10-14-13 1:04 AM EDT | Email Article
   By Gillian Tan 
 

SYDNEY--Russia's OAO Norilsk Nickel (GMKN.RS), the world's largest nickel and palladium producer, has hired Barclays PLC (BARC.LN) to sell the majority of its international assets, including mines in South Africa and Botswana, people familiar with the matter said.

The U.K. bank has sent out information to prospective buyers for assets including Norilsk's 50% stake in the Nkomati joint venture in South Africa. African Rainbow Minerals (ARI.JO) owns the remaining interest and has the right to match any offer for the stake, one of the people said.

The company's 85% stake in Tati Nickel, which it co-owns with the Botswana government, is also for sale. Both assets were acquired when Norilsk outbid Xstrata PLC to acquire Canada's LionOre Mining International Ltd. for 6.3 billion Canadian dollars (US$6.1 billion) in 2007.

Another asset on the block is the Norilsk Nickel Harjavalta refinery in Finland, which produces 50,000 metric tons of nickel a year, according to its website.

Norilsk said Oct. 4 that it would divest its international portfolio and focus on its profitable Russian business. At the time, Chief Executive Vladimir Potanin said the company would focus on Tier 1 assets, or those that deliver more than US$1 billion in revenue, a reserve life of more than 20 years, and a profit margin of more than 40%.

Norilsk plans to spend up to US$2.5 billion on three producing projects--Oktyabrsky, Taymyrsky and Komsomolsky--to extend mining by at least four years.

Last month, the miner hired Citigroup Inc. to handle the sale of its Australian assets, which were mostly acquired through the takeover of LionOre Mining.

The price of nickel--used in the manufacture of stainless steel--has fallen around 22% over the past year, due to slowing demand.

Norilsk estimates that roughly 15% of global nickel capacity is idle or at a loss and more shutdowns are likely if the nickel price doesn't rebound. Earlier this month, management said a profit margin of 20% is needed just to sustain their business.

Norilsk counts Russian tycoon Roman Abramovich, the owner of Chelsea Football Club in the U.K., among its major shareholders with a stake of 5.9%. Mr. Abramovich paid US$1.5 billion for the stake last December in a deal which cemented a truce between Mr. Potanin and fellow billionaire Oleg Deripaska, who controls a 27.8% stake in Norilsk through United Co. Rusal PLC.

Mr. Potanin is Norilsk's largest shareholder with a stake of 30%. The Russian has a net worth of US$14.3 billion, according to Forbes Magazine, making him the 58th richest person in the world. According to Forbes, Mr. Abramovich and Mr. Deripaska have a net worth of US$10.2 billion and US$8.5 billion each, making them the 107th and 131th richest respectively.

Credit Suisse AG's annual global wealth report estimates 35% of Russia's wealth is held by just 110 people.

Norilsk's board this month approved a change in dividend targets to a minimum of 50% of earnings before interest, tax, depreciation and amortization. Additionally, proceeds from the disposal of non-core assets will be returned to shareholders as a special dividend, worth up to US$1 billion, between 2014 and 2015.

Norilsk's change of strategy comes as Glencore Xstrata PLC (GLEN.LN) and Brazil's Vale SA (VALE) remain in early talks to combine their nickel-mining operations in Canada's Sudbury basin in an effort to cut costs following a slump in nickel prices, The Wall Street Journal reported on Friday.

 

-Write to Gillian Tan at gillian.tan@wsj.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

October 14, 2013 01:04 ET (05:04 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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