He is also the governor of the Chukotka region and the owner of Britain's Chelsea football club.
On November 4, Millhouse LLC, the company that manages Abramovich's assets, announced that it signed an agreement with Highland Gold, the fourth largest gold miner in Russia, on the acquisition of a 40% stake in it for $400 million.
Thanks to the new shareholder, the Britain-registered Highland Gold will get the funds to develop new deposits and overcome Russian bureaucratic barriers.
Highland Gold Mining Ltd., which was established in 2002 for the purpose of acquiring, consolidating and developing a portfolio of quality gold mining projects in Russia, owns the fully operational Mnogovershinnoye mine in the Khabarovsk Territory; three development projects - Novoshirokinskoye and Taseyevskoye (Chita Region), and Mayskoye (Chukotka); six exploration areas - Belaya Gora, Iska and Maya Inikan in the Khabarovsk Territory, Lubavinskoye-Malo-Fedorovskoye in the Chita Region, Sovinoye in Chukotka and Unkurtash in Kyrgyzstan (Central Asia).
Before the Russian tycoon bought into Highland Gold, the company's shareholders, including its largest beneficiary, Canadian Barrick Gold (34%), were looking for a strategic investor. It was a very delicate task, because last July the Russian environmental authority Rosprirodnadzor proposed revoking Highland Gold's development license for Mayskoye, the most promising project in its portfolio.
There will be no problems with Mayskoye now that Abramovich has bought 40% of Highland Gold's additional share issue. The company will even have more chances to access other Russian deposits, in particular the largest gold ore deposit at Sukhoi Log, in East Siberia's Irkutsk Region. The deposit is so far on the strategic list, but may soon be put up for auction.
The deal between Abramovich and Highland Gold was made in strict compliance with market conditions. The billionaire offered a price adequate to the company's gold reserves, 8.1 million ounces, to be paid in cash rather than securities. Highland Gold needs the funds to repay its $100 million debts and finance its projects.
Abramovich is likely to use Highland Gold as a step toward establishing a gold segment in his business empire. He controlled Mayskoye in the past, when businessman Oleg Savchenko turned over a 70% stake in it to the Chukotka administration and Millhouse for management in 2003.
Highland Gold later bought out the development license for the deposit, but this year Abramovich decided to resume his gold business. He started buying gold assets at the Dvoinoye deposit, also located in Chukotka, last summer.
The reason for his interest is the price of gold, which has soared to $800 per ounce, the highest price since 1980.
Steel magnate Alexei Mordashov, another Russian billionaire, is completing the acquisition of Ireland's Celtic Resources, which owns gold deposits in Kazakhstan. He plans to become one of the Russia's top four gold miners within a few years.
But his task has become more complicated now that Abramovich has bought Highland Gold.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
