Rusal Wants Independent Chairman At Norilsk

LONDON (Dow Jones)-Russia’s United Co. Rusal, the owner of 25%-plus-two shares in Russian mining giant OAO Norilsk Nickel (GMKN.RS), wants changes to Norilsk’s board structure and an independent chairman, while questioning current Norilsk policy and strategy. "We consider it appropriate to change the current structure of the board to make it balanced and to have directors, representing interests of all three groups of shareholders equally," Rusal’s Director of Corporate Strategy Artem Volynets told Dow Jones Newswires Tuesday.

Norilsk declined to provide immediate comment.

The world’s largest producer of primary aluminum wants three board members to represent Rusal; three to represent Interros, an investment vehicle of Russian billionaire Vladimir Potanin, who owns just less than a 30% stake in the company; and another three independent members to represent minority shareholders.

Volynets also said Rusal suggests electing an independent Norilsk board chairman, to comply with U.K. corporate governance codes and international best practice.

Rusal wants Norilsk minority shareholders to support the two proposals at Norilsk’s annual general meeting June 30, Volynets said.

Norilsk announced Monday that proposed amendments to the company charter will also be discussed at the meeting. Volynets said it would be more appropriate to debate the proposed amendments to the charter when Rusal is represented on the Norilsk board. "We haven’t had a chance to understand and discuss the proposed amendments with Norilsk," he said.

Volynets called Norilsk "a terrific company, which can deliver huge potential to create value for all the shareholders. We want to be an active participant in this process."

Volynets said he is concerned about Norilsk’s management policy and these concerns are shared by minority shareholders.

"As Rusal is rapidly growing and has plans for organic growth of 50% in production of aluminum in the next five years, we can’t see any such plans at Norilsk." Volynets said there is a huge potential for growth for companies in Russia’s mining and metals industry and there are "good opportunities to invest in large scale organic growth projects bringing value to all shareholders."

Volynets also questioned Norilsk’s cash-flow strategy, as the company in his opinion has "a huge cash flow, but no organic growth pipeline."

Giving Rusal as an example of successful consolidation strategy, he said Norilsk’s recent acquisitions haven’t "resulted in a growth of production capacities or diversification into the new segments."

Rusal is interested in knowing more about the synergies generated from buying Canadian nickel producer LionOre International Mining Ltd. (LIM.T) and Russian energy assets, he said.

"We want to understand better Norilsk M&A strategy," Volynets added.

Last year Norilsk said it wants to sell its energy assets, notably Russia’s generating company OAO OGK-3 (OGKC.RS). However, Volynets said it would be better to spin off the company to existing shareholders.

Volynets also questioned Norilsk’s environmental policy in the Krasnoyarsk region, where the bulk of Rusal and Norilsk’s production is concentrated.

"While we are planning to invest $1.4 billion in the next five years, we don’t see any such program at Norilsk, and would like to understand what exactly is the specific program in regards to the environment," he said.

Rusal, controlled by Russia’s richest man Oleg Deripaska, purchased its Norilsk stake from Russian billionaire Mikhail Prokhorov’s Onexim Group in April.

Onexim received a 14% stake in Rusal for the sale of its Norilsk shares, plus an undisclosed amount of cash.

Rusal has repeatedly said it seeks a full merger with the company. "Our plans with regard to Norilsk hasn’t changed," Volynets said, without specifying whether a full merger is Rusal’s ultimate goal.

Norilsk’s management, supported by Prokhorov’s former business partner, Interros' Vladimir Potanin, opposed the idea and pursued an alternative merger with Russian tycoon Alisher Usmanov’s steel-producing company Metalloinvest.

Volynets said he is slightly concerned someone might be buying Norilsk shares from the market. "While the nickel price is down by 15% over the month after the deal closure, Norilsk shares are skyrocketing without any major corporate news, which reflects that someone is actively buying shares," he said, adding Rusal isn’t buying Norilsk shares and wants to know "who is doing it and why."

Norilsk shares were down $17 or 5.1% at $278 at 1025 GMT in Moscow.