Russia: Rusal rounds up resource suppliers

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Russia: Rusal rounds up resource suppliers

Rusal has grown from scratch in 2000 to become the world's third-largest producer of aluminium. But if this rapid growth is to continue, the company will need to stick to the acquisition trail, picking up bauxite and alumina producers worldwide. Kathryn Wells reports.

Prey becomes predator

Russia's Rusal has a natural appetite for M&A. Created just five years ago after the merger of various aluminium smelters and alumina refineries belonging to two companies – Oleg Deripaska's Basic Element, formerly known as Sibirsky Aluminium; and Sibneft, then belonging to Roman Abramovich and Boris Berezovsky – it has swiftly risen to become Russia's largest aluminium company and the third largest globally.

Basic Element has gradually increased its ownership in Rusal ever since, taking full control of the company in 2004.

The company boasts at least one huge competitive advantage – access to the cheap hydropower supplies available in Siberia; its major drawback is a lack of self-sufficiency in raw materials, involving heavy costs transporting them to Russia from far-flung locations.

This has given it a voracious appetite for companies with access to supplies of the bauxite and alumina used to produce aluminium, and has led it to widen its vision beyond Russia to central Asia, Africa, south America, and lately even Australia as it goes in search of new sources.

Rusal's most headline-grabbing acquisition to date took place in April 2005 when it completed a $401 million deal for a 20% stake in Australia's Queensland Alumina, the world's largest alumina refiner.

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