Bystrinsky GOK produced dividends – Newspaper Kommersant No. 179 (7380) dated 09/28/2022

Bystrinsky GOK, owned by Norilsk Nickel, Interros and the Chinese fund Hopu, has paid dividends to shareholders for the first time. Last year, plans were discussed to launch GOK for an IPO, but now they have become irrelevant due to the geopolitical situation. At the end of 2021, the retained earnings of the project amounted to RUB 70 billion. Analysts say earnings could shrink in 2023 due to lower copper prices.

The Bystrinsky GOK (it includes the Bystrinsky deposit and the GOK in the Trans-Baikal Territory) paid dividends to its shareholders in the first half of the year, Kommersant’s sources say. Norilsk Nickel owns a 50.01% stake in the asset, Vladimir Potanin’s Interros structures own 36.66%, and the structure of the Chinese fund Hopu Investments owns 13.33%. The companies did not provide comments.

The mine reached full capacity in the second quarter of 2020. In 2021, the GOK produced 68 thousand tons of copper concentrate and 258 thousand troy ounces of gold in copper and gold concentrates. Bystrinsky’s EBITDA increased by 50% year-on-year to $1 billion. According to reports, in 2021, Bystrinsky GOK had RUB 70 billion. undistributed net income. The project does not have a separate dividend policy. Norilsk Nickel in its IFRS financial statements for the first half of the year reflected an increase in profit from investment activities by 4.5 times compared to the same period last year – up to 9.6 billion rubles. If we assume that this additional profit is dividends from Bystrinsky GOK, then in general the project could pay shareholders about 17 billion rubles. This year, most companies in the sector refused to pay dividends due to high uncertainty.

Bystrinsky GOK is practically not integrated into the Norilsk Nickel production chain. The shareholders of the asset have been nurturing plans for an IPO of GOK for a long time. In March 2021, Rusal, which is one of the main shareholders of Norilsk Nickel, Interros and Roman Abramovich’s Crispian agreed to spin off Bystrinsky GOK in favor of all Norilsk Nickel shareholders. After the spin off, the shareholders would receive shares of Bystrinsky listed on the Moscow Stock Exchange. Rusal then agreed to sell its 14% stake in Bystrinsky to Interros for $570 million. Based on this, the entire asset was valued at $4 billion.

“Bystrinsky GOK is a separate asset, geographically remote and practically not integrated into the Norilsk Nickel production chain, there are no significant synergies between the two assets. The project has an independent and very interesting investment history for the market, so we believe that its spin-off will create new value for all Norilsk Nickel shareholders,” Vladimir Potanin said in March 2021.

But these plans were never realized. Norilsk Nickel was accused of disrupting the Rusal deal, since the issue of spinning off Bystrinsky GOK was not submitted to the company’s board of directors. Rusal said that “it is in the best interests of Norilsk Nickel to have Bystrinsky GOK on its balance sheet.” At the same time, in 2021, the Chinese shareholders of Bystrinsky GOK had an option to sell their stake for $428 million to Norilsk Nickel, but they did not use it.

In fact, 2021 was the first year of full-fledged operation of the GOK after reaching capacity, says Sergey Grishunin from the NRA. There were plans for spin offs and IPOs, but today, against the backdrop of falling markets, they are irrelevant, the expert says. Therefore, it is logical that investors decided to distribute profits through dividends. “Next year, most likely, it will not be possible to increase profits against the backdrop of falling commodity prices. But given the general underfunding of the copper mining industry, as well as the artificially low price of gold, already in 2024 and beyond, the company is likely to show profit growth,” the expert says.

Evgeny Zainullin