Russia 111117 Basic Political Developments

‘All Parts’

Republican Senators Dan Coats of Indiana and Pat Toomey of Pennsylvania on Nov. 7 asked the Energy Department’s inspector general to investigate the Severstal loan. Representative Darrell Issa, a Californian Republican and chairman of the Committee on Oversight and Government Reform, asked the department Oct. 27 for “answers about the decision-making processes,” saying Severstal didn’t need immediate assistance and that its products aren’t in short supply in the U.S.

The loan helped preserve steelmaking jobs at the Michigan plant, enabling it to supply U.S. automakers as they produce more fuel-efficient vehicles, Mordashov said. High-strength steel is a lightweight formulation of the metal used in automotive frames. Advanced high-strength steels are treated to give them greater tensile strength.

“To make cars more efficient, it’s necessary to address all parts of the car,” Mordashov said. “We are addressing this with structures made out of steel.”

Mordashov spoke after announcing a $550 million expansion of the Mississippi plant, doubling the capacity of a facility that supplies steel to automakers like Bayerische Motoren Werke AG and Daimler AG.

Regulators scrutinized Severstal’s application for more than two years, vetting it thoroughly, Mordashov said. Severstal’s financial strength was a prerequisite for the loan, ensuring U.S. taxpayers won’t be on the hook for missed payments, he said.

Vehicle Loan Program

Under the program, “companies like Nissan and Severstal can set up an American company and apply for a loan to support a project here in the United States,” Damien LaVera, an Energy Department spokesman, said. “This is about creating the innovative clean-tech jobs of tomorrow here in the United States.”

Ford Motor Co. (F) is the biggest recipient of loans under the advanced-vehicle program, borrowing $5.91 billion, followed by Nissan Motor Co., which borrowed $1.45 billion. Electric-car producers Tesla Motors Inc. (TSLA) and Fisker Automotive Inc. have also received loans.

Severstal, which already supplies steel to General Motors Co. (GM) and Ford, plans a cold-rolled steel mill and galvanizing line in Dearborn. It acquired the plant in 2004 as part of its $285.5 billion takeover of bankrupt steel supplier Rouge Industries Inc.

Non-U.S. Recipients

Under one incentive program created in a 2005 energy bill, companies such as Ormat Technologies, a unit of Yavne, Israel- based Ormat Industries (ORMT) Ltd., are eligible for Energy Department loan guarantees if their projects are located in the U.S., according to the legislation. U.S. units of Seville, Spain-based Abengoa SA have also received loans under the program.

The program from which Severstal received its conditional commitment was created in a 2007 energy bill.

Mordashov, 46, said in an interview last month that he plans to boost Severstal’s production capacity in the U.S. to 5.2 million metric tons a year, narrowing the gap with competitors U.S. Steel Corp., ArcelorMittal (MT), Nucor Corp. (NUE) and Steel Dynamics Inc. (STLD)

To contact the reporters on this story: Jeff Plungis in Washington at [e-mail]; Sonja Elmquist in New York at [e-mail]

To contact the editors responsible for this story: Bernard Kohn at [e-mail]; Simon Casey at [e-mail]

Russian company increases price of diamonds supplied to Armenia

http://news.am/eng/news/82129.html

November 16, 2011 | 15:16

YEREVAN. - Although international market price of diamonds has fallen by about 20%, the Russian ALROSA company has raised the price of diamonds supplied to Armenia, director of Arevkan diamond company Vardan Andreasyan said at a Wednesday press conference.

Nevertheless, the company has not stopped buying raw materials for diamonds from the ALROSA not to disrupt strategic cooperation.

“While buying raw materials we knew we would incur losses, but we did it not to stop deliveries in the future,” he said adding that the Russian company sets prices for rough diamonds unilaterally.

Director of Lori company Gregory Shahnazaryan also said they had to cut volume of supplies due to rise in prices.

Both managers refrained from naming precise price of diamonds, saying it depends on weight, color, degree of damage. For instance, Andreasyan said that a diamond of 0.5 carats was bought for $400, a diamond of 0.75 carats - for $520.

Economy Minister Tigran Davtyan also present at the briefing stressed that they are working on diversification of raw material sources.

Armenia receives 90% of raw material for diamonds from the Russian ALROSA company.

November 17, 2011 11:47

High River reduces Q3 gold output 5%

http://www.interfax.com/newsinf.asp?id=287980

MOSCOW. Nov 17 (Interfax) - Canada's High River Gold Mines (HRG), which is controlled by Russia's Severstal (RTS: CHMF) group, reduced gold production 5% quarter-on-quarter to 91,057 oz or 2.8 tonnes in Q3 2011, the company said in a statement.

Total gold production decreased 5.0% to 91,057 oz (Q2 2011 - 96,093 oz). Total cash cost per ounce increased 2% to US$720 (Q2 2011 - US$704 per ounce).

The Zun-Holba and Irokinda Gold Mines in Russia produced 34,100 oz (Q2 2011 - 33,594) at a total cash cost of US$705 per ounce.

Gold production at Berezitovy, also in Russia, was 25,565 ounces (Q2 2011 - 28,746 ounces) (100%) at a total cash cost of US$ 787 per ounce.

The Taparko-Bouroum Gold Mine in Burkina Faso produced 31,391 ounces (Q2 2011 - 33,753) at a total cash cost of US$ 681 per ounce.

HRG said net gold revenue was $111.5 million, a decrease of 18% from $136.2 million in Q2 2011, an increase of 11% from $100.8 million in Q3 2010.

Net income was $41.3 million ($0.05 per share) compared to a net income of $41.4 million ($0.05 per share) in Q2 2011 and a net income of $24.0 million ($0.03 per share) in Q3 2010.

Cash flow from operations was $23.1 million, down from $42.9 million in Q2 2011, and from $26.3 million in Q3 2010.

Cash and cash equivalents decreased to $150.0 million from $207.3 million at the end of Q2 2011, and increased from $125.6 million at the end of Q3 2010.

Working capital decreased to $296.0 million from $307.2 million at the end of Q2 2011 and increased from $205.3 million at the end of Q3 2010.

Current and long term debt decreased to $22.7 million from $24.0 million at the end of Q2 2011 and increased from $22.1 million at the end of Q3 2010.

High River is an unhedged gold company with interests in producing mines, development and advanced exploration projects in Russia and Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two open pit gold mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso, are also in production. High River also has a 90% interest in a development project, the Bissa gold project in Burkina Faso, and a 50% interest in an advanced exploration project with NI 43-101 compliant resource estimates, the Prognoz silver project in Russia.

Severstal's gold mining unit Nord Gold N.V. on 75.06% of HRG as of the end of August.

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EBRD to provide RUB 1 billion loan to Rosvodokanal Group

http://www.steelguru.com/russian_news/EBRD_to_provide_RUB_1_billion_loan_to_Rosvodokanal_Group/236176.html

Thursday, 17 Nov 2011

Interfax reported that the European Bank for Reconstruction and Development and Russia Rosvodokanal Group signed a second loan agreement on Wednesday for the provision of RUB 1.5 billion to the latter company.

Mr Varel Freemen the EBRD first vice president said at an Interfax press conference that this is our second agreement. We will provide a total of RUB 3 billion to Rosvodokanal including the first loan."

The loan will be available for 13 years. It was reported in August that Rosvodokanal plans to raise RUB 3 billion in bank financing, 50% of which would be provided by the EBRD. The other half was to come from a Russian financial institution.

The funds will likely go to the modernization of Rosvodokanal infrastructure in Kaluga, Tyumen, Orenburg, Barnaul, Tver, Omsk and Krasnodar. EBRD first loan at the same amount of RUB 1.5 billion was raised in 2008. The loan agreement terms foresaw a three-year grace period during which the company would have to return the interest and not the principle.
Mr Jean-Patrick Marquet the EBRD's director for municipal and infrastructural projects said that the bank would invest RUB 5 billion in Russia municipal sector in 2011.

Ms Natalia Khanjenkova the bank managing director for Russia said including the agreement signed on Wednesday, the EBRD has invested RUB 2 billion in Russia since the start of 2011.

She said "With the signing of this project, our bank's investment in 2011 in Russia has already gone over EUR 2 billion. We are continuing to work and this will be a bigger amount by year's end."

(Sourced from Interfax)