Incubator behind Polymetal's move to London

02.11.2011 | Financial Times

The mining group founder talks to Michael Kavanagh about why he has set his sight on the FTSE 100.

Discussing the start of formal trading of Polymetal and expectations of imminent promotion to the FTSE 100, Alexander Nesis prefers to be interviewed through interpreters in his native Russian.

But, when the thorny issue of corporate governance surrounding attempts by Russian and other foreign companies to join Londons main list is raised, the founder of the gold and silver miner uses the English term. It is not, of course, Russian has no words for corporate governance. It is simply that the English version is shorter to pronounce and has become businessmans slang in his native tongue, he says.

On Wednesday, Polymetal, Russias fourth-biggest gold and leading raw silver miner by volume, formally joins Londons main list after a £491m share placing last Friday and abandons its previous main listing in Moscow where it floated in 2007.

However, its expected promotion to the FTSE 100 at the next quarterly review comes amid concerns over a number of companies from ex-Soviet countries seeking to join Londons main list. These centre on limited free floats and the influence of leading shareholders and founders.

But Mr Nesis, whose ICT Group controls just under 20 per cent of the mining group he founded and which is managed by his brother Vitaly as chief executive insists he has ticked all the boxes on corporate governance and free float conditions, which apply to premium rather than global depositary receipts (GDR) listings in London.

Unlike some other ex-Soviet and other overseas applicants, he says it has never used a waiver or sought exemptions to the usual rules that apply to companies included in the FTSE 100.

As a wider debate rages about the merits of including more foreign companies in the index, Mr Nesis talks through a conveyor belt of other ventures that he hopes to eventually divest by flotation or sale.

Earlier this year Mr Nesis, ranked among Russias richest 40 billionaires, successfully helped raised $718m in a flotation of Nomos Bank, ranked as Russias eight-largest lender by assets. Its GDRs are listed in London.

Mr Nesis is a former nuclear scientist who helped to produce Soviet navy submarines and icebreakers in the USSRs Baltic shipyards. He describes his ICT Group as an incubator preparing a wide range of interests for corporate independence and potential sale.

His current focus is a $1.5bn project aimed at producing 13,000 railroad cars a year at a plant in the remote monastery town of Tikhvin, 125 miles east of St Petersburg. So far, $1.2bn has been spent. The venture aims to profit from replacing the ageing fleet of Soviet rail stock.

He has twice been involved in the management of, and buying and selling, Baltiysky Zavod, the leading Russian shipyard that required drastic restructuring following the end of Soviet navy shipbuilding. Real estate interests and ferroalloy producer Oriel Resources have also been sold on.

ICT has also recently acquired a 12 per cent stake in Uralkali, the worlds leading potash producer by volume, which is also considering plans for a premium London listing.

His track record, he argues, demonstrates his willingness to let go of businesses he has built up.

But Mr Nesis concedes that the owners of some Russian companies will carry a legacy issue for ever over the way property was privatised and redistributed after the collapse of the Soviet Union. It was not always fair, he says.

But, distancing his own businesses and others such as the internet companies Mail.Ru and Yandex, or retailer Magnit from this legacy issue, he states that Russia presented no particularly worrying political risk. The discount applied for Russian companies is not on the basis of political risk, but corporate governance that is granted, he says.

Meanwhile, he argues that a move to a premium listing in London by Polymetal simply reflects a rational attempt to improve its marketability. The Russian financial markets are too narrow for a business such as Polymetal. When the market is narrow, that means high volatility, he says. FTSE inclusion should also improve Polymetals access to debt financing, he adds.

And while the 48-year-old appears to have plenty of future projects on the go, he has no intention of establishing a dynasty of Russian business leaders. Instead, he wants to protect the inheritance of his two grown children and recently born infant. The former Soviet shipyard supervisor seems clear that his children will not follow his circuitous path to becoming a billionaire capitalist even if their fortunes will be secured. My kids are not businessmen and they are not going to be, he laughs.

Source:  Financial Times

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