Rusal Sees Progress in Kazakhstan

The danger of Kazakh authorities taking the major Bogatyr Access Komir coal asset away from Rusal shareholders has passed after the Russian company reached an agreement with the state-owned Kazakh Samruk Corp. on its joint ownership. It may now be combined with the Ekibastuz-2 hydroelectric plant. Rusal wants to use them as the base for a holding with aluminum and alumina plants, which would require investments of about $3.5 billion. A Samruk source said that it was decided to split Bogatyr, one of Kazakhstan's largest coal mines, equally. The mine had been managed by Access Industries on the behalf of Viktor Vekselberg and Leonard Blavatnik. Kazakh law requires government approval for any change of ownership of mineral production assets, with the state receiving the right of first refusal. Amendments to national mineral law allowing contracts for mineral production to be terminated without a court decision are awaiting the signature of Kazakh President Nursultan Nazarbayev. Last month, Samruk head Kanat Buzumbaev stated that Bogatyr is part of the country's strategic interests. At the same time, Access lost control over the Ekibastuz-2 hydroelectric plant to Samruk. It had managed the Kazakh government's 50-percent share. The other shareholder in the power generator is Inter RAO UES. A Samruk source said that the company's share in the Ekibastuz electric plant is being considered as payment for the share in Bogatyr, but no decision has been made yet. If a cash payment is made, it is expected to be at least $1 billion. Using the resources of Bogatyr and the Ekibastuz-2 plant, Rusal wants to build an aluminum plant in Pavlodar Region in Kazakhstan with a capacity of 500,000 tons per year at a cost of about $2 billion. In the second phase of that project, an alumina plant would be built for $1.5 billion using bauxite from the state-owned Central Turgai deposit in Kustanai Region. Kazakh businessman Alexander Mashkevich's Eurasian Group may be a partner in that undertaking, which would require the approval of Nazarbayev.