RZD Seeks Partners for Copper Bid

Russian Railways is forming a consortium with the aim of bidding for the huge Udokan copper field in Siberia when the government sells it off this year, a spokesman said Wednesday.

The company will contribute a partly built railway link to the neighboring Chineiskoye deposit and will be responsible for infrastructure development relating to the billion-dollar Udokan project, said Dmitry Pertsev, spokesman for Russian Railways, or RZD.

"Yes, we are creating a consortium," Pertsev said in response to a question. He did not identify the state-owned railway's partners in the project.

Kommersant reported Wednesday that RZD could join forces with Vneshekonombank, the government debt agent and pensions manager, and Urals Mining and Metals, the country's No. 2 copper miner, to bid for Udokan.

Privately owned Urals Mining and Metals had no immediate comment.

The Natural Resources Ministry said Tuesday that it would announce the conditions within a week for the sale of Udokan, one of only two metals deposits large enough to be declared strategic and therefore unlikely to be sold to foreigners.

Citing a source in the Federal Subsoil Resource Use Agency, Kommersant said the contest might take place July 17 and the starting price had been halved to 4.5 billion rubles ($191.2 million).

The ministry has said investment in the project should total about $1.6 billion and that the state should pocket more than $3 billion from its development.

Udokan, located in the eastern Siberian region of Zabaikalsky, could produce up to 187,000 tons of copper per year, or about 15 percent of the country's current output of the metal.

The deposit's strategic status, like that afforded to the Sukhoi Log gold deposit, is understood to make it virtually impossible for a foreign company to gain majority control.

But analysts say few mining companies have the financial clout or technical expertise to develop Udokan on their own, making it likely that the winning bidder will be a partnership of some sort, possibly involving a state entity.