Economic Sanctions Hurting Russian Miners

October 27, 2014

 

When Russia intervened in Ukraine affairs the west took action by instituting economic sanctions. At first Russia brushed off the measures and said it would have no impact on their economy. Now, a year later many of Russia's mining tycoons including Mikhail Prokhorov, are looking to unload their stakes in mining operations that are struggling due to these sanctions.

 

"Whenever you hear billionaires say they are not affected by sanctions and the general situation in Russia, that's not quite true," Yulia Bushueva told Bloomberg. Bushueva helps to manage roughly $500 million at Arbat Capital in Moscow.

 

Combining with the sanctions is a global slowdown in metal demand that has shareholders in steel and nickel selling some assets to relive debt and add more cash to their books. According to Bloomberg, the net worth of Russia's seven richest mining and metals magnates has dropped $80.8 billion at the start of the year. Well know Russian mining companies including OAO Severstal and OAO Norilsk have increased dividends from their businesses after selling assets.

 

Another reason for the sudden sell-off is the chance that the Chinese economy, after decades of double-digit growth, is beginning to slow. If this happens it could mean a significant decrease in demand for Russian mining minerals. After China no other country is poised to fill the void as the United States, South America and Africa are all struggling with mining costs.