Highland Gold has tested the patience of its shareholders since it listed on London’s Aim market in 2002. The Russia-based gold producer has been battered by operational delays, geological setbacks, a fatal fire and political threats, and has been one of the mining market’s poorer performers in spite of a strong rally in the gold price.

It appeared on Tuesday that Highland’s future had been secured after Roman Abramovich, Russia’s richest man, agreed to invest up to $400m through his Millhouse investment vehicle.

If the investment by Millhouse is approved by shareholders, Mr Abramovich will control about 40 per cent of Highland Gold and be its biggest shareholder. This raises the question of whether it is the first step in a takeover of Highland by Mr Abramovich. A banker close to the situation said on Tuesday that this was not on the cards now, but could not be ruled out in future.

There is a growing interest in gold among Russian oligarchs. Mr Abramovich’s investment follows the takeover of Aim-listed, Kazakhstan-based gold company Celtic Resources by Severstal, the Russian steel company controlled by billionaire Alexei Mordashov.

Mr Abramovich already owns the Dvoinoye gold deposit in Russia’s remote far-eastern Chukotka region, where he is the governor. Highland’s largest prospect, the Mayskoye gold deposit, is also in Chukotka, so Mr Abramovich is familiar with the asset. It is not yet clear whether his main priority is to pump money into his province or to launch a larger gold business but bankers predicted that he would roll the Dvoinoye project into Highland and use the London-listed vehicle for more gold acquisitions.

The sale of two tranches of new Highland shares to Millhouse will mean that the group’s existing shareholders – including Barrick Gold of Canada and the Fleming family – will be substantially diluted. Barrick controls 34 per cent of Highland and is the group’s largest shareholder, but this will be diluted to 20.4 per cent.

Barrick insisted on Tuesday that it did not mind being overtaken by Millhouse as Highland’s biggest shareholder and said “an injection of $400m is a good thing for the company”. Barrick added that Highland should benefit from having a strong Russian partner.

The company was attacked in October by Oleg Mitvol, deputy head of Rosprirodnadzor, the Russian environmental watchdog, who said Highland had breached licence requirements by not starting production at Mayskoye on time. Shares were hit, but Highland later secured an extension to its Mayskoye licence and pledged to start production there by 2010.

Highland Gold was founded by Ivan Koulakov in 2002 with the backing of the Fleming family and Harmony Gold of South Africa. Mr Koulakov took over the MNV gold mine near Sakhalin island in Russia’s far east, and used it as a base for a new Russian gold company to rival Aim-listed Peter Hambro Mining, also based in eastern Russia.

Highland floated on Aim at the end of 2002 at a price of 190p a share. It has had a patchy share price performance since and has often traded below its listing price: in September it traded as low as 76p, and shares closed at 178p on Tuesday.

Harmony Gold sold out of Highland in October 2003 having almost doubled its money. The Flemings have also sold down their interest in Highland over the years and are understood to have done well from the company.

Barrick Gold and some of the group’s institutional shareholders have done less well, however. Barrick started to build its stake in Highland in 2003, just as things started to wrong for the company.

Highland made a profit from the MNV mine in 2004, but had problems bringing the Darasun mine into production. Delays at Darasun and rising mining costs at MNV meant that by 2005 Highland was losing money, in spite of a rising gold price.

In September 2005 Highland’s new chairman James Cross, who had replaced Lord Daresbury, claimed that it had “turned a corner”. But the losses continued and in September 2006 the company ran into a fresh crisis when a fire at Darasun killed 25 miners. The company closed the mine and sold it in October for $15m.

Shareholders will be hoping that Mr Abramovich‘s presence will shake up Highland and change its fortunes.

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