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MOSCOW/HONG KONG, June 11 (Reuters) - Billionaire Oleg Deripaska has bid for the right to develop Russia's largest untapped copper field in a contest that will also include mining giant Norilsk Nickel GMKN.MM and the state railway monopoly.
Strikeforce Mining and Resources Ltd (SMR), the mining arm of Deripaska’s Basic Element company, said on Wednesday it submitted a bid to participate in next month’s tender for the Udokan deposit, which contains over 13 million tonnes of copper. Russia’s Natural Resources Ministry will award the deposit at an auction on Aug. 14. It has set the starting price at 4.5 billion roubles ($190 million) and said about $1.6 billion would be required to bring the deposit into production.
“SMR, together with leading Russian and international specialised research and development organisations, is elaborating a programme for overall development of the Udokan deposit,” SMR Chief Executive Geoffrey Cowley said.
SMR will bid through Sorsk Mining and Processing Complex, one of its two ferro-molybdenum plants in Russia that together supply 4 percent of world demand for the steel-hardening alloy.
SMR, which is also exploring for gold and other resources in Kyrgyzstan and Mongolia, said it wanted to diversify production. The company has also said it plans a $200 million share float in Hong Kong toward the end of this year. [ID:nHKG269887]
Udokan, like the Sukhoi Log gold field in Siberia, is classified as strategic by the Kremlin, effectively preventing a foreign company from gaining majority control of its resources.
The resources ministry says the deposit could produce 187,000 tonnes of copper annually, equivalent to 15 percent of Russia’s current output of the metal used in everything from telephone wires and computer chips to air-conditioning units.
Analysts said the Udokan field, in a remote part of eastern Siberia, would require a significant amount of investment in both mining expertise and infrastructure development.
“The government is going to put some strict time lines on the project, and it’s going to be a project that requires a pretty big commitment,” said Tim McCutcheon, partner at metals-focused finance boutique DBM Capital Partners in Moscow.
Wednesday was the deadline for expressions of interests in Udokan. Ministry officials were unavailable for comment.
Norilsk Nickel, Russia’s largest copper producer, has said it will bid and would consider inviting partners to join the project should it win. [ID:nL15103767]
Norilsk invited BHP Billiton Plc/Ltd BHP.AXBLT.L to develop the Iisk-Tagul nickel field in Siberia after winning a tender in March in which Basic Element was also a contender. It also has an exploration partnership with Rio Tinto Plc/Ltd RIO.AXRIO.L focused on Siberia and the Russian Far East. Russian Railways is leading a rival bid as the head of a consortium called Russkaya Med, or Russian Copper. This includes No. 2 Russian copper producer Urals Mining and Metals Co, controlled by billionaire Iskander Makhmudov, and state debt and pension fund agent Development Bank. State conglomerate Russian Technologies, which has steel and titanium assets, has also said it was considering a bid.
Additional reporting by Polina Devitt; editing by Christopher Johnson
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