A top official with Star Mining Corporation of Australia said Tuesday his firm will fight a Russian Supreme Arbitration Court decision canceling the firm's rights to Russia's largest unexploited gold mine and potentially wiping out the $72 million already invested.
"For us it's a shock. ... We will most definitely try to appeal that decision," said Christopher MacNee, Star Mining's managing director, in a telephone interview from London.
The Federal Supreme Arbitration Court on March 31 declared "null and void" registration documents for the Lenzoloto joint venture created to mine the Sukhoi Log gold deposit, effectively canceling Star Mining's 31 percent stake in the company.
"The law on privatization was violated and it follows that all the agreements signed between Star Mining and Lenzoloto after that will not be recognized as valid anymore," said Natalia Vishnyakova, spokeswoman for the Prosecutor General's office, which filed the suit against Lenzoloto.
Officially, Star Mining has lost the $72 million that went toward such expenses as charter capital, loans and feasibility studies, MacNee said.
The only step left, he said, is to appeal the court's decision to the Presidium, the highest executive body of Russia's Supreme Arbitration Court.
In the meantime, Star Mining has suspended trading on its shares since the middle of last week, MacNee said. There are no plans to restart share trading until Lenzoloto's status is clarified, he said.
One Moscow-based gold analyst warned that such a precedent could send a chill through foreign mining companies thinking of doing business in Russia.
"Such a decision will make it difficult for other foreign companies trying to raise money to do mining projects in Russia," he said.
Vishnyakova of the prosecutor's office said the court's decision was based on procedural contentions that the privatization of Lenzoloto was not done according to the official rules.
But MacNee suggested other motives, including "internal fights between various government bureaucracies, or possibly a third party trying to get the gold mine for itself."
While some analysts agreed with MacNee, German Pikhoya, general director of the Russian gold mining company Evrozoloto, dismissed the theory. "[A third party] would have to be pretty big to be able to influence the Prosecutor General." The focus of the dispute dates back to April 1992, when Russia's chaotic privatization scheme was just gearing up and Lenzoloto officials received permission to privatize in the form of a decree by then-prime minister Yegor Gaidar.
A month later, President Boris Yeltsin signed another decree officially laying out the rules for Russia's privatization program and contradicting some aspects of Lenzoloto's privatization.
"They [Lenzoloto] invented their own privatization legal scheme," said Brian Zimbler, a lawyer with Le Boeuf, Lamb, Greene & MacRae.
Further bolstering Star Mining's belief that everything had been done to the government's satisfaction was a September 1994 decree, signed by Prime Minister Viktor Chernomyrdin, stating that the joint venture had been legally registered and privatized.
"This shows the foreign community that even two prime-ministerial decrees are no guarantee for your investment in Russia," MacNee said, adding that Star Mining could seek "in excess of $100 million" in damages from the Russian government.
Until the issue is resolved, analysts said, it is unknown who will be left in charge of the Sukhoi Log mine.
"For us it's a shock. ... We will most definitely try to appeal that decision," said Christopher MacNee, Star Mining's managing director, in a telephone interview from London.
The Federal Supreme Arbitration Court on March 31 declared "null and void" registration documents for the Lenzoloto joint venture created to mine the Sukhoi Log gold deposit, effectively canceling Star Mining's 31 percent stake in the company.
"The law on privatization was violated and it follows that all the agreements signed between Star Mining and Lenzoloto after that will not be recognized as valid anymore," said Natalia Vishnyakova, spokeswoman for the Prosecutor General's office, which filed the suit against Lenzoloto.
Officially, Star Mining has lost the $72 million that went toward such expenses as charter capital, loans and feasibility studies, MacNee said.
The only step left, he said, is to appeal the court's decision to the Presidium, the highest executive body of Russia's Supreme Arbitration Court.
In the meantime, Star Mining has suspended trading on its shares since the middle of last week, MacNee said. There are no plans to restart share trading until Lenzoloto's status is clarified, he said.
One Moscow-based gold analyst warned that such a precedent could send a chill through foreign mining companies thinking of doing business in Russia.
"Such a decision will make it difficult for other foreign companies trying to raise money to do mining projects in Russia," he said.
Vishnyakova of the prosecutor's office said the court's decision was based on procedural contentions that the privatization of Lenzoloto was not done according to the official rules.
But MacNee suggested other motives, including "internal fights between various government bureaucracies, or possibly a third party trying to get the gold mine for itself."
While some analysts agreed with MacNee, German Pikhoya, general director of the Russian gold mining company Evrozoloto, dismissed the theory. "[A third party] would have to be pretty big to be able to influence the Prosecutor General." The focus of the dispute dates back to April 1992, when Russia's chaotic privatization scheme was just gearing up and Lenzoloto officials received permission to privatize in the form of a decree by then-prime minister Yegor Gaidar.
A month later, President Boris Yeltsin signed another decree officially laying out the rules for Russia's privatization program and contradicting some aspects of Lenzoloto's privatization.
"They [Lenzoloto] invented their own privatization legal scheme," said Brian Zimbler, a lawyer with Le Boeuf, Lamb, Greene & MacRae.
Further bolstering Star Mining's belief that everything had been done to the government's satisfaction was a September 1994 decree, signed by Prime Minister Viktor Chernomyrdin, stating that the joint venture had been legally registered and privatized.
"This shows the foreign community that even two prime-ministerial decrees are no guarantee for your investment in Russia," MacNee said, adding that Star Mining could seek "in excess of $100 million" in damages from the Russian government.
Until the issue is resolved, analysts said, it is unknown who will be left in charge of the Sukhoi Log mine.