Roman Abramovich, Russia’s richest man, agreed on Tuesday to take a 40 per cent stake in Highland Gold, the ailing London-listed gold miner, signalling a new focus on the gold industry.
Mr Abramovich is making the investment of up to $400m through his Millhouse investment vehicle. Millhouse is due to buy a s25 per cent stake in Highland Gold next week by purchasing 65m new shares at 151p, a 7.5 per cent discount to Monday’s closing price of 163.25p.
If Highland Gold shareholders approve the deal at a meeting in early January, Millhouse will buy another 65m new shares at the same price, taking it up to 40 per cent.
Shares in Highland Gold rose 8 per cent to 177p on Tuesday, their highest level since May. The company’s shares have been hit by a string of problems over the years, including delays to its Russian gold projects and a fatal fire at its Darasun mine, which killed 25.
Barrick Gold of Canada is currently Highland Gold’s largest shareholder with a stake of 34 per cent. This will be diluted to 20.4 per cent if the deal with Millhouse goes through. The Fleming family, Standard Life, BlackRock and JPMorgan Asset Management are among the other investors that will see their holdings diluted.
Barrick has been increasing its participation in Highland since 2003 and merged most of its gold assets in Russia and Central Asia with the group last year. But Highland Gold has been suffering from funding problems for the past year and it is understood that Barrick was reluctant to inject more cash into the company. Barrick welcomed Mr Abramovich’s investment and said it “greatly strengthens Highland Gold’s presence in Russia”.
Eugene Shvidler, chairman of Millhouse, said: “This investment in Highland Gold fits perfectly with our approach of taking strategic stakes in businesses with strong growth potential. We believe our investment and management input will help Highland to obtain maximum returns on a world-class set of assets.”
Highland Gold is registered in Jersey but is not subject to the UK Takeover Code. That means that like Barrick Gold before it, Millhouse will not be obliged to make a full takeover bid in spite of increasing its stake beyond 30 per cent.
Highland Gold said that its co-operation agreement with Barrick Gold would continue and it would carry out business at arms length from Millhouse. However, Millhouse will appoint three of the nine board directors and have the right to appoint a chief executive who will not serve on the board.
Highland Gold operates and owns the MNV mine in Russia’s Khabarovsk region. The company had a turnover of $43.4m with an operating profit of $4.2m and produced 62,643 ounces of gold in the first half
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