RusAl is eyeing a stake in Norilsk Nickel

This development immediately propped up the latter’s stock valuations. In our opinion, Rusal’s interest is most likely attributable to its aspiration to establish one of the largest mining companies worldwide. This news caused NorNickel to spike on Friday (up 7.2% as of 5:46 pm Moscow time) and propped up other Russian shares. As of 5:59 pm Moscow time, the RTS Index was up 2.74%.

RusAl is the world’s largest aluminum maker, while NorNickel is the world’s biggest producer of nickel and palladium and also a large producer of copper, platinum and cobalt. In Antanta Capital’s opinion, by acquiring a stake in the miner, RusAl’s beneficiaries are looking to establish a giant commodity company which could be a peer to such majors as BHP Billiton, CVRD and Rio Tinto.

In view of the situation, it would be logical to assume that the next step will be an attempt to acquire large iron ore assets. In our opinion, undeveloped Krivoy Rog Oxidized Ore Mining Mining-and-Processing Integrated Works (Ukraine) could be the most appealing asset in FSU territory. In our opinion, it is quite problematic to acquire such assets in Russia, since they have all been snapped up by leading steel makers.

According to RusAl CEO Alexander Bulygin, the merged company’s sales will amount to nearly $10 bln in 2006 and NorNickel’s FY06 IFRS sales are projected at $11.1 bln. Thus, in the event that the two giants merge, the holding’s consolidated sales could top $20 bln. By comparison, BHP Billiton’s sales stood at $32 bln during the last financial year and Rio Tinto reported sales amounting to $22.5 bln.