Russian Billionaire exits potash platform: enter stage left, invest rare earths
In the early 1990s, Russian billionaire Alexander Nesis founded ICT Group (Investments, Construction, Technologies) of companies, which has grown to become the largest privately owned investment and industrial group of companies in Russia (and also Kazakhstan). Headquartered in Moscow with $8 billion in assets under management, ICT invests in, develops and manages assets in numerous industries including banking, precious metals, mining, construction, engineering – and now rare earths production.
ICT (through ICT majority-owned TriArkMining) entered into a $1 billion joint venture with Russian state-owned Rostec to fast-track production of rare earths; extracting REEs from thorium-bearing concentrate. TriArkMining bought approximately 75,000 tonnes of stored monazite concentrate (Russian stockpiles) from state-owned Uralmonatsit, which contains thorium – an alternative to uranium as a nuclear fuel – and rare earths. The unused Russian stockpiles were left over from the 1940s, when the Soviet Union opted against using thorium for uranium to develop its nuclear weaponry. The unused monazite concentrate was shipped to Krasnoufimsk in the Sverdlovsk region of Russia’s Ural Mountains, where it has been stored until Nesis’s ICT joint venture bought it earlier this month. According to Nesis, the ore contains 55% rare earths (rich in dysprosium and terbium) and 7% thorium. With such a high percentage of REEs, TriArkMining and Rostec can apparently go straight into REE production, skipping the normal laboratory testing that new REE projects typically require. Through TriArkMining, ICT will be utilizing its experience in industrial engineering and construction of mineral processing and hydrometallurgical plants as a managing partner in the joint venture deal. TriArkMining and Rostec plan to extract approximately 40,000 tons of REEs over seven to eight years, commencing in 2015.
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The joint venture aims to address Russian demand for REE materials – as REE stocks are almost depleted — by 2017, according to the Moscow Times. Russia accounts for only 2% of the world’s REE production and, like the rest of the word, relies heavily on China for its rare earths supply. Presently Russia consumes an estimated 1,500 tons of REEs annually and, according to Rostec, Russian demand is expected to reach upwards of 6,000 tons by 2020. Rostec produces a wide range of defense products and views REEs as a strategic raw material for defense, renewable energy, electronics and telecommunications. Russian President Vladimir Putin and the Russian government announced the country’s intent to expand REE production in an effort move towards sustainability and to protect Russia’s high-tech industry against supply and price fluctuations in the REE global market.
Mr. Nesis, who has a net worth of $3.3 billion (according to the Bloomberg Billionaires Index), stated in an interview with Bloomberg in Moscow published yesterday that ICT’s joint venture with Rostec also plans to bid for Tomtor in the Siberian republic of Yakutia — a deposit that has more than 150 million tonnes of ore containing REEs and is among the largest deposits in the world. “Once we have the technology and the best deposit, we will have a competitive position in this segment,” Nesis told Bloomberg.
Until this past July, just prior to Russian potash giant Uralkali’s exit from potash marketing powerhouse Belarusian Potash Co. (BPC) with partner Belaruskali — and wreaking absolute havoc in the potash world — Nesis was a major Uralkali shareholder. In 2010, Nesis bought a 13.2% stake in Uralkali, alongside fellow Russian billionaires Suleiman Kerimov and Filaret Galchev (all told the acquired a 53.2% shareholding in Uralkali). Although Nesis had been reducing his stake in the Russian potash producer over the past year, he controlled a 5.1% stake (worth around $1 billion at the time), which he sold just days before Uralkali withdrew from BPC.
Nesis told Bloomberg his bet on Uralkali was based on the expectation its combination with rival OAO Silvinit, completed in 2011, would deliver returns. “Once we saw that the value of the merger was realized in the share price, we started to sell,” he explained. Nesis’s companies sold a third of the Uralkali holding in August 2012 and another 33% at the start of this year. The disposal of the rest was completed in July, as arrangements Nesis put in place to hedge against a drop in the stock were triggered (days before the Uralkali bombshell was announced, sparking an intense ongoing feud with Belarus President Alexander Lukashenko).
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