By John Helmer, Moscow
For the first time Canadian mine stock investors say that Russian mining and metals oligarch Alexei Mordashov has run into resistance to his takeover schemes by a combination of share dilution, insider rewards, and share price manipulation — tactics which have succeeded for Mordashov when he acquired the last three Canadian goldminers he took aim at.
Speaking of the takeover now under way by Mordashov’s London-listed Nordgold for Toronto-listed Columbus Gold, shareholders, analysts, insiders and stock promoters have been discussing on the Canadian Stockhouse bulletin board  what they expect to happen next. A small stakeholder told others on the bullboard in December: “Can’t see any reason Nord does not move quickly on [Columbus Gold] as it will only get more expensive.” A few days later, Brien Lundin, a gold stockpicker in the US, advised his clients to take advantage of the Russian interest: “I urge you to take advantage of any market-induced weakness to buy the company in advance of the feasibility study.” Another bullboard entry warned on February 9: “Pretty obvious they’re going to take us out, put those 5 million Z’s [gold reserves] in their portfolio, and continue on with their growth plan. We’re the proverbial low hanging fruit, it’s now just a matter of price.”
The next day another commentator warned: “As for [Columbus Gold].. NORD has never failed to follow through on eventually taking over a company in which they have picked up a notable minority stake.” He drew the response: “NORD would definitely like to steal it but they won’t be able to because too many other buyers want it also. So NORD may decide to sell instead at a premium and take their marbles somewhere else where they can get a better deal.”
The Canadian consensus is that Mordashov is making a raid on Columbus Gold. “What I think we have to watch for is if they low ball us like they don’t want any partners, putz around for a year or so, then sell the whole shooting match to one of the above for a $ billion or better, screwing us out of our fair share. Got to keep a close eye on those Russians…”
Columbus Gold started in Vancouver in 2004, and is controlled by Robert Giustra, cousin of the well-known Canadian entrepreneur Frank Giustra (pictured below left). In 2010 Frank Giustra sold  Mordashov (right) a controlling stake in the West African goldmine operations of Crew Gold for $215 million, making Giustra a 124% profit on an 8-month investment. Together, Mordashov’s goldmines have been consolidated into Nordgold, which listed on the London Stock Exchange in 2012 with a sale of just over 10% of the shares. Mordashov has kept the rest, while the value of the shares and the company has been cut in half. The current market capitalisation of Nordgold is US$1.3 billion. Mordashov has lost that much in Nordgold’s asset value in five years.
Mordashov started negotiating with Robert Giustra in 2013, buying a small stake in Columbus Gold, and a larger one in Columbus Gold’s stake in operating rights at the French Guiana goldfield known as Montagne d’Or; it is also known as the Paul Isnard project after the nearby town, and after a 19th century French mine prospector in the area. For details of Mordashov’s plans and Giustra’s reactions, read this report  of December 22.
The Montagne d’Or deposit is estimated to hold between 4 million and 6 million troy ounces of gold. At the current gold price, they are worth US $5 billion to US$7.5 billion.
Just how valuable the mine will prove to be is scheduled to be disclosed publicly next month, when Columbus Gold and Nordgold release their bankable feasibility study for Montagne d’Or. That document will reveal new calculations of gold reserves, mine grades, and the commercial value of the project. After spending about US$36 million and releasing the study, Nordgold would then own a 55% share of the new project. At the start of this year, Nordgold also held 8.5% of Columbus Gold shares, the second largest shareholder behind IAMGold, a Canadian mining company, which controls about 10%.
Through Nordgold, Mordashov appears to be the second largest shareholder with 8.5% of Columbus Gold, a stake currently worth C$5.7 million ($4.2 million). Nordgold won’t be precise about the size of Mordashov’s shareholding today.
Before Columbus Gold, Mordashov’s goldmine purchases and takeovers in Canada have included  US$500 million to buy Crew Gold into Nordgold. His takeover of High River Gold in 2012 cost  about C$200 million ($148.3 million). This year’s takeover of Northquest has cost US$22 million. In each case, minority Canadian shareholders resisted Mordashov, claiming in and out of court and in filings to local stock market regulators, that he had made sweetheart deals with insiders, manipulated his target’s share price, and taken over at a fraction of the companies’ true worth. The court claims were all dismissed; no wrongdoing by Mordashov has been adjudicated.
On December 22, Giustra was asked  if a Mordashov takeover had been considered by the Columbus Gold board. Nordgold must “earn its interest [in Montagne d’Or] first,” he replied. “That will come in March of 2017. They have not made any offer to us. It’s not been the subject of any planning or strategy. Using reasonable assumptions I suspect there will be a dialogue at some point. It hasn’t happened yet.
The share price of Columbus Gold then took off, jumping by 2.3 times from 47 Canadian cents on December 21 to C$1.07 on February 10. Asked this week to explain, Giustra said nothing was happening, either inside Columbus Gold headquarters in Vancouver, nor at the mine site in Guiana. “We’ve outperformed the market and our peers consistently for the last 3 years,” Giustra emailed. “Nothing unusual here. Gold stocks were depressed in December and started a recovery around the time of your article through January; Columbus’ share price strengthened as a result, we just followed the general market.”
But there was a magnitude of difference which Canadian market observers didn’t miss. The Toronto gold index rose by 33%; Columbus Gold didn’t follow the market, it far outstripped it with a gain of 128%.
TORONTO GOLD SHARE INDEX – UP 33% SINCE DECEMBER
Source: http://www.stockwatch.com/Quote/Detail.aspx?symbol=TITTGD®ion=C 
ONE-YEAR SHARE PRICE TRAJECTORY FOR COLUMBUS GOLD – UP 128%
Source: https://www.bloomberg.com/quote/CGT:CN 
On January 10 an investor commented  on the Stockhouse bullboard: “Boom! + .14 [share price up 14 cents] but can’t find any news. Volume is over a million shares ! What happened?” Another replied : “a >20% jump on the day suggests that someone knows that news is coming soon.” The Stockhouse site is a unique Canadian invention for small shareholders. It describes  itself this way: “With over 1 million unique visitors a month, Stockhouse is Canada’s #1 financial portal and one of North America’s largest small cap investor communities. Our members are smart, affluent investors actively researching stock and looking for new opportunities. Stockhouse.com is the global hub for investors to find relevant financial news, access expert analysis and opinion and share knowledge and information with each other.”
On January 9, Columbus Gold announced it was giving its management 1.65 million stock options at a price of 65 cents. The number of shares represented just over 1% of the 151 million Columbus Gold shares on issue. That day, however, the market price for the shares was 89 cents. The insiders were getting a reward discount of 37%. “The management team awarded themselves a nice batch of options because they know a takeover is coming and can cash in on it,” claimed one of the bullboard commentators.” “This was/is a payoff for those close by,” suggested  another.
A few days later, on January 18, Giustra announced  a “$5 Million Bought Deal Short-Form Prospectus Offering”. Bought deal transactions can be understood here . In practice, they are the sale of shares to an institutional investor, bank or broker to raise cash, with the institution betting on making a profit when (if) the shares rise in market price and can be resold. What Giustra had done was agree with Beacon Securities of Toronto to take C$5 million for 8 million shares (5% of the issue) for 63 cents apiece.
The purpose of the financing, ostensibly according to Columbus Gold, was that “the net proceeds received by Columbus from the sale of the Offered Shares will be used to carry-out an exploration drilling program at its Montagne d’Or gold project in French Guiana, and for working capital and general corporate purposes.” Since Nordgold was financing the Guiana project, and is only days away from reporting the bankable results, Canadian market sources believe this was an odd thing to claim.
By coincidence perhaps, last April Beacon Securities was the independent valuer and adviser to Northquest Ltd. when Mordashov was taking  it over. Beacon recommended accepting Mordashov’s buy-out offer, although minority shareholders of Northquest claimed it was a steal and went to court to stop it. Click to read .
On the Stockhouse bullboard a source claimed: “they [Columbus Gold] did  a bought deal financing to get new shareholders in to fend off a Nord offer. Why do a dilutive financing when you know a big cheque could be coming from selling the French Guyana property to Nord?” Noone has suggested that Beacon was buying the shares on behalf of Mordashov. Nordgold spokesman Olga Ulyeva (right) did not respond to questions. The Beacon share sale concluded on February 15. The deal price by then was more than 40% below the market value of the shares.
Mario Maruzzo, head of investment banking at Beacon in Toronto, was asked whether Beacon Securities was acting for a third-party client, and “whether there was, is, or is likely to be any relationship you know of between your role in the transaction and Nordgold, Alexei Mordashov, or an entity associated with them?” Maruzzo, and Alistair Maxwell, the firm’s managing director, refused repeated requests to answer.
As the Columbus Gold share price was rocketing upwards on unusual volume of share buying, Mordashov got Nordgold to issue a statement on January 31 to address “media speculations”. The statement said : “Nord Gold SE… the internationally diversified gold producer, acknowledges recent speculation regarding a possible delisting of the Company’s global depositary receipts from the Official List and the London Stock Exchange. The Board of Directors continues to consider options for maximising shareholder value, including a potential delisting of the Company’s global depositary receipts, although no decision has been taken and there is no certainty that the Company will delist. The Company will keep the market updated.”
What was happening was that a very small number of shareholders, or Mordashov himself, had begun selling Nordgold shares. The share price reached $3.70 on January 13, its highest level since March of 2013. The price then started sharply downward to reach a low of $3.43 on February 22. The claim “there is no certainty that the company will delist” had not been believed in the market. Selling resumed the next day.
ONE-MONTH SHARE PRICE TRAJECTORY OF NORDGOLD
Source: https://www.bloomberg.com/quote/NORD:LI 
Was it Mordashov’s plan for de-listing Nordgold to lower the share price before he confirmed the de-listing and announced his offer price to buy out the minority shareholders who wanted to exit? A Canadian market analyst observes: “Keep in mind that the only real buyer of Nord stock for two years now is the Nord Gold buyback at up to $4. Without that program, they would be trading at even a lower market cap. Yes, they certainly are frustrated enough to go private and probably their reputation as not being trustworthy for minority shareholders has played into the market cap.”
A week later, on February 9, Mordashov fessed up. “The market capitalisation of the Company has failed to increase in line with the market,” a new company release  said, “and in particular against its peers, during a period of a major gold price rally. As a result, the Board believes the market capitalisation does not accurately reflect the true value of Nordgold. The Directors believe that the principal reason for this undervaluation is the very low trading volumes and general lack of liquidity in the GDRs, caused by the Company’s capital structure, and that any changes in its performance are unlikely to overcome this structural disadvantage.”
“The Board’s decision to de-list comes having carefully considered these facts and that an equity placing, even at the current price, would result in the unacceptable dilution of current shareholders. The Board has agreed a key objective for the de-listing is therefore to eliminate the current public market value benchmark, which it believes does not fully reflect the fundamental value of the Company and to consider re-listing in the future, subject to market conditions.”
Mordashov offered to buy out shareholders before the de-listing at US$3.45. The share price on the day of his offer was 3 cents less, at US$3.42. But the market, anticipating Mordashov intended his buy-back at a low-ball price, had been selling off the peak of US$3.70. Was Mordashov at the same time buying up Columbus Gold shares, as its value rocketed? In Moscow for Nordgold, Ulyeva does not say what stake in Columbus the combination of Mordashov and Nordgold currently have.
A Canadian goldmining investor sums up: “We know Mordy’s modus operandi and it is not partnering with, and or selling out to rival bidders. He will not sell the Isnard property [Montagne d’Or], but will buy it 100%. The question is — did Giustra actively seek to increase his shareholder base and pump up the stock to fend off a Columbus takeover so Mordashov is forced to pay a fair price for Isnard? Hard to tell. It looks like they did do the options just in case. There are all sorts of funds around the world looking for these arbitrage deals where a buyout is imminent. I suspect this played the biggest part in the stock price increase.”