburg told Interfax that at an extraordinary general meeting in July OJSC Uralasbest and the Sverdlovsk Region government, which each own 25% of the plant, blocked a decision to issue new shares.
The plant's principal shareholder, LLC Solimag (St. Petersburg), which is 25% owned by Ginzburg and 75% of LLC SMV Engineering, proposed to issue 200,000 common shares in the plant with par value of 1,000 rubles each in order to raise 200 million rubles to cover debts on wages to employees of the plant, pay tax debts and finance current operations.
Petrov explained why the shareholders voted against the new share issue. The shares were supposed to be sold in a private placement to Minmet Financing Company S.A., which currently owns two shares in the plant. The company proposed to pay for 50,000 shares in cash and acquire the other 150,000 shares by offsetting claims against Russian Magnesium on previously issued loans.
Minmet, which sold a 50% stake in the plant to Solimag in June 2012, extended loans to the plant at 10% annual interest. The debt on these loans is now 2.076 billion rubles, including 556 million rubles in interest.
"The 50 million rubles that were to be invested in the project in the form of cash do not solve the current problem. This would keep the company going, perhaps, to the end of the year, taking into account the need to even just pay wages, taxes, not to mention payment of the debt to Uralgipromez," Petrov said.