$2Bln Zambian Deal Seen In July

Three Russian metals companies hope to announce a major investment worth more than $2 billion in Zambia next month, Russian diplomats said, reflecting a growing interest in acquiring mining assets abroad.

Representatives of the three companies will visit Zambia in July to conclude negotiations on the "mining transaction," said Mikhail Afanasyev, an assistant to the Russian ambassador in Lusaka.

He declined to provide details about the agreement or identify the Russian or Zambian companies.

"Its a commercial secret, you know," Afanasyev said by telephone. "The embassy cannot reveal names of the companies involved because that would look like jumping the gun."

Norilsk Nickel and Basic Element are likely to be among the three companies. Flush with cash from high world metals prices, both are actively looking to expand.

Norilsk Nickel CEO Denis Morozov told The Moscow Times that he would not comment on whether his company had any plans in Zambia. Norilsk Nickel is Russia's biggest producer of copper, while Zambia is Africa's biggest producer of the metal.

BasEl officials directed all questions to a representative with the company's resources division. The representative was traveling Wednesday and unavailable for comment.

The Zambian Embassy in Moscow said it had no information about the negotiations or the July visit.

"We have so far not received any communication from the Russian side about a delegation going to Zambia in July," said Eusedus Katai, the minister-counselor at the embassy.

He said, however, that he had noticed an increase in interest from Russian companies in recent months. "We have had a lot of delegations and prospective investors going to Zambia, and many have shown interest in the country's mining sector," he said.

A Russian deal would be good news for Zambia, he said. "This is a very good development and speaks volume about the investment prospects in Zambia," he said.

Russia's outgoing ambassador to Zambia, Anvar Azimov, said in an interview published this week in The Post, Zambia's biggest newspaper, that the Russian negotiations involved multibillion-dollar companies and that the agreement would be worth more than $2 billion. He also said the deal would create many jobs for Zambians.

The ambassador was unavailable for comment Tuesday and Wednesday, and an aide said he was out of the country.

Russian investors are examining Zambia as they look to expand and search for higher returns within emerging markets, said Eddie Kapungulya, president of the Zambia Association of Chambers of Commerce and Industry.

"Zambia is witnessing an increase in inflow of foreign investors from Russia and Germany, flocking to the country to explore business opportunities, especially in the mining sector," Kapungulya said.

He attributed the trend to recent government policies aimed at attracting foreign investment to the mining sector.

Zambian President Levy Patrick Mwanawasa said in April last year that the country planned to double copper output to 1 million tons by 2011. "We have opened new copper mines and are now ready to attract more foreign investors to the country," he said.

China has a foothold in the country through its acquisition of the Chambishi copper mine in northern Zambia in 1998. India's Vedanta Resources and Canada's First Quantum Minerals also has significant operations there. In late July, Australia-based Equinox Minerals Limited is to start partial production at the Lumwana copper mine, the largest open-pit copper mine in Africa. Total investment in the mine is expected to reach $1 billion.

Norilsk Nickel has a strong presence in Africa, including a large nickel operation in Botswana that it acquired when it bought Canada's LionOre Mining last year.

RusAl, the world's largest aluminum and alumina producer, paid $300 million last year for a 77.5 percent stake in the Aluminum Smelter Company of Nigeria, or Alscon. In addition, RusAl owns the $350 million aluminum industrial complex in Frie in Guinea and the country's Dyan-Dyan bauxite field, one of the world's largest bauxite deposits.

RusAl and BasEl are both owned by billionaire Oleg Deripaska.

A RusAl spokesman said Wednesday that the company was not thinking of entering Zambia.

Severstal-Resource, a division of steel giant Severstal, holds a 61.5 percent stake in African Iron Ore Group, as well as exploration rights for its 500 million-ton deposit in Liberia, for which it paid $37.5 million last month.

A Severstal-Resource official said Wednesday that the company was not planning any concrete projects in Zambia, although the area was "very interesting."

Among other Russian interests in Africa, billionaire Viktor Vekselberg's Renova Group signed an agreement with South Africa's Harmony Gold Mining in February last year to jointly develop gold and uranium deposits in South Africa. State diamond monopoly Alrosa owns a 32.8 stake in the Katoka Mining Society, which manages an industrial complex Angola.

Officials at the Ural Mining and Metallurgical Co., Russia's second-biggest copper producer, did not answer telephone calls Wednesday. Alexander Khanin, a spokesman for the Russian Copper Co., the No. 3 company, said his firm had "no interest in Zambia or in Africa."

Metalloinvest spokesman Igor Tikhomirov said he was not aware of any projects in Zambia and asked a reporter to call back. He did not answer repeated calls later in the day.

Marat Gabitov, a metal analyst at Aton, said Zambia would be an attractive market for Norilsk Nickel, Metalloinvest and Severstal.

"Those companies are in position to invest billions of dollars to expand into foreign markets," Gabitov said. "Since emphasis would be on copper-cobalt mining, Norilsk Nickel could be expected to lead the thrust."