Rusal and Omen to create joint venture

The joint venture “VolkhOR”, which will be held in equal share (50/50), will be based on a production site at the Volkhov aluminium smelter (“VAZ”). The JV’s capacity is estimated at 5kt of auto-components per year. Start-up operations will be held in September-December 2014. The start of production is scheduled for the first quarter of 2015.

Rusalwill provide the joint venture with 5ktpa of primary foundry alloys with an option to increase supplies. Omen will in turn create cutting-edge automotive components, in line with the best global standards.

The financing will be provided on a parity basis, with each party investing $1 million into the project, with external borrowings to cover the remaining funds required. Total investment volume is estimated at $20.6 million from 2014 through 2016.

“Thanks to its close location to key sales markets as well as lack of local competition, VolkhOR has great potential. We expect that engine parts, steering columns, break-gear details and other auto-components produced at the JV will be in high demand in Russia and other CIS countries. GM, Ford Sollers and Renault have already registered their interest in such products,” commented Alexey Arnautov, UC Rusal’s director for new projects.

The shareholder agreement is another step forward in the partnership’s development following the signing of a memorandum between the Leningrad region, VAZ’s trade union committee and Omen at the XVII St. Petersburg International Economic Forum in 2013.

Earlier, Rusal and The State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ (“VEB”) announced the signing of a Memorandum of Intent to convert Rusal’s loss-making smelters. Rusal and VEB intend to work together to create production facilities to produce aluminium- and aluminium alloys-based automotive components, rolled and cable products.