East Siberian Metals Corporation (MBC - a subsidiary of IFC Metropol) has declined to take part in the construction of a magnesium plant in the Sverdlovsk region. The official reason was the sale of a controlling stake in the Urals enterprise to U.S. citizen Mark Lisnyansky, bypassing this investor. But the unofficial motive was the departure of Rusnano from the Russian Magnesium project, which would have guaranteed public funding. Experts told this columnist for RusBusinessNews that Anatoly Chubais's destructive stance has sealed the fate of high-tech manufacturing.

 

In 2011, 780,000 tons of magnesium were produced globally. Consumption of this lightweight metal has been steadily increasing in recent decades, and according to Anastasiya Redko, an analyst with the information portal Sogra, its use in the automotive industry will further this growth in the future. Almost all experts predict an increase in magnesium production in the medium term. According to Clark & Marron, demand for the metal will grow by an average of 7.9% annually, assuming there are no crises in the world economy before 2019.

 

However, experts caution that growth is possible only at a low price for the metal - no more than 50% higher than aluminum. China was the first to take advantage of this fact - thanks to its government's protectionist policy, that country was able to claim 85% of the world market by 2008. By that time, many Western companies that depend on complex, power-hungry equipment had shut down, and plants in the former USSR that at one time had held 30% of the magnesium market had reduced their output, shifting to the production of rare-earth metals.

 

But Russian experts were not prepared to accept Chinese dominance and began to look for ways to reduce the costs of magnesium production. The idea arose to use waste from asbestos production as a raw material instead of natural carnallite (on which magnesium is based). This plan was tested at a pilot facility at the Solikamsk Magnesium Plant. The results of those experiments were encouraging - the production cost dropped from $1,600 to $1,200 per ton. During the electrolysis process a number of other commercial products (silicon oxide in particular) were produced. For this reason, the decision was made to build a plant at the Asbest mining and processing facility, the waste from which can fuel more than just magnesium production.

 

The project had many advantages from the very beginning: an industrial site surrounded by a buffer zone for health protection, external utility systems and transportation lines, nearby sources of energy, and available skilled personnel. But oddly enough, none of the Russian investors seemed to be in a hurry to invest in this promising industry.

 

In 2004, the Swiss firm Minmet Financing Company S.A. took an interest in the project, acquiring a 50% stake in Russian Magnesium, OJSC. But the foreigners were not willing to finance the construction of the plant on their own. In January of 2011, East Siberian Metals Corporation agreed to become one of the project's strategic investors. Minmet Financing Company was promised that a loan would be forthcoming from Vnesheconombank.

 

The bankers in turn requested from the investors that Rusnano provide state backing for the credit. That corporation, which is headed by Anatoly Chubais, approved the project for funding, but did not become a shareholder of Russian Magnesium. The red tape dragged on for months, prompting the representatives of the joint-stock company to write an open letter to Russia's leaders in March of 2012, accusing Rusnano of failure to meet its deadlines for the construction of the magnesium plant. The corporation saw this as public pressure, and in late May it announced its reluctance to provide loan guarantees.

 

Immediately afterwards, Minmet Financing Company relinquished its controlling stake in favor of the firm Solimag, which belonged to Mark Lisnyansky. In the end, East Siberian Metals withdrew as one of Russian Magnesium's strategic investors.