Shareholders of Rezhnickel, Ufaleynickel prepared to hand shares to Development Corp.
YEKATERINBURG. July 4 (Interfax) - Shares in Rezhnickel (Sverdlovsk Region) and Ufaleynickel (Chelyabinsk Region) could be handed over to OJSC Development Corporation (formerly known as Corporation Ural Industrial - Ural Polar) to prevent the nickel producers' bankruptcy, one of the owners of the companies, Alexander Timofeyev told reporters on Tuesday.
"If this will be the condition [of aid to the companies], we are willing [to hand over shares]," Timofeyev said. The shareholders and representatives of the corporation, at a meeting at the Ural envoy's office, "discussed a transfer, not for money, but in order to save the companies," he said.
"We understand that this is very costly. Before the crisis, such companies were worth almost a billion dollars. Now times are tight. We can haggle as long as we want with the envoy and [Development Corporation CEO Alexander] Beletsky, but we don't have the time for this," Timofeyev said.
In order to resolve the problem of paying salaries and settling up with suppliers, Timofeyev said he asked the presidential envoy for short loans totaling about 300 million rubles.
He stressed that for him and his brother Artem Timofeyev, who is also a shareholder of both companies, these are significant assets, but state banks are refusing to lend at current nickel prices.
Timofeyev also said the meeting at the envoy's office discussed the outlook for modernizing the plants, so that in future if nickel prices fall the situation with a shortfall in working capital will not be repeated.
He said the priority now is to prevent a shutdown of production at Ufaleynickel and Rezhnickel, as this would essentially mean bankruptcy.
The managing director of the plants, Eduard Karpenko told reporters that production costs at the plants amount to about $19,000 per tonne, while the current exchange price of nickel is about $16,000.
Ufaleynickel and Rezhnickel, Russia's oldest nickel plants, were part of the OJSC Koks group until the summer of 2010, when their shares were bought from Koks in equal stakes by the three principal shareholders of the Industrial and Metallurgical Holding (IMH): Boris, Yevgeny and Andrei Zubitsky.
At the end of 2011, it was reported that the Urals nickel plants had been acquired by Highmetals KDS. Moscow-based Highmetals KDS is a management consulting firm owned by brothers Alexander and Artem Timofeyev, according to the SPARK database.
Chelyabinsk Region Governor Mikhail Yurevich said earlier that Highmetals KDS would prepare Ufaleynickel for sale to a strategic investor. Russia's biggest nickel producers, MMC Norilsk Nickel and the Mechel group said in January that they were not interested in the Ural nickel plants.
The Ural plants, whose equipment and technology has not been modernized since it was launched in the mid-1930s, have become unprofitable amid the slump in nickel prices. Ufaleynickel, the chief local employer, has been operating at a loss, while Rezhnickel shutdown production in November 2011 and in March relaunched two shaft furnaces.
Ufaleynickel, Russia's third largest nickel producer, produces nickel from raw material from the Serov nickel mine, and also used nickel scrap and nickel matte from Rezhnickel. The plant produced 14,000-16,000 tonnes of nickel annually prior to the crisis. Prior to 2008, the plant also produced cobalt from cobalt concentrate supplied by Norilsk Nickel.
Development Corporation is the management company for the Ural Industrial - Ural Polar regional development project that includes exploration and development of mineral resources, and construction of railroads and electricity infrastructure. The shareholders include the Tyumen, Chelyabinsk and Sverdlovsk region, and the Yamalo-Nenets and Khanty Mansi autonomous districts.