ILL WIND BLOWS PROFIT FOR IGOR ZYUZIN AND HIS MECHEL STEEL AND COAL COMPANY — IN CHELYABINSK WHERE THERE IS PROFIT, THERE’S CORRUPTION

By John Helmer, Moscow

Sergei Ivanov had been in charge of protecting Russia’s environment for just ten weeks when he arrived in Chelyabinsk city last November 1. The former Kremlin chief of staff and principal advisor to President Vladimir Putin took with him a large delegation of federal officials, including a deputy prime minister, the minister of natural resources and environment, and the chief of the environmental control agency, Rosprirodnadzor,  to meet Boris Dubrovsky, the Chelyabinsk governor (lead image, right).  

Much was promised for cleaning up the air of the city and region. A month later, on December 5, President Vladimir Putin visited Chelyabinsk region, and flew by helicopter with Dubrovsky over several of the worst air pollution areas.  Dubrovsky announced  that he favoured a new set of air control standards for enforcement by federal and regional governments. Putin replied with the acknowledgement that air pollution was especially serious in Chelyabinsk.  He claimed: “we need to encourage entrepreneurs, and industry to apply the latest technology, the best technology available. This program starts to work, and I very much hope that it will have the desired effect in 2017.”

Then in mid-January the smog struck Chelyabinsk city. Ivanov, Dubrovsky and Putin had all failed to prevent the longest air pollution crisis in the city for years.  Mechel’s owner, Igor Zyuzin (lead image, left), had succeeded in keeping his plants operating with minimal interruption, a promise to do better, and no criminal charges.  A local environmental activist says:  “People in the west think Putin is so powerful he can change the outcome of elections in the US, UK, France and Germany. So how come he can’t put a stop to the говно in the Chelyabinsk air coming from one oligarch who owns the plants?” (more…)

OFFSHORIZATION IN THE WILDS OF BORNEO — ANDREI MELNICHENKO AND NATHANIEL ROTHSCHILD MAKE MONKEY OF KREMLIN

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By John Helmer, Moscow

Andrei Melnichenko (lead image, left) and Nathaniel Rothschild (right) are offering $100 million in cash, plus refinancing of at least $450 million in debt notes expiring in eight weeks. That’s money London bankers say Rothschild doesn’t have, and Melnichenko can’t borrow. The offer is for the takeover of Asia Resource Minerals Plc (ARMS), a London-listed operator of coalmines in Indonesia.

From his Channel Island headquarters Rothschild has announced the deal with Melnichenko for a joint takeover bid. But in Cyprus, where he is headquartered, Melnichenko is saying nothing. In Moscow, the Russian interpretation is a combination of scorn for Rothschild, and a determination to make out of an improbable business deal in Borneo the appearance of international clout which Russian business has lost. According to Russian investment banker number-1: “I have spent enough time in Indonesia so that I never even try to do business here – the deck is stacked against you. Nat is a serial [expletive; translation, passive recipient of forcible intercourse], and he is in for yet another treat.” Russian investment banker No. 2: “Russians are trying to break out of the corner in which the Americans have confined them. They will use any pretext. – any kind of foreign venture is designed to make Russian business legitimate and powerful looking. This is driven by the huge inferiority complex now felt by highly leveraged men like Melnichenko. They need to show they still can [expletive; translation, active initiator of forcible intercourse].”
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THE BLUE SKY POTENTIAL OF CHUKOTKA — WHY IS STATE MONEY BEING WAGERED ON TIGERS REALM COAL?

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By John Helmer, Moscow

Tiger is an unlucky brand-name for Russian investment. The record of Mikhail Prokhorov and Maxim Finsky in trying, and failing three times over to sell shares in White Tiger Gold on the Toronto Stock Exchange explains. So why is the Russian Direct Investment Fund, a state development bank, betting on a small Australian-listed coking coal company in Chukotka called Tigers Realm Coal?

The feareasternmost province of Russia, Chukotka makes a good case for ample underground resources to be mined, so long as costs of digging and shipping to China stay low; and demand recovers. Perish the thought that Tigers Realm Coal is an insider manipulation with the aim of pumping the share price, then dumping the project by several names associated with such scheming in the past.
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GLOBAL WAR AGAINST RUSSIA TAKES NEW TURN — CHINA ATTACKS AUSTRALIAN COAL, FAVOURS RUSSIAN COAL

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By John Helmer, Moscow

Last Thursday the government in Beijing struck a new blow against the domination of global commodity markets by countries allied with the US in the sanctions war against Russia.

The measure announced is a 3% to 6% tariff to be imposed on coal imports to China, commencing on October 15. Australia, the largest supplier of coal to China, will take the largest hit in its trade. Indonesia, the second largest coal supplier to China, will be exempt as a member of the free trade zone between China and the Association of Southeast Asian Nations (ASEAN). Russia and South Africa, the next largest coal exporters to China, are allied with China in the BRICS geopolitical group: they are to benefit, too. Russian officials and industry sources confirm that negotiations on tariff relief are underway in Moscow this week as Prime Minister Dmitry Medvedev met his counterpart, Chinese Prime Minister Li Keqiang.
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ALEXEI MORDASHOV AND IGOR ZYUZIN VIOLATE THE NEW KREMLIN RULE ON NOT AIRING THEIR DIRTY LINEN IN FOREIGN AIR

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By John Helmer, Moscow

Two Russian steelmaking oligarchs, Alexei Mordashov (above, left) of Severstal, and Igor Zyuzin (right) of Mechel, went to court early this month over a debt of $4 million. The debt stems from a contract for delivery of Mechel-made metallurgical coke to Severstal’s steelmill in Dearborn, Michigan. The court is the US District Court for the Northern District of Illinois, Eastern Division, in Chicago. The claim was filed by Severstal’s local lawyers on May 5.

Russian reporting of the case this week noted the irony in the situation that both Mordashov and Zyuzin are trying to sell the companies which are now facing each other in court as plaintiff and defendant. As yet unreported is the Kremlin directive, informally but directly from President Vladimir Putin to the control shareholders of Russia’s large metals and minerals companies, not to take their business disputes to foreign courts. The order, confirmed by insiders at a well-known metal company, has been put in the context of the threat the Russian economy is now facing from US sanctions over the conflict in Ukraine.
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BLIND TRUST — SIBERIAN ANTHRACITE TRIES SELLING ITS SHARES FOR THE UMPTEENTH TIME, WITHOUT AUDITED FINANCIAL REPORTS, CONSOLIDATION OF TRADING SCHEMES, OR DISCLOSURE OF OWNERSHIP

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By John Helmer, Moscow

It isn’t known whether Dmitry Shatokhin (right), the chief executive, board chairman, and apparent control shareholder of Siberian Anthracite, reads the news. Not the commodity price reports showing that the demand and price for the coal he is selling are falling. Rather, the news that President Vladimir Putin, along with the heads of the other G8 governments, agreed formally this week to put a stop to concealment of beneficiary ownership of public companies, and of the trust, tax and trading schemes by which hidden owners cheat public shareholders.

According to the G8 communique, “a lack of knowledge about who ultimately controls, owns and profits from companies and legal arrangements, including trusts, not only assists those who seek to evade tax, but also those who seek to launder the proceeds of crime, often across borders. We will make a concerted and collective effort to tackle this issue and improve the transparency of companies and legal arrangements. Improving transparency will also improve the investment climate.” If that’s the standard, how come Siberian Anthracite refuses to publish audited financial reports and won’t disclose the shareholding structure of the company?
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IGOR ZYUZIN’S SUBTERFUGE – WHY MECHEL SHAREHOLDERS DON’T REALIZE THE COMPANY HAS BEEN NATIONALIZED

By John Helmer, Moscow

Igor Zyuzin (right) is almost entirely dependent on the Russian government for the solvency of his Mechel steelmaking and coalmining group. With between $9 billion and $10 billion in debt, Zyuzin, who owns 65.49% of Mechel’s shares and controls the company as chairman of its board, is now the steel and coal sector’s most heavily indebted proprietor. If not for a series of cash loans, bond purchases and guarantees from state-controlled banks – Sberbank, VTB, Gazprombank, Eurasian Development Bank (EDB), and Transcreditbank – he would be bankrupt.

That is, Mechel, with a bottom-line loss last year of $1.7 billion, would be as bankrupt as the Estar group of steelmills, which Zyuzin took over in 2009, when Estar’s proprietor Vadim Varshavsky went bankrupt. Varshavsky was consigned by state officials and the state banks to go belly up for debts of about $3 billion. Zyuzin has been preserved in his place for three times that debt. He has also been permitted to buy Varshavsky’s old assets at a fraction of their value, using tolling schemes which may be considered asset stripping, a form of larceny, outside Russia — if their terms were known. In other words, Varshavsky’s insolvent steelmills appear to be paying Zyuzin to take them over for Mechel.
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INVIDIOUS CHOICE – THE INDIAN, THE CHINAMAN, OR THE WHITE MAN (IGOR ZYUZIN)

By John Helmer, Moscow

Igor Zyuzin’s desperately indebted steel and coal-mining group Mechel is negotiating the sale of a 25% shareholding stake in Mechel Mining, his coal division, for $1.25 billion. That’s a fraction – maybe half — of what it was worth two years ago.

Would such a loss of capital value, and the still uncounted costs of Mechel’s unfinished, non-operational ElgaUgol coalmine in the Sakha republic have materialized if, instead of Zyuzin (left), the Kremlin had decided in October 2007 to award the project concession to the high bidder at the time, Lakshmi Mittal (centre)? Does anyone in the Kremlin believe today that the discount for ElgaUgol which Baosteel, China’s leading steelmaker, is about to extract from Zyuzin has been worth the six-year wait? Will President Vladimir Putin, who has been in charge of the milestones of wealth accumulation and loss marking Zyuzin’s career so far, instruct the government’s Control Commission to vote in favour of this strategic resource acquisition by the Chinese? And if the Chinese are acceptable as coalmining partners now, why weren’t the Indians in 2007?
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ROMAN ABRAMOVICH TESTS KREMLIN FOREIGN INVESTMENT STRICTURE WITH NEW BILLION-DOLLAR AUSTRALIAN DEAL

By John Helmer, Moscow

Roman Abramovich was recently able to bamboozle a British judge with no experience of Russia, when the credibility standard was set by Boris Berezovsky. But can his winsome personality persuade President Vladimir Putin and energy chief Igor Sechin that Russia badly needs to acquire an Australian company that has adapted Soviet technology for turning coal into gas; should lend Abramovich up to $2 billion to buy the asset; and maybe several hundred more million dollars to flip the asset to Evraz, the Russian steel and coalmining group which Abramovich’s holding, Millhouse, already controls?

Abramovich’s last attempt at spending a Russian dividend stream on foreign assets was aborted when Evraz withdrew its bid to buy Scaw Metals, a South African steelmaker owned by Anglo American. That deal, worth between $500 million and $700 million, didn’t happen at the same time as Victor Rashnikov was extricating Magnitogorsk Metallurgical Combine from its $560 million commitment to buy Flinders Mining, an Australian iron-ore project.
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WHERE DO RUSSIAN ELEPHANTS GO TO DIE? NOT BY CHOICE INTO ROMAN ABRAMOVICH’S BONEYARD

By John Helmer, Moscow

The two 20-year veteran coalminers who have directed Raspadskaya, one of Russia’s leading coking coal producers, have unexpectedly sold out their stake in the company. According to the terms of the deal announced in Moscow yesterday, Evraz, the vertically integrated steel and mining group controlled by Roman Abramovich (left image), will pay Gennady Kosovoy, currently CEO, and Alexander Vagin, board chairman, $202 million in cash, plus an 11.06% share of Evraz’s equity.

Kosovoy is the coalmine boss; Vagin runs political interference at the regional level and protection wherever required. They haven’t enjoyed being the co-control shareholders, with Abramovich, of the publicly listed company. Even less, they haven’t cared for Abramovich’s pressure to pay him dividends from Raspadskaya’s profit — and that was when the mining company was making a profit, and when the two veterans wanted to reinvest the proceeds in the mine itself. Because Raspadskaya was the only half-way independent coal supplier to the steel industry in Russia, its takeover by Evraz significantly reduces competition in the Russian market.
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BLACK HOLE FOR EVRAZ, BLACK EYE FOR ROMAN ABRAMOVICH — $35.8 MILLION LAWSUIT LAUNCHED IN UK HIGH COURT OVER IRON-ORE AND COAL TERMINAL ON BLACK SEA

By John Helmer, Moscow

Evraz, the Russian steelmaker listed on the London Stock Exchange main board, is being sued in the UK High Court for $35.8 million by a group of Swiss investors over a failed project to build a terminal for iron-ore and coking coal at Yuzhny port, on the Ukrainian Black Sea coast near Odessa. The dispute is over an asset on which Evraz has put a substantially higher value on its own balance-sheets than the Swiss investors are claiming in valuation and compensation in court.

The High Court claim papers were filed on April 26. At the same time, a court in Cyprus agreed to impose a freeze over money in the accounts of an Evraz subsidiary operating in Cyprus called Watney Ltd.
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BATTENING DOWN THE ELECTION HATCHES, PART 2 – STEEL AND COAL

By John Helmer, Moscow

When crisis strikes the global steel sector, sales revenues drop faster than costs, and earnings and profits shrink. The normal correction is for mill owners to cut their costs by reducing production, closing furnaces, furloughing workers, trimming supply of steel into the marketplace, cutting product prices to clear unsold inventories, and crossing fingers for an improvement of demand. If they can help it, the proprietors of steelmills don’t normally lift their interest expenses by raising debt loads.
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ABRAMOVICH TO GET THE SECOND BIGGEST GIFT IN RUSSIAN HISTORY, WHILE IGOR ZYUZIN HOPES FOR HIS TURN SHORTLY

By John Helmer, Moscow

If Vnesheconombank (VEB), the state bailout bank chaired by Prime Minister Vladimir Putin, really has agreed to pay $5.3 billion for the 80% control shareholding of Raspadskaya, the coking coalminer, then this is going to be Roman Abramovich’s lucky day. His second lucky day, if to count the September 2005 transaction when state-owned Gazprom paid $13 billion for Abramovich’s 72.6% stake in the oil company Sibneft. Well, it’s everyone’s lucky day, because Abramovich is known to be a sharing kind of man. With almost everyone.
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IS THAT RUSSIAN RISK MONEY WAVING GOODBYE, OR GOING SHORT ON COMMODITIES?

By John Helmer, Moscow

In The Long Good-Bye, private detective Philip Marlowe says of the snob column in the newspapers, “I don’t read them often, only when I run out of things I dislike.” Some people feel that way about the weekly report from Emerging Portfolio Fund Research(EPFR). That is the Boston outfit which tracks the flow of investor funds into and out of emerging market destinations in the aggregate (GEM, EMEA), and in particular countries.

The bad news, out today in EPFR’s bulletin and Uralsib Bank’s weekly analysis, is that outflow of investor cash in Russian stocks and funds hit a record this week of $298 million. This was a big turnaround from the previous week’s positive inflow; though it makes just a small dent in the total flow inward to Russia since January 1 of $3.5 billion.
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FIRST–EVER RUSSIAN HAT-TRICK – EVRAZ RULED TO HAVE ILLEGALLY RIGGED VANADIUM PRICES, AFTER BEING FOUND GUILTY OF RIGGING COKING COAL AND STEEL PRICES

By John Helmer, Moscow

In the game of cricket, nothing is rarer than a hat-trick. That is when the bowler for one side dismisses three batsmen for the opposing side in three successive balls. For the bowling side, it is a rare triumph, and almost never happens in international test games. For the batting side, it is one of the greatest of humiliations.

In Russia, cricket is almost unheard of, and up against the Russian oligarchic combines, the Federal Antimonopoly Service (FAS) rarely inflicts humiliation.
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CASE OF ANGER, AVARICE, OR GLUTTONY – IS RASPASKAYA COAL THE LATEST SLICE IN THE RUSSIAN RESOURCE PIE TO BE REDIVIDED?

By John Helmer, Moscow

Russia’s largest coking coal producer independent of the major steel groups is for sale, as the two controlling shareholder groups — Gennady Kosovoy and Alexander Vagin, who run the management, and the Evraz group — have engaged investment banks to find a buyer for their combined 80% stake in the company. At least, this is the appearance of the story, after Kosovoy and Vagin announced their intention to sell just a few days after Evraz beat them to it, and following the former owner-managers’ declaration of their unwavering intention to remain precisely where they are.
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THE CHAMBER OF SECRETS – HARRY POTTER IS THE ONLY FOREIGNER ALLOWED TO LOOK INSIDE (BUT THAT’S KIDSTUFF)

By John Helmer, Moscow

Deep inside the Russian government there is a chamber of secrets where officials have gathered just eight times since April 29, 2008, the day when then-President Vladimir Putin signed the law that created the chamber. The law was entitled “On Procedures for Foreign Investments in Business Entities of Strategic Importance for National Defence and State Security”; for short, Law № 57-FZ. The chamber is called the Government Commission for Control of Foreign Investment in the Russian Federation, the Control Commission for short (aka the Government Commission).
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FEAR OF DRACULA — THERE ARE SEVERAL REASONS WHY THE KREMLIN WON’T ALLOW RUSAL TO TAKE OVER NORILSK NICKEL – HERE’S THE GLENCORE REASON

By John Helmer in Moscow

In the business of bloodsucking, noone does it better than Glencore of Baar, Switzerland. They call it trading.

The way it works is that Glencore sinks its teeth into anyone unknowing, foolish, impoverished or desperate enough to come within range. Glencore then trades on 18% or higher profit margins for export sales, which no producer would tolerate if he’s in his right mind and health. So Glencore turns him into a corpse, semi-alive in order to keep up the flow of the red stuff. The profits from trading commodities from companies in which Glencore owns equity positions is even better than the straight trading ventures. In Russia, this is known as transfer pricing or cash and asset stripping. It’s illegal, although the law is almost never enforced.
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THE WAGES OF SIN — PUTIN APPEARS TO SHIFT LIABILITY FOR RASPADSKAYA MINE DEATHS TO COMPANY

By John Helmer in Moscow

Prime Minister Vladimir Putin met yesterday at Novokuznetsk city, in the Kemerovo region, with families of miners who were killed at the May 8 explosions that destroyed the Raspadskaya coking-coal mine, one of Russia’s largest. In remarks published on the prime ministry website, Putin hinted that he holds Raspadskaya’s management and owners, which include the Evraz steel group and Roman Abramovich, responsible for inadequate safety measures at the mine; and also for a scheme of miner bonuses which encouraged safety violations leading to the two fatal methane detonations.
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PUTIN’S ATTACK ON EVRAZ OPENS PRICE CONTROL FLOODGATES

By John Helmer in Moscow

As Russian villagers used to say in olden times, when the tsar is kind, the wait to see him is long; when he is cruel, there is no delay at all.

Prime Minister Vladimir Putin’s explicit attack on steel prices at the start of this week, and the commencement of a new antitrust investigation of price-rigging against the Evraz group, have opened the floodgates to a spate of complaints — by the state-owned car manufacturers against the flat-sheet mills, and by the oil companies against the pipemakers.
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WHAT GAME, WHOSE DEAL IS THIS? ARCELORMITTAL CONSIDERS BUYING COAL MINES FROM EVRAZ

By John Helmer in Moscow

In an unusual break with the traditional hold Russian steel companies like to keep on their domestic coking-coal sources, and secure the future expansion of their steel capacity with ample reserves, the Evraz group is reported to be considering the sale of two of its Kemerovo mines to global and regional rival, ArcelorMittal. If they are good mines, why is Evraz selling? And if they are bad ones, why is ArcelorMittal buying? ArcelorMittal, which initiated the industry reports of the asset deal, has firmly silenced the tongue that was wagging; Evraz refuses to open its mouth at all.
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SPARKY ISN’T SURE THIS TIME — CRIMINAL CASE OPENED INTO MECHEL COKE BATTERY EXPLOSION

By John Helmer in Moscow

The Chelyabinsk prosecutor has opened a criminal investigation into a lethal explosion this week at a coke battery of the Mechel group in Chelyabinsk. One worker at the battery was killed immediately, and three others are in serious condition in hospital after the blast, which occurred, according to a company statement, on Thursday morning, at coke shop number 2 of Mechel-Coke. A search by Emergency Ministry specialists continues today for others who may have been killed in the explosion, and remain unrecognizable in the rubble.
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SPARKY’S VALENTINE — EVRAZ CLEARED TO REOPEN COALMINE IN KEMEROVO

By John Helmer in Moscow

The federal mine inspectorate in Russia, Rostekhnadzor (RTN), has cleared Evraz’s mine subsidiary Yuzhkuzbassugol (YKU) to reopen the Esaulskaya mine, after a methane accident on January 20 led to a regional court-ordered closure on January 25. Evraz is owned by Roman Abramovich’s Millhouse holding, and Alexander Abramov.
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METHANE TOLERANCE IN RUSSIAN COALMINES — COURT AND MINE SAFETY AGENCY ORDER HALT AT EVRAZ COAL MINE

By John Helmer in Moscow

Evraz, Russia’s largest vertically integrated steel group, has been ordered by the federal mine safety agency Rostekhnadzor (RTN) and a Kemerovo court to stop production at the Esaulskaya mine, in the Kemerovo region, until inspectors have resolved reported methane problems. Esaulskaya is one of several mines in the wholly owned Evraz subsidiary, Yuzhkuzbassugol (YKU — “South Kuzbass Coal”).
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WATCH BILLY BUNTER’S ARSE, NOT HIS LIPS

By John Helmer in Moscow

Billy Bunter was a fictional schoolboy character well-known to British and colonial schoolboys of my generation. Like most of us, his eyes were bigger than his stomach. Unlike many, by the age of ten Bunter had grasped the concept of leverage — to feed himself he was always borrowing against the legendary postal order that was in the mail from his Pater. To assist in his cons, Billy was also a gifted ventriloquist, making voices appear to come from everywhere but himself. This was always amusing even though — maybe especially because — Bunter was usually caught out, and either caned by his school masters, or kicked by his classmates. (You can have a Russian empire if naughty boys get away with their japes, but not a British one.)
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CHINESE CHECKERS OR WEI CHI, ANYONE? — PRIME MINISTER VLADIMIR PUTIN IN CHINA TO DISCUSS STEEL AND COAL TIT FOR TAT

By John Helmer in Moscow

Chinese checkers may be the closest Russia’s metal oligarchs, Igor Zyuzin (right) and Vladimir Lisin (left), have come to understanding Chinese strategy. The problem is that the game is neither Chinese, nor checkers. It’s actually an American invention, dating from the 1880s. It is based on the simple tactic of jumping your pieces further and faster into your opponent’s goal, before he can do the same to yours. As developed 15 years ago, Russian asset raiding tactics in the metal and mining sector are not more sophisticated.

Wei Chi, on the other hand — also known as Go, in Japan — is said to have been created by the Emperor Shun around 2200 BC, to train the brains of his son and heir. The game has evolved such complex strategy over the board space that a novice cannot readily understand how his space has been surrounded without apparent capture; and in the champion games, who has won and how.
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HOW RUSSIA IS RULED, CHAPTER 69 — PUTIN TAKES FRANCHISE IDEA FROM RONALD MCDONALD, LENDS MONEY TO IGOR ZYUZIN

By John Helmer in Moscow

Ronald McDonald is the most famous brand-name franchise in the world.

It operates 32,000 sales points, with more than 58 million clients, in about 118 countries around the world. Currently, the McDonald’s Corporation has a market capitalization of $61 billion; this is only 16% below the peak of its pre-crisis value last year.

This is what the McDonald’s Corporation says about how it does business: “McDonald’s has always been a franchising company and has relied on its franchisees, our Owner/Operators, to play a major role in the System’s success. McDonald’s remains committed to franchising as a predominant way of doing business. We are actively seeking highly qualified business people to join our System as Owner/Operators. Owning a McDonald’s restaurant is a tremendous opportunity. We are seeking individuals with significant business experience who have successfully owned or managed multiple business units or have led multiple departments and who have significant financial resources. We are a family of over 2400 Owner/Operators passionate about satisfying our customers, growing our business, making money and having fun.”
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CAT IN A SACK, PIG IN A POKE — MECHEL’S BLUESTONE COAL DEAL DRAWS FIRE

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By John Helmer in Moscow

Confirmation this week by Mechel of its takeover of the West Virginia coal producer, Bluestone, has drawn fire from Moscow bank and brokerage analysts, who claim the price paid exceeds the value of the deal.

The Mechel announcement was issued on April 22, confirming details of a transaction which first commenced late in 2008, when Mechel made a cash down-payment, first reported at $425 million. An issue of about 80 million preferential shares, completed in March, was the second payment stage of the transaction. Although undisclosed to shareholders or to the US Secutiries and Exchange Commission, which regulates US-listed Mechel, the early reports indicated a valuation of Bluestone, owned by James Justice, of about $870 million. The share issue, it was speculated before this week, would amount to a 19% dilution for current shareholders.

Negotiations to finalize the deal appear to have continued between Justice of Bluestone and Igor Zyuzin, Mechel’s controlling shareholder and chief executive. According to the new release of the “definitive agreement”, Mechel says “”the aggregate merger consideration is $436 million paid in cash (including $36 million interest paid), approximately 83.3 million preferred shares, plus the assumption of approximately $132 million of net debt”.

Additional terms disclosed set out a more complex valuation of Bluestone, and substantially more to be paid for its acquisition by Mechel over the next five years. An analysis of the transaction by Uralsib Bank indicates that “if the value of the market value plus dividends paid in the next five years is less than $1585 million in five years’ time, Mechel will make a top up cash payment on the fifth anniversary of the deal. Finally, Mechel will pay an additional $3.04/ton for every ton of proven coal reserves in excess of 458 mln tons. Mechel’s expectation is that reserves could be 730 mln tons, implying that an additional $828 mln will be paid when the reserves are proven.”
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RUSSIAN COALMINER TESTS OLD KING COAL’S HUMOUR — BUTTERS UP UNCLE SAM, BUYING BLUESTONE COAL OF WEST VIRGINIA , AND BEGS KREMLIN FOR $3 BILLION BAILOUT, PLUS IMPORT PROTECTION

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By John Helmer in Moscow

Mechel (MTL:US), owned by Igor Zyuzin, fell sharply in Moscow stock market trading Wednesday on news the company is to acquire unlisted, West Virginia-based Bluestone Coal.

Without an official company statement so far, Mechel has revealed to brokers and Moscow industry sources that it has agreed to a valuation of Bluestone, owned by James Justice, of about $870 million, and will acquire 100% of Bluestone’s shares for $425 million in cash, and an issue of 80 million Mechel preference shares, currently worth about $310 million. The cash was paid at the end of last year, it has now been revealed, and the share issue will amount to a 19% dilution for current shareholders. Mechel’s acquisition will also mean taking on $135 million in Bluestone debt.

Mechel spokesman Ilya Zhitomirsky told Minesite the company is making no comment at this stage. He did not deny the Bluestone takeover. But he said he could not explain why there has been no reference to the purchase in Mechel’s filing to the US Securities and Exchange Commission (SEC) on January 22, when operational results for the past year were reported, despite the fact, now known, that the takeover had already been signed with Bluestone, and the down payment made.

Mechel is listed on the New York Stock Exchange, but owns no steelmaking assets in the US, and can claim no coal supply synergies in that country. Last year, Mechel produced 26 million tonnes of coal, 15 million of coking coal, and 11 million tonnes of steam coal; along with smaller volumes of iron-ore, nickel, ferroalloys, and steel. Until now, its only operations outside Russia have been steelmaking in Romania, Bulgaria, and Lithuania; and chromium mining in Kazakhstan.

The larger Russian steelmaker Severstal (CHMF:RU) owns considerable steelmaking capacity in the US, and has bought US coalmines to supply it through its wholly owned mining division, Severstal Resources, which is currently expanding into iron-ore in west Africa and gold in Russia.
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RUSSIAN COAL – NOW YOU SEE IT, NOW YOU DON’T

By John Helmer in Moscow

At current prices, old King Coal is a merry old soul in Russia.

In the bad old days, when Boris Yeltsin was in charge of Russia, all you had to do to acquire a steelmill on the cheap was to cut off its gas, electricity, iron-ore, scrap metal, or its coking coal. Adapting Honore de Balzac’s maxim just a little, behind every Russian steel fortune there is a raw material crime. Not because they had read Balzac, the Russian steelmakers came to understand that in order to protect their easily taken assets, they were obliged to insure and control their raw material supplies, especially iron-ore and coal.

The resulting interlocking shareholding schemes, by which most of Russia’s coal mines are controlled, and deter raiders, are very difficult to unravel. It’s a condition even PriceWaterhouseCoopers might call non-transparency. But that was in an economy recovering from the damage Yeltsin did to it. Today’s Russian GDP is growing at a rate of 7%, and while state policy can probably sustain that relatively comfortably, accelerating inflation rates pose problems that President Vladimir Putin was not threatened by. Official inflation is running at 1.2% per month, but the price of hot-rolled steel is up 25% over the past month; cold-rolled steel, 29%.
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IF IT SMELLS ALLURING, IT’S RUSSIAN – IN WARTIME L’ORÉAL (FRANCE) AND ESTÉE LAUDER (US) MAKE A BAD SMELL



By John Helmer, Moscow
  @bears_with

The war plan of the US and the European allies is destroying the Russian market for traditional French perfumes, the profits of the French and American conglomerates which own the best-known brands, the bonuses of their managers, and the dividends of their shareholders. The odour  of these losses is too strong for artificial fresheners.

Givaudan, the Swiss-based world leader in production and supply of fragrances, oils and other beauty product ingredients, has long regarded the Russian market as potentially its largest in Europe; it is one of the fastest growing contributors to Givaudan’s profit worldwide. In the recovery from the pandemic of Givaudan’s Fragrance and Beauty division – it accounts for almost half the company’s total sales — the group reported “excellent double-digit growth in 2021, demonstrating strong consumer demand for these product categories.”    Until this year, Givaudan reveals in its latest financial report, the growth rate for Russian demand was double-digit – much faster than the  6.3% sales growth in Europe overall; faster growth than in Germany, Belgium and Spain.    

Between February 2014, when the coup in Kiev started the US war against Russia, and last December, when the Russian non-aggression treaties with the US and NATO were rejected,   Givaudan’s share price jumped three and a half times – from 1,380 Swiss francs to 4,792 francs; from a company with a market capitalisation of 12.7 billion francs ($12.7 billion) to a value of 44.2 billion francs ($44.2 billion). Since the fighting began in eastern Ukraine this year until now, Givaudan has lost 24% of that value – that’s $10 billion.  

The largest of Givaudan’s shareholders is Bill Gates. With his 14%, plus the 10% controlled by Black Rock of New York and MFS of Boston, the US has effective control over the company.

Now, according to the US war sanctions, trade with Russia and the required payment systems have been closed down, alongside the bans on the importation of the leading European perfumes. So in place of the French perfumers, instead of Givaudan, the Russian industry is reorganizing for its future growth with its own perfume brands manufactured from raw materials produced in Crimea and other regions, or supplied by India and China. Givaudan, L’Oréal (Lancome, Yves Saint Laurent), Kering (Balenciaga, Gucci), LVMH (Dior, Guerlain, Givenchy), Chanel, Estée Lauder, Clarins – they have all cut off their noses to spite the Russian face.

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THE WAR AGAINST FOOD – WHO IS TO BLAME



By Nikolai Storozhenko, introduced and translated by John Helmer, Moscow
  @bears_with

This week President Joseph Biden stopped at an Illinois farm to say he’s going to help the  Ukraine ship 20 million tonnes of wheat and corn out of storage into export, thereby relieving  grain shortages in the international markets and lowering bread prices around the world.  Biden was trying to play a hand in which his cards have already been clipped. By Biden.  

The first Washington-Kiev war plan for eastern Ukraine has already lost about 40% of the Ukrainian wheat fields, 50% of the barley, and all of the grain export ports. Their second war plan to hold the western region defence lines with mobile armour, tanks, and artillery  now risks the loss of the corn and rapeseed crop as well as the export route for trucks to Romania and Moldova. What will be saved in western Ukraine will be unable to grow enough to feed its own people. They will be forced to import US wheat, as well as US guns and the money to pay for both.

Biden told his audience that on the Delaware farms he used to represent in the US Senate “there are more chickens than there are Americans.”  Blaming the Russians is the other card Biden has left.  

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EXILE



By John Helmer, Moscow
  @bears_with

The problem with living in exile is the meaning of the word. If you’re in exile, you mean you are forever looking backwards, in geography as well as in time. You’re not only out of place; you’re out of time — yesterday’s man.

Ovid, the Roman poet who was sent into exile from Rome by Caesar Augustus, for offences neither Augustus nor Ovid revealed, never stopped looking back to Rome. His exile, as Ovid described it, was “a barbarous coast, inured to rapine/stalked ever by bloodshed, murder, war.” In such a place or state, he said, “writing a poem you can read to no one is like dancing in the dark.”

The word itself, exsilium in Roman law, was the sentence of loss of citizenship as an alternative to loss of life, capital punishment. It meant being compelled to live outside Rome at a location decided by the emperor. The penalty took several degrees of isolation and severity. In Ovid’s case, he was ordered by Augustus to be shipped to the northeastern limit of the Roman empire,  the Black Sea town called Tomis; it is now Constanta, Romania. Ovid’s last books, Tristia (“Sorrows”) and Epistulae ex Ponto (“Black Sea Letters”), were written from this exile, which began when he was 50 years old, in 8 AD, and ended when he died in Tomis nine years year later, in 17 AD.  

In my case I’ve been driven into exile more than once. The current one is lasting the longest. This is the one from Moscow, which began with my expulsion by the Foreign Ministry on September 28, 2010.  The official sentence is Article 27(1) of the law No. 114-FZ — “necessary for the purposes of defence capability or security of the state, or public order, or protection of health of the population.” The reason, a foreign ministry official told an immigration service official when they didn’t know they were being overheard, was: “Helmer writes bad things about Russia.”

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IN THE FOG OF WAR THERE’S THE GUTERRES CERTAINTY AND THE CADIEU CERTAINTY – GORILLA RADIO SEES THROUGH THE COVER-UP



By John Helmer, Moscow
  @bears_with

Antonio Guterres is the Secretary-General of the United Nations (UN), who attempted last month  to arrange the escape from Russian capture of Ukrainian soldiers and NATO commanders,  knowing they had committed war crimes. He was asked to explain; he refuses.   

Trevor Cadieu is a Canadian lieutenant-general who was appointed the chief of staff and head of the Canadian Armed Forces last August; was stopped in September; retired from the Army this past April, and went to the Ukraine, where he is in hiding. From whom he is hiding – Canadians or Russians – where he is hiding, and what he will say to explain are questions Cadieu isn’t answering, yet.

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DID UN SECRETARY-GENERAL GUTERRES COMMIT A WAR CRIME AT AZOVSTAL?

By John Helmer, Moscow
  @bears_with

Antonio Guterres, the United Nations Secretary-General, is refusing this week to answer questions on the role he played in the recent attempt by US, British, Canadian and other foreign combatants to escape the bunkers under the Azovstal plant, using the human shield of civilians trying to evacuate.

In Guterres’s meeting with President Vladimir Putin at the Kremlin on April 26 (lead image), Putin warned Guterres he had been “misled” in his efforts. “The simplest thing”, Putin told Guterres in the recorded part of their meeting, “for military personnel or members of the nationalist battalions is to release the civilians. It is a crime to keep civilians, if there are any there, as human shields.”  

This war crime has been recognized since 1977 by the UN in Protocol 1 of the Geneva Convention.  In US law for US soldiers and state officials, planning to employ or actually using human shields is a war crime to be prosecuted under 10 US Code Section 950t.  

Instead, Guterres ignored the Kremlin warning and the war crime law, and authorized UN officials, together with Red Cross officials,  to conceal what Guterres himself knew of the foreign military group trying to escape. Overnight from New York, Guterres has refused to say what he knew of the military escape operation, and what he had done to distinguish, or conceal the differences between the civilians and combatants in the evacuation plan over the weekend of April 30-May 1.May.

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THE LAST DITCH IS POLAND – RUSSIA’S PHASE-3 PLAN FOR WESTERN UKRAINE



By Vlad Shlepchenko, introduced & translated by John Helmer, Moscow
  @bears_with

The more western politicians announce pledges of fresh weapons for the Ukraine, the more Russian military analysts explain what options their official sources are considering to destroy the arms before they reach the eastern front, and to neutralize Poland’s role as the NATO  hub for resupply and reinforcement of the last-ditch holdout of western Ukraine.

“I would like to note,” Defense Minister Sergei Shoigu, repeated yesterday, “that any transport of the North Atlantic Alliance that arrived on the territory of the country with weapons or material means for the needs of the Ukrainian armed forces is considered by us as a legitimate target for destruction”.  He means the Ukraine border is the red line.

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THE MATLIN PLOT, THE BROWDER PLOT AND THE NEW YORK TIMES PLOT



By Lucy Komisar,  New York*
  @bears_with

Here’s a story the New York Times has just missed.

US politicians and media pundits are promoting the targeting of “enablers” of Russian oligarchs who stash their money in offshore accounts. A Times article of March 11   highlighted Michael Matlin, CEO of Concord Management as such an “enabler.” But the newspaper missed serious corruption Matlin was involved in. Maybe that’s because Matlin cheated Russia, and also because the Matlin story exposes the William Browder/Sergei Magnitsky hoax aimed at Russia.

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YELLOW COAL, THE FUEL MADE OUT OF RACE HATRED — MAY DAY MESSAGE FROM SIGIZMUND KRZHIZHANOVSKY, 1939



By John Helmer, Moscow
  @bears_with

In 1939 a little known writer in Moscow named Sigizmund Khrzhizhanovsky published his idea that the Americans, then the Germans would convert human hatred into a new source of energy powering everything which had been dependent until then on coal, gas, and oil.

Called yellow coal, this invention originated with Professor Leker at Harvard University. It was applied, first to running municipal trams, then to army weapons, and finally to cheap electrification of everything from domestic homes and office buildings to factory production lines. In Russian leker means a quack doctor.

The Harvard professor’s idea was to concentrate the neuro-muscular energy people produce when they hate each other.  Generated as bile (yellow), accumulated and concentrated into kinetic spite in machines called myeloabsorberators, Krzhizhanovsky called this globalization process the bilification of society.

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IS CAESARISM THE PROBLEM, THE SOLUTION, A FANCY DRESS COSTUME, OR A PROPAGANDA CARTOON?



By John Helmer, Moscow
  @bears_with

In imperial history there is nothing new in cases of dementia in rulers attracting homicidal psychopaths to replace them.  It’s as natural as honey attracts bees.

When US President Woodrow Wilson was incapacitated by a stroke on October 19, 1919, he was partially paralysed and blinded, and was no longer able to feed himself, sign his name, or speak normally; he was not demented.

While his wife and the Navy officer  who was his personal physician concealed his condition, there is no evidence that either Edith Wilson or Admiral Cary Grayson were themselves clinical cases of disability, delusion,  or derangement. They were simply liars driven by the ambition to hold on to the power of the president’s office and deceive everyone who got in their way.  

The White House is always full of people like that. The 25th Amendment to the US Constitution is meant to put a damper on their homicidal tendencies.

What is unusual, probably exceptional in the current case of President Joseph Biden, not to mention the history of the United States,  is the extent of the president’s personal incapacitation; combined with the clinical evidence of psychopathology in his Secretary of State Antony Blinken;  and the delusional condition of the rivals to replace Biden, including Donald Trump and Hillary Clinton.

Like Rome during the first century AD, Washington is now in the ailing emperor-homicidal legionary phase.  But give it another century or two, and the madness, bloodshed, and lies of the characters of the moment won’t matter quite as much as their images on display in the museums of their successors craving legitimacy, or of successor powers celebrating their superiority.  

Exactly this has happened to the original Caesars, as a new book by Mary Beard, a Cambridge University professor of classics, explains. The biggest point of her book, she says, is “dynastic succession” – not only of the original Romans but of those modern rulers who acquired the Roman portraits in marble and later copies in paint, and the copies of those copies, with the idea of communicating “the idea of the direct transfer of power from ancient Romans to Franks and on to later German rulers.”

In the case she narrates of the most famous English owner of a series of the “Twelve Caesars”, King Charles I — instigator of the civil war of 1642-51 and the loser of both the war and his head – the display of his Caesars was intended to demonstrate the king’s self-serving “missing link” between his one-man rule and the ancient Romans who murdered their way to rule, and then apotheosized into immortal gods in what they hoped would be a natural death on a comfortable bed.

With the American and Russian successions due to take place in Washington and Moscow in two years’ time, Beard’s “Twelve Caesars, Images of Power from the Ancient World to the Modern”,  is just the ticket from now to then.

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RUSSIAN REPORTING ON THE SECRETS OF THE COMMAND BUNKER UNDERNEATH AZOVSTAL



By Margarita Menshikova, translated by John Helmer, Moscow
  @bears_with

On the day before Good Friday (Orthodox), Russian Defence Minister Sergei Shoigu reported at the Kremlin to President Vladimir Putin that at Mariupol,  inside the Azovstal steel works, about two thousand troops remain underground, including foreigners. Putin issued the following order: “There is no need to penetrate these catacombs and crawl under these industrial facilities. Seal off the industrial zone completely.”  

Four days earlier on April 17, the Defence Ministry spokesman Major-General Igor Konashenkov told the press that “up to four hundred foreign mercenaries were trapped [at Azovstal]… Most of them are citizens of European countries, as well as Canada. We have already reported earlier that radio conversations between militants in Mariupol are conducted in six foreign languages”  

Today, an unusually detailed report by the Moscow internet broadcaster Tsargrad was published to signal the strategic significance and political value of the NATO officers in their command bunker under Azovstal.

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