Norilsk bags Canadian metals giant

Russian metals firm Norilsk Nickel has completed its purchase of 90% of Canada’s mining firm LionOre, paving the way for a full takeover of the company.

Norilsk is extending its offer for the rest of LionOre's shares until the 10th of July. 

LionOre is one of the largest remaining assets on the world's highly-consolidated nickel production market.

Norilsk Nickel has already got approval from the Canadian authorities to buy out LionOre for $US 6.3 BLN.

However, one of Norilsk's main shareholders, Mikhail Prokhorov, has criticized the company for overpaying.

Management insists the tie-up is worth the money.

“It is a very fair valuation, We  have spent a lot of time valuing the company, looking very carefully not only at the value that LionOre has today but also at the value LionOre will bring in the future, including effects from our operations with assets we acquired internationally. And we also need to look to the future value that LionOre would bring with technology, advanced technology which is focused on processing low nickel-barium sulfate ores,  which are a type of ore that Norilsk Nickel is rich in,” said Deputy General Director of Norilsk Nickel Ralph Morgan.

However, nickel is not the only interest for the company. At the annual shareholders meeting, NorNickel’s management called the electricity sector one of its priorities.

The company has recently bought a stake in wholesale generating company OGK 3 and plans further acquisitions.

“We are planning to acquire at least a controlling stake in OGK 3 by August this year and OGK 3 will be the major part of assets of the company that will be spinning off. As well, we are thinking right now of consolidating controlling stakes in at least a couple of TGKs in order to give more substance to the assets that will be subject of the spin off,” said the Director of Nornickel Denis Morozov.

After consolidating its electricity assets, Norilsk Nickel will then spin off its electricity assets and create a new blue chip, by the end of the year.

The strategy has already proved to be successful. In 2005 the company spun off its gold mining assets – creating Polus Zoloto. Since then, the capitalization of the new company has grown by 50 %.