Polyus Gold is owned by Russian oligarch Mikhail Prokhorov, who is regarded as friendly to the Kremlin. Russian Polyus is under investigation for asset stripping and has subsequently suffered severe financial damage; its current value is just 2.5 percent above that of a year ago. Kazakh Gold has also experienced difficulties, with a dramatic reduction in value on the London Exchange and its market capitalization falling by almost half over the past year.
If the Polyus bid for KazakhGold succeeds, then the Romanian Baia Mare gold field will come under the ownership of Polyus with the result that the Kremlin will have a controlling voice in the management of gold mining in Romania and, by the same token, will be able to exert an even greater influence on the Romanian economy and politics.
The formerly state-owned Baia Mare gold mine is mired in a long history of mismanagement and negligent, if not criminal, behavior. The Baia Mare field was responsible for a tragic cyanide spill into the Somes (Szamos) River which spilled over into the Tisza River. It went 36 miles (60 km) through Romanian territory and more than 360 miles (600 km) through the entire length of the Hungarian part of the Tisza. The spill was described by Hungarian officials as the worst environmental disaster to afflict the region since the Chernobyl disaster in 1986, although Romanian officials have denied this.
This fact has not prevented Romanian authorities from issuing preliminary rights to KazakhGold to mine at the Baia Mare site, at the same time preventing a Canadian-American gold mining company from commencing operations at a different mine, Rosia Montana, which is nowhere near the terrible cyanide spill at Baia Mare. The excuse used by the Romanian authorities is that mining at Rosia Montana would be an ecological threat. Baia Mare, however, is apparently seen as an exemplary, progressive project.
According to an article posted on www.mineweb.com on February 27, the UK markets regulator, the Financial Services Authority (FSA):
…is to investigate whether Polyus Gold, listed on the main board of the London Stock Exchange since 2006, is the target of an asset-stripping scheme perpetrated by a British Virgin Islands-registered company called Polyus Exploration, Ltd. This appears to be the same as the company called Polyus Geologorazvedka, established last May and registered in Moscow. The English translation of the Russian in the company title is awkward, but they are far from the same company.
Another example of Russian “gold digging” is that of Alrosa, the Russian wholly owned state diamond mining company, now diversifying into minerals and oil. Alrosa has already acquired one gold exploration prospect in Armenia.
Meanwhile in Venezuela, President Hugo Chavez, who is apparently dreaming of bringing Venezuela into the Russian sphere of influence and becoming the next Fidel Castro, signed an agreement on November 6 with Russian Deputy Prime Minister Igor Sechin, the person responsible for the destruction of Yukos Oil Company and the jailing of its CEO Mikhail Khodorkovsky. Under this deal the Russian company Rusoro will be allowed to help develop the large Las Cristinas and Brisas gold mines, according to Venezuelan Mining Minister Rodolfo Sanz (El Universal, November 6).
Las Cristinas, one of Latin America’s largest gold projects, is currently operated by Canada’s Crystallex, which has waited in vain for years for an environmental license to start mining. Brisas is operated by Canadian-owned Gold Reserve, which has a concession for the project, mainly for gold mining, but has also been waiting for environmental permits.
For some unknown reason, both Venezuela and Romania have decided to penalize Canadian gold mining companies and bend over backward to support Russian firms. Rusoro is controlled by Andre Agapov and his Russian associates in London. In an interview with www.goldeditor.com, Agapov stated that:
Every six months there is a Russian/Venezuelan High Commission, which is basically a business forum. It’s the aim of the Russian government to diversify into different sectors, and of course the closest attention is paid to the companies who already operate in Venezuela. Currently, the only company from Russia—actually the first company—is us, Rusoro, a private company until November 2006…. the Russian government supports us and they expect the same from Venezuela (www.goldeditor.com/articledisplay.php?id=2147).
In June Peter Hambro Mining, PHM, a Russian-UK company based in London and one of the major companies mining for gold in Russia, announced that it was leading a consortium investing $80 million (40.8 million pounds) in Rusoro Mining with the option of converting the loan into a stake of up to 14 percent in the Venezuelan gold producer.
Executive Chairman of PHM Peter Hambro stated, “We have always said that any investment outside Russia would need to have a Russo centric rationale, and the Rusoro investment is just such an opportunity” (www.peterhambro.com/keyfacts.htm).