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. Last Updated: 07/27/2016

Basic Element Plans Metals Output Boost

Oleg Deripaska's Basic Element group plans to raise ferro-molybdenum production by 10 percent this year and a further 10 percent next year to meet growing world demand for the steel additive.

Daniel Major, who heads Basic Element's resources business, said Friday the group was also bidding for the Aynak copper deposit in Afghanistan and was awaiting a decision from the Afghan government by the end of November.

"There's risk attached, but it's a world-class asset," Major said after a briefing to celebrate the firm's 10th birthday. "You're looking at a $2 billion investment in total."

Basic Element produces all of Russia's ferro-molybdenum and about 6 percent of world supply of the metal used to toughen steel. Its resources arm contributed $544 million of the group's total $18.5 billion in revenues last year.

The group more than tripled ferro-molybdenum output to 4,462 tons last year from 1,401 tons in 2005 after completing upgrades to its 55-year-old Sorsk plant in the Khakassia republic and its Zhireken plant in the Siberian Chita region.

"We're looking for another 10 percent this year and another 10 percent the following year," Major said. "At that point we'd be pushing our existing plants to the limit. Our strategy is to maximize our existing plants."

He said the investment costs for the modernization and expansion had yet to be determined.

"We're working through the numbers now," he added.

The company sells all its ferro-molybdenum to traders. The alloy has risen 26 percent in value this year on tight supply and growing demand from the steel sector.

Its molybdenum concentrate output last year was 7,717 tons, up from 7,532 tons in 2005.

Basic Element's Afghan bid stems from its interest in the Tethyan copper belt that stretches through Pakistan and other parts of Asia.

Major said the company made its bid in May but that the Afghan government had postponed a decision.

The next deadline for a decision, he said, was Nov. 24.

He said the Aynak deposit, 30 kilometers from Kabul, contained about 380 million tons of copper at an average grade of 1.7 percent.

Basic Element is also exploring in Mongolia and has nine exploration licenses in Kyrgyzstan, where its 67 percent-owned Caspet Ltd. subsidiary is exploring the Jany Jyldyz gold deposit.

Major said he hoped to have prepared early-stage resource statements for two of the deposits by early next year.

"Our focus as a company has been loosely described as Russia and surrounding countries," he said. "From a cultural point of view, it's easier to work. But more importantly for us, the geology is particularly exciting."