Mikhail Prokhorov starts a rival for Norilsky Nickel

1 Aug '08
Amidst an escalating conflict with his former partner Vladimir Potanin, Onexim Group’s owner Mikhail Prokhorov intends to invest over $10bn in a new mining and metallurgical company, Intergeo, within the next five years.

Executives who have left Potanin for a better future with the new owner are determined to make the new company a global leader and even begin gold mining.

The assets obtained by Onexim after a recent division of KM Invest business between Mikhail Prokhorov and Interros Holding’s Vladimir Potanin will lay the foundation for Intergeo, a new player in mining business.

The most cherished treasure is licenses to develop 12 deposits of non-ferrous, precious and rare earth metals located in Siberia, the Far East and Transbaikal area, which reportedly contain 15 million tons of copper, nine million tons of nickel, one million tons of molybdenum, 750 tons of platinum group metals, and 90 million tons of titanium. Experts have tough times estimating the value of these deposits.

Leviathans in a scramble

The core of a future Intergeo team will comprise former top managers from Norilsky Nickel. Maxim Finsky, ex deputy CEO of Nornickel, will lead the new company.

As the Intergeo story unfolds, the relations between the two former partners and co-owners of several large businesses, Mikhail Prokhorov and Vladimir Potanin, are deteriorating dramatically and not only because of “deserters.”

Immediately following Intergeo’s announcement about using the deposit licenses for start-up operations some time ago, Norilsky Nickel threatened to start official investigation as the firm suspected Finsky of misappropriation and mismanagement of the company assets in favor of Onexim. Investigation results have not been disclosed yet.

In due course Intergeo managers will own a stake in the company as an option program is being worked out.

Ambitious plans

Onexim Group CEO Dmitry Razumov dwells on the company’s plans in detail. Intergeo is to invest $250m in exploration within two years and shift from just ore mining to metal production in five to eight years.

Onexim owners are determined to see Intergeo rank second in Russia (after Nornickel) for nickel output (150,000 tons a year), third or fourth (280,000 tons) for copper, second for molybdenum (15,000 tons), and lead the pack in titanium dioxide production (120,000 tons).

Razumov says the company intends to focus on development of their own deposits of complex ore and augment its extraction base through acquiring new licenses. The company wants to diversify and mine more than 17 tons of gold a year in the future.

Mikhail Prokhorov once announced intentions to work on the Udokansky copper deposit in Chita Region, the world’s third largest. But more recently the plans have been shelved as he failed to find partners for the endeavor.

The company will also provide professional consulting services to other market participants in management of mining-metallurgical companies.

“We are launching a unique project for new Russia. The company’s managers are to complete legal formalities, recruit employees and submit proposals on medium-term development strategies”, Razumov says.

For reference:

As experts estimate, Mikhail Prokhorov has gained $5bn as a result of the division of assets earned jointly with Vladimir Potanin. He made $7bn more when he sold 25 percent plus one share of Norilsky Nickel to Oleg Deripaska’s Rusal.

Onexim group is a $25bn private investment fund with business interests in the mining-metallurgical sector, energy industry including hydrogen power sector and nanotechnologies, as well as financial services, media, and real estate. The group was founded by Mikhail Prokhorov in 2007.

Norilsky Nickel is the world’s largest nickel producer. It posted $17.1bn revenue, $5.28bn+ net profit and $35.7bn+ capitalization in 2007. Major owners are Vladimir Potanin (29.8 percent) and UC Rusal (25 percent).
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