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. Last Updated: 07/27/2016

RusAl, SUAL Vie for 'Half of Montenegro'

OSLO -- Russian aluminum groups SUAL and RusAl are the likeliest buyers of Montenegro's massive KAP aluminum smelter, based on the interest shown so far in the privatization sale, a KAP executive said last week.

Montenegro is offering a 65.4 percent stake in Kombinat Aluminijuma Podgorica, or KAP, which would be the first major privatization move in Montenegro since October 2002.

RusAl and SUAL are two out of four companies that the privatization agency has said have passed the first hurdle and qualified to bid. Initially eight companies expressed interest.

"I am expecting SUAL or RusAl [to be the buyer]," KAP's market analyst Goran Djukanovic said on the sidelines of a Metal Bulletin aluminum conference in Oslo. Djukanovic works as a senior adviser to KAP's top management.

KAP has an ingot smelter that aims to produce 120,000 tons this year, a 240,000-ton alumina refinery and related government-owned bauxite mines. It accounts for half of Montenegro's industrial output and 80 percent of exports.

"Buying KAP is not just buying a company -- it is [like] buying half of Montenegro," Djukanovic told the conference.

Djukanovic said that he based his view on the degree of interest shown by the prospective bidders, not on knowledge about the preferences of the privatization agency. He said SUAL had been especially active, visiting KAP several times.

"RusAl has also visited, but not as often as SUAL," Djukanovic said.

The privatization agency has said that RusAl and SUAL, Swiss-based commodities trader Glencore and Indian firm Vedanta Resources have qualified as bidders, Montenegrin media reported Tuesday.

The agency will shortlist all eligible bidders for the purchase of a majority stake in its sole aluminum smelter, local media said.

The Republika daily said firms that still have some time to qualify include Germany's BAGR group, Austrian firm A-TEC, Montenegro's Vectra, Lithuania's Ukio Banko Investicine Grupe, and Swiss firm IMR, which submitted its offer after deadline.

Final bids are to be submitted by Dec. 1.

Montenegro has said it wants a strategic partner with 2003 aluminum production of at least 120,000 tons or annual sales of at least 165 million euros. Financial investors could qualify only if they manage funds of at least 300 million euros.

The government has said it wants a buyer ready to invest at least 100 million euros to upgrade and develop the plant and improve its standard of environmental protection.

Djukanovic said it was clear that KAP would not be sold for cash, but for a commitment to invest and to assume debts to the Montengrin government, Vectra and international debt-holders.

The government has said that the buyer of KAP could also purchase the government's minority stake in a bauxite mine and get a concession to exploit bauxite ore to be processed only by KAP.

Bauxite, which is refined into alumina, is the main raw material for aluminum.