Aurum Mining Waits In Suspense
By Rob Davies
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Political risk is a major fact of life these days for resource companies all round the world. Even the UK is not immune from it with calls now for windfall taxes on the oil companies. That said, political risk does seem to increase as you go east and the Kyrgyz Republic has not got a good reputation in this regard. Its latest casualty is Aurum Mining and its Andash property in the North West of the country on the border with Kazakhstan. It acquired the property in January 2005 and was due to start producing a gold rich concentrate in the second half of 2008. All was progressing well until the company was notified of a claim against an earlier owner of the deposit that puts a question mark over its ownership of the property.
The company took the decision on March 4th to suspend trading in the shares pending clarification of the situation. With hindsight Mark Jones, chief executive of Aurum, admitted to Minews that given the way the problem has dragged on it might have been better not to have done that. In any event the company is now half way through its six month suspension period and it will only be another three months at most before trading restarts.
The problem relates to a claim made by a company called Marsa based in Lichtenstein, backed by a woman named Olga Elefteriade. This company asserts it was a major shareholder in a company that used to own the deposit and claims it was defrauded of ownership after documents were falsified. The fact the claim is being made now when production was imminent is probably more than a coincidence. Even so, the case is being bounced around by the two lower courts in Bishkek, the capital of the Kyrgyzstan Republic.
Mr Jones firmly believes the case is entirely without foundation and that it would never have come to court in countries with a more mature legal system. Unfortunately, the Kyrgyzstan legal profession knows a good thing when they see it and the case has dragged on much longer than Aurum expected. The company is pursuing a number of avenues to speed resolution of the problem, one of which is a freezing order over the bank accounts of Marsa in Lichtenstein.
In spite of these efforts Aurum has had to stop development of the Andash mine and Mr Jones accepts that even a quick result will not allow the mine to be commissioned this year. A bad winter did not help the mine construction process either as it was often too cold to pour concrete. The good thing for shareholders is that there is no project debt ticking away with interest to be paid and there are no forward sales to be satisfied. Aurum had opted to develop the project on its own, with no local partner, and using its own equity.
Again, with hindsight, Mr Jones now concedes that the problem of having a local partner might have been the lesser of two evils. One other source of comfort is that another company, Bulakashu Mining is having the same problem and is cooperating with Aurum on legal matters. It is all deeply frustrating when there is a perfectly good orebody containing over 1.1 million ounces of gold and equivalent waiting to be developed. |
