Russian mining company boss attacks fellow businessmen as ‘adolescent’

The chief executive of the latest Russian mining company heading for the FTSE 100 has attempted to distance himself from the corporate governance woes afflicting his compatriots by slamming businessmen from the former Soviet Union as “showy” and “adolescent”.

Vitaly Nesis, the head of precious metals group Polymetal, added that many of his country’s industrialists think it a “requirement to circumvent or massage around [corporate governance standards]” and that they need to either “rationalise or take a leap of faith”.

“The Russian business culture is still an adolescent culture,” he said. “It has not learned patience or humility. It is still showy and wide-mouthed. This is just youth.”

The comments come after Polymetal announced last week that it is to list on the London Stock Exchange and hopes to raise $500m (£319.9m) in new money.

The remarks also follow a string of negative stories about the corporate governance standards of companies from the former Soviet Union, an issue which has caught the attention of David Cameron who has commented: “When these companies come to London, they’ve got to understand we do have rules of corporate governance that need to be obeyed.”

The prime minister’s intervention followed the debacle at the top of Kazakh copper miner , which was described as “more Soviet than City” by departing director Ken Olisa earlier this year after major shareholders clashed with the board. Furthermore, two of Russia’s most famous oligarchs – Roman Abramovich and Boris Berezovsky – are currently playing out their long-running feud in a London court.

Nesis added: “The perception of the Russian oligarch is negative in London. Such news only adds to the struggle.”

Polymetal, Russia’s fourth-largest gold producer and the country’s biggest silver producer, has a market capitalisation of around 200bn roubles (£3.9bn) on the Russian stock market, a valuation that should put it in the third quartile of the FTSE 100 by early December. Entry to the benchmark index would force UK funds seeking to replicate FTSE 100 performance to buy the miner’s shares, which is likely to add to recent criticism of the index for being too heavily exposed to foreign natural resources companies.

The group says it is switching its shares to London to give it access to capital for future projects while the listing will also create a more acceptable currency for global acquisitions. Around 15% of the group’s shares are also traded via Global Depository Receipts (a financial instrument used to own foreign companies) meaning the Russian limit of 25% would be breached if any of the three major investors wanted to sell. Polymetal’s leading shareholders are Czech billionaire Petr Kellner’s investment group PPF which owns around 20%; Nesis’s brother Alexander who holds around 18%; and billionaire Waterstone’s owner Alexander Mamut with around 10%. The trio are locked-in for 180 days.

Nesis said he receives no intereference from any of the main shareholders and is confident they will cause a London-listed company no embarrassment. “I know for sure that my brother never dealt with the devil. What I know of Mr Mamut and Mr Kellner, they haven’t either.”

Polymetal was Russia’s fourth-largest gold producer and the country’s biggest silver producer last year. After enjoying a stellar run on the back of its status as a safe haven, the value of gold has dropped slightly recently. Nesis said that if “there were a dramatic fall [in the gold price over the next few weeks] we will have to cancel the offer”, although he insisted that the company’s existing shares would still be listed in London.

Boris Berezovsky sues Roman Abramovich Over Sale of Sibneft Shares

Exiled Russian Boris Berezovsky is suing Roman Abramovich for £3.2billion over shares that he was forced to sell at a loss.

Boris Berezovsky claims that he was intimidated into selling shares in Russian oil company Sibneft for $1.3billion before fleeing his homeland in 2000. His lawyer, Laurence Rabinowitz, told London’s High Court yesterday that Boris Berezovsky was left with two options, either sell his shares in Sibneft for a considerable loss or risk having them seized altogether.

Boris Berezovsky

made clear to the High Court that Roman Abramovich is: “a man to whom wealth and influence mattered more than friendship and loyalty.”

Roman Abramovich has denied that Boris Berezovsky was his business partner, indicating that he was the sole owner of Sibneft. Roman Abramovich went on to sell Sibneft to Gazprom, Russia’s largest oil and gas company, for £8.4billion.

Boris Berezovsky resides in London and has held distinguished positions in Russia, where he is a member of Russian Academy of Sciences and a former government official and Deputy in the Duma.

Russia launches US telecoms satellite into orbit

Russian successfully launched a

into space late Wednesday, aboard a Zenit carrier rocket from the Baikonur space centre in Kazakhstan, a Russian space agency official said.

The launch provided more good news for the country’s space industry which is resuming normal service after some recent high-profile failures.

“The launch of the Zenit 3SLB rocket carrying an Intelsat satellite took place at the cosmodrome in Baikonur”, in the Kazakh steppes, at around 2100 GMT Wednesday, the Interfax news agency quoted the official as saying.

The satellite, produced by Orbital Services, will separate from the rocket at around 0330 GMT Thursday and take up its geostationary orbit, the source added.

The Intelsat-18 satellite is equipped with 32 transponders and will provide telecommunications services to customers in East Asia, US West Coast and the Pacific region.

It has an expected life-span of 15 years.

The successful launch came quick on the heels of the launch of a Soyuz-2 rocket and navigation satellite on Sunday, providing some welcome news for Russia’s space industry after recent crashes, groundings and delays.

The Roskosmos space agency was forced to temporarily ground all Proton-M rockets using the Briz-M upper stage booster after losing an advanced telecommunications satellite on August 18.

Only six days later, a Progress cargo vessel flying to the International Space Station aboard a Soyuz carrier rocket crashed back to Earth less than six minutes after launch.

Some Soyuz missions have since also been grounded, forcing a delay of the next manned flight to the space station until November 14.

Soyuz is currently providing the only workhorses running to and from the international space station, following the recent retirement of the American space shuttles.

Russia capital flight reaches $50 bn

Russia on Tuesday reported $18.7 billion in capital outflows in the third quarter that far outweighed state estimates and underscored the uncertainty gripping the country in recent months.

The Central Bank said the poor quarter came on top of $30.6 billion (23 billion euros) that had left Russia between January and June, bringing the nine-month total to $49.3 billion — three times the $16 billion seen one year ago.

Government officials have blamed the capital flight on a fragile business climate in which investors complain of red tape and the inability to defend their rights in court.

But economists said even more money headed for safer harbours in the second half of the year while investors waited for Prime Minister Vladimir Putin to announce whether he planned to grab back the presidency he held in 2000-2008.

Putin on September 24 ultimately disclosed plans to return in March polls that will almost certainly see him replace his hand-picked successor Dmitry Medvedev as head of state

But the market’s relief over that announcement was followed by the shock resignation days later of Russia’s respected finance minister Alexei Kudrin.

Emerging Portfolio Fund Research said some $443 million had been pulled out of funds that invested in Russia that week compared to $164 million that left on week ending September 21.

The veteran fiscal conservative’s brief has since been handed to First Deputy Finance Minister Igor Shuvalov — another Putin ally who previously oversaw Russia’s industrial policies.

The English-speaking Shuvalov has a reputation for being a consummate political insider who is responsible for restoring Russia’s image at international forums such as the G8.

Yet he is also seen as a more pliable figure who may be more willing to fit the country’s tight budget in line with Russia’s plans to boost expenditure on the military and other pricey projects.

Shuvalov told a US investment forum on Tuesday that his government was open for business despite Russia’s reputation for corruption and graft.

But he also urged patience and stressed the importance of social stability — a mantra of Putin’s rule that worries some investors.

“Improving the country’s business climate is a long-term process,” Dow Jones Newswires quoted Shuvalov as telling a US-Russian Business Council in Chicago on Tuesday.

“It’s impossible to change the country very quickly,” said Shuvalov. “It’s very hard work that will need time. In order to have that time we need social stability.”

The Central Bank figures were reported only moments after Shuvalov spoke and no Russian official has yet referred to them directly or tried to explain the enormous jump.

Officials had earlier predicted $36 billion in total capital outflows for 2011.

The Central Bank meanwhile also gave estimates for the capital position dependent on the price of oil — a key export earner for Russia and crucial for the public finances.

It said an oil prices average of $75 per barrel in 2012 would still see $15 billion in net outflows as the export income generated continued to leave the country.

The oil income would balance the capital outflows at $100 per barrel while a price of $125 would result in a capital gain for the year of $10 billion — still a very small figure compared with actual energy earnings.

The estimates highlight the importance of energy exports even as Putin and Medvedev have stressed the need to wean Russia off them and modernise its economy.

VTB Group Chief Financial Officer Herbert Moos said oil price shocks now posed one of the biggest risks to foreign investors in Russia.

“There is no large manufacturing, banking or financial sector (in Russia) that could absorb the shock” of plunging oil prices, Moos told the RIA Novosti news agency.