Mineral giants Russia and Safrica forge closer ties

CAPE TOWN, Sep 5 (Reuters) Global mineral and diamond superpowers Russia and South Africa forged closer ties today as President Vladimir Putin began the first visit to the country by a Russian head of state.

President Putin went quickly into talks with President Thabo Mbeki after arriving in Cape Town from Greece for a two-day visit.

President Mbeki told a news conference after the talks that Pretoria and Moscow wanted to build on strong political ties to deepen economic and trade relations and had signed several agreements including a friendship treaty.

Mr Putin said Russia had agreed to supply fuel to South Africa's Koeberg nuclear power plant.

Russian tycoon Victor Vekselberg, one of 100 business leaders accompanying Mr Putin, told Reuters his Renova investment firm would invest more than 1 billion dollars in the building of a ferro-alloy plant in South Africa's Eastern Cape region.

The plant, near the coastal city of Port Elizabeth, would have capacity of 300,000 tonnes and be ''a big part of the world market'', Mr Vekselberg said.

Moscow has long historical ties with South Africa's ruling African National Congress (ANC), many of whose leaders received military training in Russia during the battle against white minority rule that ended in 1994.

But President Putin's visit is clearly motivated by hard economic considerations more than nostalgia.

The Kremlin previously said in a statement that Renova would sign a ''whole range of documents'' at a business conference in Cape Town tomorrow, including an agreement to guarantee electricity supplies to its jointly owned manganese mine and to the new ferro-alloy plant.

Renova owns 49 per cent of United Manganese of Kalahari, which it says has deposits of several hundred million tonnes of the metal.

South Africa has 80 per cent of the world's reserves of manganese, which is used in steelmaking.

President Putin will also oversee the signing of a memorandum of understanding between De Beers and Alrosa, the South African and Russian firms that account for around 75 per cent of the world's diamond mining.

The dominance of the industry by the two firms forced them to accept a deal with the European Commission in February, under which top producer De Beers agreed to phase out the purchase of rough diamonds from No. 2 producer Alrosa from 2009.

De Beers, 45 per cent owned by mining conglomerate Anglo American, accounted for about half the world market in 2005.

De Beers chairman Nicky Oppenheimer will meet Putin during his visit. Alrosa, owned by the Russian state, extracts nearly a quarter of the world's diamonds.

In the banking sector, Russia's Vnesheconombank will agree a memorandum of understanding with Nedbank, South Africa's fourth biggest bank by assets, the Kremlin statement said.

President Putin, a former KGB spy, will visit Cape Town's Robben Island, the prison where former South African leader Nelson Mandela was held for almost 20 of his 27 years in jail during the apartheid years.

Reuters SHB GC2030