Rusal to use funds from Nornickel share buyback to upgrade, expand aluminium operations

Russian aluminium producer Rusal is to invest in the expansion and upgrading of its aluminium operations using capital raised through Nornickel’s proposed share buyback scheme, the company said on Tuesday June 15.

Rusal currently holds a 27.8% ownership in Nornickel, the Russian based high-grade nickel and palladium mining company. The exact amount of shares that will be repurchased by Nornickel has not yet been announced, although Rusal said it expects its stake to remain above 25%. 

Selling the shares will raise  additional funds to finance the completion of the company’s Taishet aluminium smelter (TaAZ) in central Russia, which is expected to produce an additional 428,500 tonnes per year of primary “green” aluminium in the first phase of its development. 

The new high-tech facility is currently being completed and once in full production, will be one of the world’s most environmentally friendly aluminium smelters, under the company’s new proposed low-carbon “AL+” brand.

The announcement to draw out capital and prioritize the company’s investment in aluminium production, comes at a time when primary aluminium and premium prices are at multi-year highs.

Aluminium prices on the London Metal Exchange are currently trading at their highest level since 2011, with the LME daily official price at $2,504 per tonne on Tuesday June 15.

Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $200-210 per tonne on Monday June 14 – its highest level since April 2015.

Rusal said an additional $5 billion will be required for rebuilds of its Krasnoyarsk, Irkutsk, Novokuznetsk and Bratsk smelters in Russia. 

“Share buybacks, as well as dividends, are a form of profit distribution among shareholders,” deputy general director Maxim Poletaev said. “This year, as suggested by Nornickel’s management team, the company’s final dividends for 2020 were reduced. However, thanks to the share buyback, the amount of funds distributed among [Nornickel] shareholders will be close to the dividend payments for 2019.”

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