May 26, 2010 10:34 ET

Mining Insight: Investors Are Hopeful That Changes at Norilsk Nickel Will Lead to Higher Earnings

LONDON and MOSCOW--(Marketwire - May 26, 2010) - Russian miner OAO Norilsk Nickel, the world's largest nickel producer, is closely watched by investors in Russia and abroad as it is getting ready to vote on its new Board of Directors that can possibly bring changes to the mining titan's management and operations. Some investors expressed optimism about the coming changes, stating that Norilsk's current leadership headed by Vladimir Potanin failed to respond to the economic crisis, and the company is recovering slower than the general market.

Norilsk Nickel is controlled by three major Russian businessmen, Vladimir Potanin, owner of Interros, Alisher Usmanov, owner of Metalloinvest, and Oleg Deripaska, owner of Rusal. Mr. Deripaska, a vocal ally of Russian Prime Minister Vladimir Putin, purchased the 25% stake in Norilsk from Mikhail Prokhorov in the Fall of 2008 for over $8 billion before the financial crisis hit Russia. As the country emerges from the crisis, Deripaska wants to increase his control over Norilsk and raise profits and dividends. So far he has been the silent investor in the company but expressed concerns about the company's poor performance and dividend policy.

Shawn Triolo, senior analyst with Mining Insight Russia (MIR), says that Oleg Deripaska is likely to try to improve Norilsk's performance in 2010: "The market is aware that Mr. Deripaska is a very agressive businessman whose activities are supported by Vladimir Putin. The fact that Mr. Deripaska was included in the list of candidates to the Norilsk's Board, while Vladimir Potanin was not, is a clear indication that Deripaska wants to increase control over the company. It's an expected move given his investment in the company and his talent as a crisis manager. Another benefit of Deripaska's increased interest in the miner is that he is better positioned than Potanin to work together with the company's CEO Vladimir Strzhalkovsky, a former KGB operative and personal friend of Vladimir Putin. The price of nickel is stabilizing and it's an opportune time for Deripaska to position himself to get return on his investment," says Triolo.

Norilsk's investors are also hopeful that possible shift of control over the company to Deripaska might lead to higher profits and better relationship with Russian government. The final vote on the board of directors of Norilsk Nickel is expected next month. Follow Mining Insight Russia's live coverage of the vote. Mining Insight Russia is a research and analysis group which tracks Russia's metals and mining industry.