Potanin eyes mining assets in Uzbekistan

The Moscow Times April 20 Metals magnate Vladimir Potanin's Interros holding is looking to acquire mining assets in Uzbekistan and tap into the country's vast uranium and gold reserves, an industry source said Wednesday. Interros is considering buying out the stake of U.S.-based gold producer Newmont Mining in its joint venture with the Central Asian state's major gold and uranium miner, said a manager at a major gold-mining firm operating in Russia. "I think there's almost no doubt the deal will go through soon," the source said, adding that the acquisition would also involve Polyus, Potanin's gold-producing unit. Interros and Polyus on Wednesday refrained from commenting, although neither company denied a deal in Uzbekistan would take place. "When our projects are finalized, we will announce them," Nina Demetsova, a spokeswoman for Interros said Wednesday. Polyus' expansion abroad is part of its long-term business strategy, Denis Davydov, a spokesman for the gold miner, said without elaborating. While rich in gold, Uzbekistan has a great deal more to offer in terms of uranium, analysts said. Its uranium reserves are estimated to exceed those of Russia. Kommersant reported Wednesday that Potanin was looking to acquire Newman's 50 percent stake in Zeravshan-Newmont, a joint mining venture between the U.S. firm and Uzbekistan's state-owned Navoisky plant. While Zeravshan-Newmont only mines gold, buying into the joint venture would provide an opportunity for Interros to get access to Navoisky, a major producer of both gold and uranium. Navoisky accounts for 60 tons of Uzbekistan's total annual gold output of 82 tons. It teamed up with Newmont in 1992 to form Zeravshan-Newmon but the venture's output has dwindled gradually in recent years, falling from 16 tons in 2002 to 7.5 tons in 2004. The Uzbek government has recently sought to annul the tax breaks previously agreed on for the miner -- a measure Newmont found unreasonable due to high costs of extraction -- signaling that it wanted to push the Americans out of the venture. Newmont's frustration may have further increased as the U.S. company in recent years failed to win any state tenders to develop other gold deposits in Uzbekistan. Vladimir Zhukov, an analyst with Alfa Bank, said it was unlikely that Interrros would be interested in Uzbekistan solely for shares in Zeravshan-Newmont, making Interros' interest in uranium the more credible explanation for the deal. Vladimir Katunin, a metals analyst with Aton, agreed. "It's not the kind of asset that Polyus usually buys or needs to buy, considering the size and potential of their Russian assets," Zhukov said. Polyus is Russia's largest gold miner and is majority-controlled by Potanin through his Interros holding, of which he is the president and majority shareholder. Potanin also holds assets in media, real estate, banking and agriculture businesses through Interros. Uzbekistan's uranium reserves could offer greater gains than its gold, said Alexander Mikhailov, chief geologist at SRK Consulting. "The Navoisky plant used to be the Soviet Union's largest uranium miner and only started to branch out into gold production in the late 1960s, after the geological exploration of gold deposits in Uzbekistan was initiated," Mikhailov said. Gold is often a byproduct of uranium mining, as it is often found near uranium deposits, he said. Interros would have fewer obstacles in accessing Tashkent's resources than would Western companies, Mikhailov said. "Uzbek state policy always used to be focused on the development of mineral deposits in joint ventures with Russian companies," he said. Russia has embarked on a major program to boost its nuclear energy output by building 40 nuclear reactors in the next two decades. The plan will require the country to increase its uranium supplies as current stocks dwindle. President Vladimir Putin in January welcomed Uzbek President Islam Karimov into a CIS nuclear alliance. Uzbekistan's membership in the club will provide "additional long-term possibilities for the building of a stable nuclear fuel energy base," Putin said.