Hambro companies buy more Russian skills

Aricom, the Anglo-Russian developer of mineral resources, has agreed to acquire a 68.49% holding in OJSC Giproruda for a cash consideration of some $8 million, conditional on Russian Anti-Monopoly approval. Based in St Petersburg, and employing 148 people, Giproruda is one of Russia’s most respected mining design institutes specialising in the analysis and design of mining projects. Giproruda has unique experience in the design of pits and mines in extreme mining, geological and climatic conditions. Other areas of expertise include the development of efficient mining technologies, project repair base layout, design and transportation services, the repair of technical equipment, storage facilities and the design of administrative and domestic facilities.

Peter Hambro’s mining companies, of which Aricom is one, appear to be forward looking in an approach to the skills shortage that involves locking in the expertise of companies like Giproruda. Late last year, Peter Hambro Mining (PHM) acquired an 80% equity holding in the Irkutskiy Institute for Scientific Research of Precious and Rare Metals and Diamonds (Irgiredmet), one of the best known Russian laboratory research and scientific consulting companies. The Irgiredmet laboratories provide a range of services in the testing, developing and optimizing of gold, precious metals and diamond projects. At that time, PHM intended to extend the offer to the holders of the remaining 20% of Irgiredmet’s equity on the same terms, implying a total acquisition value of $50million. It was eexpected that the acquisition of the remaining 20% would be completed in early 2007.

These acquistions are also focussed on the needs of the Hambro companies. Iron ore is a key area of specialisation for Giproruda. This will be of specific benefit in the analysis and design of a number of Aricom’s future and existing development projects. Giproruda will continue its work programme for other customers but will be given an opportunity to focus attention on Aricom’s portfolio of projects.

Giproruda believes it currently has about a market share of the project design services market in the Russian mining sphere. As well as development plans to grow its operations within the CIS, Giproruda is advancing its international programme with contracts signed on a number of projects as well as an application for ISO 9000 status.

Jay Hambro, Chief Executive of Aricom, commented: “Aricom’s project portfolio now contains a sizeable amount of reserves and resources which are all located within 500 miles [800 km] from the Russian-Chinese border. We are an existing client of Giproruda and their position, as a leader in Russian mine design and development, will significantly enhance the Group’s ability to exploit the massive potential inherent in our assets. With Kuranakh nearing production, Aricom’s next task is to bring on stream two very large iron ore projects – with Giproruda’s wealth of experience in iron ore, I believe there will be significant benefits in them becoming part of our Group.”

Aricom plc is a leading developer of Russian metal and mining assets, focusing on iron ore and ilmenite production and delivery. The Company was established in September 2003 to develop projects, situated in the northwest of the Amur Region, in Russia’s Far East. These projects are set to service the Chinese and Russian commodity market. Aricom currently operates three projects in the Amur region and the adjoining Jewish Autonomous Region, which will be the subject of International Mining’s September issue Operations Focus.

Aricom’’s Kuranakh, K&S and Bolshoi Seym projects have combined estimated reserves and resources of over 1,000 Mt of iron ore and ilmenite ore. The location of the deposits offer a significant logistical advantage being close to the Trans-Siberian-Express and the Baikal-Amur Magistral railways.

In 2005, 700 Mt of iron ore were shipped globally, of that 300 Mt (43%) was shipped to China. In June 2006, Aricom announced a Memorandum of Understanding with China’s largest nonferrous metal company Aluminium Corp China (Chinalco), to co-operate in the design and development of a titanium sponge production plant in China.

Giproruda Institute is the oldest leading design institute in Russia, working in the complex mining enterprise design sphere dealing with open-pit and underground excavation. Giproruda has built and reconstructed around 200 enterprises in Russia, Kazakhstan and Transcaucasia. The institute has designed enterprises, which now work in China, India, Iran, Egypt, Bulgaria, the Balkans and other countries.

For the calendar year ended 31 December 2006, Giproruda had revenue of $6.8 million, operating profit of $1.4 million, profit after tax of $1.5 million and net assets of $3.3 million – all of these figures are as yet unaudited.