Russian Copper Company - Альфа-Банк

Transcription

NON-FERROUS METALLURGY
Russian Copper Company
Olga Gorokhovskaya
Viktoriya Kravchuk
31.03.2006
OGorohovskaya@alfabank.ru
(095)786-4877
WKravchuk@alfabank.ru
(095) 786-4269
www.alfabank.com
Moscow
CLN Structure
Issuer
Borrower
Guarantors
Volume
Expected issue date
Maturity
Put-option execution
Coupon period
Circulation
Jurisdiction
Lead manager
EMSP B.V.
Russian Copper Company Limited
• CJSC Russkaya Mednaya Kompaniya
• CJSC Ormet
• CJSC Novgorodsky Metallurgichesky Zavod
• LLP Aktubinskaya Mednaya Kompaniya
$100 mln
December 2005
36 months
24 months
6 months
Euroclear/Clearstream, OTC
English Law
Alfa-Bank
Investment Summary
•
Russkaya Mednaya Kompaniya (RMK) is one of the three top copper companies in Russia
RMK controls 14% of the copper cathode market and 40% of the non-ferrous scrap market
(according to Expert’s data). RMK runs eleven enterprises in four regions in Russia and
Kazakhstan. These facilities form a cyclical production turnaround including mining, scrap picking,
copper concentrate and black copper production as well as copper hot-rolled rod production and
production of finished goods on the base of copper and its alloys.
•
In 2004 consolidated IAS revenues of RMK totaled $530 mln and assets – $600 mln
In 2004 RMK produced 116,000 tons of cathode copper, 36,000 tons of hot-rolled rod, 29,000 tons
of zinc, 26,000 tons of copper and bronze alloys and 25,000 tons of non-ferrous mill products.
According to experts’ estimates, RMK revenues may amount to $740 mln by the end of 2005 and
net income may reach $90 mln.
•
In October 2005 CJSC “KMEZ” attracted a syndicated loan totaling $100 mln
CJSC Kyshtimsky Medeelektrolitny Zavod (one of RMK’s companies) attracted a syndicated loan in
the amount of $100 mln. The loan is used for improvement of credit portfolio structure, earlier
targeted modernization of fixed assets, and for production acceleration. The annualized gain from
debt refinancing according to management estimates will reach $3 mln.
•
In 2008-2009 RMK plans to conduct an IPO
1
RUSSIAN COPPER COMPANY .................................................................................................................... 1
Investment Summary ................................................................................................................. 3
Group overview ..................................................................................................................... 3
Credit Linked Notes (CLNs) .................................................................................................. 4
Russkaya Mednaya Kompaniya ................................................................................................ 6
Group’s Structure .................................................................................................................. 6
Market outlets, market share and distribution ....................................................................... 7
Investments ........................................................................................................................... 8
RMK plans and purposes of fund raising .............................................................................. 9
Description of the Group’s Facilities ........................................................................................ 11
Russkaya Mednaya Kompaniya.......................................................................................... 11
Mining and processing of copper ore .................................................................................. 13
Fire and electrotechnical black copper refining ................................................................... 18
Precision casting and non-ferrous bar rolling ...................................................................... 22
Group Financial Analysis ......................................................................................................... 25
Assets analysis.................................................................................................................... 25
Liabilities analysis................................................................................................................ 26
Financial indicator analysis ................................................................................................. 28
Forecast of RMK revenues.................................................................................................. 29
Copper Market Overview ......................................................................................................... 30
Global copper market dynamics.......................................................................................... 30
Current situation on copper markets ................................................................................... 31
Market segmentation: Key players ...................................................................................... 31
2
Investment Summary
Group overview
RMK controls 14% of the copper cathode market, 24% of Russian cupriferous
raw material stocks and 40% of the non-ferrous scrap market (according to
Expert’s data). Holding RMK is the third-largest copper producer in Russia
after Norilsk Nickel and UGMK. RMK operates eleven enterprises that can be
divided into several groups: mining (CJSC Ormet, OJSC Aleksandrinskaya
Gornorudnaya Kompaniya et al) and metallurgical enterprises (CJSC
Karabashmed, CJSC Kyshtymsky Medeelektrolitny Zavod, LLC Zavod
Tochnih Splavov et al). The RMK enterprises are represented in four regions
in Russia and Kazakhstan. They form a cyclical production turnaround,
including copper mining, scrap picking, copper concentrate and black copper
production as well as copper hot-rolled rod production and production of
finished goods on the base of copper and its alloys. According to experts’
estimates, RMK revenues may amount to $740 mln by the end of 2005 year
and net income may reach $90 mln.
Fig. 1. SWOT analysis
STREGNTHS
+ One of the biggest copper companies in Russia with a market share of about 14%
+ Unique mining assets
+ Experienced team of managers
+ High share of exports in total turnover
+ Modern equipment that meets international standards
+ Up-to date technologies of copper production
+ Cyclical production turnaround
+ Compact geographical situation of fixed assets
+ Stable growth of revenues and favorable financial indicators
WEAKNESSES
Ө Leverage growth caused by large investments in production modernization and asset acquisition
Ө Demand for large investments for production modernization
OPPORTUNITIES
↑
↑
↑
↑
Increase of refining copper output
Acquisition of raw material assets
Modernization of production and increase of profitability
IPO
THREATS
↓ Experts’ estimate that world copper prices may stagnate for 2-3 year period
↓ Growth in copper export tariff
Sources: Group’s reports, Alfa Bank estimates
3
Credit Linked Notes (CLNs)
Fig. 2. Credit Linked Note Structure
Issuer
Borrower
Guarantors
Issue Volume
Issue Date
Maturity
Put-option execution
Coupon period
Coupon base
Circulation
Jurisdiction
Lead manager
EMSP B.V.
Russian Copper Company Limited
CJSC Russkaya Mednaya Kompaniya
CJSC Ormet
CJSC Novgorodsky Metallurgichesky Zavod
$100 mln
1H December, 2005
36 months
24 months
6 months
Actual/360
Euroclear/Clearstream, OTC
English law
Alfa Bank
Sources: RMK, Alfa Bank
In 2005 Alfa Bank registered a Global Repackaging Program in a total amount
of $10 bln that can be realized to professional market participants. Within the
framework of the above Program, a new structure called Emerging Markets
Structured Products B.V. (EMSP B.V.) was founded under Netherlands
jurisdiction. EMSP B.V. is run by an independent international management
company TMF and acts as an Issuer of the RMK Credit Linked Notes. An
Issuer is legally and economically independent from a Borrower and a Lead
Manager.
EMSP B.V. provides a loan to the Borrower – Russian Copper Company
Limited (RCC), the parent company of the Group RMK. The Issuer issues
notes, the parameters of which coincide with the relative parameters of the
raised loan. The CLNs are served in the same manner as RCC serves the
above loan. Major Russian and Kazakh companies of the Group are
guarantors of the loan. The list of guarantors comprises one of the biggest
Russian producers of cathode copper – OJSC Russkaya Mednaya
Kompaniya, the biggest mining asset of the Group; CJSC Ormet, one of the
biggest processors of the Group; CJSC Novgorodsky Metallurgichesky Zavod;
and LLP Aktubinskaya Mednaya Kompaniya, which mines a unique field – the
ore mine “50 Years of October”.
In case of default, the Issuer assigns the loan to the Trust company (JP
Morgan Trustee). The Trust company triggers the procedure of debt collection
for the Issuer and the Guarantors.
The international legal company Lovells is responsible for preparation of the
legal documents, including legal opinion on the CLN issue.
4
Fig. 3. CLN – General Scheme
ЗАЕМЩИК
BORROWER
Amtel
RussianHoldings
Copper
Holland N.V.
Company
КРЕДИТ
LOAN
TRUSTEE
JP Morgan
Переуступка
Loan
and guarantee
прав по
кредиту
assigningиin case of
default
поручительству в
случае дефолта
ISSUER
ЭМИТЕНТ
EMSP B.V.
Principal andосновной
Погашение
interest rate
amortization
суммы долгаon
и
CLN
процентов по кредиту
ПОРУЧИТЕЛЬСТВО
GUARANTEE
ПОРУЧИТЕЛИ :
GUARANTORS
ПЛАТЕЖНЫЙ
PAYING
AGENT
АГЕНТ
JP Morgan Chase
ИНВЕСТОР
INVESTORS
Principal andосновной
Погашение
interest
суммы и купона
amortization
on CLN
по
кредитным нотам
Preliminary
Предпоставка
денегreservation
fund
на счет on
Эмитента
the Issuer account
у ПА by
PA
SALE OF CLN
ПРОДАЖА
НОТ
АЛЬФА
ALFA
-БАНК
BANK
Participation об
Соглашение
участии
Agreement
CJSC RMK
«ШК « Амтел o ОАО
CJSC
Ormet
Поволжье»
CLSC NMZ
o ООО «ХК « Амтел »
LLC Aktubinskaya
o ООО « Амтелшинпром »
Mednaya Kompaniya
Sources: Alfa-Bank
CLN placement will
increase the Group’s
leverage by no more
than $25 mln
The Credit Agreement that is signed between a Borrower and an Issuer under
a CLN issue stipulates a number of financial and management restrictions to
avoid a decline of the Group’s financial stability indicators:
1) restriction on the maximum level of holding leverage;
2) restriction on the minimal level of Group shareholder’s equity;
3) restriction on the sale/resale of assets;
4) restriction on Borrower’s investments besides those which are important
for maintaining and developing primary activities;
5) restriction on merger, reorganization and etc. besides those which were
stated in advance.
Not less than 40% of raised funds will be used for refinancing of existing loan
portfolio of the Group. Another part will be spent on opening new workshops
and finishing the construction of processing plant at “50 Years of October” and
on modernization of metallurgic production at CJSC Karabashmed.
Implementation of the investment program will result in the possibility to bring
in the production the new minefield and the processing plant with the output to
44,000 tones of copper in copper concentrate in 2006. This CLN issuer will
also afford to increase the production of black copper under a new technology
at CJSC “Karabashmed” to 90,000 tons per year and the production of refining
copper to 50,000 tons (margin revenue is about $100 mln and margin profit is
$25-27 mln).
5
Russkaya Mednaya Kompaniya
Group’s Structure
RMK Holding is currently the third largest producer of copper in Russia, after
Norilsk Nickel and UGMK. It controls 14% of the copper cathode market and
24% of Russian copriferous raw material stocks (according to Expert’s data).
RMK operates eleven enterprises that can be divided into several groups:
mining (CJSC Ormet, OJSC Aleksandrinskaya Gornorudnaya Kompaniya,
OJSC Uralgidromed, OJSC Aleksandrinskaya Gornorudnaya Kompaniya,
LCC Aktubinskaya Mednaya Kompaniya, LCC Copper Technology) and
metallurgical enterprises (CJSC Karabashmed, CJSC Kyshtymsky
Medeelektrolitny Zavod, CJSC Novgorodsky Metallurgichesky Zavod, CJSC
Revdinsk Non-ferrous Processing Factory, LLC Zavod Tochnih Splavov). The
RMK enterprises operate in four regions in Russia and Kazakhstan, and form
the cyclical turnaround containing copper crop, scrap picking, copper
concentrate and black copper production as well as copper hot-rolled rod
production and production of finished goods on the base of copper and its
alloys. In 2004 RMK produced 116,000 tons of cathode copper. The staff of
the holding numbers 12,000.
Fig. 4. RMK Output in Natural Terms, tons
350 000
123
20 784
20 090
21 876
300 000
118
250 000
24 880
26 200
200 000
115
150 000
26 174
100 000
24 343
10 303
86 577
28 798
19 891
35 742
162 834
135 694
50 000
101 334
0
2003
copper cathod
hot rolled rod
2004
zink in zink cathods
2005Е
copper and brronze alloys
nonferrous mill products
gold and silver
Source: Group data and estimates
RMK exploits four minefields (Djusinskoe, Barsuchiy Log, Aleksandrinskoe,
Gumeshevskoe) at three mining and processing plants in Orenburg (CJSC
Ormet), in Chelabinsk (OJSC AGK) and in Sverdlovsk (OJSC UGM) regions
and owns rights to the subsurface use of three minefields in Chelabinsk region
(Chebachye, Maukskoe) and also in Aktubinsk region (Kazakhstan) – 50
Years of October. The above-mentioned pitshafts are the main current and
future resources of firsts and ore for the next ten years. The RMK facilities
form a cyclical turnover.
6
Fig. 5. Operating Pitshafts of Russkaya Mednaya Kompaniya
Pitshaft
Ore stocks, tons
Cu %
Zn %
3 838 871
138 500
13 021 700
7 985 300
18 006 000
4 443 000
45 118 900
92 552 271
1.76
1.99
1.88
2.98
0.43
1.59
1.84
1.65
3.62
4.01
3.26
2.43
1. Aleksandrinskoe, Ormet
2. Barsuchiy Log, Ormet
3. Chebachye, AGK
4. Djusinskoe, AGK
5. Gumeshevskoe, UGM
6. Maukskoe, КCF
7. 50 year of October, AMK
Total
1.57
0.47
1.13
Pb %
Au g/t
Ag g/t
0.48
0.30
1.90
11.49
32.75
0.71
1.21
25.54
0.10
3.08
3.90
4.78
0.06
0.13
Source: Group data
Market outlets, market share and distribution
RMK targets domestic as well as foreign markets for distribution. It controls
14% of the Russian copper market and 0.94% of the global copper market.
Fig. 6. Geographical Structure of Export in Physical
Terms
100%
0.33%
Fig. 7. Export Dynamics, 3Q04/3Q05
140
90%
127.500
65,473
120
24.06%
80%
100
70%
80
60%
50%
$ mln. .
60
99.67%
40%
40
75.94%
30%
20
20%
0
10%
59.25
6.72
9 month 2004
0%
9 mth 2004
9 mth 2005
In Europe
In other countries through a port (St.Petersburg, Novorosiysk)
copper hot rolled rod
Source: Group data
9 month 2005
copper cathodes
Source: Group data
CJSC RMK, CJSC NMZ and CJSC KMZ are the key exporters in the RMK
Group structure. The Group intends to export 53,000 tons of copper hot-rolled
rod (65% of total output in physical terms).
Export prices for the company’s production correlate with monthly average
quotations on the London Metals Exchange (LME).
Fig. 8. Major Consumers of RMK Goods, 2004
Seller
Traders
CJSC RMK
CJSC NMZ
CJSC KMEZ
Amalko Ltd, Cyprus
Gerald Metals, Great Britain
Glenkor International AG, Switzerland
Goods
Hot rolled rod produced by CJSC NMZ
Hot rolled rod produced by CJSC KMEZ
Export tariff
No
No
No
Source: Group data
7
The final consumer of hot rolled rod:
Pirelli
Draka
Southwire
Toyota, Mitsui
Gerald Metals
Hot rolled rod is exported to many countries of the world (basically in West
and East Europe, the Far East and North America) by automobile transport
(Great Novgorod – European countries), by automobile and railway transport
(Great Novgorod – the port of St. Petersburg further by sea to ports of
destination).
Investments
On September 21, 2005 Russkaya Mednaya Kompaniya began operating the
first Russian copper crop facility on the basis of Gumeshevskoe minefield,
where the technology of subsurface ore leaching is applied. Total investments
in the project amounted to $18.5 mln.
The newly created
production complex will
allow RMK to use small
and poor ore minefields
that have yet to be
regarded as potential
sources of raw materials
Investments in scientific research, development and adaptation of the unique
mining technology to the local environment exceeded $3.5 mln. Specialists of
CJSC Uralhydromed together with SNC-Lavalin Europe Ltd (Great Britain)
took part in development of the pilot production. Engineering and construction
of the project was executed by Outokumpo Technology Oy (Finland).
Construction of the solvent extraction and other required facilities cost about
$15 mln. First-stage production capacity of the newly created complex
(including hydro-technological ground and solvent extraction facilities) is about
5,000 tons of copper cathodes. The industrial rollout of the second stage of
the hydro-technological ground will double output by 2006. Subsurface basic
crop processes and the absence of human labor make this technology very
attractive, as it allows to increase efficiency. Such a technology is the latest
development in world hydro-metallurgy, and most European companies have
recently started its implementation. RMK is the first company to have
launched this technology in Russia (at Uralhydromed).
Domestic and foreign experts consider the project to be ecologically safe.
A second workshop
for electrolytic
processes will start
operating at KMZ by
the end of 2005
By the end of 2005 a second workshop for electrolytic processes will start
operating at Kyshtymsky Medeelektrolitny Zavod (KMEZ). Its production
capacity is 40,000 tons of cathode copper annually. As a result, general
production capacity of the factory will rise to 122,000 tons of cathode copper
annually vs. a current 82,000 tons. CJSC RMK has invested more than $20
mln in the project. The newly established workshop will reach the calculated
capacity in 2Q06. The key supplier of black copper for CJSC KMZ remains
Karabashmed.
Major investment is planned to be made in 2005, with 23% of the total amount
to be spent in 2006-2007.
8
Fig. 9. Investments, 2004-2007, $ ‘000 (including VAT)
OJSC Aleksandrinskaya Gornorudnaya Kompaniya: Minefield Chebechye
LLP Aktubinskaya Mednaya Kompaniya: Minefield “50 Years of October”
CJSC Kyshtimsky Medeelektrolitny Zavod: Reconstruction of electrolyses
and rolling capacities
CJSC Karabashmed: Modernization of melting and sulphuric capacities
Uralhydromed: Construction of facility for cathode production
CJSC Novgorodsky Metallurgichesky Zavod:Reconstruction of electrolysis
workshop
OJSC Revdinsk Non-ferrous Processing Factory: Reconstruction of
production
Total for all projects
2004
0
19 124
2005
8 333
106 786
2006
28 333
7 145
2007
8 333
0
TOTAL
45 000
133 055
0
23 494
10 290
22 076
24 676
13 343
1 366
7 933
4 768
0
0
0
23 442
56 103
28 401
0
5 436
0
0
5 436
3 510
56 418
0
180 650
9 678
59 224
4 748
13 081
17 937
309 374
Source: Group’s data
RMK plans and purposes of fund raising
RMK intends to increase its share of the Russian market for cathode copper
from 14% to 20% in order to take control over a number of minefields (RMK
plans to take part in the tender for Udokan) and in 3-4 years conduct an IPO.
In October 2005 RMK raised a 4-year, $100 mln syndicated loan at
LIBOR+4.8%. The loan was organized by Moscow International Bank (MMB),
Bayerische Hypo und Vereinsbank AG (HVB) and BCEN-Eurobank.
RMK intends to use the loan for material resources development and
improvement of the credit portfolio structure. RMK estimates the refinancing
effect at $3 mln on an annual basis. Modernization is expected to result in
growth of pure copper output from current 116,000 tons to 200,000 tons in
2006.
RMK is considering two primary directions of modernization:
1. Raw materials development:
One of the primary and promising areas of RMK’s development is material
resources expansion. By the end of 2005 the new copper sulphide minefield
named “50 Years of October” will become operational in Western Kazakhstan
(investigated copper stocks total about 900,000 tons). After starting up the
mining and concentration complex in Kazakhstan, the share of inventories on
RMK’s balance sheet will rise from 30% to 70%. Mineral resource expansion
will allow RMK to increase production of copper from a current 116,000 tons
annually to 200,000 tons in 2006 and respectively to boost the Group’s market
share from 14% to 20%.
The Group also plans to implement an aggressive strategy in the area of
merging primary and processing copper facilities.
2. Metallurgy complex development
-
CJSC Karabashmed
The end of reconstruction at CJSC Karabashmed and the start-up of the
concentration complex are expected in 2006. More than $2 bln was spent for
these purposes in 2003-2004 alone. A modern melting furnace Ausmelt Ltd
(Australia) is currently in the process of installation, and its start-up is planned
for the first quarter of 2006. With the end of reconstruction, Karabashmed
integrated plant will become the most modern and cleanest metallurgy
production facility in Russia.
9
-
CJSC Kyshtymsky Medeelektrolitny Zavod
The start-up of second priority of electrolysis at Kyshtymsky Medeelektrolitny
Zavod is planned in December. This will allow an increase in output of
cathodes from 80,000 tons to 120,000 tons.
Moreover, in 2-3 years the Company plans to purchase new minefields in
Russia and Kazakhstan for the purpose of enhancing the output of copper
concentrate in 2006 to 140,000 tons. In 2009 the Group will also start up a
new ore mine at Chebachye minefield.
According to RMK’s estimates, in the near future there will be a shortage on
the copper market, and as a result copper companies should manage to
recover capital investment costs.
10
Description of the Group’s Facilities
The core businesses of RMK are storage, realization and processing of
secondary resources including junk, iron-and-steel and non-ferrous waste, fire
and electrolytic black copper refining, production of specific profile iron and
distribution services on the local and foreign non-ferrous markets. The
facilities of the Group form a cyclical turnaround.
1. Mining and processing of copper ore, mining of precious metals:
-
CJSC Ormet – mining and processing of copper ore, lead-zinc ore, mining
of precious metals;
-
OJSC Aleksandrinsky Mining Company – mining and processing of
copper-zinc ore;
-
OJSC Verkhneuralskaya Ruda, Chelabinsk region – in the process of
construction;
-
LLC Aktubinskaya Mednaya Kompaniya, Kazakhstan – in the process of
construction.
RMK has the right to the subsurface use of seven minefields with total ore
stock of 92,552,271 tons.
2. Purchase of non-ferrous scrap:
-
CJSC Russkaya Mednaya Kompaniya – purchase of iron-and-steel waste
and scrap.
3. Fire and electrolytic black copper refining:
-
CJSC Karabashmed – black copper production;
-
OJSC Kyshtymsky Medeelektrolitny Zavod – refining copper production;
-
CJSC Novgorodsky Metallurgichesky Zavod – refining copper production;
-
OJSC Uralgidromed – copper production using hydrometallurgical
methods.
4. Precise casting and profile rolling of non-ferrous metals:
-
LLC Zavod Tochnih Splavov – processing of waste and non-ferrous scrap,
production of secondary aluminum alloys and copper-bearing alloys
(brass, bronze);
-
OJSC Revdinsk Non-ferrous Processing Factory – non-ferrous mill
products.
Currently the main goal of RMK is to create a vertically integrated structure
ranging from minefields to final high-tech mill products.
Russkaya Mednaya Kompaniya
RMK is Russia’s largest producer of cathode copper and functions as the
management company of RMK Group. Its facilities form a cyclical turnaround
comprising the purchase of secondary non-ferrous metals, copper ore mining,
scrap picking, black copper production as well as output of finished goods
(copper hot-rolled rod and cathode copper).
11
Fig. 10. Balance Sheet, RUR ‘000
Gross property, plant, and equipment
Construction in process
Long tern financial investments
Deferred tax asset
Fixed Assets
Inventories
Value added tax
Short-term accounts receivable
Short-term financial investments
Cash
Current Assets
TOTAL ASSETS
Shareholders equity
Retained earnings of current period
Liabilities and Shareholder’s equity
Deferred tax liabilities
Long-term liabilities
Loans
Account payable
Other current liabilities
Current liabilities
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY
2004
1H05
9M05 .
4 517
2 000
1 500
S10
8 027
662 740
148 992
524 733
70 012
101 222
1 507 787
1 515 814
14 998
76 773
91 771
90
90
389 384
1 034 527
42
1 423 953
1 515 814
7 911
1 457
1 500
63
10 931
1 118 687
376 674
1 085 094
167 545
45 427
2 808 719
2 819 650
14 998
293 610
308 608
201
201
1 415 376
1 095 453
12
2 510 841
2 819 650
9 398
173
1 600
88
11 721
1 227 392
140 785
967 997
201 161
37 361
2 597 526
2 609 247
14 999
472 061
487 060
331
331
1 388 768
733 048
40
2 121 856
2 609 247
Source: RAS statement of CJSC RMK
RMK has demonstrated impressive growth, as it handles a good deal of the
Group’s turnover. Thus, total revenues of the Group increased by more than
five times in 9M05 compared to the year-ago period. Revenues reached a
level of $330 mln. Moreover, productivity highlights – such as the return on
gross profit, the return on operating profit and the return on net income – also
continued to climb.
Fig. 11. Income Statement, RUR ‘000
Revenue
COGS
Gross profit
Return on gross profit
Selling expenses
General and administration expenses
Selling profit
Return on selling profit
Interest receivable
Interest payable
Other operating profit
Other operating expenses
Operating profit
Return on operating profit
Nonselling profit
Nonselling expenses
Pretax income
Deferred tax assets
Current profit tax
Net income of current period
Return on net income
For reference:
Fixed tax liabilities
2004
1H05
9M05
1 757 210
1 627 101
130 109
7.40%
8 881
11 934
109 294
6.22%
733
2 826
47 063
49 188
105 076
5.98%
3 364
6 390
102 060
10
90
25 184
76 796
4.37%
6 143 553
5 614 857
528 696
8.61%
36 018
114 275
378 403
6.16%
5 588
44 682
2 339 806
2 351 448
327 667
5.33%
23 102
58 295
292 474
53
111
75 578
216 838
3.53%
9 283 150
8 348 822
934 328
10.06%
55 881
204 450
673 997
7.26%
9 622
79 023
2 950 379
2 968 127
586 848
6.32%
33 375
69 808
550 415
78
238
140 600
409 655
4.41%
769
5 443
8 661
Source: RAS statement, RMK
12
Mining and processing of copper ore
Mining-and-processing Integrated Complex Ormet
CJSC Ormet was founded on May 5, 1995. Ormet was created on the basis of
the former mining and processing integrated complex Ormet. This company
mines and processes 1 mln tons of copper-bearing ore annually, and
produces copper, zinc and piritic concentrates.
Mineral resources of the two minefields – Barsuchiy Log and Djusinskoe –
provide Ormet with balanced inventories.
The company possesses its own modern processing factory that began
operating in 1998. In 2004 the production capacity of the factory was
increased to 750,000 tons per year. The total volume of investment amounted
to R106.8 mln.
Fig. 12. Ormet – Production Output
Production
unit
2003
2004
1H05
Gold in raw materials
Silver in raw materials
Copper in raw material
Zinc in zinc concentrate
kg
kg
kg.
t
836
25 418.9
137
14 802
720
26 870.8
8030
22 178
387
15 123.0
12 880
8 533
Fig. 13. Ore Mine Barsuchiy Log
Fig. 14. Ore Mine Djusinskoe
13
Fig. 15. Production Plan of Processing Factory Ormet
Processing of copper ore
Cu, %
Zn, %
Au, g/t
Ag, g/t
Copper extraction
Gold extraction
Silver extraction
Copper concentrate (dry meter, t)
Copper, t
Au, kg
Ag, kg
Processing of copper-zinc ore
Cu. %
Zn, %
Au, g/t
Ag, g/t
Cu extraction in copper concentrate
Au extraction in copper concentrate
Ag extraction in copper concentrate
Copper concentrate (dry meter. t)
Copper, t
Au, kg
Ag, kg
Zn extraction in zinc concentrate
Au extraction in zinc concentrate
Ag extraction in zinc concentrate
Zinc concentrate (dry meter, t)
Zn, t
Au, kg
Ag, kg
2005
2006
2007
2008
2009
2010
2011
221,952
3.098
0.38
0.818
16.4
82
30
55
36,377
5,638
54
2,002
498,048
2.552
4.32
1.73
33.75
80
33
42
65,601
10,168
284
7,060
65
5.8
11.4
30,403
13,985
50
1,916
247,104
3.05
0.36
0.82
16.02
82
30
55
39,871
6,180
61
2,177
472,896
3.2
4.41
1.54
33.65
80
33
42
78,1104
12,106
240
6,683
65
5.8
11.4
29,469
13,556
42
1,814
256,704
2.93
0.34
0.77
15.61
82
30
55
39,791
6,168
59
2,204
463,296
3
4.32
1.48
32.65
80
33
42
71,736
11,119
226
6,353
65
5.8
11.4
28,281
13,009
40
1,724
285,600
2.92
0.35
0.75
16
82
30
55
44,119
6,838
64
2,513
434,400
2.9
4.08
1.39
32.88
80
33
42
65,020
10,078
199
5,999
65
5.8
11.4
25,044
11,520
35
1,628
238,944
3.14
0.39
0.78
12.81
82
30
55
39,692
6,152
56
1,683
481,056
2.43
3.17
1.22
27.19
80
33
42
60,334
9,352
194
5,494
65
5.8
11.4
21,548
9,912
34
1,491
319,926
3.03
0.35
0.86
12.57
82
30
55
51,182
7,933
82
2,207
400,704
2.41
3.05
1.15
25.97
80
33
42
49,842
7,726
152
4,371
65
5.8
11.4
17,269
7,944
27
1,186
328,032
2.85
0.31
0.83
12.2
82
30
55
49,459
7,666
82
2,201
392,968
2.43
2.99
1.35
25.98
80
33
42
49,286
7,639
175
4,288
65
5.8
11.4
16,603
7,637
31
1,164
Fig. 16. Balance Sheet CJSC Ormet, RUR ‘000
Intangible assets
PP&E
Construction in progress
Investments available for sale
Long-term financial investments
Deferred tax assets
Fixed assets
Inventories
VAT
Accounts receivable
Short-term finical investments
Cash
Current assets
TOTAL ASSETS
Shareholders equity
Added capital
Reserves
Retained earnings of current year
Shareholder’s Equity and Liabilities
Loan
Loan
Accounts payable
Payable to shareholders
Short-term liabilities
TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES
2003
2004
1H05
9M05
971
326 317
227 741
82 848
198
638 075
119 680
52 492
59 423
495 647
6 505
733 747
1 371 822
13 594
935 145
897 329
11 251
11 251
356 215
105 261
1 766
463 242
1 371 822
892
618 278
295 415
130 464
238
1 045 287
138 449
98 357
604 224
254 146
205 622
1 300 798
2 346 085
13 594
935 145
309 390
1 258 129
208 139
27 632
235 771
611 749
238 670
1 766
852 185
2 346 085
852
613 259
611 833
247 972
130 464
271
1 604 642
83 213
21 885
712 912
138 133
194 002
1 150 145
2 754 787
13 594
935 145
680
516 154
1 465 573
272 394
33 473
305 867
423 104
558 477
1 766
983 347
2 754 787
833
603 070
646 749
571 181
130 514
251
1 952 598
104 152
22 612
736 359
886 546
145 836
1 895 506
3 848 104
13 594
935 145
680
615 844
1 565 263
1 244 267
37 082
1 281 349
381 836
617 889
1 766
1 001 492
3 848 104
Source: RAS statement, CJSC Ormet
In 2004 the assets of CJSC Ormet rose by 1.7 times, and for 9M05 by more
than by 1.5 times. Current and fixed assets have approximately equal shares
on the balance sheet. Shareholders equity demonstrates a positive dynamic,
14
primarily due to the capitalization of retained earnings (R310 mln in 2004 and
R612.8 mln for 9M05).
Long-term liabilities amounting to 56.13% of the total comprise the majority of
the raised funds. In the past the major part of the liabilities was short-term.
The change in the balance sheet structure stems from optimization of the debt
portfolio in favor of long-term liabilities.
Fig. 17. Income Statement of CJSC Ormet, tons ‘000
Revenues
COGS
Gross profit
Selling expenses
Selling profit
Interest receivable
Interest payable
Operating profit
Non-selling profit
Nonselling expenses
Pretax income
Deferred tax assets
Current profit tax
Tax sanction payable
Fixed tax liabilities (assets) of 2002
Extraordinary charges
Net income of the current period
For reference:
Fixed tax liabilities
Income tax privilege
2003
2004
1H05
9M05
1 255 293
871 556
383 737
30.57%
109 922
273 815
21.81%
36
41 026
2 616 384
2 629 731
219 478
17.48%
23 162
18 490
224 150
198
11 251
31 535
8 208
5 744
179 098
14.27%
2 322 247
1 639 875
682 372
29.38%
164 273
518 099
22.31%
5 804
57 189
1 779 174
1 806 292
439 596
18.93%
42 840
35 606
446 830
39
16 381
61 433
1 014
5 744
1 497
360 800
15.54%
750 049
428 631
321 418
42.85%
21 606
299 812
39.97%
8 756
29 542
593 217
597 781
274 462
36.59%
51 323
83 949
241 836
33
5 840
28 585
207 444
27.66%
1 073 500
610 341
463 159
43.14%
31 529
431 630
40.21%
16 161
53 225
1 077 817
1 087 318
385 065
35.87%
97 357
121 922
360 500
13
9 450
43 929
307 134
28.61%
15 826
56 312
29 456
109 702
-23 649
-
-33 154
-
Source: RAS statement, CJSC Ormet
Aleksandrinskaya Gornorudnaya Kompaniya
Founded in 1995, OJSC Aleksandrinskaya Gornorudnaya Kompaniya mines
and processes copper-zinc ore from Aleksandrinsky ore mine. The company’s
production capacity is about 400,000 tons of ore per year. This ore mining is
unique due to its copper-zinc ore quality characteristics. The mining facility
was designed and constructed by Outokumpo and began operations in 2001.
Fig. 18. Production indicators of Aleksandrinskaya Gornorudnaya Kompaniya (2001 – 2005)
Год
Powder ore, dry t
% Cu
% Zn
160,780
394,111
397,363
420,152
175,381
3.22
3.96
2.85
2.76
3.31
5.59
4.64
4.22
3.28
3.34
2001
2002
2003
2004
2005 (6M)
Copper % Cu
concentrate, dry t
25,822
87,361
65,968
62,130
31,331
14.77
15.32
15.08
14.93
14.91
Copper
extraction, %
73.58
85.75
87.73
80.01
80.52
Zinc concentrate, % Zn
dry t
11,478
26,597
20,615
14,423
5,232
46.46
47.34
46.28
43.81
44.33
Zinc
extraction, %
59.33
58.64
56.92
45.91
39.59
The basic range of final goods includes metals in copper and zinc
concentrate: zinc in zinc concentrate, copper in copper concentrate as well as
also gold and silver in copper and zinc concentrates. The major consumers of
the company’s final products are the following: copper concentrate – LLC
UGMK (up to 2004), CJSC Karabashmed; zinc concentrate – OJSC
15
Chelabinsky Electrozinkovy Zavod, gold and silver bars – Investment Banking
Group NIKoil.
Fig. 19. OLSC Aleksandrinskaya Gornorudnaya Kompaniya
Production
Gold in ore
Silver in ore
Copper in ore
Zinc in zinc concentrate
unit
kg
kg
t
t
2003
2004
1H05
291.0
17 004.4
9 950.4
9 541.3
319.9
13 287.5
9 897.2
6 620.5
104.0
4 237.9
5 085.0
2 405.0
Fig. 20. Ore Mine Aleksandrinskoe
Fig. 21. Copper-Zinc Ore Processing Factory
Fig. 22. Production Plan of Aleksandrinskaya Gornorudnaya Kompaniya for
2005 – 2008
Wet milling product (t)
% Cu
% Zn
Cu extraction %
Zn extraction %
Cu in copper concentrate (t)
Zn in zinc concentrate (t)
2005
2006
2007
2008
410,000
2.55
3.60
80.0
60
8 364
8 856
410,000
2.70
3.60
80.0
60
8 856
8 856
410,000
2.70
3.90
80.0
60
8 856
9 594
410,000
2.75
4.40
80.0
60
9 020
10 824
Uralhydromed
OJSC Uralhydromed was founded in 1999 and began operating in September
2005. Its major business activities are mining and roughing-out at one of the
oldest Urals minefields – Gumeshevskoe. The company uses equipment for
subsurface dissolution of ore. Together with Outokumpo, Uralhydromed is
participating in the construction of a plant for commercial copper production
with the use of Outokumpo technology. The total output of cathode copper is
5,000 tons with a potential increase to 10,000 tons in 2006.
16
Fig. 23. Production capacities
Verkhneuralskaya Ruda
RMK acquired OJSC Verkhneuralskaya Ruda in March 2004. At present the
company is preparing the Chebachye ore mine for exploitation. The total
amount of investment in this project is $30-45 mln. The ore mine will be put in
commission in 2009, with production totaling 800,000 tons annually.
Aktubinskaya Mednaya Kompaniya
LCC Aktubinskaya Mednaya Kompaniya (AMK) was founded in 2004 for
mining the pitshaft named “50 Years of October”. The mining and processing
facility at this ore mine is currently in the process of construction. Its potential
mining capacity is about 3 mln tons of ore per year. The total amount of the
investment required to launch the entire project (2004-2006) is $133 mln.
Fig. 24. Balance Sheet of LCC ACC, ‘000 tenge
Intangible assets
Amortization of intangible assets
Residual book value of intangible assets
GG&P, total
Capital consumption
Residual book value of GG&P
Investments, total
Total fixed assets
Inventories, total
Short-term account receivable
Cash
Total current assets
TOTAL ASSETS
Shareholder’s equity
Retained earning (losses)
Total Shareholder’s equity
Loan
Total long-term liabilities
Short-term loans and overdraft
Short-term account payable, total
Tax payments
Other accounts payable
Total short-term liabilities
TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES
2004
1H05
9M05
7
1
6
2 478
131
2 348
9
2 536
2 354
7 950
454
8 407
10 761
1
1 093
1 094
2 421
2 421
972
536
436
903 765
48 288
855 477
0
855 913
155 725
1 264 267
47 755
1 467 747
2 323 660
92
261 300
261 392
0
0
1 730 574
353 737
-16 719
-5 324
2 060 068
2 323 660
990
600
390
1 720 359
58 855
1 661 504
0
1 661 894
393 095
2 407 293
45 260
2 845 648
4 507 542
92
-122 326
-122 234
0
0
4 067 526
428 521
53 082
80 647
4 629 776
4 507 542
6 773
472
1
7 246
10 761
Source: KAS (Kazakhstan Accounting Standards), LLC AMK
1H05: 1 USD = 132.41 tenge, 1 RUR = 4.70 tenge
2004: 1 USD = 130 tenge, 1 RUR = 4.68 tenge
17
AMK showed a substantial increase in assets due to the start of the
investment program to construct the mining facility. The company is sustaining
operating losses, as the project has yet to recover its start-up costs.
Fig. 25. Income Statement LCC АCC, ‘000 tenge
Revenues
GOGS
Gross profit
Expenses
Operating profits
Non-operating profits
Pre-tax operating income
Corporate profit tax expenses
Net operating income
Net income
2004
1H05
9M05
24 474
18 770
5 704
23.31%
4 142
1 562
0
1 562
469
1 093
1 093
4.47%
287 167
229 334
47 833
16.7%
134 240
0
0
-86 407
0
0
-86 407
n.m.
433 708
290 108
143 600
33.1%
656 665
-513 065
43 032
-470 033
0
0
-470 033
n.m.
Source: LLC AMK report under KAS (Kazakhstan Accounting Standards)
1H05: 1 USD = 132.41 tenge, 1 RUR = 4.70 tenge
2004: 1 USD = 130 tenge, 1 RUR = 4.68 tenge
Fire and electrotechnical black copper refining
Karabashmed
Closed Joint Stock Company Karabashmed is formed on the basis of
Karabashmed plant for the manufacture of black copper and granulated slag.
The ore mine Barsuchiy Log and the Republic of Bashkortostan supply the
plant with material inputs – ore and concentrate.
The company is currently reconstructing its gas sulphur disposal complex. For
the modernization of copper production facilities Karabashmed plans to invest
$70 mln.
Fig. 26. CLSC Karabashmed Output
Production
Black copper
unit
t.
2003
45 573.5
2004
44 682.0
1H05
19 093.0
18
Fig. 27. Production Workshop
Fig. 28. Sulphur Disposal Workshop
Source: Group data
Source: Group data
Kyshtymsky Medeelektrolitny Zavod (KMZ)
Kyshtymsky Medeelektrolitny Zavod (KMZ) is the oldest metallurgical plant in
the Urals. Founded by Nikita Demidov in 1757, the factory has long
specialized in the manufacture of ore under the “Two Sobols” brand famous
throughout the world. At the beginning of 1908 it was transformed and
adapted for copper production, making it the first plant in Russia to refine
copper.
Company’s share in
Russia’s copper refining
market is about 10%
KMZ specializes in fire and electrolytical refining of black copper, processing
of copper scrap and cable product waste. Annual estimated capacity of the
factory allows to produce 80,000 tons of refining copper, more than 5,000 tons
of gold, 50,000 tons of silver, 50,000 tons of copper sulphate as well as nickel,
platinum, palladium, selenium, tellurium and rhenium.
KMZ is currently the leader in Russia in manufacturing of electrolytic foil
copper. The company’s quality system meets the requirement of ISO 9002
and ecological standard 14001. It was certified by GOSSTANDARD in Russia
and by the German certification body RW TÜV.
Fig. 29. CJSC KMZ
Production
Gold in bullions
Silver in bullions
Platinum in bullions
Palladium in bullions
Copper cathodes
Copper hot rolled rod
Foil, ribbon, wire
unit
2003
2004
1H05
kg
kg
kg
kg
t
t
t
4 246.9
66 810.5
319.1
497.6
78 272.0
10 303.0
4 772.1
2 635.3
69 475.4
304.0
398.7
77 287.0
9 705.0
4 936.0
1 086.5
37 664.2
137.7
165.7
39 332.0
5 267.0
2 732.0
Fig. 30. Production Workshop
Aktubinskaya Mednaya Kompaniya
The ore mine “50 Years of October” belongs to a group of potential raw
materials sources. The required facilities for ore mine utilization have already
been built. A pitshaft and mining and processing plant are in the process of
construction, which started in 2004. The company plans to start operations at
the facilities in 2006. Outokumpo (Finland) has assumed responsibility for the
project design and equipment delivery. Caterpillar (US) and Terex are the
suppliers of pit-run equipment. Estimated production capacity of the plant is
about 2,600 thousand tons of ore per year. The major end products of the
plant are copper in copper concentrate (45,000 tons per year) and breakstone
(2,700 thousand tons).
19
Fig. 31. Ore Mine 50 Years of October, Kazakhstan
Fig. 32. Copper Ore Mining and Processing
Factory
Fig. 33. Ore Stocks of “50 Years of October”
Ore body
Ore body
1
South
2, 2а
Total
Central
1
2
3
Total
North
Total in section of
minefields
Stock
category
Ore stocks,
‘000 tons
С1
С2
С1+С2
С2
С1
С2
С1+С2
С1
С1
С2
С1
С2
С1+С2
С2
С1
С2
С1+С2
37 382.5
825.8
38 208.3
1 480.2
37 382.5
2 306
39 688.5
1 971.7
531.4
149.6
2 503.1
149.6
2 652.7
2 777.7
39 885.6
5 233.3
45 118.9
Stocks and average mineral grades in ore
Principal
Cu, %
1.87
1.36
1.86
2.42
1.87
2.04
1.88
1.15
1.32
1.60
1.19
1.60
1.21
1.77
1.83
1.88
1.84
Additional
S, % Co, % Ag, g/t Se, % Zn, %
37.36
- 3.90 0.01
41.48
37.45 0.03
- 0.54
30.73 0.03
- 0.26
37.36
34.58
37.20 0.03 3.67 0.0072 0.53
35.99 0.02 4.00 0.0036 0.12
36.84 0.02 3.60
- 0.08
28.42 0.02
- 0.04
36.17 0.02 3.90 0.0028 0.11
28.42 0.02
35.65 0.02
41.71 0.03
37.29
- 3.90 0.0073
38.14
37.39 0.03
- 0.47
Novgorodsky Metallurgichesky Zavod
CJSC Novgorodsky Metallurgichesky Zavod (NMZ), situated in Great
Novgorod, was founded in 2003 based on the technologies and design of the
financial company Outokumpo Technology, the world leader in this area. The
factory was built for processing copper-bearing raw materials in high-quality
cathode copper meeting the requirements of the London Metals Exchange.
The production capacity of the factory is 40,000 tons of cathode copper per
year. NMZ obtained the quality management system certificate ISO
9001:2000.
The construction of Novgorodsky Metallurgichesky Zavod is a unique project
for Russia, representing the first metallurgical factory producing Europeantype goods that meet ISO and the highest ecological quality standards (e.g.
ecological standard ISO-14001).
20
Fig. 34. Novgorodsky Metallurgichesky Zavod Output
Production
unit
2003
2004
1H05
kg
kg
kg
kg
t.
t.
0.0
0.0
0.0
0.0
7 486.0
0.0
12.1
4 454.7
2.0
7.0
39 653.0
26 037.5
8.2
3 046.0
1.2
5.3
19 928.0
38 021.7
Gold in raw mat.
Silver in raw mat.
Platinum in raw mat.
Palladium in raw mat.
Copper cathode
Copper hot rolled rod
Fig. 35. Production Capacities
Fig. 36. Balance Sheet of CLSC NMZ, ‘000 tons
2003
2004
1H05
9M05
505 336
347 231
10
100 431
953 008
34 875
7 538
70 489
400
711 612
384 001
96 122
1 192 135
100 953
75 829
1 032 265
1 030 509
531 433
30
1 252
3 161
1 566 385
110 920
161 972
382 264
249 789
41 515
172
946 632
2 513 017
805 590
63 113
868 703
1 014 480
4 393
1 018 873
155 319
470 086
36
625 441
2 513 017
Intangible assets
GG&P
Deferred tax assets
Other fixed assets
Fixed assets
Inventories
VAT
Short-term accounts payable
Short – term financial investments
Cash
Other current assets
Current assets
TOTAL ASSETS
Retained earning of current year
Shareholders equity and reserves
Loans
Loan
Accounts payable
Deferred revenue
Short-term liabilities
62
12 866
112 964
1 065 972
805 590
- 29 549
779 041
117 571
169 360
0
286 931
1 221 913
2 414 048
805 590
38 481
844 071
708 000
708 000
252 000
609 975
2
861 977
693 667
757 044
30
96
2 899
1 453 736
127 528
123 488
543 200
149 789
1 953
172
1 046 128
2 499 864
805 590
53 174
868 764
1 029 601
3 463
1 033 064
157 373
450 659
4
608 036
TOTAL SHAREHOLDER’S EQUITY AND
LIABILITIES
1 065 972
2 414 048
2 499 864
Source: RAS report of CJSC NMZ
21
Fig. 37. CJSC NMZ Income Statement
Revenue
COGS
Gross profit
Selling expenses
Selling profit (Losses)
Interest receivable
Interest payableе
Operating profit
Nonselling profit
Nonselling expenses
Pre-tax profit (loss)
Deferred tax assets
Current profit tax
Net income (loss)
For reference:
Fixed tax liabilities (assets)
2003
2004
1H05
9M05
46 450
53 851
-7 401
n.m.
-26 514
n.m.
2 220 272
2 102 329
117 943
5.31%
14 499
103 444
4.66%
1
22 492
109 609
105 434
85 128
3.83%
56 146
47 720
93 554
28 524
65 030
2.93%
1 547 364
1 430 468
116 896
7.55%
14 663
102 233
6.61%
1 804
31 439
479
16 478
56 599
3.66%
28 874
66 703
16 570
1
-2 977
5 599
7 995
0.52%
2 379 792
2 206 284
173 508
7.29%
18 663
154 845
6.51%
6 519
52 214
1 075
26 248
83 977
3.53%
49 523
91 323
42 177
1 157
3 907
20 427
19 000
0.80%
-
-
4 598
11 689
-7 401
n.m.
34
430
6 483
-13 420
n.m.
1 264
14 358
-26 514
-
Source: RAS report of CJSC NMZ
n.m. – not meaningful
The substantial 48x increase in COGS in 2004 can be explained by the fact
that the factory achieved its planned capacity. It is estimated that revenue
growth could total as much as 40% by the end of 2005.
Precision casting and non-ferrous bar rolling
Zavod Tochnih Splavov
CJSC Zavod Tochnih Splavov (ZTS) was built in 1998 in Polevskoy,
Sverdlovsk region. It specializes in alloys on the basis of aluminum and
copper. Its major customers include companies such as General Motors and
Mitsubishi Corporation, and its production capacity reaches 26,000 tons of
aluminum and copper alloys annually.
The major clients of the factory are automobile and casting bearing plants.
ZTS is one of the first Russian enterprises to have successfully passed
certified audit according to three standards at once. The Moscow office of
Bureau Veritas Quality International (BVQI) conducted an audit of the
company’s integrated quality management system, ecology, health protection,
and industrial safety based on ISO 9001:2000; ISO 14001:1996; OHSAS
18001:1999.
Fig. 38. LLC ZTS Output
Production
Ferrotitanium
Aluminum Bullions
Bronze Bullions
Brass Bullions
unit
t
t
t
t
2003
2004
1H05
901.9
21 624.0
1 799.2
1 848.6
1 531.0
23 051.0
701.0
916.9
1 006.0
8 852.0
138.0
49.0
Source: Group’s Data
22
Fig.39. Production capacities
OJSC Revdinsk Non-ferrous Processing Factory
OJSC Revdinsk Non-ferrous Processing Factory (RNPF), located in the Urals,
was founded on December 6, 1941. The factory is Russia’s leading enterprise
in the area of pipes and rod production from copper, nickel, brass, bronze and
alloys. The factory delivers 95% of its end products to Russian automobile and
electricity plants. The remaining 5% is exported to the US and countries in
Eastern Europe. The production capacity of the factory is about 25,000 tons of
non-ferrous metals per year.
In 1996 the British company Lloyd's Register certified for the first time the
company’s quality management system, which met the requirement of ISO
9002:1994. In 2002 the factory was re-certified according to the new version
of MS ISO 9001:2000.
RNPF elaborated a plan of modernization until 2012. Investment during the
first stage of modernization exceeded 350 mln rubles.
Fig.40.OJSC RNPF Output
Production
Nickel mill products
Secondary casting bronze
Bronze mill product
Brass mill product
Secondary casting brass
Ligature
Copper-Nickel mill products
Copper mill products
unit
t
t
t
t
t
t
t
t
2003
2004
1H05
2.0
1 380.0
1 771.0
8 732.6
184.5
274.2
1 053.1
6 493.8
1.3
1 738.5
2 063.0
11 898.2
163.4
281.5
888.5
7 845.7
0.6
935.8
662.3
4 629.8
108.8
124.3
533.2
3 397.3
Source: Group’s Data
23
Fig. 41. Production Capacities
Source: Company’s Data
24
Source: Company’s Data
Group Financial Analysis
Assets analysis
Fig. 39. Current Asset Structure in 3Q05
Fig. 40. Fixed Asset Structure in 3Q05
Sort-term
accounts
receivable
42%
Fixed assets
41%
Financial
investments
6%
Current assets
Fixed assets
56%
41%
Current assets
59%
Available for sale
3%
Construction in
progress
30%
Financial
investments
14%
Inventories
28%
Intangibles
6%
Cash
8%
Source: Group’s report
PP&E
56%
Fig. 41. RMK Consolidated Balance Sheet for 2002-2005, RUR ‘000
Intangible assets
PP&E
Long term investments (available for sale)
Deferred tax assets
Other fixed assets
Fixed assets
Inventories
raw and other materials
expenses in construction in progress
final goods and goods for resale
goods delivered
prepaid expenses
other inventories and expenses
VTA
Long-term accounts receivable
Short-term accounts receivable
customers
Short-term and middle-term financial investments
Cash
Other current assets
Current assets
TOTAL
2002
2003
2004
2Q05
445
2 642 748
1 275 372
0
327 896
0
0
4 246 461
1 458 965
821 901
260 703
130 359
131 706
113 756
540
309 739
6 092
3 281 378
3 322 852
890 074
28 126
658
5 975 042
10 221 503
1 126
3 528 863
1 278 653
0
515 349
0
105 925
5 429 916
1 797 125
947 875
417 403
126 767
109 376
195 704
0
0
2 089 697
1 566 413
1 838 949
158 588
1 050
6 277 113
11 707 029
464 789
4 568 128
1 209 589
0
560 857
876
0
6 804 239
2 577 043
1 558 538
487 853
254 590
5 947
270 115
0
0
4 652 006
2 390 422
1 628 682
492 651
626
10 059 646
16 863 885
440 656
5 401 927
2 479 676
571 181
487 307
1 917
3 161
9 385 825
3 383 280
2 333 730
343 451
248 530
9 051
448 308
210
0
4 617 824
3 203 305
2 064 552
883 257
23 608
11 877 307
21 263 133
Method of consolidation: Direct addition without excluding correlated calculations
25
Liabilities analysis
Fig. 42. Shareholder’s Equity Structure, 1H05
Statute
capital
30%
Liabilities
82%
Shareholders'
capital
Reserve
18%
capital
2%
Fig 43. Liabilities’ Structure, 1H05
Long-term
liabilities
34%
Additional
paid-in capital
42%
Shareholder Liabilities
82%
s' capital
18%
Retained
earnings
27%
Short-term
liabilities
66%
Source: Group’s Report
Fig. 44. RMK Consolidated Balance Sheet in 2002-2005, RUR ‘000
2002
Additional capital
Reserves
reserves under law
reserves under instruments of incorporation
Special purpose receipts
Retained earning/ Uncovered losses
Shareholders’ Equity and reserves
Long-term loans
Other long-term liabilities
Short-term loans
Accounts payable
Payable to shareholders
Deferred revenues
Other short-term liabilities
Short-term/middle-term liabilities
SHAREHOLDER’S EQUITY AND LIABILITIES
152 733
1 636 634
0
0
0
727
279 247
2 069 341
2 403 291
0
2 403 291
2 156 872
3 586 162
5 804
33
0
5 748 871
10 221 501
2003
958 323
0
1 512 923
1 809
0
1 809
- 100 961
2 372 094
4 015 356
20 083
4 035 439
2 462 408
2 831 783
5 273
34
0
5 299 498
11 707 031
2004
1 044 582
0
1 499 830
1 809
1 758
51
790 232
3 336 453
4 710 813
44 717
4 755 530
3 030 783
5 734 844
5 273
4
998
8 771 902
16 863 885
2Q05
1 324 583
0
1 493 555
2 489
2 438
51
1 298 405
4 119 032
6 137 046
58 735
6 195 781
5 034 214
5 892 340
5 273
36
16 457
10 948 320
21 263 133
Source: Group’s data,
Method of consolidation: Direct addition without excluding correlated calculations
RMK demonstrated sustained growth throughout the period between 20022005. As of July 1, 2005 the balance sheet had nearly doubled, with current
assets accounting for 58% of the total. Shareholder’s equity in 2Q05
compared with the respective indicator from 2002 climbed 58%. Leverage of
the Group amounts to 48.2% and is mainly comprised of long-term loans
(57.8%).
26
Fig. 45.Group’s Credit Portfolio as of 31.10.2005
Company
RMK
Bank-Creditor
Sum of Loan, USD
Fortis Bank
Gazprombank
Vneshtorgbank
NATEXIS
Alfa-Bank
22 500 000
Total
KMEZ
Alfa-Bank
Alfa-Bank
Vneshtorgbank
Vneshtorgbank
BCEN
CIB (Chelindbank)
Khanty-Mansiisk Bank in
Moscow
Total
Ormet
Alfa-Bank
Alfa-Bank
Alfa-Bank
Alfa-Bank
Alfa-Bank (guarantor)
Alfa-Bank
Alfa-Bank
Alfa-Bank
Amsterdam Bank
Total
NMZ
Severnaya Kazna
Raiffeisen Bank
Raiffeisen Bank
Total
Uralgidromed
Alfa-Bank
Alfa-Bank
Alfa-Bank
Alfa-Bank
Total
RNPF
Raiffeisen Bank
Alfa-Bank
AGK
MBRR
Total
Total
TOTAL FOR GROUP:
Sum of Loan, RUR
44 000 000
4 000 000
5 000 000
5 000 000
32 500 000
2 785 627
5 593 621
Maturity Date
04.05.05
10.05.05
16.09.05
04.10.05
24.12.04
25.11.05
03.04.06
30.03.06
30.03.06
25.01.06
31.03.04
05.04.05
20.07.05
29.07.05
13.10.05
21.01.05
25.05.05
05.03.07
20.01.06
29.01.06
13.10.09
20.01.06
24.04.05
24.04.06
28.01.05
28.01.05
06.09.04
28.10.04
06.12.04
06.04.05
08.04.05
29.07.05
30.06.05
17.08.05
25.04.06
25.04.06
25.07.05
11.07.05
05.09.09
06.10.06
06.10.06
29.06.07
30.06.07
17.09.08
04.03.04.
01.04.05
25.06.04
25.04.09
01.03.06
26.06.07
08.04.05
25.04.05
26.04.05
27.04.05
07.04.06
24.04.06
26.04.06
27.04.06
22.11.04
31.07.08
10.02.05
09.02.06
48 000 000
122 000 000
5 511 259
90 000 000
303 210
104 193 717
1 500 000
1 500 000
2 101 880
2 792 184
20 967 290
956 085
2 230 865
9 000 000
3 500 000
22 000 000
66 548 304
3 036 725
5 450 000
17 062 400
25 549 125
1 500 000
300 000
600 000
2 600 000
5 000 000
12 868 422
1 109 937
13 978 359
15 000 000
15 000 000
262 769 504
Issue Date
200 000 000 RUR
322 000 000 RUR
0
0
0
0
0
370 000 000
The Group’s credit portfolio as of October 30, 2005 totaled $275.8 mln. Thus,
the total amount of open credit limits exceedes $370 mln.
The Group has no outstanding accounts payable. As of October 1, 2005
acounts payable comprised 33.2% of the total, the major portion of which was
formed by accounts payable to suppliers and other creditors.
27
Financial indicator analysis
Fig. 46. Consolidated Income Statement (Accrued Total), RUR ‘000
Revenues
COGS
Gross profit
Return on gross profit, %
Selling expenses
Administrative expenses
Selling profit
Return on selling profit, %
Interest receivable
Interest payable
Profits from participation in other companies’ equity
Other operating profits
Operating profit
Return on operating profit, %
Other non-selling profits
Other non-selling expenses
Pre-tax income
Income tax
Retain earnings
Return on retain earnings, %
Quarter amortization (form 5).
EBITDA
EBITDA margin, %
Indicators
Asset debt ratio, %
Current liquidity
Quick liquidity
Absolute liquidity
2002
2003
2004
2Q05
6 827 456
6 066 392
761 064
11.15%
116 335
30 026
614 703
9,00%
327
157 442
98
3 331 876
3 439 203
350 359
5.13%
3 063 554
3 215 221
198 692
130 386
68 306
1.00%
76 186
8 698 440
7 756 188
942 252
10.83%
231 073
218 453
492 726
5.66%
2 611
172 846
98
4 923 401
5 023 585
222 405
2.56%
2 943 870
3 133 959
32 316
163 689
-136 301
-1.57%
166 425
15 196 944
13 522 725
1 674 219
11.02%
327 977
125 933
1 220 309
8.03%
18 692
267 120
102
4 259 426
4 358 452
872 957
5.74%
3 504 870
3 307 166
1 070 661
262 559
808 102
5,32%
578 085
21 114 755
19 484 639
1 630 116
7,72%
201 386
320 137
1 108 594
5.25%
34 274
1 552 515
102
4 649 346
4 749 120
-509 319
-2,41%
1 255 221
1 770 199
-1 024 297
845 762
- 1 870 059
-8,86%
984 078
432 320
6.33%
371 587
4.27%
1 915 866
12,61%
1 512 296
7,16%
44.61%
1.04
0.83
0.16
55.50%
1.18
0.76
0.38
45.91%
1.15
0.85
0.24
52.54%
1.08
0.78
0,27
Method of Consolidation: Direct addition without excluding correlated calculations
28
Forecast of RMK revenues
Fig. 47. Financial Indicators Forecast, USD ‘000
Revenue
EBITDA
Return on EBITDA
Net income
Operating cash flow
Debt (long- and short-term loans)
EV
EV/EBITDA
P/E
P/CF
EBITDA/V
ROE
Financial debt
DEBT
2004
2005
2006
2007
2008
2009
2010
2011
526 081
72 685
13.82%
30 945
5.88%
40 295
217 973
704 831
9.70
18.44
14.16
0.14
0.08
217 973
217 973
738 500
165 421
22.40%
90 635
12.27%
106 449
323 363
907 031
5.48
7.61
6.48
0.22
0.18
495 756
323 363
854 848
230 359
26.95%
151 465
17.72%
142 180
379 087
1 078 488
4.68
5.56
5.92
0.27
0.28
551 480
379 087
686 399
184 745
26.92%
138 314
20.15%
141 615
301 640
1 139 920
6.17
7.08
6.92
0.27
0.32
474 033
301 640
759 452
207 032
27.26%
163 964
21.59%
176 268
168 550
1 136 141
5.49
6.98
6.49
0.27
0.34
340 943
168 550
820 288
243 906
29.73%
200 174
24.40%
206 121
26 936
1 015 516
4.16
6.71
6.52
0.30
0.40
199 328
26 936
843 043
252 890
30.00%
210 351
24.95%
216 143
0
982 788
3.89
7.39
7.19
0.30
0.42
172 393
0
844 127
246 996
29.26%
204 732
24.25%
211 217
0
976 303
3.95
8.59
8.33
0.29
0.40
172 393
0
Source: Group’s forecast
29
Copper Market Overview
Global copper market dynamics
Copper is a financial instrument with high liquidity and is included in the
calculation of major commodity indices. Most of the contracts are negotiated
on futures markets in the US (COMEX) and the UK (LME).
The situation on the copper market is currently quite favorable. For the past
three years the catalyst for the global increase in prices has been a deficit of
copper alongside high demand from major consumers. At the beginning of
2002 the price of copper stood at $1,446 p/t. In 2003 and 2004 the price of
copper rose 38% and 42%, respectively. Since the beginning of the 2005 the
copper price is up another 27%, including a rise of 10% during the summer
months. In addition to global factors, speculation connected with the decline in
exchange stocks also contributed to the summer rally in copper prices.
On October 1, 2005 copper prices reached a 12-year high ($4,271 p/t) on the
Shanghai Stock Exchange. By the end of September the correction in stock
volumes had ended, which pushed down copper prices to a level of $3,500
p/t. Nevertheless, prices continued to test new highs. On October 20, 2005 the
price reached a new all-time high, breaking through $4,000 p/t and testing the
$4,500 p/t mark during one trading session.
Fig. 48. Prices for Copper on LME, 10-1$/t
Source: Bloomberg
30
Current situation on copper markets
In 2004 world copper consumption posted annual growth of around 6.3% (to
16,625 thousand tons). Asia remains the major consumer of copper, primarily
due to increasing demand for copper concentrate in China, the world’s largest
copper importer. For the past ten years, demand for copper in China has
shown sustained 18% growth annually. In 2004 demand reached 4.1 mln tons,
or one-third of world copper consumption. According to forecasts, the copper
deficit in the global market will break the 1.05 mln ton mark by 2010.
In 2004 copper consumption was at a level of 17,818 thousand tons. GFMS
Metals Consulting expects a further positive dynamic in copper consumption
in 2005-2006. By its estimate, growth in 2005 will amount to 4.2% and in 2006
will total 6.2%. In 2004 South-East Asia accounted for the main growth in
copper consumption, led by Taiwan (+11.4%), China (+3.6%) and South
Korea (+3.0%).
The rise in prices for copper concentrate has stimulated producers to
accelerate production. At the same time, growing demand in the major copper
consuming regions, especially China (+10-12%) and India (+6-7%), will
compensate for increasing copper supply in the medium term, while
maintaining a deficit in 2005-2006.
Market segmentation: Key players
There are three dominant players in the Russian copper market – OJSC GMK
Norilsk Nickel, CJSC UGMK and Russkaya Mednaya Kompaniya.
In 2004 world cathode copper output totaled 16 mln tons, including 925,000
tons in Russia (according to International Copper Study Group data). The
percentage distribution is the following: 447,000 tons (48.3%) from GMK
Norilsk Nickel, 342,000 tons (37%) from UGMK and 116,000 tons (14.7%)
from RMK.
Fig. 49. Market Share of Russian Copper Companies
UHCC
37%
Global production
95%
RCC
15%
Russia
5%
Norilsk Nickel
48%%
Source: GMK Norilsk Nickel, UHEC, RMK
31
Contact Information
Corporate bonds and new issues
Anna Komova
(7 095) 786-9671
Maria Habarova
(7 095) 786-4893
Evgeniya Lubimova
(7-095)-788-0309
Viktoriya Kravchuk
(7-095)-786-4269
Igor Pankov
(7 095) 786-4892
Mikhail Grachev
(7 095) 785-7404
Fixed Income Trading
REPO and Finance Operations
Oleg Artemenko
(7 095) 785-7405
12 Akad. Sakharov Prospect, Moscow, Russia 107078
Address
Alfa Securities (London)
Telephone
Address
Arthur Saribekov, senior vice -president
(7 095) 786-4897
Olga Gorokhovskaya, Ph.D
(7 095) 786-4877
Nikita Gusakov,
(7 095) 788-0326
Maxim Shashenkov
(4420) 7588-8400
City Tower, 40 Basinghall Street, London, EC2V 5DE
Copyright Alfa Bank, 2005 All rights reserved
The report and the information contained herein are the exclusive property of Alfa Bank.
Unauthorized duplication, replication and dissemination of this report, in part or in whole,
without the expressed written consent of Alfa Bank is strictly prohibited.
This publication has been approved for distribution in the United Kingdom by Alfa Securities Limited, which is regulated by the Securities and Futures Authority for the conduct of investment
business in the United Kingdom. It has not been approved for distribution to, or for the use of, private customers as defined by the rules of the SFA and may not be distributed to such persons.
Although the information herein has been obtained from and is based upon sources the Firm believes to be reliable, no representation or warranty express or implied is made nor responsibility of
any kind is accepted by Alfa Securities Limited, its directors or employees either as to the accuracy or completeness of any information stated herein or that material facts have not been omitted.
All information and opinions stated herein are subject to change without notice. Alfa Securities Limited makes no warranty or representation that the securities and/or recommendations referred to
herein are appropriate for all recipients. This document is for information purpose only and is not intended as an offer or solicitation to buy or sell securities. Alfa Bank, Alfa Securities and their
associated companies may issue this publication in other countries. Alfa Bank, Alfa Securities and their associated companies and their respective officers, directors and employees, including
persons involved in the preparation of issuance of this document may have or may from time to time deal in, hold or act as market makers or advisors, brokers or commercial and/or investment
bankers in relation to securities, financial instruments or companies mentioned in this document or be represented on the board of such companies. Foreign-currency-denominated securities are
subject to fluctuations in exchange rates that could have an adverse effect on the value or the price of, or income derived from, the investment. In addition, investors in securities such as ADRs,
the values of which are influenced by foreign currencies, effectively assume currency risk. The distribution of this document in other jurisdictions may be restricted by law and persons into whose
possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of United States
securities laws or the laws of any such other jurisdiction. Investing in Russia and Russian securities involves a high degree of risk and investors should perform their own due diligence before
investing.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act") and are subject to United States tax law requirements. The
Notes are being offered outside the United States by the Alfa Bank in accordance with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or delivered within the
United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act."
This document may contain "forward-looking statements" that relate to, among other things, plans, objectives, goals, strategies, future operations and performance of the Borrower and estimates
thereof. Such forward-looking statements are characterized by words such as "anticipates," "estimates," "expects," "believes," "intends," "plans," "may," "will," "should" and similar expressions, but
are not the exclusive means of identifying such statements. Such forward-looking statements involve known and known risks, uncertainties and other important factors that could cause
circumstances or the actual results, performance or achievements of the Borrower to be materially different from any future circumstances, results, performance or achievements expressed or
implied by such statements.

Russian Copper Company - Альфа-Банк

Transcription

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