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. Last Updated: 07/27/2016

Stalin's Metals Plant Is Looking to Go Public

ReutersBoris Khodyukov, head of Krastsvetmet's jewelry-making division, speaking to reporters in Krasnoyarsk this month.
KRASNOYARSK -- It was built by gulag slaves during World War II and soon presented its first platinum and palladium ingots to Josef Stalin.

Six decades later, the Krasnoyarsk Nonferrous Metals Plant, known by its Soviet-era acronym Krastsvetmet, works closely with the West and is even considering going public.

"It's really hard to say what Stalin could have been thinking when prisoners from the local Kraslag labor camps produced the first platinum and palladium in March 1943," said Boris Khodyukov, head of the plant's jewelry-making division.

"Maybe he just puffed his pipe and said: 'Well done, keep up the good work and produce more of the stuff.'"

Today Krastsvetmet, in eastern Siberia, refines about 80 tons of gold per year, roughly half of Russia's output, and processes all but a tiny fraction of the country's platinum-group metals.

Krastsvetmet's gold output, buoyed by world prices that have doubled since 2003, has grown 2.5 times over the last five years, CEO Igor Tikhov said.

Silver refining is forecast to jump tenfold from around 100 tons annually at present. "Silver prices nearly tripled over the last few years, so we had to start refining the metal so as not to miss out on such lucrative business," Tikhov said.

Non-ferrous metallurgy is the backbone of the Krasnoyarsk region, the country's main gold-mining region and an area four times the size of France populated by only 3 million people.

Polyus Gold, the country's largest gold miner, and metals giant Norilsk Nickel, the world's largest palladium miner, are among the pillars of the local economy.

Once witness to Stalinist repression and a top-secret enterprise, Krastsvetmet now boasts state-of-the-art workshops equipped with Western machinery and is trying to adapt to market economics.

Tikhov said the state-owned firm might even consider joining the ranks of those that have raised billions of dollars in share offerings at home and abroad.

"The idea of an IPO -- the buzzword in Russia now and one that has swept through the Russian market -- would be an interesting option for us as well," he said, without elaborating.

Norilsk Nickel, Polyus and precious metals miner Polymetal are all major suppliers to Krastsvetmet, and Tikhov said selling stakes in the company to these firms could also be an option.

"My personal opinion is that we should issue additional shares to these firms and thus solidify their status as suppliers of raw materials to Krastsvetmet," he said.

Krastsvetmet, employing 3,200 workers, is a joint stock company but 100 percent-owned by the Krasnoyarsk regional government.

The company's net profit has more than trebled in the last six years, reaching 1.8 billion rubles ($69.23 million) last year.

The Krasnoyarsk region is packed with natural resources, holding 99.9 percent of all Russian platinum, 65 percent of its nickel, 30 percent of copper and coal, 20 percent of lead and 10 percent of gold.

But the harsh climate and huge distances are a challenge. "Our greatest disadvantage is that we are equally 4,000 kilometers away from European and Asian markets," Krasnoyarsk Governor Alexander Khloponin told visiting foreign journalists. "There's only one way out -- to produce competitive output."

Diversification has become Krastsvetmet's motto.

"We work on competitive, fickle markets," Tikhov said. "Our experts now cudgel their brains about what to do if these markets tumble. ... Our ideology is output with high added value."

To cushion possible fluctuations in metal prices, the plant launched its own jewelry manufacture in 1994. Hundreds of sophisticated machines work round-the-clock, 365 days per year, churning out kilometers of gold chains and bracelets.